Healthy Competition - The Daily Gwei #343

Competition in crypto is fierce - but that doesn't mean that it has to be unhealthy.

Competition is the lifeblood of a capitalist system. By having a vibrant competitive environment, various ventures can all battle it out to create the best products and services which ultimately benefit the users/customers the most. Within crypto, competition is extremely fierce and due to its open source nature, no project is really safe from being forked/copied.

There are 2 distinct categories of competition - healthy and unhealthy - only the former leads to actual benefits for users/customers. Unhealthy competition comes in the form of monopolies or duopolies, anti-competitive tactics such as price-fixing and enrichment of the few at the expense of the many. On the flip side, healthy competition blossoms when everyone has a level playing field with a set of conditions to abide by. With Ethereum, anyone is able to build an application (or fork it) and they’ll be on the same playing field that every other app is on - the Ethereum network doesn’t discriminate based on what the app does.

On that note, competition is very cutthroat within the crypto ecosystem - whether it be competing layer 1’s, competing dapps or developers just trying to one-up eachother - you’ll find no shortage of ruthless competition in crypto. This is especially true when it comes to layer 1 networks as their teams and community just love to take shots at Ethereum for its “shortcomings” such as the high fees and slower transactions. Of course, these layer 1 networks will never tell people the trade-offs they have made to achieve more “scale” (usually they just centralize). Now, with the rollout of Ethereum-based layer 2’s really heating up, competitor networks are trying to spread seeds of doubt around how effective layer 2’s are when it comes to scaling Ethereum - this just signals to me that they are afraid of the competition.

Of course, layer 2’s have their own trade-offs whether that be reduced security & decentralization, liquidity fragmentation and more - but I believe that they are all still much better than most of the other layer 1 networks that claim to “scale” (more on why I think this here). Any engineer or researcher worth their weight in ETH recognizes this if they’ve actually educated themselves as the tech coming out of the layer 2 ecosystem is simply next-level. Though when someone has vested interests to protect it becomes a weird game of convincing oneself that the competition either doesn’t exist, is outright bad or that there must be something fundamentally “wrong” with it. I always find it funny how humans will literally find a way to rationalize any point of view out of fear that their existing view could actually be the wrong one.

In saying all of this, crypto is in quite a unique position because of its open-source nature. You’ll often see teams of “competing” projects leveraging each-other’s strengths to play positive-sum games where both teams benefit. Of course, there’s the other side to this where projects can be endlessly forked (like Uniswap has been) which leads to things like Uniswap putting a license on their v3 code. As with everything in life, there’s a balance to be had between competition and collaboration - and the crypto ecosystem certainly loves to regularly test this balance.

Have a great day everyone,
Anthony Sassano

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