Ethereum, Solana Defy L1 Myth — Bitwise CIO Sees Prediction Markets Changing Everything

The concept Layer 1 blockspace has change into a commodity could also be untimely, based on Bitwise CIO Matt Hougan, who argues that institutional conduct tells a really completely different story.

Hougan pushed again on what he described as an “growing view in crypto that L1 blockspace is a commodity.

Institutional Capital Clusters on High-Tier Chains as On-Chain Prediction Markets Redefine Data Edge

In response to the Bitwise government, if infrastructure have been really commoditized, capital and improvement can be evenly distributed throughout chains.

As a substitute, the overwhelming majority of institutional constructing is happening on only a few chains (Ethereum, Solana, and so on.).

“…principally, zero curiosity in constructing on the 20th largest L1,” he defined.

Networks like Ethereum and Solana proceed to dominate mindshare, liquidity, and developer exercise, at the same time as newer Layer 1s compete aggressively on charges and throughput. Hougan provided a less complicated rationalization for at present’s low-fee setting.

“High-tier L1s constructed extra bandwidth than the market can use in the meanwhile, so charges are rock-bottom.”

Nevertheless, he cautioned that the present equilibrium could not final.

“The actual query is what occurs when demand scales as stablecoins/tokenization/DeFi develop into the trillions,” he wrote. “I’m undecided we all know the reply but.”

If blockchain-based monetary infrastructure expands to help trillions of {dollars} in tokenized property and on-chain settlement, at present’s extra capability might shortly tighten. Such an final result might probably reshape the economics of main networks.

Prediction Markets as a “Reg FD for the Web Age,” Hougan Argues

Past infrastructure, Hougan additionally weighed in on one other contentious matter: insider buying and selling issues surrounding crypto-based prediction markets.

“The insider buying and selling worries about prediction markets are principally backwards,” he wrote. “Prediction markets are a markets-based extension of Reg FD, placing us all on a degree enjoying subject.”

Regulation Honest Disclosure (Reg FD) was designed to forestall selective disclosure of fabric info to favored buyers.

Hougan argues that prediction markets prolong that precept by publicly pricing chances round main occasions.

He mirrored on how hedge funds traditionally extracted “alpha” throughout pivotal legislative moments in Washington, D.C., hiring lobbyists and consultants to assemble personal intelligence from Capitol Hill.

Right now, nonetheless, retail buyers can monitor dwell chances on platforms like Polymarket, together with markets tied to the potential passage of laws such because the Readability Act.

“For liquid markets, these odds are in all probability pretty much as good or higher than something the lobbying complicated can present. It’s a extra even enjoying subject,” Hougan stated.

He acknowledged that dangers stay, citing the necessity to aggressively police insider buying and selling in prediction markets. Nonetheless, he emphasised that the influence stability is dramatically constructive and egalitarian.

Subsequently, there are two debates right here:

• Whether or not L1s are commoditized and
• Whether or not prediction markets allow unfair benefits

Each debates revolve round how energy is distributed in monetary techniques. In response to Matt Hougan, institutional focus on top-tier chains displays financial actuality slightly than pure commoditization.

In the meantime, open prediction markets symbolize a uncommon occasion the place info asymmetry may very well be shrinking.

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