Blockchains are cities – Haseeb Qureshi and Bankless
Haseeb, Dragonfly Capital
“Multichain thesis”
Best metaphor for blockchains is cities eg
Eth is Manhattan
Solana is LA
Blockchains you can’t just add servers and scale
Why?
Core is blockchains = trustless
Rules are set in place, everyone follows them
You must individually be able to verify
If you have to trust a 3rd party or a centralized service, then it’s no longer trustless
Must keep independent verification costs low
Web2 adds servers – speeds up
Web3 adds servers – slows down (more consensus / coordination required)
Different blockchains have different thresholds – BSC and Solana node reqs are very high, BTC and ETH are lower
How to scale a blockchain “city”?
3 approaches
1. rollups = build up (skyscrapers)
2. interoperability networks
3. alt layer ones
ONE – Rollups – extends L1, same trust guarantees, still same core rules – like skyscrapers, pack more in same space
ETH has burning need for more space now – right now it’s like an old city, very flat, lacks the skyscrapers + subways to connect them
TWO – Cosmos / Polkadot – internet of blockchains; same SDK / underlying guts, spin up own blockchain
Not a big supercity but small towns that exist to do one thing – like all mining, or all shops
Osmosis (Cosmos SDK chain) – focused on “Balancer” functionality
In top 100, not many application specific blockchains
Not likely to be lions share of activity
Demand competing for will be valued less highly than general use chains
THREE – Alt layer ones
When cities full, people go build new cities
Cities are far from each other, cultures different
New cities have a lot of redundancy – basic infra, roads, marketplaces, schools
Seems wasteful initially
Advantage is not burdened by technical debt / bad decisions
Can be different from existing cities – from laws to values
Solana is like LA – very far from ETH (NYC) – everything cheap and fast and for builders
Other cities and blockchains
Avalanche – Chicago (3rd largest in US, finance, kinda like NYC, newer and fast growing, next gen Wall Street)
Near – San Francisco (relatively new, but culturally important, embraces ETH2 vision, true believers in decentralization, idealistic)
People don’t really switch between very different cities – they kinda stay in similar places eg Californians stay in Cali, NYers go to Jersey, etc
Blockchains will become increasingly distinct from each other, less commoditized
Will there be power law winners?
Yes, NYC > LA > Chicago etc
Big cities where almost all value is, concentrated in ETH
Skyscrapers are valuable, but skyscraper value is WAY less than a city (LA)
Cross-chain bridges will be extremely valuable
Bankless – sees them not as cities but nation-states (instead L2s are cities, and L1s are nations)
to go between nations, need more verification / security, there’s friction
EVM = constitution = allow cities to sync up
ETH = federal government
Everyone starts friendly, but as competition grows, could start being more aggressive / restrictive
L1 security costs = military = minting of new tokens or transaction fees
Nice thing about L2 is military comes for free – how can alt L1s compete?
Security spending is marginally less valuable after a certain point
What’s trajectory of the chain?
People wanna bet on winners
Both cities and nation states have power law winners at any time
How bullish on non-ETH chains?
“Quite bullish”
Rollups are much harder technically – if a skyscraper falls – much less flexible than alt L1s
From user perspective, best L2 is a vibrant L1, and so far market has reflected that
ETH is amazing except when it’s congested and then it sucks
Bear market is about sentiment – not there right now