For some of Ethereum’s fledgling rivals, their greatest liability is their greatest asset in the markets: they do not exist (yet).¹

Something that does not exist cannot be clumsy, ugly, or slow. It cannot get hacked or compromised. Its network cannot get clogged or overwhelmed. It cannot encounter growing pains.

But it can be exciting and have lots of potential.

And markets for young speculative technology trade on possibility rather than reality.

Imaginary coins are exempt from all the frictions of reality while prospering from baseless optimism. A car cannot crash before the rubber hits the road.

This doesn’t mean they can’t or won’t succeed but that they are more prone to irrational exuberance.² Not being stress-tested by reality is a great limitation for anything that wants to evolve and get better, but it makes it easier to be optimistic.

Do you want to pay a high valuation for something that is slow and inefficient, or a much cheaper valuation for something that promises to be radically better (once it actually exists). The latter sounds more appealing, even if it’s the wrong choice.

There’s a tendency to look at a crypto protocol as something static that has better or worse tech, like a car with higher or lower horsepower. But unlike a car, a code base is not a final, uneditable product; it’s an evolving thing like an essay draft that can be reworded, rewritten.³ In the early days, tech mostly matters insofar as better tech attracts better talent and is easier to build on.

An up-and-comer like EOS doesn’t need to just out-tech Ethereum, it needs to overcome massive network effects with adoption, security, and developer talent. These network effects are greater for a distributed platform that gains resilience from every added node than for a server-based app like early Myspace.

If Ethereum someday succeeds as the world’s go-to protocol for smart economy⁴, then today it is like a fledgling 1-year-old Usain Bolt. Taking his first baby steps, he is a bit clumsy and slow. If you’re looking at little Usain stumbling around it’s hard to imagine he will someday be the fastest person alive. It may even be tempting to bet on his younger peers who haven’t yet taken their first steps. After all, something that does not move cannot be clumsy and slow.

But with every step little Usain gets a little stronger, a little faster, a little harder to outrun. These slow, clumsy steps that make him so easy to bet against are the same steps that take him closer to greatness.

As always just some thoughts. Not investment advice.

By “don’t exist yet,” I mean they haven’t launched mainnets, VMs, or they have but with trivial usage. I’m mostly talking here about smart contract platforms, but the ideas here probably apply more broadly to other types of crypto assets. But this premium may be offset by other factors such as an “access premium” whereby large coins like Ether are less discounted since they are easier to buy than most alts or since they are more prominent.

3. This may be somewhat less true in the case of building a protocol.

4. By smart economy, I mean any web of transactions e.g., for value, data etc running on contracts that are programmable, decentralized (no middlemen), and virtually guaranteed to execute as written.

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