Ethereum Parasites v. Ethereum-Alts and Where Tezos Fits In
Someone said to me recently that Tezos is just one of a myriad of Ethereum-killers, lost in the crowd, impossible to differentiate, and so it will drown in a sea of sameness.
Damn that is depressing. Is it true? Well let’s categorize things.
First you have the chains that are essentially Ethereum parasites. They have built a centralized machine meant to run Ethereum dapps and siphon off its liquidity. Those chains would be things like Binance Chain and Avalanche. This is not where Tezos fits in. I would argue that Tezos is not so much competing against centralized chains — though the market does not recognize this.
Next you have Ethereum-alts. These are chains trying to build something better than Ethereum by building from the ground up and by staying true to the point of a blockchain, namely decentralization for the sake of censorship resistance, robustness, and ecosystem building. These would be chains like Cardano and maybe Algorand. To me, this is where Tezos would fit in.
Rational Person: So how is Tezos doing in this crypto-competition?
Me: Well if you judge based on coinmarketcap not great. (Tezos is rank 47 as I write this line.)
Rational Person: Okay the market has spoken! The market is efficient! ha!
Me: I would argue that crypto is even less efficient than other markets and that here in crypto the marketcap is roughly determined by 90% meme marketing and crowd madness (and sometimes 100%) and 10% by tech; but that you also have to throw in some undisclosed percentage affected by the VCs (and protocols themselves) due to the free money giveaways, which somewhat knights liquidity winners (while the hot money runs hot anyway). So at this point it feels like Tezos is competing on an uneven playing field. It is like you open a pizza place and someone opens a pizza place right next door and starts giving out free pizza. At that point it does not matter if your pizza is better, the other place is free.
Rational Person: What is the point of trying to build a better Ethereum if all the money is in building a centralized version of Ethereum and porting over its dapps and some of its liquidity (and then making it rain with VC and protocol liquidity too)?
Me: Grit. I think Tezos is developing grit and an actual ecosystem/network that they can call their own. The things being built on Tezos are not simply ported over from Ethereum; they are built from the ground up on a system that itself has been built from the ground up; they have some uniqueness, sparks of originality. Also Tezos is attracting actual users, people who are there because they want to use the thing, and that builds a strong foundation.
Rational Person: Like what?
Me: Well, for example, The Transmission is described as a crypto-techno-horror-adventure. (Check it out here: https://thetransmission.xyz/) That is something that was not simply ported over from Ethereum (nothing built on Tezos is ported from Ethereum). It has creative energy behind it.
Rational Person: Well it isn’t even finished yet. So why are you using it as an example?
Me: Okay, fair point — though it will be live very soon. But okay, likewise HEN the biggest Tezos marketplace is a unique freewheeling creation that some people hate but that many artists and collectors love — again a unique creation. Check it out here: https://hicetnunc.art/
Rational Person: I heard HEN fell apart?
Me: The lead developer quit and shut down the frontend. But the community has been banding together to create new frontends, token systems, and so on to keep it alive, which is a perfect example of decentralization in action. And they are keeping it alive for good reason! Outside of Ethereum marketplaces like Opensea the Tezos marketplace HEN is probably the most vibrant in crypto. And if you lump all the Tezos NFT marketplaces together — Kalamint for example is another good one (find it here: https://kalamint.io/ ) and Objkt is another (find it here: objkt.com )— Tezos is probably the second best NFT space in crypto. For whatever reason Tezos has managed to attract lots of highly talented artists who are building exciting NFT stuff.
Rational Person: Why has Tezos managed to attract interesting artists? And can you give me an example of some artists or are you blowing smoke up my ass?
Me: I will take the second question first. John Karel would be one example.
Note: To all those who think clean NFTs is a marketing gimmick and that artists do not care on average about saving the environment, John Karel is a very popular artist on Tezos (has sold millions of dollars worth of NFT artwork on the platform) and he literally does not want his artwork wrapped and sold on Ethereum. I think that narrative of artists not caring about clean NFTs is something that is projected by crypto traders themselves because traders on average do not care if a blockchain is polluting or not because their aim is the almighty dollar. Artists like to make a buck too but their motivations on average are more than just chasing the almighty buck. (In fact some would say you cannot serve two masters.)
Universal Everything is another stellar artist producing NFTs on Tezos platforms.
And looking at the twitter profile for Universal Everything we can see a note about clean NFTs.
Rational Person: So are you saying that talented artists are coming to Tezos because of the clean NFT thing?
Me: I do think that is part of it. But another part is that Tezos itself is imbued with creative energy because it is not a copy-paste chain and I think the artists can sense that. It affects everything from the wallets (such as Kukai where you can send anyone with a Twitter profile or a gmail account a Tezos token or an NFT) to the the very dapps that are built on the platform and exist in their own unique way — separate and distinct from the hegemony of Ethereum and its many copycats. Fittingly, it could be that artists sense vibrant creative energy and traders do not!
