Author: Jiawei @IOSG

Foreword

▲ Source: Jon Charbonneau

dba Co-founder Jon Charbonneau published an article titled "Etherum's North Star" late last year, pointing out that Ethereum lacks a clear "Polaris" goal. Jon also pointed out in an earlier tweet that even Ethereum cannot reach an agreement on its core products.

Since this cycle, the community has been discussing the poor performance of ETH prices. Overall, ETH price is not only a reflection of market sentiment, but also a key factor in whether Ethereum can unify its community vision, balance decentralization and performance, and consolidate its leading position as a smart contract platform.

Inspired by the above article, this article will discuss some of the problems that the author believes have occurred in Ethereum.

ETH price - It does mean something

In this cycle, we saw the ETH/BTC exchange rate hit a new low for many years, and SOL/ETH continued to be a new high, becoming the main factor that Ethereum was criticized by the community.

EF's tech geeks are offensive to the community's dissatisfaction with ETH prices, believing they are a gang of short-term speculators. Admittedly, protocol design should not be price-oriented, but excessive avoidance of price discussion is also a bad sign. This section discusses the importance of ETH price.

#ETH price is directly related to EF's runway

From the 2024 report, as of October 2024, EF's total assets were approximately US$970.2 million, including the additionalCryptocurrency assets are $788.7 million (99.45% ETH); non-crypto assets are $181.5 million.

If the burn rate of US$130 million per year and the ETH price is stable, the current treasury can last for about 7.5 years. The decline in ETH price will shorten the actual runway, and vice versa.

The $130 million burn rate is an exaggerated number. Previously, the community also criticized EF staff redundancy (about 200 people), with only 35% being technicians. Aave founder Stani Kulechov proposed to cut the burn rate to $30 million and lay off employees to 80 people.

#Protocol security

ETH price directly affects the attack cost under the PoS consensus. Of course, actual attacks also need to consider geographically distributed verification nodes and Slashing mechanisms, but price is still a key factor.

After Ethereum adopts the PoS mechanism, the ETH price directly affects the stakeholder's income. As the price of ETH falls, the actual returns will also shrink, which may lead to the exit of pledge nodes and the decline in network security. Lido's TVL is currently about $20 billion, down nearly 50% from the $40 billion high in December last year. Last year, the SOL/ETH trading pairs increased by more than 3 times, and the SOL staking income was still about 2 times that of ETH, which may drive many stakeholders to switch from Ethereum to Solana in the next cycle.

#Confidence of ecological participants

No need to say much, the price is the result of voting by ecological participants (developers, users, investors and other roles) with their feet. In this cycle when mainstream public opinion is generally not optimistic about Ethereum, poor price performance may trigger a negative feedback loop.

Ethereum ecosystem early developer and co-author EIP-1559 eric.eth also posted a statement saying: With Vitalik fading out, EF gradually became disconnected from the community and opacity intensified. Faced with the expansion of rivals such as Solana and EF's "anti-competition" attitude, he received a large number of early Ethereum developers "why insist on staying inThis ecology is a question.

ETH's price is a mirror that deserves the attention and attention of EF.

Decentralization is spectrum, and competition is also

Different people must have different understandings of decentralization from different positions. The memecoin trader on Solana does not require a blockchain that can resist level attacks. Memecoin's chip distribution, dev run, and mouse warehouse address can be seen on the chain, which is enough for them.

▲ Source: dba

Similarly, competition and non-competition are also relative relationships. The author believes that the competition faced by Ethereum is mainly as follows. As a store of value assets

As a smart contract platform

As a smart contract platform

The author mentioned in his previous Ethereum pledge report that ETH is the reserve asset of the DAO vaults of each protocol, the collateral of CeFi and DeFi, as well as NFT transactions, MEV pricing, token trading pairs, respectively, and the value continues to exist in time and space, and should be used as a store of value assets.

But this is only within the Ethereum ecosystem. Broadly speaking, if you look beyond the ecosystem, the value storage attribute of ETH is still significantly weaker than that of Bitcoin.

For example, from the perspective of positioning, since the birth of Bitcoin, people have begun to build their narratives around "digital gold" and "scarce assets against inflation". The core functions of Bitcoin are clearly defined as store of value, which is easier to be understood by mainstream markets and the public.

Ethereum, as a smart contract platform, its value sources include Gas, pledge income, ecological applications built on the chain, etc. This complexity leads to the dilution of its value storage attributes, which the public prefers to regard as "technical tokens" and "utilitarian tokens" rather than pure valueStorage tools.

