Sam Trautwein


One Chain to Rule them All?

Someday someone will make a chain named Yoshinoya if they haven’t already

As the only multichain stablecoin, we are committed to building stablecoins and fiat on / off ramps on all of the best chains. Consequentially, we spend a lot of time researching chains and trying to decide what makes a chain “the best”.

“Ethereum Killer” is a term that was thrown around a lot during the ICO era. At the time the sector generally believed that 1) protocols would capture the lion share of value 2) network effects would lead to rapid winners and losers with technology being the core catalyst of success. This lead to hundreds of large “high risk, high reward bets” being made on high-throughput oriented teams. As the sector has matured it has become apparent that convergence, if it is the cards, is distant. The real challenge, and moat, is adoption. We now live in a world where many of the best and brightest minds in blockchain are at the helms of massive, well-funded projects engaged in a prolonged, possibly pyrrhic struggle for transaction volume.

At a high level, there are two buckets of high throughput chains: Those aimed at global consumer adoption and those aimed at enterprise. “Global Chains” are by far the more ambitious of these two buckets as they usually require massive cap x and, unless they see meaningful adoption in the short term, tend to be forgotten quickly. In fact, many already have failed. These chains have generally stuck much more closely to the original sales pitch of displacing Ethereum although the successful ones have usually opted to play to their strengths, choosing to devote resources only to markets in which throughput or transaction cost give them an edge. EOS and Tron are the two most prominent (and successful) chains in this bucket.

The second bucket are chains geared towards “enterprise” which means they vaguely plan to do for blockchain what Oracle did for databases and IBM did for computing. More than a few of these started out in the first bucket and opted to reorient as competition heated up. There are currently 50 projects in this bucket that have raised over 8 figures on 9 figure valuations.

Enterprise is a slower game, heavily dependent on relationships and sales cycles. There will be many “Clinkles” in this space. The “Enterprise Chains” will also have to compete with forks of the “Global Chains” geared specifically at enterprise, like Quorum. Before going further I want to emphasize the importance of compliance in this sector. In every major enterprise deal, both parties’ lawyers need to sign off. Compliance will be one of the few ways enterprise focused chains can give themselves “unfair advantages”.

Rolodex Era

For the first two years we will be in the “Rolodex Era”. Growth will correlate to the collective rolodex power of the team. Teams with leadership from prominent tech companies and banks will almost certainly have the most success in driving those crucial early contracts that legitimize the increasingly commoditized products. We are already starting to see the conference circuit reorient from fundraising towards partnerships.

Strategy Era

For the next two years we will be in the “Strategy Era”. Teams that have robust and nuanced go-to-market strategies that haven’t fallen too far behind on during the “Rolodex Era” will be able to break ahead here and will likely end up owning entire markets.

There will be consulting firms and advisors that actually deliver real value here. Sales funnels will be powerful weapons. We will start to see blockchain make material differences to bottom lines.

Technological Age

While this is a contrarian opinion, in the enterprise sector technology likely won’t even be a major factor until around at the earliest year 4. Throughput will not be a bottle neck on any of chains as layer X solutions are rapidly becoming more robust and more portable. This means that what is really being sacrificed is security. Chain security will likely take a long time to be relevant but when it does it will be through regulation, endorsement, and hacks. Similar to what we saw with Blackberry, government guidelines around security create powerful moats as enterprise clients often follow the government’s lead. Real endorsements by real tech companies (rather than the dime a dozen “partnerships” that are bought in bulk with tokens today) will also drive large market blocks towards specific solutions. And, last but not least, “hacks” and outages will massively undermine the credibility of some of the weaker projects. The “Technological Age” will be by far the most exciting and what much of the current academic discussion in the sector is currently, in my opinion prematurely, geared around.

The speed of regulation may speed up or slow down this timeline and it also remains to be seen how much of the “enterprise pie” gets eaten by permissioned ledgers.

My advice to chains: play aggressively to your strengths. You need to survive the eras in which you’re weak to thrive in those where you’re strong. You can also hire or buy talent or assets to fill specific gaps at specific points in the timeline. For example, we will see large enterprise chains become interoperability layers over better consensus protocols at the end of the strategy era. There will also be more entrants. Some permissioned ledgers will evolve into public ledgers and large tech companies will launch their own solutions.

My advice to everyone else in this space: stock up on popcorn.

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