Author: Ishan B

Translation: TechFlow

Blockspace is a commodity. Therefore, I propose a framework for evaluating Layer 1 and Layer 2 blockchain networks: over the past 30 years, the growth trajectory of blockchain networks has closely resembled that of telecommunications networks. Here's what we can learn from it:

With so many Layer 1 and Layer 2 networks entering the market, you need a framework to understand how this space is evolving and why certain blockspace is more valuable than others. This will help form investment theses on who will dominate this field.

So why are telecom networks similar to blockchains?

• Peer-to-peer (P2P) networks;

• Distributed systems relying on nodes to transmit data;

• Fault tolerance;

• Facing scalability challenges (2G, 3G, 4G, 5G);

• Global connectivity;

• Interoperability.

The history of telecommunications tells us that standardization is necessary for widespread adoption. The Ethereum Virtual Machine (EVM) provides us with such standardization. However, since many blockchains are EVM-compatible, what can we learn from telecoms to help us invest in/analyze Layer 1 and Layer 2 networks? Two key insights stand out:

1. Regional winners;

2. Niche application advantages.

1. Regional Winners

Looking at the telecom industry, each region has its dominant player:

• United States: AT&T / Verizon;

• Canada: Rogers;

• India: Reliance Jio;

• Europe: Deutsche Telekom;

• Japan: Nippon;

• UK: Vodafone.

Why do I believe blockchains will also have regional winners?

A. Regulation

Governments impose strict regulatory requirements on telecom providers, creating regional monopolies. As concerns around KYC/AML grow, Layer 1 and Layer 2 networks may face regulatory hurdles, allowing governments to support localized winners.

B. Network Effects

As telecom networks accumulate large user bases, they become more attractive to new users. Similarly, as blockchain networks develop dApps and grow their user base, they become more appealing to new developers and users (liquidity, efficiency, dApp composability, etc.).

Different regions have different needs. Blockchains offer varying use cases (e.g., Africa requires more P2P payment solutions or stablecoins for savings compared to the U.S. or India). Regional users will coalesce around distinct use cases, driving network growth within those regions.

Some potential regional winners I see:

• United States: Arbitrum / Polygon;

• India: Polygon;

• China: Conflux;

• Asia-Pacific: BNB Chain;

• Turkey: Avalanche (Avax);

• Korea: Mantle;

• Europe: StarkWare;

• UAE: Haqq Network.

2. Niche Application Advantages

Just as telecom providers have niche strengths (infrastructure, enterprise services, etc.), blockchains can gain market share by targeting specific use cases. There will be blockchains built specifically for music, gaming, DeFi, IoT, DePIN, RWA, and other applications. In this regard, I categorize them as:

• Cosmos ecosystem;

• Rollups-as-a-Service;

• Super chains / subnets;

• High-throughput blockchains.

I do believe high-throughput blockchains (like Aptos, Sui, Solana, SEI, etc.) have their unique place. However, I think they will ultimately serve specific use cases such as DePIN, gaming, CLOBs, etc.

Composability within blocks is critical and will unlock specific application use cases. With new Layer 1 and Layer 2 networks emerging every few weeks, it’s essential to build a framework to understand how all this blockspace should be used. In my view, we can learn a lot from the scaling and growth patterns seen in the telecom industry, which can inform our investment theses.

Moreover, this is where alpha is generated. If you don’t have an edge in the market (especially during a PVP bear market), sustaining capital growth will be difficult. Building a framework and investing within it can help you develop your own competitive advantage.

In my opinion, strong conviction combined with flexibility is the best investment strategy. One final point: like the telecom industry, progress will seem slow—until it suddenly accelerates.