Ethereum is, without a doubt, one of the most complex ecosystems in the blockchain space.

This diversity is incredible, but it also makes it difficult to understand how the ecosystem works, where it's going, and how it will respond to future challenges.

The goal of this and the next couple of articles is for you to be able to understand how the ecosystem works today and where it might be moving. Most importantly, how does this let you make strategic decisions for your startup or your self.

A Wardley Map of Ethereum

One of the best tools I know for understanding complex systems is Wardley Maps.

A value chain — a chain of needs — (users, needs, and capabilities arranged and connected according to dependency) mapped against the four stages of evolution (Genesis, Custom, Product, and Commodity).

The following map is a high-level map of the Ethereum ecosystem. It is impossible to do a single complete map. I will create more detailed maps of some critical regions in future articles.

Positioning and Point of View

The Point of View of the map is essential. I sketched this map from the Point of View of the leadership team of a fictional Ethereum Inc.

Positioning is equally crucial, and since it has meaning, it also allows us to see and show movements.

The Y-axis indicates visibility. Stakeholders, their needs, and the capabilities they directly use are towards the top, with less visible yet still fundamental capabilities are further down.

The X-axis is where most of the game takes place. The further to the left indicates that the component is more of an idea or hypothesis, as we prove or develop things further, it moves to the right.

Just glancing at the map you can see most of Ethereum is towards the right and thus proven. There are, however, key areas that are still in the Genesis phase. In my diagram, most importantly, the infamously hard to find End Users.

Layer 1

I've grouped all of Ethereum's Layer 1 in the bottom right. I'm treating the Ethereum Mainnet as a being a singular thing in this map and thus a product.

If I was creating the map from the POV of a developer, I could have looked at EVM (Ethereum like) chains as a commodity.

ETH the token of the Ethereum Mainnet is a commodity both literally and figuratively. It is essential for the Ethereum Mainnet ecosystem but may not even exist in other maps.

Other parts of Layer 1 such as client implementations (Geth, Parity, Pantheon, etc.) for running full nodes, and the EVM itself have become commodities. They are now being used for many other blockchains, in particular in the enterprise space.

Developer Ecosystem

One of the most critical parts of Ethereum is its Developer Ecosystem.

One of the most critical parts of Ethereum is its Developer Ecosystem.

Some analysists only look at core developers, which is the small group of developers building and improving Layer 1. You can quickly work out this number by analyzing a few GitHub repos.

But the Real Power of Ethereum comes not from its Layer 1, but the incredible amount of diversity happening above:

dApps (Decentralized Apps)

Wallet developers like Metamask and enablers like WalletConnect

Solidity and other smart contract languages

Truffle and other development tools like OpenZeppelin

Public nodes like Infura making it easy to get dApps and wallets running quickly

Higher-level abstractions like uPort for Identity and 0X for token exchanges

The Developer Ecosystem is Ethereums greatest strength, its primary viral loop. New developers are excited by what they can do with existing tools and frameworks, join the community, and add to it.

In the map, the Developer Ecosystem straddles the Product and Commodity columns. There are so many developers and tools out there that it makes it relatively easy to get started building new projects.

Stakeholders and Needs

Decentralized technologies like blockchains do not have traditional centralized leadership, so to understand how they behave, understanding the various kinds of stakeholders and their needs is critical.

Ethereum is also a very complex platform with no clearly defined customers nor suppliers.

There are many more types of stakeholders than I could include in the high-level map above. Here is a separate map of most principal stakeholders.

You may notice I intentionally have not included Vitalik or the Ethereum Foundation. While they are founders, by design, I don't believe them to be that important for understanding the movements of the Ethereum 1.0 ecosystem today.

They still have an essential role in building Ethereum 2.0, which I will cover later.

Crypto Investors

Crypto investors are the financial foundation of the Ethereum ecosystem. New investors keep growing the size of this.

Their needs are:

Primarily they want their ETH to grow so they HODL (Hold on for Dear Life)

They also need to manage their ETH and tokens using wallets etc.

Their needs for hedging their Ethereum holdings or temporarily converting ETH to fiat has been primary drivers for the growth of DeFI projects such as the MakerDAO's CDPs and DAI.

In 2017/2018 they were also significant investors in the ICO space and thus funded much of the early and current development work. Regulatory put a halt on this, but as STO's become common, I'm sure they will be active in the startup funding scene again.

Developers

I mentioned Developers and the viral growth loop around them earlier. Due to their technical capabilities, they are also often Crypto Investors themselves and form most of the early adopters of products in the whole Ethereum ecosystem.

