Authentic Title: What occurred to Ethereum?
Authentic Creator: @paramonoww
Authentic Compilation: Peggy, BlockBeats
Editor’s Be aware: Just lately, Vitalik Buterin printed a prolonged article mentioning that with the numerous enchancment in Ethereum L1’s scaling capabilities and the lengthy-time period lag in L2’s evolution in the direction of “Stage 2,” the previous imaginative and prescient of viewing L2s as “Ethereum-branded shards” is now not tenable. He emphasised that L1 is accelerating its return to the core focus of scaling, now not needing L2s as a “crutch” for efficiency enlargement.
This rewriting of the L2 positioning has sparked widespread dialogue in the neighborhood. Past worth, this text shifts the main target again to Ethereum itself: from the fading of the “ultrasound cash” narrative and the wavering Rollup roadmap, to the shortage of economic incentives and the lack of core expertise, the issues don’t stem from exterior competitors however from unclear path and structural inner friction.
As Vitalik displays on the prevailing roadmap and the Ethereum Basis pushes for inner reforms, Ethereum stands on the threshold of a crucial pivot. Whether or not it will possibly shift from ideology again to clear objectives and execution effectivity will decide if it regains vitality or continues to exhaust the market’s endurance.
Towards this backdrop, Vitalik means that L2s reposition their worth proposition, shifting in the direction of differentiated instructions equivalent to privateness enhancement, deep optimization for particular purposes, excessive scalability, non-monetary use circumstances, extremely-low latency architectures, or constructed-in oracles; in the event that they proceed to deal with ETH-associated property, they need to at the very least attain Stage 1 and strengthen interoperability with the Ethereum mainnet as a lot as doable.
The next is the unique textual content:
This text was primarily impressed by Vitalik’s current tweet about change and the present state of the market. Towards the backdrop of a declining general market, it is truly tough guilty any single particular person, and I’ve no intention of creating such accusations.
I’m writing this text from the attitude of somebody who has collaborated with many Ethereum groups, represented a enterprise capital fund in investing in a number of protocols constructed on Ethereum, and was as soon as a staunch supporter and believer in Ethereum and its EVM ecosystem.
Sadly, I can hardly say the identical anymore. As a result of I really feel that Ethereum is shedding its path (and I am not the one one who feels this manner).
I do not need to focus on ETH’s worth motion, however I can not ignore the truth that because the world’s second-largest cryptocurrency by market cap, ETH’s efficiency is filled with uncertainty. No matter which method the worldwide market strikes, ETH behaves extra like a stablecoin that’s “de-pegging.”
This text goals to debate: what precisely has occurred to Ethereum over the previous few years, and why are an increasing number of individuals shedding confidence, or have already fully misplaced it. Ethereum will not be shedding to Solana or some other undertaking; Ethereum is shedding to itself.
The Rollup-Centric Roadmap
When Ethereum proposed the “Rollup-centric roadmap,” virtually everybody was excited. The imaginative and prescient it painted was: Rollups (and Validiums) would deal with scaling, finish-person transactions would primarily happen on Rollups, and Ethereum would function the settlement layer—which means, prioritizing being the L1 for Rollups slightly than an L1 immediately serving customers.
In comparison with growing a model-new L1, constructing a Rollup is quicker and cheaper, so a future with “hundreds of coexisting Rollups” appeared each reasonable and optimistic.
What may probably go flawed?
Because it seems, all the pieces may go flawed, and virtually all the pieces did: meaningless debates, prioritizing ideology over actual wants, extended inner friction inside the neighborhood, identification crises, and hesitant, delayed abandonment of the Rollup-centric imaginative and prescient.
Every part that would go flawed, did. Most individuals in the neighborhood as soon as seen Max Resnick as an incompetent and “evil” determine, solely to later notice he was proper on virtually each key problem.
Throughout his tenure at Consensys, Max repeatedly identified the adjustments Ethereum wanted to make to maneuver ahead, however he was met virtually completely with criticism, with little real assist.
