Jessy, Jinse Finance
The unanimous bearish sentiment towards Ethereum changed after the Ethereum spot ETF was approved.
After the news that Ethereum's spot ETF was likely to be approved this month, Ethereum rose 20% in one day. After the spot ETF was approved, its price briefly reached $3,800.
In this round of bull market, Ethereum's performance is not as good as Bitcoin, and some public chains such as Solana have risen strongly, which has also posed a certain threat to Ethereum. From this point of view, it is reasonable for Ethereum to be pessimistic. But under these appearances, what is not noticed is that Ethereum still occupies 60% of the TVL of the public chain market, and the second and third places only account for single digits. And Ethereum has never stopped technological innovation to improve those criticized problems.
Is Ethereum really running out of ideas? Or is it just dormant?
Under the cyclical market, the exchange rate of Ethereum against Bitcoin has continued to fall
Over the past year, the exchange rate of Ethereum to Bitcoin has indeed been falling. The fundamental reason behind this is the strength of Bitcoin. After all, it is not just Ethereum. When Bitcoin enters an adjustment cycle, most of the Altcoin have very low growth rates, and some are even lower than the prices during the bear market.
Shenyu even commented that there may not be a copycat season in this bull market.
The rule of the last two rounds of market is that Bitcoin rises first, then Ethereum rises, and the rise of Ethereum brings about the explosion of Altcoin. In the last round of bull market, most Altcoin also rose tenfold. When there is sufficient capital in the market, it will overflow and flow from mainstream coins to Altcoin.
The logic behind the rise of Ethereum bringing about the explosion of Altcoin is that, previously, most projects were built on Ethereum, and the surge in Ethereum prices will indeed bring prosperity to the entire chain ecosystem.
This round of bull market is indeed different from the previous ones. The cycle has been advanced. In the past, bull markets started only after the Bitcoin halving, but this bull market started half a year earlier. The reason is very simple. This bull market was driven by the passing of spot ETFs, and then the Bitcoin halving was superimposed.
However, due to the impact of the economic cycle, there is still less money in the market that is more likely to invest in high-risk assets. From this perspective, the price of Ethereum has not increased much, and the reason is that there is not enough liquidity in the market and there is not much money.
Moreover, Ethereum’s narrative this year is indeed not new enough, nor strong enough. Looking at the public chain track alone, in this round of bull market, Solana is undoubtedly the best performer, with its price rising continuously and its on-chain ecology also flourishing. The main reason is the support of Wall Street capital. TON, which also ranks in the top ten in market capitalization, tells a story of traffic conversion backed by 900 million Web2 users, which has attracted a number of VCs to support it.
Ethereum also has a very attractive narrative in the industry - Layer2. In the bear market, everyone placed heavy bets on this track. However, the growth of Layer2 tokens was not satisfactory, and they were criticized for their high unlocked market value. In addition, the emergence of numerous Layer2s has indeed distracted everyone's attention from Ethereum, and the funds originally intended to be invested in Ethereum have been siphoned away by Layer2s.
From a technical perspective, Ethereum is indeed constantly innovating, but the most attractive concept of Layer 2 cannot bring a large influx of funds to Ethereum.
Of course, in this bull market, Ethereum has another exciting narrative - the approval of the US Ethereum spot ETF. The price increase in the past few days is also because there is news that the Ethereum spot ETF is likely to be approved on May 23rd, US time.
On the surface, the biggest driving force behind Ethereum's rise is the approval of the spot ETF, but what cannot be ignored is that the ecological development of Ethereum itself is the cornerstone of shaping value.
Public chains are changing, but Ethereum is unchangeable
Ethereum is still the public chain with the highest TVL.
According to DefiLIama data, Ethereum currently accounts for 59.93% of TVL, followed by TRON, which only accounts for 8.61%. The reason why it ranks second is that Tether issues USDT on it. BSC ranks third, accounting for 5.31%. Solana, which has a great voice in this bull market, ranks fourth, accounting for 4.69%. It can be seen that Ethereum is still the only one, and it is difficult for other public chains to surpass it.
Why is Ethereum so dominant?
Ethereum was established in 2013 and officially put into use in 2015. It can be said that Ethereum was born for smart contracts. It is the first blockchain to achieve Turing completeness. It was established to be able to carry various applications. It is also the emergence of Ethereum that has brought more possibilities to the blockchain.
But during the last bull market, the DeFi ecosystem on Ethereum flourished, the number of users surged, and the Ethereum network became congested, resulting in longer block times, slow transactions, and rising transaction fees.
