Original Title: Money, Blockchains and Social Scalability v2
Original Author: Nick Tomaino, Founder and General Partner of 1confirmation
Original Translation: Hailesman, ChainCatcher
Editor's Note: Recently, FUD about Ethereum and the dispute over Layer 2 and mainnet interests have been rampant. Nick Tomaino, founder and general partner of 1confirmation, wrote in strong support of Ethereum and Vitalik. From the perspective of social scalability, he re-examined the role and potential significance of Ethereum as a credibly neutral, internet-native value storage tool, pointing out that while Bitcoin is being actively embraced by mainstream financial markets and governments, ETH may also prove to be more socially scalable than BTC.
Social scalability refers to a system's ability to allow more people to participate and achieve a win-win situation. This is also 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 titled "Money, Blockchains, and Social Scalability", describing Bitcoin as a social breakthrough, which has now become a must-read article. Most people think cryptocurrencies are purely technical and focus on technical scalability. But I agree with Szabo's view that while technical scalability plays a role in social scalability, it is not the primary factor. The biggest winners will be cryptocurrencies that achieve social scalability through credible neutrality and provide the greatest utility.
Bitcoin's Social Scalability
Bitcoin is the first credibly neutral, internet-native value storage tool that is useful to people in the United States, China, Russia, Brazil, and hundreds of other countries worldwide. By "credibly neutral", I mean fair, unbiased, and not influenced by a minority group. Credible neutrality is a social construct, typically rooted in technology, but ultimately based on various dynamic factors that affect human trust.
Credible neutrality is acquired over time but initially initiated by humans. Bitcoin was launched as open-source software that anyone can read, run, write, and own in a fair competitive environment. Its launch was fair. There were no private transactions, and it was not attached to any celebrities, companies, or countries. The rules were clearly established from the beginning and have not been changed. The community openly discussed everything on forums like Bitcointalk. To understand its spirit, one can read the early articles by Hal Finney.
Bitcoin's credible neutrality and utility are the main reasons for the development of the crypto industry so far. Initially, it was a grassroots movement initiated by the pseudonymous founder Satoshi Nakamoto, belonging to no individual and not governed by any region, providing a new product usable by anyone worldwide. Today, it has developed into a $1.7 trillion asset, with some of the world's largest governments and companies actively using it as a value storage tool. The Bitcoin system's rules remain difficult to change, which is one of the key reasons for its continued adoption.
Bitcoin's growth has been remarkable, but the community's early cultural decisions—focusing solely on money—limited the development of new Bitcoin developers and companies using it for purposes beyond currency. Despite extremists emphasizing Bitcoin's orthodoxy over the past 15 years, decentralized systems still have enormous opportunities to bring more freedom and progress to the world beyond money.
Is Social Scalability Really Important?
Social scalability is an important factor in Bitcoin's success, but its importance may be questioned in 2025. Today, 4 out of the top 9 cryptocurrencies by total market cap are essentially company tokens (XRP, BNB, SOL, TRON). These 4 tokens have a total market cap of over $312 billion.
These tokens have strong narratives but have not yet achieved reliable neutrality. Small teams from well-known jurisdictions (Silicon Valley, the US, and China) launched these tokens, allocating over 50% of tokens to insiders (founding teams and/or venture capital firms). They have highly coordinated marketing campaigns, insider government lobbying activities, and participate in numerous corporate, top-down activities. These protocols have not yet proven to be resilient, secure, and resistant to single points of failure. They have made radical trade-offs for performance at the expense of decentralization.
We can discuss their utility—some would say these 4 protocols are useful, but they have not enabled new use cases or broader adoption. Anyway, the approach taken by these 4 protocols has been very effective. One could also say that they have been successful in capturing value and have little to do with so-called social scalability.
But in the long term, social scalability is very important and will bring $20 trillion in value growth over the next decade. This is why we persist here. Time will tell the truth, and things will change. If you indeed agree that social scalability is crucial and look at the facts, it is clear that only two cryptocurrencies have both reliable neutrality and utility for 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 Credible Neutrality
Similar to Bitcoin, Ethereum's credible neutrality existed from the beginning. While Ethereum did not have Bitcoin's "fair issuance", only 9.9% of the supply was allocated to insiders, and anyone worldwide could easily own ETH by sending BTC to the ICO address. There were no insider transactions with VCs, and no celebrities, companies, or countries were involved.
Ethereum also initially started as a Proof of Work (PoW) chain and remained PoW for the first 7 years to ensure a more balanced distribution before transitioning to Proof of Stake (PoS). You could participate in consensus and receive rewards at the start without owning or purchasing ETH, simply by contributing computing resources. Early native PoS chain token holders dominate token rewards, and the PoW to PoS transition is unique and underestimated. It helped Ethereum reach a large, diverse set of stakeholders early on and enabled a broader group of people to participate in consensus and receive ETH rewards today.
