What's going on with Ethereum?

Compilation: Plain Language Blockchain

This article was mainly inspired by Vitalik’s recent tweets about the current market situation and changes. Although the entire market is declining and it’s hard to attribute it to any one person, I don’t intend to do so.

I have worked with many Ethereum teams and invested in numerous protocols built on Ethereum on behalf of risk funds. Overall, I was a passionate supporter of Ethereum and EVM-related matters.

Unfortunately, I can no longer say the same, because I feel Ethereum doesn’t know where it’s headed (many others feel the same).

I don’t want to discuss ETH’s price trends, but I can’t ignore one fact: the second-largest cryptocurrency in the world is performing extremely unstable. Regardless of the global market trend, ETH’s performance is more like a drifting stablecoin.

This essay aims to explore what has happened to Ethereum over the past few years and why many people are losing hope or have already lost hope. Ethereum didn’t lose to Solana or other competitors; it lost to itself.

Summary of the Centralized Rollup-Centric Roadmap

When Ethereum introduced a rollup-centric roadmap, almost everyone was excited. The promise was that rollups (and Validiums) would handle scalability, with user transactions happening on rollups, and Ethereum serving as the validation layer, focusing on becoming the L1 for rollups rather than a user-facing L1.

Developing rollups is much faster and easier than developing L1s, so the vision of “thousands of rollups” seemed very feasible and optimistic.

Where did things go wrong?

It turned out, everything went wrong. Endless debates, ideology overriding needs, ongoing community infighting, identity crises, and it was too late to abandon the “centralized aggregation” vision.

Everything that could go wrong did. Most of the community once believed Max Resnick was a completely incompetent villain, only to find out he was right about almost everything.

Max proposed many ideas on how Ethereum should move forward during his time at Consensys, but he was met with criticism and almost no support.

The dumbest peak was when the entire industry started debating whether a certain L2 is truly “Ethereum” — for example:

• Viewpoint A: “Base is an extension of Ethereum; we’ve made huge contributions to the Ethereum ecosystem.”
• Viewpoint B: “Base is not an extension of Ethereum; it’s an independent entity.”

What the hell are we even discussing?

How can such debates lead Ethereum and its ecosystem toward a better future? Why do people seriously argue about what is core Ethereum and what isn’t? Don’t we have more important issues to solve?

This kind of ideological discussion isn’t really a discussion; it’s a confrontation between two small circles (circlejerks), trying to prove who’s right. We don’t need infighting (PvP), we need external expansion (PvE). We must understand that this isn’t a conflict between us but a collective challenge for the future.

Unfortunately, many prefer chasing mental gratification rather than considering that their views might be wrong.

Technical Ideology Over User Needs

Based Rollups, Booster Rollups, Native Rollups, Gigagas Rollups, Keystore Rollups… Which one is better? What does the future hold? How do they connect? “This type is the future,” “No, that type is the future.”

All these discussions… the result is just Arbitrum and Base continuing to dominate.

Technical superiority offers advantages, but when you compare “apples to pears” or “oranges to citrus,” that advantage disappears. They are too similar, to the point that users don’t care. Outside the bubble, no one cares. One more precompile, one less precompile — you won’t win because of that.

“Oh, we’re actually ‘Ethereum-aligned,’ we have an advantage, we’re very close to Ethereum, embodying its core values, users will choose us.”

I want to ask, what values? And which users will choose you?

@0xFacet became the first rollup to reach Stage 2, exemplifying alignment with Ethereum. But where are they? Their users, developers, tech KOLs, and supporters of the Ethereum ecosystem — where are they? How many of you have heard of Facet? How many applications are available on Facet?

I have no personal opinion on Facet; I respect its founders. But where are those who keep saying we need more “Stage 2” rollups? I don’t know, and you don’t know either.

Financial incentives are far more powerful than technical ones. I was a fan of Taiko, especially their research on Based Rollups. This model has many benefits: stronger censorship resistance, neutrality, no risk of sequencer downtime, and L1 validators earn more.

Where’s the trap?

The trap lies in the financial model behind it. You can’t force people to give up income for the so-called “alignment.”

Arbitrum promised decentralization of sequencers in the past, and Scroll, Linea, zkSync, and Optimism also made similar promises. Where are they now? Where are those sequencers?

Every rollup team states in their documentation: “We currently use centralized sequencers, but we have a strong desire to decentralize in the future.” Hardly anyone follows through. Metis did, but luckily or unluckily, people don’t care about Metis.

I think they overpromised to appease influential ETH maximalists (Maxis). Do I think they truly want to decentralize sequencers? Yes, but it’s not commercially feasible.

Coinbase (Base) is legally obliged to maximize profits and create value for the company. Other teams are the same — why would you willingly kill your revenue source? That makes no sense.

Only about 5% of Base’s revenue flows back to Ethereum. Rollups have never been an extension of Ethereum.

Taiko once had days when it paid more in ordering fees to Ethereum than it earned from user transactions. Clearly, companies like Taiko have many other expenses besides paying Ethereum. Based Rollups or any “Ethereum-aligned” vision can only be realized if teams are willing to give up income.

