Is it compatible with EVM? This is a problem

The first is the battle for DeFi liquidity, and then there is a craze for NFTs-are we now in the Cambrian explosion of smart contract platforms? The rising prices of Solana, Cardano , Polkadot , Terra, and Avalanche, as well as the market excitement surrounding the launch of Ethereum’s L2 scalability solutions (such as Arbitrum and Optimism, etc.) support this view.

However, as Messari analyst Ryan Watkins pointed out in a recent article on the “Smart Contract Platform Battle”, price does not mean everything. As shown in the figure below, measured by TVL (total lock-up value), the actual activities of these platforms are still far behind those of Polygon and other Ethereum side chains that are compatible with EVM ( Ethereum Virtual Machine) , and the price of Polgyon is only A small part of its new competitors.

Is it compatible with EVM? This is a problem

Above: The top ten smart contract platforms in total lock-up value (TVL), data as of September 27, 2021

How do Ethereum side chains with relatively high market capitalizations like BSC (Binance Smart Chain) and Polygon maintain “real” use cases? How did Arbitrum , a newcomer , quickly squeeze into the top ten in terms of TVL (total lock-up value)? What do they have in common?

Is it compatible with EVM? This is a problem

Above: Among the top ten smart contract platforms in TVL, EVM-compatible platforms (left) and EVM-incompatible platforms (right) .

As of the time of writing, 70% of the top ten smart contract platforms in TVL are EVM compatible, and 30% are incompatible ! EVM is a “virtual machine” that runs smart contracts. It was originally on Ethereum and is now compatible with a series of emerging Ethereum sidechains and L2s networks . You can think of EVM as the Android (Android) operating system -mobile phones using Android (whether it is a Google phone or other Android phones) can run some of your favorite apps. Why is this detail important when evaluating smart contract platforms? Who cares about this?

Is it compatible with EVM? This is a problem

Developers will care ! As Steve Ballmer (former CEO and President of Microsoft Corporation) warned us, developers are the key to success . If you are building a blockchain platform, your initial users are developers-they will be responsible for creating the attraction that attracts users (including great experiences, applications, use cases, etc.). This makes the choice of platform a key variable that developers need to consider from the beginning .

The battle of platforms first revolves around developers, followed by users.

This can explain many things. When we look at the top ten platforms of TVL again, this time together with their respective top ecosystem dApps , we can get the following chart:

Is it compatible with EVM? This is a problem

Above: Among the top ten smart contract platforms in TVL, EVM-compatible platforms (left) and EVM-incompatible platforms (right) are their top ecosystem dApps. Graphics: Messari

The above table seems to indicate that if you choose to be incompatible with EVM when building a new smart contract platform, then you are destined to encounter fragmentation. On the contrary, if you choose a route compatible with EVM, the emerging smart contract platform can obviously win over the existing top DeFi projects and users who use these DeFi projects . As far as EVM-incompatible chains are concerned, no matter how exciting they look, they must start to build new projects or clone other products, and avoid the network effects and momentum brought by other veteran DeFi products. This leads us to our next question: In the long run, how many types of smart contract platforms will the market support?

There are only two

Apple vs Microsoft, Android vs iOS, Chrome vs Firefox, Java vs .Net, AWS vs Azure, Intel vs AMD, Nvidia vs AMD… If you look at the technology stacks in various fields, you will find a common pattern: although There are many end-user products/applications, but technology platforms tend to be in a ” dual monopoly ” state :

Is it compatible with EVM? This is a problem

Obviously, we are now in the ” Before ” stage of the smart contract platform in the figure below , with a large number of potential solutions (including EVM, Polkadot substrate, Solana WASM, etc., as shown in the figure below). But how long will a merger take place? If mergers do occur, can we really imagine a future in which EVM fails to become the “one end” of the “duopoly”?

Is it compatible with EVM? This is a problem

Are those smart contract platforms that are not compatible with EVM really just vying to become the “one of the duopoly”? Let’s extend this analogy to take a look at the comparison between Windows and Mac operating systems . Windows is the operating system used by many original equipment manufacturers (OEMs) to produce their products, while MacOS is only used on Apple’s own computers. This is no different from the blockchain field-every smart contract platform is essentially a giant distributed computer. Some blockchain platforms (just like OEMs) use EVM as their operating system, while other blockchain platforms prefer to use their own customized virtual machines. Just like the battle of computer operating systems, the design choice of this virtual machine has a major impact.

dApps developers (most developers will form small teams) are unlikely to be able to target a long list of virtual machine types. They are more likely to target the number one and second virtual machine types in the market. And they have a lower priority for integrating their dApps into small chains. In selecting EMV compatible or not compatible EVM virtual machine type, they may be based on “Blue Ocean Strategy vs Red Sea strategy”, that is, either choice compete competitive EVM ecosystem , or select a non-growing ecosystem EVM Carrying out product clone extension and differentiation, and hope that it will win in the long run .

