Rollups are competing fiercely, will a monopolistic Rollup be emerged as a result?

Will a monopolistic Rollup emerge as a result of the fierce competition among Rollups?

Author: Huang Shiliang

Currently, the Rollup in the Ethereum ecosystem is fiercely competing. Rollup can be seen as a special public chain, which is almost the same as a public chain for users.

The competition among many public chains started around 2016, but in the end, it seems that Ethereum has formed a monopolistic advantage, and other chains currently seem to have difficulty challenging the Ethereum ecosystem.

The confirmation of Ethereum’s monopolistic advantage is approximately in 2022, after the super bull market formed by DeFi and NFT, currently Ethereum is the only ecosystem. Former strong competitors such as BSC, Solana, Polkadot, and Avalanche have become weaker in the bear market.

• Popular Science What is the statelessness frequently mentioned by Vitalik in recent speeches?
• How to understand that the TVL of Friend.tech is stable, but the price of Key is declining?
• Exploring Blockchain Space Creation, Use, Valuation, and Transaction

There are many investment opportunities in the public chain, but most coins are highly volatile, with more opportunities to fall into pits. Holding ETH is currently one of the few coins that dare to hold for the long term and are not afraid of roller coasters.

Now the fierce competition of Rollup, will it also form a monopolistic Rollup and have investment opportunities like ETH?

It should be in 2021, when the Rollup concept started to heat up. At that time, Arbitrum had an absolute advantage in technical strength and time advantage. Currently, Arbitrum still has advantages in technology and ecosystem.

Arbitrum One currently accounts for about 55% of all Rollup’s TVL.

OP Mainnet relies on a good economic model, earlier issuance, and alliance with many ecological products, forming a duopoly with Arbitrum in many indicators.

Recently, Base-rollup released by Coinbase quickly took the top spot in popularity. Now Base’s TPS is already the first among all Rollups.

zksync is most likely ranked second in TPS due to the expectation of airdrops.

These two sets of data are just a few convenient displays. It is too difficult to comprehensively evaluate the advantages and disadvantages of Rollup, so we can only use some simplified models to evaluate.

TVL is for the present, TPS is for the future.

Arb and OP, which have issued coins, occupy the top spot in TVL, while Base and zksync, which have not issued coins, occupy the top spot in TPS.

Imagine, if Base and zksync also issue coins, how much will the TVL advantage of Arb and OP decrease?

From these two simplified data models, I feel that the competition between Rollups has exceeded two years, and it is now impossible to see which Rollup has the potential to form a monopolistic advantage.

From the fierce competition among many DEXs, Uniswap emerged as a monopolistic DEX, and from Ethereum’s fierce competition as a public chain, we can roughly summarize the following perspectives for evaluating whether a project with monopolistic characteristics has emerged in a certain category.

1. Technical Threshold.

Some performance indicators determined by technology, such as the ultimate TPS of OP-rollup, can reach 100 transactions per second, and zk-rollup claims to reach 1,000 transactions per second.

For example, the lowest gas cost, like op can achieve one-tenth of L1, and zk can achieve one-twentieth? And so on.

Transaction security confirmation time, like OP can achieve the same level of security as L1 for transactions after 7 days, while zk claims to achieve a settlement time of 10 minutes.

Security and decentralization are also performance indicators determined by technology.

For example, if one specific project can achieve outstanding performance in these technology-determined indicators, but other projects cannot, it has the possibility of monopoly.

Uniswap V3 relies on efficient capital optimization and its code is copyright protected, ensuring that other projects cannot fork within two years, thereby helping Uniswap establish a monopoly advantage.

Currently, among the rollup category, no project has a technological threshold that other projects cannot surpass.

2. Ecosystem Threshold.

Evaluating the ecosystem of specific projects in the Rollup category can be divided into the following sub-indicators.

1) Number, diversity, and activity of user groups.

Typically, the user group of zksync is obviously a single group of users seeking benefits. This is an unreliable indicator.

2) Number, diversity, and brand synergy of ecosystem partners and allies.

For example, Op Mainnet currently has the most and most reliable allies.

This indicator is particularly easy to form a threshold because it is not easy to cooperate with arb if a large project has already cooperated with OP. After all, everyone has face, and it is not convenient or decent to work for multiple projects simultaneously.

3) Number, diversity, and activity of developers.

Although most Rollups are project-based now, the developers of Rollup are mostly self-funded developers, not the open-source developer model of open-source projects.

However, blockchain projects still have the tradition of open-source. If a Rollup is supported by open-source developers, it is likely to receive better brand support.

For example, OP Mainnet seems to have more open-source developers, mainly because it has received frequent support from the Ethereum Foundation. The number of developers in Arb’s five-cent party also seems to be considerable.

Open-source developers are a good threshold, after all, once people are invested in a project, it is not easy for them to go and do something else. Developers are not Sun Wukong.

A typical example is the number and quality of developers in Uniswap, which surpasses other DEXs, making us feel that Uniswap is a very cool project.

4) Number, diversity, TVL, etc. of ecosystem projects.

If a Rollup has DeFi, NFT, gamefi, etc., and they are all excellent, these are very good thresholds. Because building an ecosystem is very difficult.

Ethereum is the winner because of these.

EOS was born with great fanfare, but its ecosystem was full of gambling projects and it failed before experiencing a complete market cycle.

Currently, Arbitrum is the most successful in terms of ecosystem projects. Compared to other Rollup projects, arb has established a decent threshold.

3. Brand influence and reputation threshold.

This is a significant threshold. Once a specific project establishes a superior brand, this threshold becomes tangible.

For example, Uniswap has almost become synonymous with DEX.

Currently, in the world of Rollups, I think OPMainnet is very cunning. The project name is just like the technical term “Optimistic”, which has created a good brand advantage.

Similar examples include zkevm and Polygon. These guys developed a Rollup and named it zkevm, making everyone think they are related to EVM.

But currently, I think in terms of overall brand advantage, the Rollup category still lacks specific projects. Everyone is still on the same level.

4. Innovation capability threshold.

Having a continuous stream of new products and technologies is a significant threshold.

Uniswap and ETH have the strongest innovation capabilities in their respective fields, forming a huge threshold.

The Rollup category is still in its early development stage, and it is difficult to determine whose innovation capabilities are strong.

Op and arb are continuously recommending new products, but it is still too early to tell.

However, there is one indicator that can be used for evaluation, which is research and development investment. Projects like arb and op have issued tokens and set aside development expenses, so it can be assumed that their innovation capabilities are not poor.

And projects like zksync have raised several billion US dollars in funding, indicating that their innovation capabilities are likely to be strong.

In addition, when it comes to token prices, it is more about the result rather than the cause of monopolies. In other words, if a specific project has a monopoly advantage, its token price will be high.

Finally, from these four dimensions, I feel that in the Rollup category, it is still unclear which specific project has the potential for monopoly. Further observation is needed.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!