Every public chain is like a city

Author: Haseeb Qureshi

Translator: Block unicorn

Will we live in a multi-chain world, or will there be "one chain to rule them all"? It depends on your mental model of blockchain.

People often describe L1 blockchains as networks, such as the Ethereum network or the Solana network. This implies that blockchains can scale infinitely like the internet, Telegram, or Facebook. If a blockchain is a network, then network effects will dominate, and one blockchain will win.

However, networks are a flawed analogy for blockchains; blockchains are subject to physical limitations. A blockchain cannot scale to infinite block space because it requires many independent small validators; if blocks are arbitrarily large, the blockchain will no longer be decentralized.

Smart contract chains are more like cities. If you accept this mental model, then the dynamics around L1 blockchains become less mysterious.

Everyone loves to complain about Ethereum.

It's expensive. It's crowded and slow, built long ago, and nothing seems to work as it should, with seemingly no improvements. It's so ridiculously expensive that only the wealthy can afford to trade there.

Ethereum is New York City.

New York

Of course, New York is a happening place! It has all the biggest banks, the most billionaires, the hottest brands, and celebrities. Similarly, Ethereum has all the biggest DeFi protocols, the most TVL, and the hottest DAOs and NFTs.

But it's expensive, and if you're a newcomer, you get priced out. Maybe if you had bought assets earlier, you could have become wealthy. But today, the prices will eat you alive, and there's not enough room for everyone. Billionaires may be fine, but the next generation will have to go elsewhere.

So how do you scale New York?

Three ways to scale a city:

Path #1: Build. Land may be limited, but you can always go vertical. By building taller cities, you can accommodate more people on the same piece of land.

But building up is not a complete answer; the height of skyscrapers is limited, and even skyscrapers cannot escape the congestion of the underlying city. If I live in a high-rise in Manhattan and you live in a different high-rise, if I want to visit you, I have to go down to the first floor, call an expensive taxi, and battle Manhattan traffic; we haven't escaped the fundamental constraint—Manhattan is crowded.

L2s and rollups are the blockchain equivalent of skyscrapers. Each rollup is like a vertical blockchain extending from the ground L1. There is a lot of space in rollups! But to access one rollup from another, you have to exit to the underlying Ethereum and deal with its base layer traffic.

Building up helps—it lets more people into the city—but it's not a complete answer. If Ethereum is crowded now, it will also be crowded after rollups (billionaires can afford to stay on L1 and pay the fees). So how else can you scale a blockchain?

Path #2: is the "interoperability network," like Polkadot or Cosmos. Polkadot and Cosmos provide developers with SDKs to launch application-specific blockchains—small blockchains dedicated to a single application. All these blockchains are connected through a routing system—the Polkadot relay chain, the Cosmos Hub.

In the city metaphor, this is like creating a network of small towns that each do one thing. There’s a mining town, a factory town, then an agricultural town, and then a town that’s just a direct sales store. Each of them is connected along a massive highway system.

A factory town in Sin City

This is feasible; some places will be built this way. Factory towns and agricultural towns are one thing, but they are not the majority of where people live and do business. You need more than just a few small towns to absorb a growing population.

Path #3: The last way to scale a city: build another city. This is what Solana, Avalanche, and NEAR are each doing.

When you build a new city, you first have to replicate a lot of infrastructure. It seems redundant. Each new city needs another road, another police station, a school, a hospital. Similarly, each new L1 needs another block explorer, another fiat on-ramp, a native AMM, an NFT marketplace. It’s redundant, but every L1 needs these basics to get started.

But the benefit of building a new city is that each city can be built differently.

Take Solana as an example—Solana is LA. It’s big, wide, and cheap compared to Manhattan. You can be a starving actor and get by in Los Angeles! Ignore the East Coast's obsession with decentralization—move your application to Solana, launch your NFT, and get it done in 10 minutes.

Manhattan

Of course, Solana is not the most decentralized. But games and NFTs don’t need that much decentralization at the start. The weather is nice, fees are low, and no one takes themselves too seriously.

So what about Avalanche? I would say Avalanche is Chicago: trying to be the next Wall Street, but newer, cheaper, and more radical. It’s cold there, but Avalanche’s expertise in finance and trading makes the city vibrant and confident; it’s hard not to bet on its rise.

Chicago

NEAR is San Francisco—built for web3 developers. It’s an idealistic city filled with people wanting to realize the Ethereum 3.0 dream. In their view, sharding is the only way forward in the long term.

San Francisco

The importance of these cities lies not only in their size and openness to business, but also in the different views everyone has on what a city should be and how it should be governed. They each accept different trade-offs, adopt unique values, and attract different industries.

So will we live in a multi-chain world, or will there be "one chain to rule them all"? This is a reframing question: will we live in a multi-city world, or will there be one city to rule all cities?

The answer is clear; city dominance has a power law (another interpretation: the Matthew effect) distribution, but many cities matter, and no analogy is perfect. But I find this mental model useful for predicting how L1s will evolve.

I will leave you with six predictions from this model:

1. The future will be multi-chain.

2. Ethereum may be the most valuable chain, as quoted from a famous bank robber: that’s where the money is.

3. Other L1s are also valuable, but they will continue to differentiate. New York, Los Angeles, Chicago, and Houston are enduring cities because their institutions and cultures are different from each other.

4. L2s are important—skyscraper technology is essential for scaling any city—but they are not the end of the story. L2s are "and," not "or."

5. Application-specific blockchains will remain niche markets.

6. In the real world, traffic accounts for nearly half of housing GDP. If we see something similar in cryptocurrency, cross-chain bridges will become very valuable.