Original title: Money, Blockchains and Social Scalability v2
Original article by Nick Tomaino, Founder and General Partner of 1confirmation
Original translation: Heilsman, ChainCatcher
Editors note: Recently, the community has been arguing over the interests of Ethereums fud and Layer 2 and the main network. Nick Tomaino, founder and general partner of 1confirmation , has published an article to support Ethereum and Vitalik. He re-examined the role and potential significance of Ethereum as a trusted, neutral, Internet-native value storage tool from the perspective of social scalability, and pointed out that while Bitcoin is actively accepted by mainstream financial markets and governments, ETH may also prove to be more socially scalable than BTC.
Social scalability refers to the ability of a system to allow more people to participate and achieve win-win results. It is the main reason why the cryptocurrency market has become a $2.9 trillion asset class today. In this article, I will explain what it is and why it is important.
In 2017, cryptography expert Nick Szabo published an article called Money, Blockchain, and Social Scalability that described Bitcoin as a social breakthrough, which has now become a must-read article. Most people think that cryptocurrencies are purely technical and focus on technical scalability. But I agree with Szabo that technical scalability does play a role in social scalability, but it is not the main factor. The biggest winners will be those cryptocurrencies that achieve social scalability by being the most credibly neutral and providing the most utility.
Bitcoin’s Social Scalability
Bitcoin is the first credibly neutral, internet-native store of value that works for people in the United States, China, Russia, Brazil, and hundreds of other countries around the world. By “credibly neutral,” I mean fair, unbiased, and not influenced by a minority group. Credibly neutral is a social construct, often rooted in technology, but ultimately based on multiple dynamics that influence human trust.
Trusted neutrality is something that protocols acquire over time, but it was initiated by humans at the beginning. Bitcoin was launched as open source software that anyone can read, run, write, and own on a level playing field. It was launched fairly. There were no side deals and no attachments to celebrities, companies, or countries. The rules were clearly established from the beginning and have not been changed. The community discusses everything openly on forums such as Bitcoin talk . To understand its spirit, you can read early articles by Hal Finney .
Bitcoin’s trusted neutrality and utility are the main reasons why the crypto industry has grown to where it is today. Initially, it was a grassroots movement started by the pseudonymous founder Satoshi Nakamoto, which is not owned by any individual or governed by a certain region, providing a new product that can be used by anyone in the world. Today, it has grown into a $1.7 trillion asset that is actively used as a store of value by some of the world’s largest governments and companies. The rules of the Bitcoin system remain difficult to change, which is one of the important reasons for its continued adoption.
Bitcoin’s growth has been phenomenal, but the cultural decision made by the community early on — to focus solely on currency — has limited the potential for new Bitcoin developers and companies to use it for more than just money. Despite the orthodoxy of maximalists over the past 15 years, there is still a huge opportunity for decentralized systems to bring more freedom and progress to the world beyond currency.
Does social scalability really matter?
Social scalability is an important factor in Bitcoins success, but its importance may be questioned in 2025. Today, 4 of the top 9 cryptocurrencies by total market cap are actually company coins (XRP, BNB, SOL, TRON). The total market cap of these 4 coins exceeds $312 billion.
These tokens have strong narratives but have yet to achieve reliable neutrality. Small teams launched these tokens from well-known jurisdictions (Silicon Valley, the United States, and China) and allocated more than 50% of tokens to insiders (founding teams and/or venture capital firms). They have highly coordinated marketing campaigns, insiders involved in government lobbying, and engage in a lot of corporate-style top-down activities. These protocols have not yet proven to be resilient, secure, and resistant to single points of failure. They make radical tradeoffs for performance at the expense of decentralization.
We can debate their usefulness - some would say that these 4 protocols are useful, but they have yet to enable new use cases or wider adoption. Regardless, the approaches taken by these 4 protocols are very effective. It can also be said that they are successful in capturing value and have little to do with so-called social scalability.
But in the long run, social scalability is important and will drive $20 trillion in value growth over the next decade. That’s why we’re here. Time will tell, and things will change. If you do agree that social scalability is critical, and look at the facts, it’s clear that only two cryptocurrencies have both reliable neutrality and the practicality to achieve long-term social scalability: BTC and ETH.
BTC holds the throne, but ETH may also prove to be more socially scalable than BTC. Here’s why:
ETH’s Trusted Neutrality
Similar to Bitcoin, Ethereum’s credible neutrality has been there from the beginning. Ethereum does not have a “fair launch” like Bitcoin, but only 9.9% of the supply is allocated to insiders, and anyone in the world can easily own ETH by sending BTC to the ICO address. There are no insider transactions with venture capitalists, and no celebrities, companies, or countries are involved.
Ethereum also started as a Proof of Work (PoW) chain and used PoW for the first 7 years to ensure a more balanced distribution before moving to Proof of Stake (PoS). You dont need to own or buy ETH to participate in consensus and get rewards at the beginning, just contribute computing resources. Early token holders of the native PoS chain dominated token rewards, and the transition from PoW to PoS is unique and underestimated. It helped Ethereum reach a large and diverse group of stakeholders in its early days, and also enabled a wider range of people to participate in consensus and get ETH rewards today.
