The rise of Ethereum has led to a new world of opportunity for permissionless, decentralized systems. Now, a fleet of competitors has risen to the challenge, attempting to oust Ethereum in what is being called the “smart contract wars”. The question is, will Ethereum’s golden throne be challenged, or will network effects keep the moat secure?
While the focus of this article is on Tezos and Polkadot, other smart contract platforms, such as Algorand, also have an equal opportunity to disrupt Ethereum’s moat. But if we were to pick the two that have the best opportunity for doing so, it would be Polkadot and Tezos, as both already have loyal communities.
Polkadot is the brainchild of Ethereum co-founder Gavin Wood. He left Ethereum’s development team after disagreements with Vitalik and the rest as to how the protocol should monetize. While Vitalik favored the route of setting up a non-profit foundation and keeping development away from direct conflict of interest, Gavin Wood and Charles Hoskinson (co-founder of Cardano) preferred a for-profit corporation to govern Ethereum, which would make monetization and direction easier.
On the back of this disagreement, Wood left to start Parity and eventually Polkadot. Tezos, on the other hand, rose to fame after their ICO was deemed a security and they were put through some legal trouble. While Tezos has been living for a while and actually has applications and tokenization happening on the protocol, Polkadot is shaping up to be a competitor simply because of Gavin Wood’s superstar status in the crypto-community.
Everyone thinks they can build a better version of existing infrastructures. Cardano, Polkadot, and Tezos are the direct results of people thinking they can fix Ethereum’s flaws. Putting this simply, it’s impossible to predict which smart contract platform will be the dominant one going forward. But it will be relatively simple once the signs start showing up.
Firstly, if Ethereum is to lose its moat, you will first see a large number of developers and community members flocking to a new smart contract platform. Slowly, dApps on those platforms will start growing significantly faster while Ethereum dApps will slow down. The biggest giveaway would be if a new narrative that is stronger than the existing narratives shows up on a new platform.
For example, financial protocols appearing on Polkadot and Tezos wouldn’t be a big deal as long as Ethereum had them from 2017. But if new, innovative financial products showed up on these protocols and gained traction, it would signal a potential momentum shift.
So to conclude, yes, Ethereum can be written off by its competitors, but it’s going to take more than a gargantuan effort to do so. The network effect built by Ethereum is massive. And unlike the fallen giants of the past like AOL and MySpace, Ethereum’s moat is not based on the success of a single interface or narrative. The smart contract wars are akin to different internet protocols, rather than the different protocols built on the internet.