From the supply perspective, the total amount of Bitcoin is fixed at 21 million, and the inflation rate is gradually reduced to zero through the halving mechanism. The supply of ETH may be less than Bitcoin after the implementation of EIP-1559 and PoS. However, due to the sluggish network activity recently, it has gradually returned to inflation and has been changing with the fluctuations of the network.

Compared with Bitcoin, Ethereum’s complex functions and mechanisms require a higher cognitive threshold. In addition, institutional investors (such as MicroStrategy, Tesla) publicly hold Bitcoin as a reserve asset, which also strengthens the legitimacy of their store of value.

So, at present, it is difficult for ETH to compete with Bitcoin. Ethereum’s more core positioning is the smart contract platform.

As a store of value asset

As a smart contract platform

Ethereum, as a smart contract platform, is facing fierce competition from Layer1 such as Solana and Sui. From the data perspective, although Ethereum has an absolute advantage in stablecoin issuance and TVL, it has shown a decline in key data such as daily trading volume, average daily active addresses, and transactions.

▲ Source: Artemis

From the flow of funds over the past year, protocols such as Base, Solana, and Sui have captured large inflows, while Ethereum has flowed out of nearly US$8 billion. Transactions in the Ethereum ecosystem are mostly concentrated on Base and Arbitrum. Although this meets expectations for the Rollup-centered roadmap, the sluggish activity in L1 will somewhat affect the market's pricing of ETH.

▲ Source: IOSG

The above feedback loop mechanism is basically formed between the platform, developers, applications and users. A good platform attracts high-quality developers, developers create good applications, and applications attractUsers, users promote the prosperity and growth of the platform.

Because the different technical development routes of Ethereum and Solana, developers often need to choose one of the two platforms. Therefore, at the level of "smart contract platform", the two must be in a competitive relationship.

▲ Source: Solana

solanaroadmap.com The web page is so concise that there are only four words, abbreviated as IBRL. But the current Solana is not limited to high performance. In addition to technical IBRL, Solana's cultural and attention capture also has differentiated competitive points.

▲ Source: mert

The author once asked on X "Why not launch memecoin on Ethereum L2" because L2 also has the characteristics of low cost and high throughput. The answer I got was "culture". Looking at user portraits in a general way, it is generally believed that users on Ethereum seem to be more of "old money" mining in DeFi, while Solana represents the rapid flow and redistribution of fresh blood and capital.

New things tend to capture attention better than old things. Many of the founders I have talked about in this cycle have chosen to build consumer applications on Solana. In addition to technical reasons, most of the words they mentioned are "attention" - this cycle more users focus on Solana.

In this market, there are a wide range of projects and extremely scarce attention. The founder will try his best to increase the exposure of the project and let the market discover its own products. Solana also has more hot money and a smoother user experience, because when you want others to use your product, every new step will be friction and obstacles.

Ethereum fans - Choice of the Ethereum Foundation

Governance without action is suitable for Ethereum in a strong competitive environmentIs it?

The community has disagreements over Aya's transfer to chairman of the Ethereum Foundation: critics pointed out that during Aya's seven-year tenure, problems such as slow development progress in Ethereum, insufficient developer support, and weak token prices are directly related to his management; the "subtraction philosophy" and decentralized governance advocated by him were criticized as "lazy-faith", which led to EF's failure to actively coordinate ecological resources, which is in sharp contrast to the efficient operation of the Solana Foundation.

These evaluations are difficult to clarify in a short period of time and are not within the scope of this article, but they reflect the dissatisfaction of the community to a certain extent and serve as an outlet to vent the backlog of emotions.

EF’s role has never been to control or own all domains in Ethereum. Instead, our responsibility—our accountability—lies in upholding Ethereum’s values. Through both our actions and our non-actions, we are accountable for ensuring that Ethereum remains resilient, not just as a network, but as a broader ecosystem of people, ideas, and values—never reduced to a single organization’s product. ——Aya Miyaguchi

Aya published an article "A new chapter in the infinite garden" on the day of taking office, indicating that the foundation’s role is a “gardener” rather than a “controller”, and supports the ecology by cultivating client diversity, R&D coordination, community activities, etc.; advocates adaptive growth, decentralized leadership, and opposes corporate expansion; believes that Ethereum needs to maintain its original vision as a “world computer”.

