Back in 2017 I traded a large number of different coins, including so called ETH killers, before coming to my senses and consolidating my gains into only ETH and BTC (luckily before the alt market collapsed 90%). I managed to stack a nice portfolio of ETH/BTC but now I'm starting get the itch that I need to diversify more. I have a bit of shell shock because during my period of heavy investing I also picked a number of duds that were so called ETH killers (FSN, ZIL, etc.).
As it stands, I'm not chasing quick 10-100x gains, and would be more than happy if my portfolio did a 5-10x in 5-10 years. Over the last month I've been researching diversification options, and I can't pull the trigger on anything and keep coming away unimpressed with the options. I'll lay out a few of my hesitations below, am I missing something big, overly biased, do I need to hedge against an ETH 2.0 failure scenario or some other black swan type event with such a narrow portfolio.
Cardano
I don't see how it can do anything ETH 2 + L2s won't be able to do. I don't like the appeal to authority with what I feel is an overemphasis on peer reviewed papers. I come from a software engineering background, and peer review is generally not the gold standard of how secure systems get built in the real world. It's not like ETH doesn't have research and peer review, they just don't go on and on about it. They also talk a lot about using formal methods, which again is not some magic foolproof way to write bug free code, but simply a tool in the tool bet. I also don't like the whole virtue signaling thing with trying to save Africa. If a coin can serve a community it will eventually be adopted, you don't need to force partnerships to drive a narrative that you're serving the poor people in the world.
Polkadot
I recently heard Gavin talking on the unchained podcast, and he made a lot of excuses about the past security failings of parity, and that gave me a lot of pause. A strong leader admits mistakes rather than blaming them on limited resources or other problems. DOT also claims to be vastly different from what ETH 2 is shaping up to be, but I think it's just a similar system disguised with different terminology. They propose a heterogeneous blockchain environment with a single relay chain. To me that sounds exactly like ETH 2 plus a variety of independently built L2s. I give the advantage here to ETH, because L2s can be built organically rather than having to be blessed by and run on Polkadot. The polkadot approach feels like too much central planning, and I think that prevents the market from deciding which types of L2s will be most useful.
Polygon
This one I actually find somewhat interesting, but as an ETH L2, it's a bet on ETH, and I'm already betting on ETH. I'm not convinced it would outpace just holding ETH in the long term, and I think it will face stiff competition as more L2s come online. I also heard the team is having trouble attracting enough developer talent to build out their system, which doesn't inspire a lot of confidence.
Cosmos
All I know about it is that it's like Polkadot, but each chain doesn't inherit the security of the main chain. Maybe I need to learn more about it, but on the face of it, this seems like a terrible design choice. And again, what would it be able to do that ETH + L2s won't?
Algorand
I listened to the founder on the Lex Fridman podcast, and he made a lot of claims about the superiority of their chain without discussing any of the drawbacks. They claim to have solved the trilemma of decentralization, security, and scalability, but from what I can see the network is actually very centralized, so it appears their solution is a fraud. I don't care if the founder has a turing award and invented ZkSnarks. In case you can't tell, I hate appeals to authority.
Solana
Oh look, they've solved all the scaling problems... by throwing more hardware at it and basically taking the Bitcoin Cash approach to increased throughput by insane chain bloat. Again, a team that preaches all their chain can do without being upfront about what the tradeoffs are. I don't see how this doesn't become super centralized. I heard one of the founders on the unchained podcast recently, and he didn't inspire a lot of confidence. He seemed to have a hard on for the idea of Visa maybe using them someday in the future as a settlement layer and didn't view the token as a store of value. This coin feels like it's straight out of silicon valley tech bro culture as the founders had little interest in crypto until they realized they could make a fortune starting their own during the last bull run.
DeFi tokens
I have no doubt DeFi is going to be a multi trillion dollar market itself, but betting on DeFi is betting on ETH, and I'm already doing that. I'm sure short term gains could be bigger, but I'm not sure I want to take on the stress of trying to pick winners. Also, the fact that tokens can be valued in a traditional way based on revenue gives them a price ceiling that ETH does not have. Is it worth just allocating a small position to something like DPI?
Yield farming
I'm super hesitant here, because I don't want to be caught picking up pennies in front of a steamroller. 20% returns are great until there's a hack or some other unforeseen event and it wipes out all your gains and your principal. I honestly don't see the point of chasing small gains like these if ETH can double in a year. I'd rather take the slower and safer approach.
So there you have it, I'm really trying not to be an ETH/BTC maximalist, but I just can't find any reason not to be. None of the other projects seem to have a compelling value proposition, and most fail to state the tradeoffs they've made in their architectures. Of the projects that are interesting, they all seem to be built on ETH, which doesn't help with hedging against and ETH 2.0 failure case.
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