The founder of Ethereum is Vitalik Buterin. Some opponents will question Vitaliks leadership ability and believe that the fact that a known founder has great power undermines credible neutrality. But in fact, Vitaliks leadership is transparent and authentic, and he has laid the cultural foundation of Ethereum by emphasizing credible neutrality.
You wont see Vitalik selling investment stories and chasing money, attention, and power like many of the main figures in the crypto world. He has been the most capable person in the industry to do so for more than a decade, but he refuses to do so. Instead, he does things his own way, emphasizing values such as censorship resistance, inclusion, and transparency, and focusing primarily on setting the best technical architecture and values for builders in the long term.
In fact, Bitcoin and Ethereum are governed in the same way. Changes to the protocol require a rough consensus among miners, users, and developers, so Ethereum changes much more slowly than many VC types expect. But in the long run, this helps achieve more reliable neutrality, which is a conscious trade-off made by Ethereums leadership.
The Ethereum mainnet currently has 4 execution clients (Geth, Nethermind, Besu, and Erigon) and 5 consensus clients (Prysm, Lighthouse Teku, Nimbus, and Lodestar) actively maintained. Client diversity and avoiding single points of failure
In addition, the mainnet and L2 EVM environment have become the most trusted development environment for developers and companies.
Today, Michael Saylor’s entity owns a much larger BTC supply than Vitalik and the Ethereum Foundation owns ETH supply. Bitcoin leaders are quicker to align with governments through supporting politicians and lobbying. This could be a result of Bitcoin going further than Ethereum and attracting a wider range of stakeholders, which looks like it could benefit Bitcoin.
But the risk of Michael Saylor and government lobbying undermining credible neutrality is real, while Vitalik and EF resist the urge to react to market conditions by chasing investment narratives. Ethereum leadership is focused on builders, and Ethereum is now much larger than any individual or group. It may be these unsung builders who are most important to the future of Ethereum.
Ethereum’s practicality
Since Bitcoin introduced the world to a trusted, neutral, internet-native store of value, Ethereum has dominated developer attention and has been the home of every major new crypto use case beyond currency, which has significantly introduced new people to the crypto space. Ethereum is home to specific use cases such as decentralized finance (DeFi), non-fungible tokens (NFTs), prediction markets, decentralized social networks, decentralized identities, real-world assets (RWAs), stablecoins, and more. All of these new use cases provide Ethereums trusted, neutral, store of value properties by distributing EVM wallets and ETH.
Some of these use cases started on the Ethereum mainnet and are now gradually moving to L2 chains built on Ethereum. Developers prefer a trusted developer environment that gives them more control and better economic benefits than L1, which is exactly what the Ethereum L2 architecture provides. Developers building on L2 or L3 not only get more participation, but also enjoy the security of Ethereum, the network effect of EVM, and expand the consensus of ETH as a trusted, neutral, Internet-native value storage tool. Developers of certain use cases may prefer to stay on the mainnet, after all, the liquidity advantages of the mainnet are not available on L2. Both results are beneficial to ETH.
There has been a lot of debate about whether L2 adds value to ETH or hurts the value of ETH by cannibalizing mainnet fees. Standard Chartered recently lowered its price target for ETH from $10,000 to $4,000 based on the argument that Coinbase’s L2 Base cannibalizes mainnet fees. This view misses the big picture.
The main benefit of L2 is not to contribute fees to the mainnet, but to expand the consensus of Ethereum as a trusted, neutral, Internet-native value storage tool by distributing EVM wallets and ETH. The ETH supply can be reduced based on the usage of the Ethereum ecosystem (including the mainnet and L2), which has made ETH more deflationary than BTC, which is a good feature. But fees are not the main advantage of applications and L2.
Ethereum dominates stablecoins, RWAs, and NFT use cases
Ethereum is now the main ecosystem for new developers and large companies (such as JPMorgan Chase, BlackRock, Coinbase, Robinhood, etc.) to tokenize assets. Its ecosystem is expanding from crypto-native assets such as NFTs and tokens to the US dollar, treasuries, stocks, bonds, private credit, real estate, etc. Whether these activities occur on the mainnet or L2, and how much fees L2 ultimately pays to the mainnet, will affect the scale of ETH destruction. But even in the case where all of this activity occurs on L2 and L2 pays very little fees to the mainnet, the adoption of these use cases will still expand the consensus of ETH as a trusted, neutral, Internet-native value storage tool.
$100 Trillion+ Opportunity
A trusted, neutral, internet-native store of value is the largest market opportunity in the world today. The total market cap of gold is about $20 trillion, and global M2 (broad money supply) is about $100 trillion, so it can be said that this is a market opportunity of more than $100 trillion.
Cryptocurrencies that achieve social scalability through credible neutrality and utility are best positioned to capture this opportunity. The narrative around this isn’t strong right now, but I’ve learned in life and crypto that often the stronger the narrative, the further from the truth (and vice versa). Those who stay focused and don’t get seduced by chasing the hype will be rewarded.
