Why are there always voices in the market that are pessimistic about Ethereum?

Original author: Haotian, crypto researcher

Editor's note: At the end of July, the Ethereum spot ETF was officially approved and listed. It seems that due to the favorable landing, the actual effect of the listing of the ETF on Ethereum is not satisfactory, and the price of the currency has fallen instead of rising. Last Monday, with the circuit breakers of stock markets in many countries, the crypto market ushered in a tragic plunge. Ethereum once fell below $2,100, wiping out all the gains this year. Two days ago, the Ethereum network gas fee dropped to 1 gwei. In this cycle, with the rise and prosperity of the Solana ecosystem, many voices of "badmouthing" Ethereum have appeared in the market. Crypto researcher Haotian, as a long-term Ethereum Holder, published his views on the subsequent development of Ethereum on X. BlockBeats reproduced the full text as follows:

Why are there always voices that the market is pessimistic about Ethereum? In short: The Ethereum ecosystem is indeed facing an anxious situation of internal and external troubles. Internally, expansion plans such as Layer2 have always been unable to stand up, and externally, killers such as Solana have always been determined to destroy the Ethereum. Ethereum has ushered in a difficult moment under the pressure of lack of innovation and competition. Next, let me briefly talk about my views:

1) The large and small ecosystems of Ethereum Rollups have taken shape. After the Cancun upgrade EIP-4844, the short-term technical benefits of Ethereum have been settled. Longer-term shard chains are no longer expected under the impact of Rollup, and upgrades such as reducing node costs, simplifying protocols, and ZK-SNARKs are just icing on the cake. The entire blockchain industry is waiting for the second dragon Ethereum to hand in a satisfactory layer2 answer sheet, but as of now, Layer2 has not carried Ethereum's "growth" expectations. 2) To be honest, Rollups can stand out from a variety of expansion solutions such as Plasma, Validium, and even parallel chains, all because Rollups adopts a primary and secondary chain combination interaction paradigm for layered processing such as execution and status, settlement, etc. Under normal logic, after Layer2 establishes a secure consensus for interaction with the main network, it should then strengthen and amplify the performance processing advantages on the execution layer to input incremental users and ecology into the Ethereum main network.

However, the fact is that most Layer2s have chosen to stack leverage at the commercial narrative level, adopting the Stack strategy to attract alliances, and involving shared components in the Layer3 application chain, as well as Rollup as a Service, DA as a Service, and even AVS as a Service, etc. These strategies that can infinitely expand the commercial and narrative imagination space of Layer2 at first glance can only add market expected leverage in the long term, and cannot immediately produce results in expanding the application ecosystem and empowering currency prices.

3) For a long time, some people have always ridiculed Ethereum's gas fee of 1Gwei, using it to ridicule the failure of Ethereum's Layer2 strategic direction. But from another perspective, isn't this a phased success of Ethereum's solution to congestion and high gas fees by layer2? However, the bad thing is that Layer2 not only did not bring the expected huge ecology and transaction volume of Ethereum, but even diverted some of the traffic away.

In fact, Layer2 has been successful in solving Ethereum's insufficient performance, and the competition between the OP-Rollup and ZK-Rollup camps has reached a white-hot level, but the choice of camps to engage in infra rather than pure application innovation has exposed a very embarrassing situation in the Ethereum developer community: over-reliance on VC financing to drive coin issuance rather than real value innovation.

Although this is a direct result of the influx of more developer talents into the Web3 industry and the influx of more VC funds, the competition has intensified. Although the higher threshold for entrepreneurship could have been a sign of the market's maturity, in the early stages of Crypto, excessive internal circulation became the initiator of the high FDV of projects that stifled innovation. Imagine a project with a huge FDV, all efforts are made to quickly go to market, how can there be time to precipitate value innovation. And the most effective way to VC is to stack the business narrative of the B-side, while the urgent but unsexy direction of C-side applications has been tepid. Therefore, the market has sensed the imbalance of infra> application.

4) Although the sexy narrative of Ethereum killers has been falsified in the last round of bull market, this round of high-performance public chains such as Solana, Sui, Aptos, and Sei have directly hit the "low performance" soft spot of Ethereum EVM. Although they are no longer shouting to kill Ethereum, it is undeniable that their high concurrency and special Move language security mechanisms can indeed impact Ethereum, especially the fertile ground for the growth of the new generation of Web3 application ecology, such as DePIN, large-scale games, intent transactions, AI Agent, etc.

This is what I think is the biggest opportunity for the new generation of high-performance public chains. No longer stacking infra expectations, directly declaring war on Ethereum with the rise of applications.

Or there is no need to declare war at all. Using modular thinking to place Ethereum on the thin narrative of the "settlement layer", and using the new modular execution layer, DA layer, Unified liquidity layer, etc. to reconstruct the discourse system established by Ethereum in the past, isn't it also a kind of competitive success? It is for other chains, and it is also for Ethereum. However, this is the trend I have seen in other high-performance chains or modular chains, chain abstract chains, but it seems that Ethereum is still just a "passive beating" posture. Even under the premise of advanced benefits such as ETFs, it has not been able to put down its airs to deal with it.

5)Many people are still looking forward to another DeFi Summer, but reflecting on the fact that Ethereum Layer2 is not as good as expected, I have no choice but to accept the fact that DeFi Summer may never come back.

Vitalik Buterin himself is also very clear that the biggest dilemma of Ethereum may be its excessive financial attributes. DeFi, a perfect carrier of financial attributes, has past successful experiences and the infinite nesting doll attributes of DeFi combinations, which make it naturally fit people's speculative preferences. What the Ethereum ecosystem should consider at this moment is not to reshape DeFi Summer, but to get out of the haze of pure DeFi culture.

NFT, which emerged in the last bull market, and OpenSea, which went from prosperity to decline, have never been fully embedded in the DeFi framework, but this does not affect NFT leading Ethereum out of the last round of super bull market. This round of PolyMarket decentralized prediction market is valued. Although it is not a new way of playing, and it is not known whether it can set off new vitality, fortunately, it is not pure DeFi, or it has expanded and reconstructed DeFi. How to integrate Ethereum into the Web2 world as much as possible, and move from virtual to real, is what everyone should really expect in the new summer.

That’s all.

Note: As a long-term Ethereum Holder, I sincerely hope that Ethereum can get out of the most difficult time of internal and external troubles. But I still want to emphasize that the Ethereum ecosystem brings together the largest number of geeks and is also the territory most sensitive to innovation. As long as the market gets out of the current predicament, I believe Ethereum will still be the most handsome guy to turn the tide.

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