I don’t underestimate the importance of decentralization, security, and permissionlessness. But when your sole goal is “ideological correctness” rather than “user-centric,” it all becomes meaningless.

Predictably, this weakness and the promise of “Ethereum alignment” attract a lot of grifters.

Consequences of the Centralized Roadmap Summary

Eclipse, Movement, Blast, Gasp (Mangata), Mantra: these protocols were never built with the long-term future in mind. It’s easy to hide behind masks of “Ethereum alignment,” making Ethereum better, or introducing SVM into Ethereum.

They’ve all, to some extent, “rugged” themselves. All rollups realize their tokens are almost useless because they pay fees in ETH, but their own tokens have little practical value. Speculators realize they can hype around rollup narratives and cash out by selling worthless tokens to retail investors.

Ethereum has never officially recognized Polygon as a true L2, even though it played a significant role in supporting ETH’s value. If you believe rollups are a “cultural extension” of Ethereum, why not acknowledge a project closely tied to Ethereum’s security and usage?

Polygon was crucial during the 2021 bull market, contributing significantly to ETH’s asset growth. But no, it’s not an L2 and doesn’t deserve praise from the Ethereum community. If Polygon were an L1, its valuation would be much higher.

Even top-tier VCs like Paradigm, which arguably contributed most to the Ethereum ecosystem and even developed its own L2 (Ithaca), have shifted to working with Stripe on L1 (Tempo).

I think when your biggest believers start building your competitors, you’ve definitely done something wrong.

Ethereum Foundation (EF) Lacks Direction

Although Ethereum is technically decentralized, it is culturally highly centralized around Vitalik. The inner circle of Ethereum is real. As people say, if you want to succeed, all you need is to get the attention of Vitalik’s close circle and a few influential VCs.

I’m not saying you have to agree with everything Vitalik says, but his views essentially define what is good and bad for Ethereum — you can’t compete with that.

First is ultrasound money — after EIP-1559 and the Merge, ETH’s economic model became deflationary, and many believed it would be a better store of value than Bitcoin. But in 2024, ETH’s annual inflation turned positive.

So the vision of ultrasound money lasted only 3 years? That’s impossible to become a store of value. This narrative is dead, and it was never truly alive because ETH was never designed to be a store of value — that’s Bitcoin’s mission, and you can’t compete.

Next, Ethereum can’t decide whether its token is a commodity (due to dynamic supply and staking mechanisms, making it unsuitable) or more like tech stocks (since insufficient revenue to support tech-company-like valuations).

Some even argue ETH isn’t money at all. What are we doing? We need to pick a direction. Ethereum can’t be multiple things at once — you either have a unified global definition or fall behind.

Financial Incentives… Once Again Absent

I still can’t imagine that chief engineers like Péter Szilágyi earn only about $100,000 a year for their contributions to Ethereum. The person who helped Ethereum grow from zero to a $450 billion market cap, from the very beginning, receives only 0.0001% of that market cap in salary.

The most influential and successful protocol in crypto history (second only to Bitcoin) has provided no incentives or equity. Hiding behind the doctrines of decentralization, open source, and permissionless, it’s easy to justify: “We’re not here to make money, we’re here to progress.”

But you must incentivize even your most loyal warriors, or they will leave or secretly take on side jobs.

Péter left, Danny Ryan left, Dankrad Feist went straight to Tempo.

Justin Drake and Dankrad took advisory roles at EigenLayer in 2024 and received token allocations, which led to community backlash.

Those earning “peanuts” at EF (compared to FAANG and AI labs), just because they earn money and help a protocol that aims to improve Ethereum (even if it’s not Ethereum itself), are attacked.

Are you fools? Sometimes I think if you’re honest and diligent in Ethereum, you’re deprived of earning rights and expected to work like slaves for “recognition” from Ethereum.

EF has been selling ETH to fund operations and research. But maybe they should pay their researchers enough first?

Zero Tolerance for Adaptability

“Day one. Ethereum will win. The most uptime decentralized blockchain.” We hear this every day, just like every day we hear Ethereum’s excuses.

• Yes, Ethereum is expensive and slow. But we have Rollups, so use Rollups — Rollups are Ethereum!
• Yes, ETH price lags. But Ethereum has the largest developer ecosystem, we have a solid foundation, demand will come.
• Ethereum is the most decentralized! Solana is trash; they lack client diversity.
• Ethereum has 100% uptime! Solana is trash; it’s gone down multiple times.
• Ethereum’s network activity is lower than Solana’s. That’s because Solana’s activity is spam and degenerate gamblers. We are the moral chain!

You know what, I’m happy to see people realizing their mistakes — it takes courage. But I think it might already be too late. Ethereum has once again found the path it needs to take long-term, but progress remains slow.

EF has indeed undergone some changes recently: new leadership, transparency in the treasury, restructuring R&D, etc. EF has started hiring young, talented DevRel and marketing folks like Abbas Khan, Binji, Lou3e.

But change must be fast. Ethereum must sprint to prove everyone wrong.

Let’s see if, after these reforms and EF’s shifts, Ethereum can once again become an exciting project rather than a blind, delusional faith and disappointment.

https://www.hellobtc.com/kp/du/02/6237.html

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