People in the 1960s computer industry would say the market was IBM “and the seven dwarfs”[1] in reference to the other popular computer makers: Burroughs, Control Data, Digital Equipment, RCA, Univac, Honeywell and GE. They all poured fortunes into developing newer and better technologies than IBM, yet none could compete with its massive distribution advantage. Ethereum is the IBM of the smart contract blockchains: it may not be the “best” technology, but it works well enough and has amassed a distribution advantage that will be hard to overcome by its competitors.

Technology alone does not guarantee success. Distribution, a kind of network effect, is far more important. Each of IBM’s competitors was rather successful (at least at the time) and contributed major R&D breakthroughs to the IT industry[2]. But IBM had distribution: a sales, marketing and support machine that convinced America’s enterprise world that IBM was the machine to have. Nobody ever got fired for buying IBM, was the chant. Whatever didn’t work, you dealt with it. That was cheaper and easier than choosing an alternative without the same network of technical and social support. It took decades for the empire (bigger than all the dwarves combined) to dwindle, not by the hands of a competitor, but by those of a new standard – the microprocessor – which changed the cost and market structure of the computer industry.

Blockchains are not mainframes and the world is a different place. But I see some of the same dynamics playing out in the “war” between Ethereum and everyone else. I can’t really name all of Ethereum’s dwarves (I didn’t count, but it’s more than seven) but they seem to operate under similar market conditions to the IBM era. They tend to focus on superior technology: higher scalability, better consensus, faster transactions. But Ethereum has distribution. In its ~five years of life, it’s become a $20+ billion dollar network with a vibrant and growing ecosystem with millions of users, a thriving developer ecosystem, useful applications, robust infrastructure and an investor community that takes years to develop. It’s gone through failures, forks, bubbles and crashes. And it’s become a standard for both public and private applications. Most people building smart contract-based applications are doing so on Ethereum knowing full well it’s not “the best”, at least compared to the claims of everyone coming after it. But it’s here now (so many of its dwarves haven’t actually launched), it works (I use it daily) and everyone aware of crypto knows about it. It does the job and that’s good enough.

Anyone coming for Ethereum has a lot of catching up to do. Getting hundreds of wallets, exchanges and custodians to support your new network is hard. Building liquidity to the billions per day is hard. Building a large developer community is hard. Getting them to build apps is hard, successful ones even harder. Plugging into the mainstream consciousness and onboarding users is hard. Developing network self-sovereignty is hard. And even if you’re excellent at every single one of those, at the very least it takes time, and lots of it. And you’ll be chasing a moving target because Ethereum will continue to grow in the meantime.

None of this is to say there’s no value in building alternative smart contract platforms or similar competitors. This is more of a comment on what I think the market structure will look like for at least the medium term There is success to be found in the periphery of giants: IBM’s dwarves created a lot of value for a lot of people. Though it’s worth pointing out that the more successful ones found value in what were initially “niche” markets far from IBM’s mainframe business, like DEC with minicomputers. Some crypto projects mimic this strategy by building vertical networks for markets like gaming or fashion. In fact, if it’s profits you seek, there may be more value to entrepreneurs, communities and investors in the periphery, where it is possible to grab a bigger piece of a smaller, riskier pie. But when it comes to the top, in terms of size, scale and impact, ETH looks a lot like the IBM of our era.

[1] Decades later in the 80s it became the “BUNCH” after DEC, RCA, GE dropped out (and NCR popped in).

[2] Of the startups, Univac built the first “general purpose” computer and actually got to market before IBM, Control Data designed the first SUPER computer and my favorite, Digital Equipment, created the “minicomputer” market and was actually the first example of venture capital success as the star investment of the first-ever VC firm.