How to Get Users on Ethereum

There was a thread about how to get users to use Ethereum over Solana, and I thought I'd do a brain dump on my thoughts and have all of you critique my ideas and tell me I'm wrong.

Fundamentals

There are 4 things that users look for in a blockchain:

1. Transaction Cost - How much does it take to update blockchain state?
2. Finality Speed - How long does it take to know my state change is forever?
3. Credible Neutrality - Is there a chance that the network will be biased against me?
4. Actionable - Are there things for me to do on the chain.

Let's take a look at some blockchains:

Bitcoin:

• Transaction Cost: High ↑
  
• Finality Speed: High ↑
  
• Credible Neutrality: Yes ✓
  
• Actionable: No ????

Bitcoin was (is) slow and expensive, but it was objectivley neutral for the first 5-ish years of its life - anyone could mine it, even if it meant buying an ASIC and Bitcoin miners weren't discriminating against addresses or users. Things have changed as centralized relayers with blacklists have come into play and mining has become very centralized.

Ethereum:
- Transaction Cost: Medium →
- Finality Speed: Medium →
- Credible Neutrality: Yes ✓
- Actionable: Yes ✓

Ethereum launched when people were already fed up with Bitcoin transaction costs and finality speed. Bitcoin promised being a replacement for cash, but failed to uphold that promise and refused to scale. Ethereum had, at the time, very low fees and low finality speed when compared to Bitcoin, and it was neutral because anyone was able to GPU mine and participate in the network.

Solana:
- Transaction Cost: Low ↓
- Finality Speed: Low (let's ignore failed txns for this discussion) ↓
- Credible Neutrality: No ????
- Actionable: Yes ✓

Solana offers very cheap transactions with low finality speed (again, ignoring all the failures), but has no neutrality. A PoS network without slashing means one of the following are true:

1. The network uses a cryptographic mechanism to make cheating impossible.
2. The network allows cheating.
3. The network relies on an off-chain mechanism to ensure valdiators are punished.

Solana uses option #3 via the Solana Foundation, which means they have unmatched power over the network, and they have unmatched power over all users on the network.

What about L2s?

• Transaction Cost: Low ↓
• Finality Speed: Low ↓
• Credible Neutrality: Depends ????
• Actionable: Yes ✓

Looking at the equation with an L2 lens doesn't look much better than the Ethereum or Solana result - they tend to have fewer assets, less liquidity, some are neutral/some aren't, and even the ones with exit hatches don't appeal to retail because they don't plan on using it and would struggle to figure out how. L2s bring fragmentation without bringing any user-facing benefits to users. That will go away with time, but users want to make money now. Telling users that Ethereum will eventually scale and L2s will eventually be unified just makes the Ethereum space look behind while also being older than Solana.

Side note: I sometimes wonder if having an exit hatch makes L2s look less reliable than Solana. If L2s are so good, why are they worried about being down? (that's a rhetorical question)

What is the Primary Market?

Since Solana has gained traction with retail users, that tells me that the current blockchain market values (low txn cost + low finality speed) > credible neutrality.

Back in 2013, this would have shocked me. When Ethereum launched, this would have shocked me, especially since developers seem to have the same view of the inequality.

Retail users care about one thing: How can I make as much money as possible?

This is where "actionable" comes in. There is nothing to do on the Bitcoin blockchain, so retail doesn't care about it. There's a lot to do on Ethereum, but the cost to develop new tokens on Ethereum makes it too expensive for fly-by-night pump and dump scams, which retail loves - it's the only way they know to make money. Solana, being very cheap and having plenty of new things to speculate on, makes it a very tempting place for gambling.

A retail user who currently transacts on Solana has zero incentive to move to Ethereum based on the fundamental difference that Ethereum is neutral (therefore safer) because the lack of neutrality won't affect their profits.

• They don't care that a small validator set controls their money.
• They don't care that the chain can halt at any time and lock them out of their money. They care during the outage, but quickly forget.
• They don't care that they have to resubmit transactions all the time because Solana doesn't have a mempool - retrying is cheap.
• They don't care that the Solana Foundation may someday stop subsidizing validators which will make running a validator a money-losing venture.
• They don't care that the chain will shut down permanently, stranding all of their money. At that point, they may be very happy that USDC is centralized and Circle may choose to recover their USDC if they can prove they owned them.

Once small admission: I don't beleive that users actually care about speed, but I think they look at the number and say "faster is better". I think they actually care about price up until the point that finality takes too long - finality on Bitcoin is a great example of taking too long.

Retail?

How do we get retail users to value neutrality over low fees and finality speed? We don't.

Until there is a catostrophic failure on Solana which affects them personally, I don't think they'll care. The only real chance I see of that happening is if Solana has it's Tornado Cash moment, but instead of targetting Tornado Cash, the Solana Foundation is told to halt a heavily used contract, possibly a stable coin.

That raises the question: Is there a market for credible neutrality?

I think there is, and I think this is the market that Tom Lee is accelerating.

Who wants Neutrality?

When does the equation flip to (low txn cost + low finality speed) < credible neutrality? When the entity creating or facilitating the use of on-chain assets has accountability to their users!

That isn't the case today.

If you launch a product on chain and that chain shuts down, you can walk away and hide behind your ToS and deflect blame to blockchain validators.

Tom Lee!

I beleive Tom Lee has realized this isn't the case for companies in the financial services industry (FSI) - they have a legal responsibility to their users and if the chain fails, they will be held responsible. They may be able to call out chain termination as a risk in the short term, but that won't be acceptable in the long run.

Not only is Tom selling FSI companies on the value of neutrality and explaining how critical it is to their business, he's showing his personal confidence in the market by publicly working with an Ethereum treasury company. This means a lot in the FSI space.

FSI to the Rescue?

Once the FSI onboards to Ethereum, it will start driving user adoption, though I suspect most users won't know they're using a blockchain and will instead think their using their brokerage account like they always have. At that point, users end up caring about neutrality without even realizing it. They won't pay more to transact on Ethereum, but they won't have to because their brokerage account is paying the transaction fees for them.

Etherealize

That's not to say that Etherealize and others like it shouldn't start marketting Ethereum and combatting the misinformation out there, but I don't see how that will influence retail users to choose Ethereum over Solana, or really any chain that's widely supported by exchanges and has a regular rotation of assets to speculate on.

The real goal for Etherealize should be to get things that people are using today onto Ethereum. That will expand what's possible on Ethereum by creating a larger network effect. The pull of that network effect will incentivize other developers to build on Ethereum despite the cost to deploy contracts, and if those assets are only on Ethereum, there won't be another chain that can compete. Users will stop caring about transaction fees once they're relying on an intermediary paying them.

Closing

These are my random thoughts. Please tell me where I'm wrong and how Ethereum can regain smart contract marketshare without relying on centralized businesses to bring the users.