The idea that Layer 1 (L1) blockspace has become a commodity may be overstated, according to Bitwise Chief Investment Officer Matt Hougan. In a recent commentary, Hougan challenged the growing narrative within the crypto industry that blockchain infrastructure is interchangeable and driven solely by low fees and high throughput.
If L1 blockspace were truly commoditized, Hougan argues, institutional capital and developer activity would be evenly distributed across dozens of networks. Instead, the overwhelming majority of institutional adoption is concentrated on a small group of top-tier blockchains, primarily Ethereum and Solana. These leading networks continue to dominate liquidity, mindshare, and developer engagement, while smaller Layer 1 chains struggle to attract serious institutional interest. As Hougan noted, there is “basically zero interest” in building on lower-ranked L1s.
He suggests that today’s low transaction fees are not proof of commoditization, but rather a result of oversupply. Major blockchains have built more capacity than current demand requires, pushing fees to rock-bottom levels. However, this dynamic could change rapidly. If stablecoins, tokenization, and decentralized finance (DeFi) scale into the trillions of dollars, demand for blockspace could surge, potentially tightening supply and reshaping the economics of leading networks like Ethereum and Solana.
Hougan also addressed concerns about insider trading in crypto-based prediction markets. Contrary to critics, he believes prediction markets such as Polymarket may reduce information asymmetry. By publicly pricing the probability of major events, these platforms function as a market-based extension of Regulation Fair Disclosure (Reg FD), leveling the playing field between institutional investors and retail participants.
While he acknowledges that insider trading risks must be carefully monitored, Hougan argues that transparent, liquid prediction markets can democratize access to information. Ultimately, both the Layer 1 commoditization debate and the rise of prediction markets center on how power and information are distributed in the evolving blockchain-based financial system.
