Scale or Die - The Daily Gwei #323
The scaling wars are here and Ethereans are ready for the fight.
I came across this little snippet below from a blog post Coinbase put out a few days ago and it got me really excited. In the post, Coinbase details how they’re recruiting more people for their Protocol team so that they can add support for Ethereum scaling solutions (among other things). They’ll be starting with Polygon’s PoS chain and then they plan to add support for various popular layer 2 protocols - obviously this is a very big deal.
I’ve been saying for a while now that in order for Ethereum to actually achieve its scaling dreams, it’s critical that all of the crypto on-ramps support us as much as possible. That means services such as centralized exchanges need to enable withdrawals to the various scaling solutions and/or to the bridges such as Connext and Hop. On that note, one less-talked about benefit for exchanges here is that they can become liquidity providers for the various layer 2/sidechain bridges and this could act as another source of revenue for them. On top of that, they can offer their customers a better experience than their competitors if they support these scaling solutions first which also doubles as a nice little marketing play.
I wrote a piece back in April about “credible neutrality” that I think is relevant when talking about Ethereum scaling and centralized exchanges/services. Basically, because the Ethereum protocol is decentralized and does not bias any individual or group, every exchange is happy to support it and everyone is happy to use it & develop on it. I think that this same principle applies to various scaling solutions but there is some additional nuance here. One of the bigger nuances is that many of these scaling projects have raised money from traditional venture capitalists (VCs) and this does add some subjectivity to these networks because the exchange could share investors with the scaling project. So, in turn, you may find that certain exchanges add support for certain scaling solutions much earlier than others (or may not ever support the ones that they have no vested interest in). Though I would still argue that it’s in an exchanges net benefit to support all scaling solutions because if they don’t, their competitors most likely will.
All of this brings me to the final thing I wanted to talk about and that is competitor networks. Obviously Ethereum isn’t alone in the layer 1 blockchain space and there are plenty of so-called “Ethereum killers” vying for the top spot. Many of these other networks will claim to have “greater scalability” and “lower fees” than Ethereum but, of course, they will rarely discuss the trade-offs they take to achieve this. I can’t blame the teams building these networks though - they realise that they have a very short window of time to take market-share away from Ethereum before the layer 2 ecosystem takes off because in my view, whatever these other chains can do, Ethereum layer 2 can do better. In saying that, it will be interesting to see how this all plays out over the coming years - I’m still a big believer in my economic nexus thesis.
The Ethereum scaling landscape is hotter than it’s ever been with plenty of solutions already live and much more coming soon (check out this thread for a breakdown). Though for these solutions to see the adoption we want, it’s going to take an ecosystem-wide effort to onboard users as well as change the narratives around Ethereum (the worst being that Ethereum “can’t scale”). I’m confident that we can get there - it’s just going to take some time.
Have a great day everyone,
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