Public Chain Moat: The "Differentiated" Value in the Crypto Ecosystem

After reviewing the attributes of Bitcoin, I have basically focused most of my energy on products within the crypto ecosystem that can provide services and value. This is because the future direction of Bitcoin largely depends not on Bitcoin itself, but on those products in the crypto ecosystem that can offer real services and value.

If more and more users find the services and value they need within the crypto ecosystem, the price of Bitcoin will naturally rise. Conversely, if the real services and value that the crypto ecosystem can provide decrease, then no amount of shouting "digital gold" or "store of value" will be effective.

When it comes to providing real services and value, the most important aspect in the entire crypto ecosystem, in my opinion, is layer one public chains. They directly provide services and value for the entire ecosystem. The services and value they offer will ultimately determine the value of their native tokens.

Layer one public chains are tangible products, platforms, and technologies, but in reality, their operations behind the scenes are similar to traditional companies in many ways. What drives public chains forward are the teams, culture, and communities.

Therefore, evaluating the real value of a public chain token is essentially about assessing the team, culture, and community of the public chain. This is similar to evaluating the value of a stock by assessing the company behind it.

To determine whether a company's stock is worth buying, Buffett summarized three key factors: business model, corporate culture, and trading price. Among these, the business model is what Buffett values the most.

Duan Yongping summarized the business model in very simple terms: it is the way a company makes money.

A good company must have a good business model/money-making method. So, what kind of money-making method is considered good?

Duan Yongping also provided a very straightforward explanation (essentially):

There must be a strong moat. A good moat means having differentiation. And differentiation is the service or value that customers need but other companies/products cannot provide.

The differentiation of Bitcoin from all other digital currencies is the most obvious: it is the first decentralized asset realized through blockchain technology. This unique historical value is destined to be its greatest moat, which cannot be replaced by other digital assets.

Compared to Bitcoin, the fundamental differentiation of Ethereum lies in: it provides Turing-complete smart contract functionality, and the on-chain logic and behaviors it can handle are beyond what Bitcoin can manage. The subsequent rise of a series of applications in the crypto ecosystem has greatly benefited from this. This is also the reason why Ethereum was able to rise later.

Not only Ethereum, but all layer one blockchains that have implemented smart contract virtual machines also share this fundamental differentiation compared to Bitcoin.

The Bitcoin inscription technology that emerged in 2023 and the subsequent Bitcoin layer two expansion created a whirlwind in the entire ecosystem during that time. The fundamental reason is that if this technological path truly succeeds, the differentiation between other smart contract layer one public chains and Bitcoin will be quickly erased. At that point, the status established by other smart contract public chains will be precarious, or at least they will feel a significant threat.

At that time, the effects generated by Bitcoin inscription technology and layer two expansion not only fermented within the circle but also began to reach outside. Some tech bloggers I follow, who do not specifically focus on the crypto ecosystem, were saying during that time: Ethereum is failing because Bitcoin can now also run smart contracts and issue tokens.

Whether their understanding of "Bitcoin can now also run smart contracts and issue tokens" is accurate is another matter, but their understanding of differentiation is quite precise.

However, later practices and the test of time have basically proven that the Bitcoin ecosystem's attempts have temporarily come to a halt. This pause has preserved the fundamental differentiation between other smart contract layer one public chains and Bitcoin.

Now, the thought process of seeking differentiation has returned to the layer one public chain track itself.

In other words, when we think about the differentiation of a smart contract layer one public chain, the key question is: what services or value can this public chain provide that users definitely need but other public chains find it difficult or even impossible to offer?

Using this method of thinking, we find that it seems not easy to identify such obvious differentiation. Therefore, we can use reverse thinking to consider:

• Are the most prominent and claimed characteristics and advantages of this public chain unique to itself?

• Even if these characteristics and advantages currently belong only to this public chain, with technological advancements and developments, is it possible that other newcomers or existing competitors could also achieve these characteristics and advantages in the future?

Additionally, while contemplating this issue, I think two statements made by Jobs and Duan Yongping are worth our careful consideration.

Jobs once expressed a similar viewpoint: users do not know what they need until you present it to them, and then they realize they need it.

Duan Yongping said (essentially): sometimes, the differentiated aspects only become apparent when significant events occur.

By approaching the problem from these angles, I believe it becomes much simpler to think through, and many issues become clearer.

Once we clarify this question, we will have more confidence and assurance in the layer one public chains we are optimistic about, without needing to worry about market noise.