Rational Person: So Tezos has some very good momentum in the NFT space. Why is this not reflected in the standing of Tezos on coinmarketcap?
Me: Meme marketing and the madness of crowds is unpredictable. But when you start building unique creation after unique creation after a while the synergies start to grow and the network effects build because you have a foundation of real users not a foundation of liquidity pirates. And on Ethereum Parasite Chains you are attracting liquidity pirate users, not folks who actually want to use the thing.
Rational Person: Well Cardano is trying to build something different from the ground up.
Me: Yes! But they have not built all that much yet. Instead they have spent years talking about building and talking about how great it will be once it is actually built. Meanwhile Tezos has built the thing. The system works and is plowing ahead. Functional POS. Functional on-chain governance. Functional systems built for formal verification. Functional native smart contract languages and so on.
Rational Person: I have to ask the obvious question. Tezos is way ahead of Cardano technologically and yet way behind in marketcap — why?
Me: From what I said originally — marketcaps are 90% based on memes and 10% on tech. The meme of Cardano is very strong.
Rational Person: What is the meme of Cardano?
Me: That it will one day become Tezos — that it will one day be able to do the things that Tezos can do now.
Rational Person: So the meme of Cardano is the reality that is Tezos?
Me: Yes.
Rational Person: And yet Cardano is worth multiples more. That must be frustrating for tez hodlers.
Me: Yes.
Rational Person: But also it may be doing better because it is still in the hopes and dreams stage. In that stage the sky is the limit, and charlatans can promise you sugarplums and fairies. But with Tezos the rubber has already hit the road and you can see that it is not so easy to take on the network effects of Ethereum
Me: No it is not. But Tezos is doing so incrementally. When all is said and done — when both chains have ossified it will be less about the narrative and more about what the thing actually is. And hopefully by that point at least Tezos will get its day in the sun.
Rational Person: Oh boo hoo. Tezos is not getting its just desserts. I’m playing the world’s smallest violin and calling the wambulance — that’s how bad I feel for you. Tell me what Tezos is actually doing. Why should people be excited about it?
Me: Well a generative NFT marketplace called fxhash has just launched on Tezos, attracting talented artists such as wblut, who just released a series of 512 generative NFTs there. (https://www.fxhash.xyz/generative/364/collection)
Rational Person: That is a single dapp. Who cares. Ethereum releases so many dapps you cannot even keep track. If you can keep track of what is being released and create a neat little ecosystem map then that proves it is not impressive.
Me: Right, like people thought they would be able to keep track of all the websites on the internet at first, because at first you could, but with exponential growth you eventually reach escape velocity.
Rational Person: What are you even talking about? That sounds like meaningless techno-babble.
Me: Point taken. But I think increasingly more things will be built on Tezos and that will start to get people excited.
Rational Person: Why do you think that will happen?
Me: Well it has been happening on the NFT side of things. Interesting marketplaces and projects. But I think it will start to happen in general too. And we have to go back to the categorizations at the start of this blog to see why.
Rational Person: Ethereum Parasites and Ethereum Alts.
Me: Yes, so the Ethereum Parasites are centralized. They can spin things up fast because they are just copy pasting Ethereum and in some case porting over the same dapps. But as Ethereum scales that becomes a losing strategy. Ethereum will have rollups and sharding to handle all that. So next we should consider the Ethereum alts, like Cardano and Tezos.
Rational Person: And let me guess: Tezos is way ahead of the competition?
Me: Tech-wise yes. The others have a lot of catching up to do, and Tezos is not slowing down; also it is doubtful the others will ever reach the quality of the Tezos build. The engineers are top notch.
Rational Person: But why does Tezos have any chance against Ethereum? Ethereum has all the network effects.
Me: Tezos was built from scratch (from the modular architecture to the programming languages, etc) to facilitate the creation of safe smart contracts. Ironically that would be perfect for defi which are financial applications with billions of dollars on the line. However, most of the early network effects of defi have gone to Ethereum — but there also have been many needless hacks/bugs that may not have happened had those systems been built on Tezos. However, in the frenetic degen world of defi builders and users do not care about that — right now it is all about existing liquidity and network effects.
Rational Person: Well if builders and users are content why rock the boat?
Me: In the future, I think perhaps institutions will place a premium on the ability to build safer with less of a chance of producing catastrophic bugs. Institutions are not really yolo friendly. And maybe defi will come around to wanting safer smart contracts at some point too.
Rational Person: Well why aren’t institutions building on Tezos?
Me: They are! Society General is building a bond system —
Rational Person: No that is Ethereum doing that.
Me: They are doing it on Tezos too. (Link here: https://www.ledgerinsights.com/societe-generale-security-token-on-tezos-public-blockchain-digital-asset-service/) And Tezos is a leader in the security token space.
