Grayscale referenced a Medium blog post published by Dragonfly Research on Jan. In the Dragonfly report, Haseeb Qureshi said that even though people often describe L1 blockchains as networks, networks are a false analogy for blockchains.

Qureshi went on to say that “smart contract chains are actually more like cities.” He then explained that under this framework you can say that Ethereum is New York City:

   “Of course, New York is a crime scene! It has the biggest banks, the most billionaires, the hottest brands and celebrities. Likewise, Ethereum has all of the biggest DeFi protocols, the most TVLs, the hottest DAOs and NFTs. But expensive. If you are a rising person, you are over priced. Maybe if you bought the assets early, you could get rich. But today the prices will eat you alive and there is not enough room to fit everyone. Billionaires may be fine, but the next generation will have to go elsewhere.”

While Qureshi stated that there are ways to grow a city, he listed the following.

  • Way 1: “accumulation” (“L2 and aggregations are the blockchain equivalent of skyscrapers. Each aggregation is like a vertical blockchain extending from the L1 floor. There is a lot of space in one aggregation! But to visit one aggregation from the other, you need to climb Ethereum from Below and you need to take care of the underlying traffic.")
  • Way 2: 'interoperability networks' like Polkadot or Cosmos“
  • Way 3: “build another one” (a few examples are Solana and Avalanche)

Grayscale's report titled "Get Smart on Smart Contract Platforms" also states the following about Ethereum and Polygon.

   “Ethereum is like New York City: it's large, expensive, and congested in certain areas. However, it also has the richest app ecosystem, with more than 500 apps with a total value of over $100 billion, 10 times larger than any other competing network.

While the network is expensive to use, users and developers are relieved that Ethereum will likely continue to be the center of gravity for app innovation and liquidity due to the size of its community and the amount of capital locked into the network's smart contracts.

An L2 solution like Polygon can be compared to a skyscraper in NYC: it scales by building upward. Polygon internally consolidates and resolves many transactions before returning to Ethereum's underlying chain, giving users both the security of Ethereum's core layer and the low fees of a centralized chain."