After reviewing the properties of Bitcoin, I basically focused most of my energy on products that can provide services and value in the crypto ecosystem. This is because the future of Bitcoin largely depends not on Bitcoin itself, but on products that can provide real services and value in the crypto ecosystem.
If more and more users find the services and value they need in the crypto ecosystem, Bitcoin's price will naturally rise. If the real services and value provided by the crypto ecosystem become fewer and fewer, shouting "digital gold" or "store of value" will be futile.
When it comes to providing real services and value, the first layer of public chains is the most important in my view. They directly provide services and value to the entire ecosystem. The services and value they provide will ultimately determine the value of their native tokens.
What can be seen and touched in the first layer of public chains are products, platforms, and technologies, but in fact, their operations are similar to traditional companies in many ways. The driving forces behind public chains are teams, culture, and community.
So evaluating the real value of a public chain token is actually about evaluating the chain's team, culture, and community. This is similar to assessing the value of a stock by evaluating the company behind it.
Buffett summarized three elements for assessing whether a company's stock is worth buying: business model, corporate culture, and transaction price. Among these, the business model is what Buffett values most.
Duan Yongping summarized the business model in a simple way: how a company makes money.
A good company needs a good business model/way of making money, so what kind of money-making method is good?
Duan Yongping also has a simple explanation (roughly):
It should have a good moat. A good moat means differentiation. And differentiation is the service or value that customers need but other companies/products cannot provide.
The differentiation of Bitcoin and all other digital currencies is the most obvious: it is the first decentralized asset implemented using blockchain technology. This unique historical value destined to be its biggest moat, and other digital assets cannot replace it.
Compared to Bitcoin, Ethereum's fundamental differentiation is that it provides Turing-complete smart contract functionality, with on-chain logic and behaviors that Bitcoin cannot handle. The rise of subsequent applications in the crypto ecosystem benefited from this. This is also the reason why Ethereum later rose to prominence.
Not only Ethereum, but all first-layer blockchains that implemented smart contract virtual machines have this fundamental difference from Bitcoin.
The Bitcoin inscription technology that emerged in 2023 and the subsequent Layer 2 expansions caused a whirlwind in the ecosystem because if this technical path truly succeeded, the differentiation between other smart contract first-layer public chains and Bitcoin would be quickly erased. At that time, the established position of other smart contract public chains would be precarious, or at least face a huge threat.
The effect of Bitcoin inscription technology and Layer 2 expansion at that time not only fermented within the circle but had also begun to spread outside. Some tech bloggers I follow who do not specifically focus on the crypto ecosystem said during that time: Ethereum is no good because Bitcoin can now run smart contracts and issue tokens.
Whether their understanding of "Bitcoin can now run smart contracts and issue tokens" is accurate is another matter, but their understanding of differentiation is quite precise.
However, subsequent practice and the tempering of time basically proved that the Bitcoin ecosystem's attempt temporarily stopped. This pause preserved the fundamental difference between other smart contract first-layer public chains and Bitcoin.
So now the thinking/search for differentiation has returned to the track of smart contract first-layer public chains itself.
That is to say, when we think about the difference of a smart contract first-layer public chain, the most critical question is: what services or value can this public chain provide that users definitely need but other public chains find difficult or even impossible to provide?
Using this method of thinking, we find it seems not easy to find such obvious differentiation, so we can use reverse thinking and consider the opposite:
- Are the most prominent and claimed characteristics and advantages of this public chain unique to itself?
- Even if these characteristics and advantages are currently only possessed by this public chain, with technological progress and development, is it possible for other latecomers or existing competitors to also acquire these characteristics and advantages in the future?
Additionally, when thinking about this issue, I find two sentences from Jobs and Duan Yongping very worth carefully considering.
Jobs once said something similar: Users don't know what they need until you present something to them, and then they know they need it.
Duan Yongping said (roughly): Sometimes, differentiated things can only be seen when something big happens.
Starting from these aspects, I think it becomes much simpler to think about, and many issues become clearer.
By clarifying this issue, we will be more confident about the first-layer public chains we are optimistic about, without caring about market noise.