Essentially the most absurd second was when the whole trade started significantly debating questions like: whether or not a specific L2 is taken into account a part of Ethereum, for instance:
Viewpoint A: “Base is an extension of Ethereum, we contribute vastly to the Ethereum ecosystem.”
Viewpoint B: “Base will not be an extension of Ethereum, it’s an impartial system.”
What the hell are we even discussing?
How does this type of dialogue assist Ethereum and its ecosystem transfer in the direction of a greater future? Why are individuals so significantly debating “what’s Ethereum” and “what will not be Ethereum”? Do not now we have extra essential issues to resolve?
If we determine: as a result of Rollups use ETH for fuel, they’re extensions of Ethereum—that sounds believable; if we determine: Rollups aren’t extensions of Ethereum however purposes constructed on prime of it, benefiting from it—that additionally appears believable.
Proper? Truly, fully flawed.
This so-referred to as “ideological dialogue” will not be a dialogue in any respect; it is two self-absorbed cliques shouting at one another, attempting to show they’re the right ones. We do not want PvP; we’d like PvE. The issue is not “we’re in opposition to one another,” however “we face issues and the long run collectively.”
Sadly, many individuals want the psychological thrill over even barely contemplating that maybe their viewpoint is not fully right.
Technical Ideology Prioritized Over Person Wants
Primarily based Rollup, Booster Rollup, Native Rollup, Gigagas Rollup, Keystore Rollup.
Which one is best? Which one is the long run? How ought to they join?
“This one is the long run.” “No, that one is the long run.” “There isn’t any purpose to not construct a Primarily based Rollup.” “Native Rollups are extra Ethereum-aligned; they may change the whole ecosystem.”
All these debates… and the tip result’s that Arbitrum and Base hold successful.
Technical superiority does convey benefits, however not once you’re over-differentiating between apples and pears, or oranges and oranges. These options are related sufficient that customers merely do not care. Outdoors the bubble, no person cares about these trivia. Another precompile, one much less precompile—it would not determine the winner.
“Oh, we’re the actually Ethereum-aligned ones, we’re nearer to Ethereum, we embody its core values, customers will certainly select us.”
Let me ask: which values precisely? And which customers will select you due to that?
@0xFacet grew to become the primary Stage 2 Rollup, a paragon of “Ethereum alignment.”
However the place is it now? The place are its customers? Its builders? The tech KOLs? These supporters who championed the Ethereum ecosystem and alignment narrative? How many individuals have even heard of Side? What number of purposes are on Side?
I personally don’t have anything in opposition to Side. I’ve spoken with its founder a number of instances, respect him vastly, he is an important individual. However the place are all these individuals who as soon as shouted “We’d like extra Stage 2 Rollups”? I do not know, and you do not both.
Monetary incentives are far stronger than technical incentives. I used to be as soon as a powerful supporter of Taiko, particularly admiring their analysis round Primarily based Rollups: stronger censorship resistance, neutrality, no sequencer downtime threat, L1 validators may even earn extra money.
So what’s the issue?
The issue is that the economics behind this mannequin do not work. You’ll be able to’t drive individuals to surrender their income for the sake of so-referred to as “alignment.”
Arbitrum promised decentralized sequencers; Scroll promised; Linea, zkSync, Optimism all promised. The place are they now? The place are these sequencers?
Virtually each Rollup’s documentation has this line: “We presently use a centralized sequencer, however have robust intentions to decentralize sooner or later.” But virtually none have delivered. Metis did, however whether or not thankfully or sadly, hardly anybody cares about Metis.
Do I believe they over-promised to please influential ETH maximalists? Sure.
Do I believe they genuinely need to decentralize the sequencer? Additionally sure. However it would not make financial sense.
Coinbase (Base) has a authorized obligation to generate as a lot revenue as doable for the corporate, and so do different groups. Why would you actively minimize off your personal income stream? It is not sensible.
