on moats in crypto.
imo very few crypto things have moat
moat lets a company control market share & prevents competitors entering over the long run
since almost all ideas/tech are forkable moat in crypto comes from winning product & distribution so hard that you're the most popular, trusted venue that cornered majority of liquidity in the market.
- Tron, sending money
- Pump, memecoin
- Aave, lending
- Sky, crypto stablecoin
- Pendle, yield trading
- MM/Phanton/Rabby, wallet
- Ethereum, smart contract chain
- Bitcoin, digital gold
other observations:
- product moat translates to token success in varying degrees depending on tokenomics, value accrual, crime factor
- moat associated a with brand & balance sheet more so than product, as teams can deploy new versions to suit market needs
- in crypto code/product ideas can be kept private to avoid forks h/t HL
- short run edges ≠moat, like team's network, points optimization, viral marketing
- strong network effect and economies of scale usually accompany moat, but not always
- in nascent markets with multiple similar products moats have yet to be established. mature markets can have multiple players w moats (regulatory, geographic specific ...)
Ironically the way to express this trade (that major L1s don't have moats) is a pair trade: long emerging L1s, short the majors.
That's what not having a moat actually looks like—easy encroachment by new entrants, and valuation compression among all the competitors. Even if you're bearish L1s on the whole, the pair trade will capture that.
To be clear, I don't agree with this. L1s demonstrably have very strong moats—that's what we see in practice. It's on the naysayers to theorize why the future will be different from the past. Because what Qiao is describing here is what I (and many others) believed back in 2018-2019, and we have 7 years of data showing us how wrong we were.
L1 moats are very deep. That's where my cities analogy came from. San Francisco, NYC are dysfunctional cities in so many ways, but their moats are seemingly uncontestable.
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