Schelling Point Assets - The Daily Gwei #516

Whenever a new crypto ecosystem pops up people naturally look for ways to get exposure to that ecosystem. With layer 1’s like Ethereum the natural choice is the native asset of the particular chain - same is true for layer 2’s and sidechains. This “natural choice” is no accident - it is basically a ‘Schelling point’ of sorts for an ecosystem - after all, rather than sifting through hundreds or thousands of assets, most people will naturally just choose the asset that they feel gives them exposure to everything.

sassal.eth 🦇🔊🐼 @sassal0x

@RyanSAdams Simpler explanation is that people buy the "Schelling point" asset of an ecosystem For Ethereum, that's ETH For alt-L1's and L2's, it's their native token Saves people the headache of having to sift through thousands of different tokens to get exposure to an ecosystem

7:25 AM ∙ Jul 15, 2022

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Of course, not all Schelling point assets (SPA’s) are created equal - and there is a world of difference between some of them. For example, ETH is the obvious choice to get exposure to the Ethereum ecosystem but not just because it’s a SPA - it also has fundamentally sound value drivers and is a highly desirable asset that is used in staking, as DeFi collateral, as a fee token (where most is burned), as a money/SoV and more. We can contrast this with most other layer 1 tokens which don’t have these same value drivers but still act as a SPA for their respective ecosystems (though almost all of them underperform ETH over the long term).

One major factor that acts as a ‘forcing function’ for a layer 1’s native asset is the use of the token for payment of fees. Every single sovereign layer 1 has its own token that is used to pay fees on the network - Ethereum has ETH, Bitcoin has BTC, Solana has SOL and so on and so forth. This basically guarantees that the native token becomes the SPA of the ecosystem because everyone is forced to use it if they want to use the network. Obviously most