Solely about 5% of Base’s income flows to Ethereum. Rollups had been by no means extensions of Ethereum.
Taiko as soon as had days the place it paid extra in sequencing charges to Ethereum than it collected in transaction charges from customers. And firms like Taiko have many different operational prices apart from paying Ethereum.
The imaginative and prescient of Primarily based Rollups or “Ethereum-aligned” Rollups solely holds if groups are prepared to forgo their very own income.
I am not denying the significance of decentralization, safety, and permissionlessness. But when your sole purpose is to be “ideologically right” slightly than person-centric, then it is all meaningless.
And exactly due to this, this fragility and the promise of “Ethereum alignment” have attracted numerous speculators and scammers into the area.
The Penalties of the Rollup-Centric Roadmap
Eclipse, Motion, Blast, Gasp (Mangata), Mantra: these protocols weren’t designed for the lengthy-time period future from the beginning. They simply cloaked themselves in mantras like “Ethereum-aligned,” “making Ethereum higher,” “bringing SVM to Ethereum.”
With out exception, all of them “rugged” in several kinds. All Rollups finally realized: their tokens are virtually ineffective as a result of charges are paid in ETH, and their tokens have little sensible utility. Speculators additionally realized that by producing sufficient hype across the Rollup-centric narrative, they might dump practically nugatory tokens on retail at excessive costs.
Ethereum by no means actually acknowledged Polygon as an L2, regardless of its important function in locking and carrying worth for ETH. For those who consider Rollups are “cultural extensions” of Ethereum, why not acknowledge a undertaking so tightly certain to Ethereum by way of safety and utilization?
Polygon was essential to Ethereum throughout the 2021 bull run, contributing vastly to ETH’s development as an asset. However as a result of it “would not depend as an L2,” it did not deserve recognition from the Ethereum neighborhood. If Polygon had been an L1, its valuation would doubtless be a lot larger.
Rishi reviewed the lengthy-standing controversy inside the Ethereum ecosystem concerning Polygon: in its early days, Polygon was criticized by elements of the Ethereum neighborhood as not being a “correct” L2 as a result of it was seen as a “sidechain,” however Polygon selected to prioritize fixing scalability points over conforming to L2 semantics or neighborhood ideology. Wanting again seven years later, Rishi believes the info show “Polygon was proper from the beginning”: the pragmatic, scaling-first method has stood the take a look at of time.
Rishi reviewed the lengthy-standing controversy inside the Ethereum ecosystem concerning Polygon: in its early days, Polygon was criticized by elements of the Ethereum neighborhood as not being a “correct” L2 as a result of it was seen as a “sidechain,” however Polygon selected to prioritize fixing scalability points over conforming to L2 semantics or neighborhood ideology.
Wanting again seven years later, Rishi believes the info show “Polygon was proper from the beginning”: the pragmatic, scaling-first method has stood the take a look at of time.
First, the “ultrasound cash” narrative: after EIP-1559 and The Merge, ETH’s financial mannequin was formed right into a deflationary asset, touted to change into a greater retailer of worth than Bitcoin. However by 2024, ETH’s annual inflation fee turned constructive once more.
So, the “ultrasound cash” imaginative and prescient solely lasted three years? It can not change into a retailer of worth this manner. This narrative is lifeless—and extra importantly, it was by no means legitimate to start with. As a result of ETH was by no means designed to be a “retailer of worth”; that is Bitcoin’s mission, and you’ll’t compete with it on that dimension.
Subsequent, Ethereum could not determine what its token even is:
Is it a commodity? Does not maintain—as a result of provide is dynamic, and there is staking;
Extra like a tech inventory? Additionally would not maintain—as a result of Ethereum would not have enough income to be valued like a tech firm.
Some merely consider ETH is not “cash” in any respect. So what’s occurring now? We have now to choose a aspect.
Ethereum can’t be all the pieces directly—both you may have a globally clear, unified path, otherwise you fall behind.
