The biggest competitive advantage?

Note: This article was first published on on the 11th April.

There is no doubt that to most crypto = Bitcoin. It has the brand recognition, it was the first, it attracts the bulk of media attention. This may prove to be ephemeral.

Bitcoin was passed in number of transactions by Ethereum in 2017 and came close to being passed in market capitalisation too. If it was to no longer be the biggest it is unclear what competitive advantage it would have that would keep it relevant. It has a deep pool of developer talent — but not as deep as Ethereum. It is able to process transactions quickly using methods such as Lightning Network — but not as rapidly as projects like Nano. It remains the pair of choice on most exchanges — but that is because it is the biggest and has the greatest liquidity, not because it is uniquely suited to it.

Ethereum, on the other hand, has been building towards its defining differentiation since its launch. It is the platform of choice not just for raising funds for new projects but for hosting these new projects.

Even if you take out the projects which are merely temporary ERC20 (the name for tokens operating on the Ethereum platform) tokens before moving to their own blockchains (such as TRON, EOS and VeChain) Ethereum still dominates the rankings. There are just seven projects in the top 100 currently operating on different platforms.

The crypto space becomes the Ethereum space?

Take the example of decentralised exchanges (DEXs) for example. Ethereum based DEXs only list ERC20 based tokens, which as already shown encompasses the vast majority of projects. Projects like AirSwap are squarely aimed at institutional capital — and they are ERC20 only. It is easy and it is quick to trade ERC20 tokens on a range of DEXs, including IDEX, Bancor, Kyber, ForkDelta etc.

Conversely, if you want to acquire NEP5 tokens (the tokens for the NEO platform) then you have to first buy NEO, then go to a NEO DEX (of which there is just one at present, Switcheo, which has only recently opened and has very low daily volumes). It becomes a hassle given there are more than enough ERC20 based options to choose from. As such it is harder to find liquidity for these projects, because there are less people on the NEO platform — and NEO is the most popular of the other options. Waves (a platform and a DEX I like a great deal) has such low daily volumes it is sadly not really worth trying to use.

This extends to running an ICO. There is a reason most ICOs now only accept ETH when even 12 months ago many listed BTC as their primary choice. More people have ETH and are comfortable in the Ethereum ecosystem. It is the greatest public fundraising platform in history.

That said, most people don’t trade on DEXs and NEO based ICOs have raised money just fine. But there are wider benefits than merely increased liquidity.

The projects being delivered on top of Ethereum deliver an increased level of service than any other platform can match. And these services increasingly interlink. Partnership after partnership is launched between Ethereum based DApps. Just this week has seen Request Network join forces with Digix and OmiseGo (which will become its own chain but is currently an ERC20 token and has deep links with Ethereum) partner with MakerDao. An ICO that launched its main sale yesterday, Auctus, is supported by Ripio, 0x, Aragon and Bancor — all Ethereum based initiatives. The partnerships and support links are everywhere. Because the service offering continues to expand, more new projects get launched on the platform to complement what is already there. The web of projects is ever expanding to facilitate each others shared success.

These partnerships are complimented by the Enterprise Ethereum Alliance which now boasts hundreds of members. Why is this important? Because these projects proliferate. Developers move between projects, they start new projects and the vast majority will remain on the Ethereum platform until another platform proves conclusively superior (which could be years away). It also allows enterprises to get used to one standard rather than having to learn multiple different platforms and the weight of developer talent also makes it more likely that Ethereum will be able to solve problems such as scaling and other issues that emerge.

Talent coalesces in one space. The projects combine to be greater than their individual parts because they are met by complimentary partners. And where talent and innovation leads, investment and users follow.

The iOS and Android platforms are good examples of how users become locked into a specific ecosystem. It is too much hassle to bother leaving it or using anything else. Being part of the Ethereum ecosystem reduces friction to accessibility for users and developers alike. Bitcoin is easy to leave — there are other superior cryptocurrencies and little actual merchant adoption for Bitcoin that would tie people in. Ethereum, with its greater range of projects and ideas, would not be so easy to leave once projects are actually being used.

Whilst Ethereum may have the advantage at present it has not yet translated project dominance into the mass of users necessary to cement its position (predominantly because so few projects have actually launched yet, let alone attract mainstream users). There is still plenty of time for another project to emerge which could topple it with superior technology — and this needs to be a large upgrade, not a slight improvement — but the longer the absence of this continues the greater chance Ethereum has to consolidate its advantage.

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