At the end of this month (July), the Ethereum public blockchain turns 10 years old. An inordinate amount of time in the world of crypto has been spent on discussing whether or not Ethereum will succeed and become the foundation for the next iteration of global commerce and finance. All this speculation is wasted effort. Ethereum has already won. The losers just don’t know it yet.
You may be tempted to discount my opinion because I’m a notorious ETH “maxi” and have been for a little over a decade now. Hear me out anyway.
Side note: Yes. Really. Over a decade. Vitalik Buterin got me started on Ethereum and in my prior incarnation as an IBM executive, I showed off IBM’s first foray into blockchain technology at CES in January 2015. That’s a story for another day, but I’ve been in this since the beginning.
Blockchains are, first and foremost, technology platforms. We talk about them like they are financial systems, but they behave, and they grow, like technology platforms. And if we look at the history of technology platforms, we can see some clear patterns emerging that Ethereum tends to follow.
First, it’s a winner-take-nearly-all business. IBM has 100% of the mainframe software business. Windows has 90% of desktops. Android covers about 90% of all smartphones. TCP/IP is about 99.9% of all network traffic.
This pattern repeats itself because computing platforms have two factors going in favor of a winner-take-all business model. First, zero marginal cost from adding users. Each additional user costs nearly nothing, so networks can add new users for free.
Second, network effects mean that more users make networks more valuable and, as a result, it’s extremely hard (but not impossible) for laggards to catch up with the leaders.
In the early days of platform development, it’s often easy for winners to come and go. Network effects aren’t big enough matter, and better products can sweep aside prior leaders. We saw this early in the world of PC and mobile devices as early leaders (Apple II, Commodore 64, and later with Nokia and Blackberry smartphones) were swept aside by impressive new platforms.
In all those cases, however, the platform “type” was itself very new (less than a decade old) and broad adoption was also relatively low (under 10% of the public). With Ethereum’s official 10th birthday at hand, we have passed by both of those metrics. By many accounts more than 20% of the U.S. population owns crypto and blockchain platforms are more than a decade old now.
There are, from a technological standpoint, better blockchains than Ethereum out there. One of the foundation lessons of global standards is this: the best technology never wins. From video cassettes to DVDs to mobile computing, platforms gain traction when they get “good enough” for a certain set of use cases like payments of NFTs. Many of the most successful platforms never really solve all their key issues and they often get shoe-horned into use cases for which they were never really intended.
Case in point: the internet itself was never designed for voice and video and has never really fixed issues with quality-of-service management. But it’s good enough and we all have it, so that’s how we make calls these days.
Yeah, but?
So, if Ethereum really won, you might be asking, why are there still so many other thriving blockchain ecosystems? I think there are two answers.
First, big network and technology leadership wins don’t happen instantly. They take years to manifest fully and in the fog of battle, it can be hard to see who is pulling ahead.
With Ethereum’s transition to proof-of-stake and the creation of the L2 ecosystem, it’s clear the network has seen off its biggest challengers and is steadily building on an already dominant position. Number two players will come and go, but turning back Ethereum’s dominance now looks nearly impossible.
Ethereum had a near-100% share of the smart contract ecosystem for a long time. As other chains came online, Ethereum’s share of key measures like the DeFi ecosystem fell significantly, bottoming out at around 50% in 2023. Since then, it has stabilized and started to rise again, fueled by the success of the L2 ecosystem. No other single ecosystem has even a 10% share of the total market.
This isn’t an unusual pattern. Microsoft Windows became the largest desktop computing platform in 1984 after a fierce fight in a crowded market. At that time, it still faced intense competition from Commodore, Atari, Apple and others. NeXT, Commodore, Atari, and the Apple II continued to be sold well into the 1990s. BlackBerry sales actually kept rising for the first two years the iPhone was available. Only the Mac survived the long-term PC competition.
In the mainframe business, the exit path was even longer. IBM came to dominate the mainframe business after the release of the System/360 in 1964. Unisys, IBM’s last global competitor created by the merger of Burroughs and Sperry (of Univac fame), manufactured their last proprietary hardware mainframe in 2015.
Secondly, the structure of the blockchain ecosystem itself will further extend the “shelf-life” of those networks that failed to gain traction. Most of these are run by foundations, not corporations. As such, there are no shareholders who can demand a return on their capital. Consequently, there’s no real exit pressure on chains that haven’t succeeded. Expect them to keep on releasing minor updates and mountains of Ethereum-related-concerns on X for the foreseeable future.
If there is one final lesson we should take from the world of technology standards, it is this: once locked in place, it is astonishingly difficult and exceedingly rare for the leaders to lose their top spot. Windows has been the winner on the desktop since 1984. IBM has won the data center since 1964. I’m willing to bet that Ethereum will still be the world’s preeminent blockchain ecosystem in 50 years.
Disclaimer: These are the personal views of the author and do not represent the views of EY.
