My world does not need so many layer 1 blockchain projects
Does the world need so many layer 1 blockchain projects?
This is the question I am mulling over today, an important question for an investor in cryptocurrency to ask.
Look, I am generous in the sense that I am giving you my 2 cents worth even though this is the only two cents I have!
Indeed, I am not highly knowledgeable about the blockchain industry, but I feel I need to start thinking about this question by writing it out.
Let’s go!
By layer 1, I am referring to the blockchain ecosystems out there that many projects are built on. The most famous is Ethereum. The rest are chains like Solana, Cardano, Elrond, Zilliqa, Hive and the like where others can build projects on.
Fundamentally, what every native blockchain is hoping for is that developers build projects on it, and users use them. That would make the native token valuable. That is what early adopters who had bought the tokens at ridiculously low prices are betting on. When the blockchain is of value, i.e., great adoption, prices should rocket!
That is how the game is typically played.
With that in mind, let’s go back to the question: Does the world need so many layer 1 blockchain projects?
The quick answer is no. Because there is a limit to the number of users and developers, or should I say, there is a limit to the number of willing funds to be poured into the blockchain.
Therefore, there will be a limit to how many layer-1 blockchains would be needed. If we have more blockchains, they will likely be some that have a limited user base. So, at some stage, the number of new layer 1s should dwindle. No one needs more layer 1 blockchain to build ecosystem, unless it is a new solution that the blockchain world badly needs.
As an investor, is it wise to invest in every reasonably good layer 1 blockchain? Of course not. One really must understand that some layer 1 blockchain will fail, no matter how good the founders made them sound. Simply because of the lack of adoption, and adoption is a hard game to play.
My take on this has led to me turning a blind eye to newer blockchains that appear recently. I don't follow that type of news anymore.
And no, I don't invest in Solana, Ethereum, Elrond or Cardano, because I don't plan to use their ecosystem.
Instead, I use Hive (duh!, see What is Hive?), which I find has whatever I need as a blockchain ecosystem.
The feeless transaction model is a feature that other blockchain does not have. The growing community actually talks about it on the blockchain, which I see as a win over other blockchain projects.
So no, my world does not need so many layer 1 blockchain projects.
P/S: This is not financial advice, and please do your own due diligence before investing.
If you read this far... and if you are a like-minded Hiver who is on the path to learning more about Hive and crypto investing, and if you like to be tagged when I write such posts, I welcome you to leave a comment below and let me know. We can form an alliance to support each other's growth.
You might be interested in this post, @deflacion, @jacoalberts, @young-kedar, @svanbo and @hankanon!
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My take is that there is room for a ton of blockchains but only a few will truly take off. Each one will be used for specific things because some are better than others for certain features/apps. There doesn't need to be just one or two who control everything and the options should be there for everyone.
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But the question is which one will be worthless and to avoid! !PIZZA
That depends on the people using the blockchains. There will be winners and losers but it will be tough to figure out who they are before things play out. You can make reasonable guesses if you do your research though.
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The problem is with me. My funds are limited! !PIZZA
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I temper my blockchain loyalty based on longevity. Hive is two years old. It split from Steem which is 6 years old. I anticipate that the life expectancy of any newer blockchain will be short. From an investor view, I try not to be blinded by the fandom. Crypto investing is speculative, so I recognize that losses and gains will tend to be manic and depressive. It's still fun, but it's not my long-term investment strategy.
So do you think Hive is a long term robust bet? As in … I mean once it pass a certain price, it won’t come down to that ever. And it will be 100x in 10 years. Do you have this kind of fantasy on Hive? !PIZZA
I think Hive blockchain is a commodity product. There's nothing proprietary and the entire chain can be replicated. It's more about distribution/branding than uniqueness.
We could wake up tomorrow to a hard-fork that creates E-Hive (like Elon Musk brands it, or G-Hive, like Google Hive becomes a brand) that air drops all Hive users the exact value of what they have in Hive. How many will start using E-Hive instead? Probably, a lot would. Which means that those in the old Hive system will see a great decline in value. And not only would the users jump ship to a new charismatic brand, but so would the dapps.
You probably wonder, so why hasn't that happened yet? The user base in Hive is too small to attract attention. It's a double-edged sword. Hive won't gain in value without the user base growing. If the user base grows to the point of attracting large investor attention, then someone with money and skill may decide it's easier, faster and cheaper to duplicate.
Do I think hive is 100x in 10 years? It's declined 9 times in value in 1 year. The number of active users remains about the same. Most of the new wealth created goes to the top 20 accounts. I want to believe it's a superior product and that superior products always win in the marketplace. But, that's not always true. I will keep playing the game. There's a chance of great return, but at best Hive is a speculative investment.
Very thought provoking response. I see your point and agree in part. I will have to digest it slowly while I enjoy it.
If someone forks the chain, would the community supports it?
If A forks it, what’s stopping B to Z from forking A?
Also if A forks it, will all the layer 2 apps be forked? And who will maintain the forked layer 2 apps?
My gut feeling is that community follow up is critical to the success of the forked chain.
Thanks again for your insights. More to chew on for me! ;)
!PIZZA
Is the idea or the community bigger? If the idea is bigger, then a new community can form around the fork that is larger than the old community. If the community is bigger, then the new fork doesn't happen, or doesn't have an impact.
You nailed it!
In regard to second layer tokens, they move with the crowd. I think the biggest risk for Hive is if Splinterlands moves elsewhere. The user base for Splinterlands is most of the Hive blockchain traffic. Never underestimate the greed of others.
As we all know because of Luna and FTS people's trust in the blockchain technology and crypto has been greatly reduced. Because the world's number three exchange will also run away and cause so much damage to people, no one could have imagined. I have known hive Project for the past five years. We can trust on hive because it is a total decantralized platform. Now anyway, it has become very difficult to trust any project.
I have the same sentiments too.
That’s why I don’t use CEX directly anymore for now. !PIZZA