Let’s look at some quick numbers.

Facebook experiences 30,000+ Likes / Comments per second, the Nasdaq sees 20,000+ trades per second, and MMO games like PlayerUnknown’s Battlegrounds handle over 1M concurrent users updating game state.

It would only take a few dozen apps and games of this size before you’re exceeding one million TPS in aggregate.

And then what do you do when the number of users doubles?

Clearly trying to run every single DApp on the same chain is not a practical approach.

It doesn’t matter if a blockchain can do a thousand transactions per second or a million transactions per second — no single blockchain will be fast enough to handle all the world’s decentralized applications on the same chain.

Scaling has to occur on Layer 2

The solution is obvious — these applications will need to be split up across multiple blockchains.

We realized this early on at Loom, when we presented the idea of application-specific sidechains. We foresaw that eventually some decentralized applications would grow popular enough to reach even 1/10th of Facebook’s scale, and the only possible way to run them would be on their own dedicated chains.

Of course, if you put these DApps that require thousands of transactions per second on their own standalone blockchains, they would be vulnerable to the same issues we discussed above in “Why Decentralization Matters.”

But if you put them on a sidechain to a blockchain that is sufficiently decentralized (like Ethereum) — you get the best of both worlds.

Sidechains provide higher scalability without sacrificing security

A sidechain can use a different consensus algorithm (like DPoS) optimized for DApps that require very high TPS or low-latency, while storing any tokens or data requiring a high level of security on the main chain.

This way, even though the sidechain is less decentralized than the main chain, the amount of trust required by users is minimized, since they have the option to move anything of real value to the main chain for safe keeping. (Even more so if you secure the Layer 2 assets with Plasma Cash).

By putting your DApp on a sidechain to a decentralized mainnet, you get all the benefits of higher scalability offered by a faster blockchain, while maintaining the same trust and security guarantees provided by the decentralized base layer.

Spencer, in his article, arrives at the same conclusion we came to:

The path forward: Highly decentralized base layer with increased centralization (and efficiency) on higher layers

And in fact, this seems to be the same model envisioned by Vitalik Buterin himself:

You could run StarCraft on the blockchain. Those kinds of things are possible. High level of security and scalability allows all these various other things to be built on top. Ethereum is a secure base layer that doesn’t have too many features. ~Vitalik Buterin

Ethereum provides a secure base layer for Layer 2 solutions to build on top of

Now we understand that:

Scaling needs to happen on Layer 2 The most important property of a Layer 1 is decentralization

So the real question is, if not Ethereum, what base layer would you build your Layer 2 on top of?

We’ve already seen that very few chains do decentralization as well as Ethereum does.

According to a recent ConsenSys report, there are “just under 17,000 nodes running the Ethereum blockchain across six continents, making it the most decentralized blockchain platform in existence.”

And any additional features another blockchain might offer, such as higher throughput, gas-less transactions, low-latency transactions, etc., can simply be implemented as Layer 2 services on Ethereum.

In fact, those features are exactly what we’re building at Loom Network with ZombieChain — a Layer 2, gas-free, low-latency DPoS sidechain to Ethereum.

And that’s just one of many Layer 2 scaling solutions under development.

It’s hard to fathom why a developer would want to replace Ethereum instead of simply building on top of it 🤔

Ignoring the obvious motivation that doing so allows them raise hundreds of millions of dollars in an ICO… 😉

“It’s like Ethereum… but BETTER.”

It’s kind of like reinventing the wheel.

Sure, you might be able to build a slightly better base layer that still provides sufficient decentralization AND throws in some additional features.

But then you’d somehow need to convince all the developers to jump ship to use an untested platform — and in the meantime, Ethereum developers could take whatever good ideas you had, and implement them on a Layer 2 chain on top of Ethereum.

It’s also extremely risky.

If a Layer 2 platform gets hacked or exploited, users’ loss is minimized because the majority of tokens and data of value is still safely stored on the Layer 1 (Ethereum).

But if you build a new Layer 1 blockchain that stores tokens that users pay real money for, the odds that your code will be exploit-free out the gate are slim — and in the case of an exploit, your users potentially have billions of dollars at stake.

In programming circles, there’s a rule that states “Don’t roll your own crypto.”

I’m going to go ahead and predict that after we see the first major blockchain exploit in which millions or billions of dollars in token value evaporate into thin air, we’ll start to hear a similar refrain among blockchain engineers:

Don’t roll your own Layer 1.

Which brings me to my final point…

5. New platforms are unproven, while Ethereum‘s security has already stood the test of time

At the time of this writing, there’s $61 billion in circulating ETH.

That’s a LOT of financial incentive for someone to try to hack / exploit the network.

Thousands of aspiring h4x0rs over the past 3 years, trying and failing to find an exploit in Ethereum

And yet to this day, almost 3 years after Ethereum’s mainnet launch, no one has managed to find an exploit in the platform’s security.

Note: Exploits have been found in individual smart contracts that developers have deployed to Ethereum, but I’m talking about the core platform itself.

The more time that passes without an exploit being found (despite a lot of people trying), the higher the likelihood that the platform is secure and won’t ever be exploited in the future.

This is similar to what Nassim Taleb called The Lindy Effect:

The Lindy effect is a concept that the future life expectancy of some non-perishable things like a technology or an idea is proportional to their current age, so that every additional period of survival implies a longer remaining life expectancy.

Basically, when a new blockchain platform springs up, developers will be reluctant to use it because it hasn’t stood the test of time.

What if it’s exploitable? What if it’s not truly decentralized? Why should I invest all my time building my DApp on top of it when I’m not sure if it’ll be around two years from now?

The longer the chain survives without suffering a major exploit, the more trustworthy and legitimate it becomes in developers’ eyes.

Yet again, Ethereum has a massive head start here.

For a new blockchain platform that launches today, it will take a few years before it has survived long enough for developers to view it as trustworthy.

But in that same time, Ethereum will continue to race ahead in terms of developer adoption and supporting infrastructure. (Not to mention real, live DApps and end-users).

Because Ethereum has such a long head start on all other smart contract platforms, it will always appear to be a better option from a security standpoint compared to a younger blockchain.

Especially when, as we mentioned before, any new feature a new smart contract platform adds that might tempt developers away can simply be built on Layer 2 — and still keep the security promises of Ethereum.

Conclusion: Ethereum isn’t perfect — but at this point, it’s hard to imagine it being displaced as the de facto Layer 1 for decentralized applications

JavaScript isn’t a perfect programming language, and for the longest time it was plagued with some pretty serious problems. But that didn’t stop it from becoming the de facto programming language of Web 2.0.

I predict we’ve already reached the tipping point where we’ll see the same thing happen with Ethereum for Web 3.0.

For all its flaws and short-comings, it also has some of the smartest minds in the industry working on solving them — and building tools and infrastructure to make them less of a hindrance.

And thus we come full circle to my developers argument. (Go ahead, you can watch that Steve Ballmer clip again. I won’t tell anyone. 😉)

It’s possible that, in the future, another project will spring up that offers some significant advantages over Ethereum, and manage to get all the Ethereum developers to jump ship…

But I wouldn’t bet my ERC20s on it.