Ethereum, Solana Defy L1 Myth — Bitwise CIO Sees Prediction Markets Changing Everything
The concept that Layer 1 blockspace has turn out to be a commodity could also be untimely, in keeping with Bitwise CIO Matt Hougan, who argues that institutional habits tells a really completely different story.
Hougan pushed again on what he described as an “rising view in crypto that L1 blockspace is a commodity.
Institutional Capital Clusters on Top-Tier Chains as On-Chain Prediction Markets Redefine Information Edge
According to the Bitwise executive, if infrastructure had been really commoditized, capital and growth can be evenly distributed throughout chains.
Instead, the overwhelming majority of institutional constructing is going down on only a few chains (Ethereum, Solana, and many others.).
“…mainly, zero curiosity in constructing on the 20th largest L1,” he explained.
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 supplied a less complicated rationalization for at this time’s low-fee atmosphere.
“Top-tier L1s constructed extra bandwidth than the market can use in the meanwhile, so charges are rock-bottom.”
However, 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 assist trillions of {dollars} in tokenized assets and on-chain settlement, at this time’s extra capability may rapidly tighten. Such an end result may doubtlessly reshape the economics of main networks.
Prediction Markets as a “Reg FD for the Internet Age,” Hougan Argues
Beyond infrastructure, Hougan additionally weighed in on one other contentious matter: insider trading concerns surrounding crypto-based prediction markets.
“The insider buying and selling worries about prediction markets are mainly backwards,” he wrote. “Prediction markets are a markets-based extension of Reg FD, placing us all on a degree taking part in subject.”
Regulation Fair Disclosure (Reg FD) was designed to stop selective disclosure of fabric data to favored traders.
Hougan argues that prediction markets prolong that precept by publicly pricing possibilities 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 collect non-public intelligence from Capitol Hill.
Today, nevertheless, retail traders can track live probabilities on platforms like Polymarket, together with markets tied to the potential passage of laws such because the Clarity Act.
“For liquid markets, these odds are in all probability pretty much as good or higher than something the lobbying advanced can present. It’s a extra even taking part in subject,” Hougan stated.
He acknowledged that dangers stay, citing the necessity to aggressively police insider buying and selling in prediction markets. Still, he emphasised that the impression steadiness is dramatically optimistic and egalitarian.
Therefore, there are two debates right here:
- Whether L1s are commoditized and
- Whether prediction markets allow unfair benefits
Both debates revolve round how energy is distributed in monetary methods. According to Matt Hougan, institutional focus on top-tier chains displays financial actuality fairly than pure commoditization.
Meanwhile, open prediction markets symbolize a uncommon occasion the place data asymmetry may very well be shrinking.
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