It’s that special time of the year again, when Crypto enthusiasts from all over the word descend upon New York City in a kind of crypto journey to Mecca. Consensus 2018 is about to begin. In the spirit of this major crypto event, we thought now would be a good time to discuss portfolio diversification as it pertains to Ethereum and other decentralized application (DApp) platforms.
Admittedly when CoinSavage began its own journey, we were 100% allocated to Ethereum (ETH). Since then, the DApp platform landscape has evolved. Ethereum is still the largest DApp platform by market capitalization, yet other platforms have made progress in areas such as; scalability, support for a diversity of DApp programming languages, and foundational support.
Is the age of Ethereum dominance over?
Not at all, but does one platform have to dominate the future of DApp platforms? We don’t think so, the CoinSavage team believes that there will be many niche DApp platforms beyond Ehtereum (ETH). This is because DApp developers will choose platforms based on their [DApp developers] own unique needs.
- Ethereum is not in grave danger of being “toppled”.
- The DApp platform space is NOT “winner take all”. Niche platforms will develop and likely thrive.
- Portfolio diversification is necessary in the “just in case” scenario. We have a dominant player [Ethereum], but “just in case” something like scale doesn’t get solved or takes too long to get solved, we need to understand the landscape.
- Blockchain Interoperability projects may be another way to invest around the thesis laid out above (i.e. that several DApp platforms will survive and thrive).
The Problem with Ethereum
Let’s begin our analysis with a Problem Statement for Ethereum.
Problem: Despite having a strong first mover advantage Ethereum has been slow to scale it’s transaction rate, allowing for new projects to enter the market and compete for DApp development on their own faster (more scaled) platforms. Additionally the Ethereum programming language (Solidity) is relatively new, and therefore creates a development bottleneck as developers must first learn this new language.
Of course Ethereum is not blind to these problems. Solutions are currently being worked to increase scale (i.e. Casper, Raiden, Sharding). Being the largest DApp platform also has the advantage of attracting developers, despite the need to learn a new programming language.
The Enterprise Ethereum Alliance is also a huge advantage for Ethereum as it drives large organizations into the Ethereum ecosystem.
The 3 Largest DApp Platforms Behind Ethereum (ETH)
In order per ranking on CoinMarketCap:
CoinSavage is a platform for crypto investors with a basic understanding of the technologies involved. We approached this analysis from the perspective of the potential platform “customer” (the DApp developer). If you are interested in reviewing technical information then see each projects White Paper for specifics.
EOS (EOS)– Not quite launched, but coming soon. It’s faster (more scalable) than Ethereum because of the consensus mechanism used when validating transactions. It also has a few more user friendly features, and uses the C++ programing language.
Why does the programming language matter?
In short developers already know C++, and other existing languages. When programming on Ethereum, a bit of extra effort is required to first learn a new language (Solidity).
Cardano (ADA)– Not launched, and will be slower to launch because it is relying on peer-to-peer scientific review during development.
The upside of this slower more methodical approach is that the platform will be less “buggy” at launch. If you were looking for a longterm play that could also hedge a catastrophic event in Ethereum (i.e. some unknown flaw in Ethereum that completely destroys the project/investment), then Cardano (ADA) is an option.
Like EOS, Cardano trades faster validation speeds (scale) for a little more centralization in its consensus mechanism.
NEO (NEO)– This project has been called the “Ethereum of China”. It’s faster than Ethereum, has a very strong Foundation funneling adoption of its ecosystem (Onchain), and has the backing of the Chinese government. NEO is a powerful project that will most likely experience tremendous growth in China. NEO also supports C# and JAVA programming languages, a big plus for existing developers who don’t want to learn a new programming language. CoinSavage does not currently hold a position in NEO but is seriously considering initiating a long position (buy).
Now that we’ve reviewed a few of the DApp platform projects, let’s imagine the likely scenario where they all have a place in the space.
Now imagine the logical next step… connecting them all so that they are interoperable.
CoinSavage sees this as another investment opportunity. A project we have been following is ARK. ARK supports many different programming languages and is essentially a blockchain of blockchains.
Given the information discussed, three investment strategies come to light. An investor might:
- Allocated 100% into the dominant player (Ethereum).
- Diversify into several DApp platforms.
- Invest in an interoperability project as an additional way to play the scenario where many DApp platforms survive and thrive.
As for CoinSavage, we will be pursuing a combination of strategy #2 and #3, but with a majority allocation in Ehtereum (ETH).