The author believes that it is beneficial to talk about values ​​and ideals in the growth cycle; but if the system is in a recession stage and cannot produce increments, then this kind of "high talk" is very useful.The theory will appear pale and powerless and unable to convince the public.

The premise of becoming a "world computer", the fundamental reason for practicing and developing values ​​is that someone builds ecologically and is willing to follow and promote this value. The prosperity and growth of the ecology is a necessary condition.

Han Feizi pointed out in "Five Worms" that the essence of Confucianism's "using literature to disrupt the law" lies in empty talk of benevolence and righteousness and ignoring the contradictions in reality. When resources are limited, empty talk about benevolence and righteousness will lead to deviating from actual needs and must rely on practical means such as "law, art, and power". When Confucius traveled around the countries, only Wei (more developed economy) briefly accepted his idealism; in the countries of Song, Chen, Cai and other countries where wars were frequent, Confucius' idealism was neglected because of his lack of material foundation.

Some time ago, when EF questioned that EF continued to sell ETH and did not use financial management methods such as pledge to maintain runway, EF sold another small amount of ETH that day. This move seems awful when community dissatisfaction spreads. Vitalik said that if the foundation pledges ETH, it may be forced to make an "official choice" in the controversial hard fork incident, which violates the principle of decentralization of Ethereum. This too illusory reason also seems untenable and cannot respond to the core concerns of the community.

Based on the above discussion, Ethereum seems a little overwhelmed whether it is the weakness of various data areas positioned from the "smart contract platform" or the sluggish ETH price area with the "store of value" currency attribute. At this time, choosing to insist on governing inaction is not necessarily a wise move.

"Ethereum is an ecosystem, not a company"

Vitalik's Chinese AMA on February 27 emphasized that Ethereum is not a company, but an ecosystem.

I think Ethereum is a decentralized ecosystem, not a company. If Ethereum becomes a company, we will lose most of the meaning of existence of Ethereum. Building a company is the role of the company. ——Vitalik Buterin

The author agrees that Ethereum should not be a company's view, because corporate operations mean to be profitable to a certain extent, which conflicts with Ethereum's always positioning. However,The result of corporate operations orientation is that it is difficult to set up some indicators to measure the efficiency of the system, and the system's goals are divergent, rather than optimized for a certain point or direction.

What is embarrassing is that although EF does not consider Ethereum to be a company, the public's pricing and valuation of Ethereum is still inclined to be carried out in the form of a company. Referring to indicators such as the number of active addresses, transaction volume, and protocol revenue, it is difficult to achieve the simplicity of Bitcoin's "totem".

From a series of fundamental data such as protocol revenue, Ethereum no longer has a strong momentum. For example, ETH has ended its nearly two-year deflation cycle, returning to inflation, with an annual inflation rate of 0.72%.

▲ Source: Dankrad

At the level of technical development, Aya wrote in the article: Instead of controlling, we steel All Core Dev calls to create space for technical decisions to emerge through community wisdom. Coordination rather than dominance is good from the starting point, but it is inevitably too ideal. The coordination-oriented approach will encounter many problems in practice, such as inefficiency and high friction. Everyone has their own opinions, without global decisions, which will ultimately make it difficult to execute.

Of course, this article does not explain who is right and who is wrong, nor does it criticize EF's practices, but attempts to state the author's views and logic and point out the benefits and interests. In summary, the author believes that EF needs to avoid the truth and seek truth from facts, discover problems, listen to the opinions of the community, and take actions.

Conclusion

Crypto has different main lines in different cycles. In this cycle dominated by the mainstream narrative of Bitcoin ETFs and the Solana memecoin craze, Ethereum is obviously not favored by the market. Ethereum has good values ​​and idealism, but these superstructures need to be supported by real use cases and communities.

Keep this value unchanged, what can Ethereum do at this stage?

Accelerate development progress, focus on scaling, solve cross-L2 interoperability problems, and make Ethereum available at the technical level. Attract long-term developers and so on.

Education. ethereum.org's multilingual support has been doing well. Ethereum is unlikely to do some lobbying, but education around the world is quite necessary.

EF needs reforms to achieve governance transparency and community supervision, and balance idealism with market demand.

As an Ethereum enthusiast for many years, I feel sorry for the status quo, but I am happy to see challengers such as Solana hit the status of Ethereum - the story of latecomers challenging the established "winner" in Crypto is constantly repeating, which is also exciting.

Hope we can make Ethereum great again.

Milady