1/ Blockchains are not networks—they're cities. 🏙️ This simple mental model will help you understand why the L1 wars are evolving the way they are. New blog post + short 🧵 medium.com/dragonfly-researc…

Jan 18, 2022 · 9:31 PM UTC · Twitter Web App

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2/ Blockchains are usually described as networks, which implies they're endlessly extensible like the Internet, or Facebook. If blockchains are networks, then network effects will dominate, and one blockchain will win. But networks are the wrong analogy for blockchains.
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3/ Blockchains are *physically constrained*. If blocks were arbitrarily big, the blockchain could not be decentralized. Smart contract chains are more like cities. If you use this mental model, L1s are no longer mysterious. Take Ethereum.
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4/ Ethereum is expensive, congested, slow, and only the wealthy can afford to interact with it anymore. Ethereum is New York City. NYC has the biggest banks, the most billionaires, the hottest brands and celebrities.
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5/ Ethereum has the biggest DeFi protocols, the most TVL, the hottest DAOs and NFTs. But it's expensive. If you're an up-and-comer, you're too late to the party—you're priced out. So how do you scale New York? The first approach is to build up: that is, skyscrapers.
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6/ Skyscrapers let you fit more people into the same land. That's L2 in a nutshell—rollups let you scale an L1 vertically. But like with skyscrapers, you don't actually escape the constraints of L1. When you want to move between rollups, you still have to deal L1 congestion.
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7/ L2s will help you scale, but they're not a complete answer. The second approach is application-specific blockchains, enabled by Polkadot or Cosmos. This is like building lots of small towns that do one thing: a factory town, or a farming town, or a bunch of outlet stores.
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8/ All of these will be connected up by a highway system (Polkadot's Relay Chain, or Cosmos's Cosmos Hub). That can work! Some places will be built that way. But they're not going to be the lion's share of where people live and do business.
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9/ That leaves the third approach: building another city. When you build a new city, you have to reduplicate a lot of infra: roads, a police station, a hospital. Likewise, any new L1 needs a block explorer, an AMM, a lending protocol, an NFT marketplace.
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10/ But the nice thing about building a new city is that *each city can be built differently*. Take Solana—Solana is LA. Big and sprawling and cheap compared to NYC.
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11/ Ignore the east coast fixation on decentralization: move to Solana, launch your NFT, capture your ten minutes of fame. Sure, it's not the most decentralized, but games and NFTs don't need that. The weather's great, the fees are low, and no one takes themselves too seriously.
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12/ What about Avalanche? I'd say Avalanche is Chicago—trying to be the next Wall Street, but newer, cheaper, more aggressive. It's cold up there, but Avalanche's specialization in finance and trading gives the city energy and self-confidence. It's hard not to bet on it rising.
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13/ And NEAR? NEAR is San Francisco - built for web3 techies. It's an idealistic city, full of people who want to fulfill the Ethereum 3.0 dream. In their minds, sharding is the only way forward long-term.
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14/ The important thing about these cities is not just that they're big and open for business. Each has a different vision of what a city should be and how it should be governed. They each accept different tradeoffs, adopt unique values, and attract different industries.
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15/ So will we live in a multi-chain world, or will there be "one chain to rule them all"? Here's the question reframed: will we live in a multi-city world, or will there be one city to rule them all? The answer jumps out at us.
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16/ No metaphor is perfect. But this model makes 6 predictions: 1. The future is multi-chain 2. Ethereum will be the most valuable 3. L1s will differentiate 4. L2s matter, but they're not enough 5. Application-specific blockchains will be niche 6. Bridges will be valuable
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