Rational Person: zzz…
Me: Okay yeah that is not the narrative of importance right now but narratives change in crypto all the time. But I am mainly just making the point that institutions are choosing Tezos — so the safer smart contract thing might already be catching on.
Rational Person: Okay so it sounds like Tezos can make a case for safe smart contracts, and that it is doing quite well in the NFT space but is still trying to find it’s footing with defi.
Me: Well it is making progress with defi. Just recently Tezos released ctez which allows you to lock up your tez and to receive ctez in return so you can participate in defi while continuing to bake. It is a public good so there are no fees. Link here: https://ctez.app/
Rational Person: Well, what about when Ethereum gets POS in about eight months — will Tezos lose its edge with NFTs?
Me: First of all eight months is an eternity in crypto. But also Ethereum still will not be cheap to mint on the base-layer: POS will not change that. Sure you can mint on the L2s but that is not user friendly. Also Tezos has always been a POS chain, while Ethereum has been polluting with POW for years.
Rational Person: What does that matter if Ethereum is going to change to POS?
Me: Artists will probably remember that. It is similar to the electric car space. Tesla is a pure play electric company without the baggage of internal combustion energy factories. That is also better for the brand — that Tesla has never been polluting. Some people care about that sort of thing. Likewise Tezos has always been a clean chain while Ethereum has put many tons of CO2 into the atmosphere.
Rational Person: That seems like a stretch that Ethereum will be “tainted” because it did not have some immaculate conception as a POS chain.
Me: Yeah, probably, but I have seen so many stretch arguments made by Ethereum influencers on Twitter I thought I would try my hand at it here for Tezos.
Rational Person: Please stop and leave it to the professionals.
Me: Okay, fair enough.
Rational Person: Out of curiosity what have you seen as a stretch argument for Ethereum that has annoyed you?
Me: I can’t remember the exact wording — and I have seen it in multiple forms — but basically that Ethereum will be the only provably neutral sound money in the existence of the universe.
Rational Person: Yeah I know that one — because of its distribution as a POW chain and because of its off-chain governance system, folks argue that it would not be an oligarchy running things. On the other hand, Tezos people would say that Ethereum decisions are made by a cabal. So is that your side of the argument?
Me: No, I think the oligarchy versus cabal debate is moot — well it will be moot eventually.
Rational Person: Oh interesting why is that?
Me: Because at some point in the not too distant future Ethereum and Tezos will ossify. When they ossify you really will not need a governance system. So the whole point of the governance system will have been (a) how effectively and (b) efficiently it delivered the chain to the point of ossification. And I believe that on-chain governance, particularly the Tezos form, allow consensus to occur faster — and so reaching that point of ossification could very well be more rapid. And once you have ossified it is hard to argue that it is not a neutral system — especially because Tezos has had years to distribute at a cheap price as it has never really pumped, and also the crowdsale had 30k wallets participate and did not give sweetheart deals to VCs. The distribution on Tezos is very good.
Rational Person: Maybe so but I disagree that chains will ever ossify. People will always be arguing about issuance, from now to eternity.
Me: Well that should be determined by security parameters—
Rational Person: But people will keep arguing about it.
Me: Yeah possibly. But by and large I think my point stands. And so I see no reason that both folks who believe in on-chain and off-chain governance couldn’t see that Tezos is a neutral system due to its (a) high decentralization and (b) ossification (once that point comes).
Rational Person: Well how will Tezos scale? Because even assuming all this is true it does not matter if Tezos cannot scale.
Me: Tezos is working very hard to increase tx per second on the baselayer and to speed up finality without sacrificing decentralization. It will do so very soon in an upgrade called Tenderbake. That should give it an edge against Ethereum because they will both have L1’s supported by rollups and later by sharding. But Tezos should have faster and cheaper (decentralized) layer 1 txs. Also, Tezos is in a very good position to implement rollups because it has already integrated Sapling. And it will integrate rollups at the protocol layer which will offer some minor improvements compared to how Ethereum integrates higher up the stack.
Rational Person: Only minor improvements?
Me: Yes but these things add up incrementally over time.
Rational Person: Yeah that might be a rational point but it does not pay to be rational in crypto. I’m going to yolo into…
Disclaimer: Not financial advice. Long eth and eth tokens, Long tez and tez tokens. Crypto is highly risky because it is a meme-lord playground and memes are unpredictable; also the madness of the crowds could cause your investment/speculation to crash 99% or more — as has actually happened to me! — so if you are investing/speculating with your hard earned cash in the crypto circus keep in mind a horrendous crash is always possibly right around the corner. The Stock Market Crash of 1929 comes for crypto at regular intervals.
Thanks: Elenion, David_99, Guillaume, and Oyster