Ethereum's founder is Vitalik Buterin. Some opponents may question Vitalik's leadership and argue that the fact that a known founder has significant power undermines credible neutrality. But in reality, Vitalik's leadership is transparent and genuine, and he established Ethereum's cultural foundation by emphasizing credible neutrality.
You won't see Vitalik selling investment stories and chasing money, attention, and power like many major figures in the crypto space. For over a decade, he has been the most capable person in the industry to do so, but he refuses. Instead, he does things his way, emphasizing values like censorship resistance, inclusivity, and transparency, primarily focusing on setting the best technical architecture and values for builders in the long term.
In fact, Bitcoin and Ethereum's governance is the same. Changing the protocol requires a rough consensus among miners, users, and developers, so Ethereum's changes are much slower than many VC-type expectations. But in the long run, this helps achieve more reliable neutrality, a trade-off consciously made by Ethereum's 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 maintaining it. Client diversity and avoiding single points of failure have always been a focus. Moreover, the mainnet and L2 EVM environment have become the most trusted development environment for developers and companies.
Today, Michael Saylor's entities hold a much larger BTC supply compared to Vitalik and the Ethereum Foundation's ETH supply. Bitcoin leaders are aligning more quickly with governments through supporting politicians and lobbying. This might be a result that makes Bitcoin progress further and attract a broader range of stakeholders.
However, the risk of Michael Saylor and government lobbying damaging credible neutrality is real, in contrast to Vitalik and EF resisting the impulse to react to market conditions by chasing investment narratives. Ethereum's leadership focuses on builders, and Ethereum is now much larger than any individual or group. The most important people for Ethereum's future might be these unsung builders.
Ethereum's Utility
Since Bitcoin introduced a credibly neutral, internet-native value storage tool to the world, Ethereum has dominated developer attention and been the origin of every major new crypto use case beyond currency, significantly drawing new people into the crypto space. Ethereum is home to specific use cases like decentralized finance (DeFi), Non-Fungible Token (NFT), prediction markets, decentralized social networks, decentralized identity, real-world assets (RWA), stablecoins, and more. All these new use cases provide Ethereum's credibly neutral, value storage characteristics through distributing EVM wallets and ETH.
Some of these use cases began on the Ethereum mainnet and are now gradually moving to Layer 2 chains built on Ethereum. Developers prefer a trusted development environment that offers more control and better economic benefits than L1, which is precisely what Ethereum's L2 architecture provides. Developers building on L2 or L3 not only gain more engagement but also enjoy Ethereum's security, EVM's network effects, and expand the consensus of ETH as a credibly neutral, internet-native value storage tool. Some use case developers might prefer staying on the mainnet, given its liquidity advantages that L2 cannot provide. Both outcomes are beneficial for ETH.
There have been many debates about whether L2 adds value to ETH or damages ETH's value by cannibalizing mainnet fees. Standard Chartered recently lowered ETH's price target from $10,000 to $4,000 based on Coinbase's L2 Base cannibalizing mainnet fees. This perspective overlooks the bigger picture.
The primary benefit of L2 is not contributing fees to the mainnet, but expanding Ethereum's consensus as a credibly neutral, internet-native value storage tool by distributing EVM wallets and ETH. ETH supply can decrease based on the Ethereum ecosystem's (including mainnet and L2) usage, a feature that has already made ETH more deflationary than BTC, which is a good characteristic. However, fees are not the main advantage of applications and L2.
Ethereum Dominates in Stablecoin, RWA, and NFT Use Cases
Ethereum is now the primary ecosystem for new developers and large companies like JPMorgan, BlackRock, Coinbase, and Robinhood to tokenize assets. Its ecosystem is increasingly expanding from crypto-native assets like NFTs and Tokens to areas including dollars, government bonds, stocks, bonds, private credit, and real estate. Whether these activities occur on the mainnet or L2, and how much L2 pays to the mainnet in fees, will affect ETH burning. But even if all these activities happen on L2 with minimal fees paid to the mainnet, the adoption of these use cases will expand the consensus of ETH as a credibly neutral, internet-native value storage tool.
Opportunity Exceeding $100 Trillion
A credibly neutral, internet-native value storage tool represents the largest market opportunity in today's world. Gold's total market value is around $20 trillion, and global M2 (broad money supply) is approximately $100 trillion, so this can be described as a market opportunity exceeding $100 trillion.
Cryptocurrencies that achieve social scalability through credible neutrality and utility are most capable of seizing this opportunity. The narrative around this is not currently strong, but I've learned in life and the crypto space that often, the more intense the narrative, the further from the truth (and vice versa). Those who remain focused and are not tempted by chasing trends will be rewarded.
