What does valve do to prevent itch and gog from having a fair shot at competiting if they scrounged up the investors to develop up a competing platform? They offer the features their customers expect and that customer base has so far proven to be a much smaller market

They're not competing with Steam. They're offering different services.

Competition is like EA Origins or the Epic store.

The others have been improving for a bit but GOG and itch have been focused on niche markets while Steam has grown broadly using the money from valve's early successes. If they want to step up to the kind of scale steam operates at, it will take a lot to overcome the innate loyalty of 'I already have 1000 games worth of time and money invested in the steam system,' and grow their repertoire outside their niches. Epic and Ubisoft also have tried, but they're still trying to catch up to where steam has been plugging along for ages. Epic has tried to build out their own version of the '1000 games' moat by giving out constant free games but their moat still isn't that big, and ubisoft has been relying mostly on having a few exclusives, but that hasn't really been a winning plan either because it's not enough to get people to think 'I want a game,' means 'go to origin,' instead of 'check to see if i already have it on steam.'