Their needs are:

Primarily they need to make a living , which I believe is oddly one of the least appreciated parts of the Ethereum ecosystem

They want to develop dApps and other tools

The kinds of developers attracted to the Ethereum ecosystem also want to to work on exciting, challenging problems

Startups

Startups in the Ethereum space fund most of the innovation happening outside of Layer 1. Like in the Developer Ecosystem, there also exist many different kinds of startups.

Their needs are:

Primary need early on is to Fundraise

Ultimately they want revenue and a business model

To get there, they need to acquire users

Finally, since many of these startups are operating in the financial space, they need to KYC users, so they don't go to jail

Miners

Unlike the Bitcoin world, miners don't seem to have an outsized influence in the Ethereum world at the moment. When implementing hard-forks, they tend to follow the wishes of the overall community.

We may see this change eventually as a move to Ethereum 2.0 minimizes their role in the ecosystem.

Their primary need is:

to earn mining rewards

Exchanges

Crypto Exchanges are currently the primary onramp for both users and investors into Ethereum. In the early days of crypto, we expected these to become utility services reasonably quickly.

Unfortunately, the increased regulatory heat has made this much more difficult and expensive for new entrants to join.

Well funded early innovators like Coinbase were able to invest heavily in regulatory compliance in first-world markets and have been able to build a moat around their offering in these markets.

Many exchanges have invested heavily in offerings for institutional markets.

Their needs are:

Earn Transaction Fees

Be regulatory compliant

Maintain banking connections

VCs

Since the fall of the ICO market, VCs are again the primary source of funding for startups in the Ethereum world.

Many people felt that ICO's would displant VCs in the blockchain space. I do think the experience in curation, analysis, and due diligence that a good firm has is going to be necessary for a long time.

Their primary need is:

Earn good overall returns for their Limited Partners

Governments

You often hear people in our space say that Governments should not touch blockchains. A truly decentralized system could theoretically operate without government intervention.

But looking above at the other stakeholders in the Ethereum world, they primarily consist of regular people and businesses. They live and operate in countries with governments and have customers in other countries.

Governments will get involved, whether we like it or not. It is crucial to understand the actual requirements governments have while regulating Ethereum related businesses. Not just to be compliant today, but also have an idea where things will move to over the next year or two.

Many governments and regulators will be very interested as Layer 2 relays, DeFi startups, DEXs, and other such new capabilities reach more widespread adoption.

Their needs are:

Ensure Tax compliance for most larger economies

Comply with FATF guidelines for most smaller economies

Protect citizens from fraudulent investment offerings

End-Users

It is all about end-users, right? We need to make it easier for them to onboard. Depending on who you talk to, it could mean:

Performing KYC

Download an in-app browser so they can try my new dApp

Open an account at an exchange and purchase ETH

Pay Gas

The above are probably all correct. There is, however, an even more significant problem.

Your average, typical person does not have any good reason to use Ethereum yet. Even if onboarding was simple, without a good reason, most people would not join.

The reality is that Ethereum today does have end-users. They happen to be developers, investors, or work for a crypto startup. They all have good reasons to use Ethereum and went through the steps required.

For this reason, I have placed end-users in the Genesis column. As the industry develops and more non-core stakeholders start becoming end-users, I will move it towards the right.

As this happens, old UX patterns that work with current sophisticated end-users may have to change. There could be pushback from early adopters to the requirements of newer less crypto-savvy users.

End users needs are:

Buy ETH

Manage ETH

Interact with dApps

Use a Stable Coin

Ethereum strongholds

In my view, Ethereums greatest strengths are its Developer Ecosystem, the startups working in the space, and the new DeFi platforms being built by them.

How Ethereum moves in other areas such as scalability will determine if it's current strength is enough to hold the new generation of blockchains at bay.

This article was primarily about laying a basic map for discussing where the market is going in future articles.

In the next article, I will cover some of the significant movements I think we will see over the next year in the Ethereum space.

Analyzing movement is an essential pre-requisite for building a strategy. It lets you look for strategic areas where you or your startup can compete.

Where to next?

I will continue to cover Ethereum, but this newsletter will be about the blockchain space as a whole.

There are a lot of similarities between maps of individual blockchains. It will be fascinating to map the differences and movements between them.

One of the most significant risks to successful blockchains is inertia from core stakeholders. Bitcoin has suffered in the past from this, but Ethereum is starting to do so as well.