One example is Serum, a decentralized exchange built on Solana (not compatible with EVM). Although the standard DEX (decentralized exchange) model in the EVM world is an automated market maker (AMM) model that uses a liquidity pool , Serum takes advantage of the speed and low-cost environment of the Solana chain to create a central limit DEX in the price order book (CLOB) mode. This CLOB mode allows a completely different set of dApps to be built on it, but at the expense of interoperability with other EVM-based applications.

Before the emergence of a clear competitor to EVM, Serum’s model seems likely to continue: This is an island platform where all dApps deployed on the EVM chain and incompatible EVM platforms (the reason why it is an island is because of these Platforms that are not EVM compatible only manage the war between their own dApps. So, did you decide to choose EVM or not?

Is it compatible with EVM? This is a problem

Above: The advantages and disadvantages of smart contract platforms that are compatible with EVM versus those that are not compatible with EVM.

As shown in the figure above, the advantages and disadvantages of a smart contract platform compatible with EVM are :

Advantages :

  • Existing experienced users can be migrated over;
  • Inherit existing dApps;
  • Higher technological maturity;
  • It is easier to achieve interoperability with the Ethereum ecosystem, which is the so-called “network effect”

Disadvantages :

  • Capital circulation is easy, because the cost of capital conversion is very low;
  • Constrained by the Ethereum roadmap, this may interfere with your release plan;
  • Innovation is constrained by EVM rules.

In contrast, the advantages and disadvantages of smart contract platforms that are not compatible with EVM are as follows :

Advantages :

  • Can realize differentiated functions (such as Serum);
  • Have a “lock-in effect” on existing users;
  • Independent of the Ethereum roadmap;

Disadvantages :

  • Barriers to entry for developers: the need to use a new language/framework/development environment;
  • Entry barriers for users: need to use new wallets/interfaces/applications;
  • Need to increase the user base from scratch;
  • Due to the island state, the network effect is reduced – cross-chain DeFi composability

Based on the above information, this gives us a potential framework to evaluate the most exciting EVM projects and non-EVM projects.

EVM universe

Is it compatible with EVM? This is a problem

Above: Comparison of fees , TPS , incentives/attractions of major EVM smart contract platforms .

EVM-based Ethereum sidechains, Rollups, and other L1s public chains are essentially competing for the same dApps and users . Capital flows quickly. If users can get benefits, the newly launched EVM compatible chain will be enthusiastically adopted by users. But as long as the cake is still growing, this may not be a zero-sum game . This industry is still very young. As long as the EVM compatible chain can be competitive in terms of cost and performance, and at the same time attract users to bring and stay in an incentive manner, then it may survive.

In the EVM universe, differentiation is a subtle matter: Compared with other EVM-compatible L1s public chains, Ethereum Rollups claims to have a better degree of decentralization, but the market has not yet given a premium. As more interoperability agreements go online, the cross-platform structure has great potential. For example, providing collateral on one EVM compatible chain and making loans on another EVM compatible chain will expand the availability of the entire economy. This field is likely to be an open market, with multiple platforms competing for the attention of users -just like the Windows PC market.

Platforms that are not EVM compatible

Is it compatible with EVM? This is a problem

Above: Comparison of differences and incentives/attractions between several smart contract platforms that are not compatible with EVM.

In sharp contrast, a platform that is not compatible with EVM needs to provide a model that is significantly different from the Ethereum model , and it also needs to increase its user base from scratch . These projects will have to demonstrate why their smart contract or execution environment is the best, and use incentive plans and funding to drive adoption -and EVM-based Arbitrum does not need to do so to achieve exponential growth.

Although these EVM-incompatible platforms may be developing in a relatively less crowded field, they may be fighting an uphill battle for the head position. It is hard to imagine that dApps developers, users, and even the most innovative wallet companies can successfully cope with the different development languages, architectures, update schedules, and roadmaps of so many different (EVM-incompatible) platforms .

Based on this argument, it seems likely that there will be a winner in the non-EVM field, absorbing most of the non-EVM user base , and repeating the “duopoly” model we have seen time and time again. This is likely to end up being a battle between execution and fundraising capabilities—perhaps allowing older, mature projects to gain an advantage. However, another way forward for these platforms is to become an application-specific chain : Terra is an example, which focuses on building use cases around its native stablecoin.

Write at the end

When evaluating a smart contract platform, it is useful to first determine whether the platform is compatible with EMV. This allows us to look at its prospects from the perspective of “blue ocean strategy vs. red ocean strategy”-EVM- based platforms compete in cost, performance, and incentive plans, while solutions that are not compatible with EVM are developed with highly differentiated products. Unknown territory .

Both strategies are likely to succeed, as the newcomers Solana and Arbitrum have recently demonstrated. Whether the pattern of smart contracts will continue to exist in the form of an oligopoly , or the transition to a fierce duopoly , will be an important model worthy of attention in the next few years. 

Posted by:CoinYuppie,Reprinted with attribution to:
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