Monetary Incentives… Once more
I nonetheless cannot perceive how a lead engineer like Péter Szilágyi earns solely about $100,000 per 12 months. He has been concerned because the earliest days of the undertaking, serving to Ethereum develop from virtually zero to a $450 billion market cap, but acquired a return equal to 0.0001% of that market cap.
Essentially the most influential, most profitable protocol in crypto historical past after Bitcoin, providing neither incentives nor fairness. It is easy to defend this with the beliefs of “decentralization, open-supply, permissionlessness”: “We’re not right here to earn cash; we’re right here to advance progress.”
However the issue is, even essentially the most loyal troopers should be given incentives, in any other case they both depart or tackle different tasks privately. Péter left, Danny Ryan left, Dankrad Feist went straight to Tempo.
In 2024, Justin Drake and Dankrad accepted advisory roles at EigenLayer and acquired token allocations, and the neighborhood instantly attacked them.
These individuals on the Ethereum Basis with “pitiful salaries” (in comparison with FAANG firms and AI analysis labs) had been met with collective hatred merely for desirous to earn some cash whereas additionally serving to an impartial protocol that “is not Ethereum itself however goals to make Ethereum higher.”
Is not this absurd? Generally I really really feel: if you’re an trustworthy, hardworking individual in Ethereum, you appear not allowed to earn cash, destined to be a laborer for all times, working just for “recognition” from the Ethereum neighborhood.
The Ethereum Basis has been promoting ETH to fund varied operations, tasks, and analysis. However maybe, researchers’ salaries needs to be paid first?
Zero Tolerance for Adaptability
“Day 1. Ethereum will certainly win. It is essentially the most decentralized blockchain with the best uptime.”
We hear this rhetoric day-after-day, identical to we hear Ethereum defending itself day-after-day.
Sure, Ethereum is dear and sluggish. However now we have Rollups, simply use Rollups, Rollups are Ethereum!
Sure, ETH’s worth underperforms all the pieces. However Ethereum has the most important developer ecosystem, a powerful basis, demand will catch up finally.
Ethereum is essentially the most decentralized blockchain! Solana sucks, it has no shopper range.
Ethereum has 100% uptime! Solana sucks, it has gone down a number of instances.
Ethereum’s community exercise is decrease than Solana’s? That is as a result of Solana is filled with spam transactions and meme-playing degens, we’re the “moral chain”!
Through the years, it is all the time the identical excuses, the identical solutions, the identical self-reassurance. Every part besides Ethereum and Rollups is trash; if Ethereum underperforms on any metric, we are saying “it is nonetheless Day 1,” we all know what we’re doing, there is no higher place on this planet than Ethereum.
Everyone seems to be already bored with these excuses repeated time and again by the neighborhood.
Ethereum is more and more like an previous, rich grandmother who can barely stroll, refuses any innovation, and simply retains handing out cash to her kids and grandchildren, letting them parasitize her.
Reform
Simply hours earlier than I completed this text, Vitalik tweeted acknowledging that the Rollup-centric roadmap has failed, and a brand new path must be discovered, shifting in the direction of scaling L1.
You realize what? I am truly joyful when individuals can acknowledge their errors. It takes braveness to confess errors publicly. However I am afraid it is likely to be a bit late. Ethereum has as soon as once more discovered a protracted-time period path it should take, however general progress stays sluggish.
The Ethereum Basis has certainly seen some adjustments not too long ago: new management, treasury transparency, R&D restructuring, and so on. Concurrently, the inspiration has began bringing in some contemporary, youthful faces from developer relations and advertising and marketing instructions, equivalent to Abbas Khan, Binji, Lou3e, and others.
However change should be quick sufficient. Ethereum should dash at full pace to show everybody flawed.
Let’s wait and see: after these reforms and adjustments, can Ethereum change into an thrilling prospect once more, slightly than an entity outlined solely by blind religion and disappointment.