For retail investors, Ethereum has become a public chain with low cost-effectiveness.
In this context, a number of new public chains have emerged. They have made improvements to the problems existing in Ethereum, or directly want to replace Ethereum. Some public chains have raised the banner of "Ethereum killer" and started to divide up the market share.
The “Ethereum killers” that emerged in the last bull market include Cardano (ADA), Avalanche (AVAX), BNB Chain (BNB), Solana (SOL), and Polkadot (DOT).
These "killers" have one thing in common, that is, they all claim to have high throughput and low transaction fees. Of course, each has its own advantages. BNB Chain is backed by Binance, has a large flow, and its token BNB has more capabilities. Avalanche has greatly optimized its transaction speed through its pioneering protocol consensus mechanism and three subnets with different functions. Its low latency and low fees make it a public chain that Gamefi loves. The biggest advantage of Polkadot is its multi-chain structure and active developers on the chain.
Public chains hope to comprehensively improve their technical level from the perspective of underlying frameworks such as development language, code complexity, and operating mechanism, in order to make up for some of Ethereum's shortcomings. Although they all have their own strengths, there is no talk of surpassing Ethereum, as their TVL is less than one-tenth of Ethereum's.
Not to mention public chains like Aptos that were born in a bear market. Although they have the support of VCs, their performance is disappointing.
Although public chains are emerging one after another, there is no public chain that can really shake the position of Ethereum. Even these public chains combined cannot shake Ethereum. There are two reasons. First, Ethereum has a long history and has accumulated a large number of users and projects. Second, those criticized expansion problems, congestion problems, high gas prices, and even restrictions like EOA addresses, have already been solved.
For example, the expansion problem has evolved into various solutions such as Rollup, Plasma and Validium. The limitation of EOA addresses has also been solved by relying on the ERC4337 Account Abstraction upgrade, and even evolved into an account abstraction track. Even due to the potential limitation of the block capacity upper limit, heavy solutions such as Eigenlayer have been launched, and the capabilities of DA have been expanded. It can be optimized through the modular combination of third-party DA solutions such as Celestia and the optional replacement of the VM execution layer.
Layer2 is now an important narrative of Ethereum and has become an independent track in the industry. It is designed as a key solution to Ethereum's scalability problem. It builds an additional network layer on top of the Ethereum main chain, allowing more transactions to be processed while maintaining the security and decentralization of the main chain.
In addition, Ethereum's mainnet also has a very clear development path. For example, in order to improve performance, Vitalik planned five development stages for Ethereum: Merge, Surge, Verge, Purge and Splurge.
From the above, we can see that Ethereum has never stagnated. In most cases, it is actually driving technological progress in the entire industry.
What changes does Ethereum need to make in the future?
Ethereum also faces challenges. Privacy, consensus, smart contract security and scalability are challenges that Ethereum has faced since its inception. Moreover, at different stages of development, these challenges have very detailed and different problems.
For example, in terms of how to protect the security of user assets, the Ethereum account abstraction, namely the ERC-4337 protocol, was proposed. The Ethereum community has been studying it for a long time and has currently determined an optimal solution to this problem. This protocol can implement the Ethereum standard of account abstraction on the protocol without changing any consensus layer.
However, Vitalik once said in his speech that while promoting broader account abstraction, it is also necessary to consider how to deal with the MEV issue to ensure the fairness, security and healthy development of the system. This requires the joint efforts of all roles in the entire ecosystem. The overall goal is to make the on-chain experience consistent with the centralized service experience.
It can be seen that the innovation and promotion of a technology alone actually involves very specific and meticulous work that requires coordination among multiple parties.
Similarly, Vitalik also pointed out that in terms of Layer2 expansion, when L2 packages and submits valid proof of transactions to L1, how to ensure the security and decentralization of this proof system is also a very important issue. Among the technical components of L2, most transaction sorters are centralized, which may have potential risks. L2 has different technical selections and development directions. How to build wallets and addresses across L2, and how to give users a better experience. Transaction record-related data requires space for safekeeping and storage. How to solve the problem of data availability, similar very detailed technical issues, are also very practical problems that need to be solved step by step for the future development of the Ethereum ecosystem.
A more obvious problem is that after Ethereum switched to Pos, the industry has been criticizing the centralization of Ethereum’s current pledge, and some even questioned that such Ethereum could be easily controlled by the government. How can this be solved?
However, some of the problems currently facing Ethereum are actually some technological advances that the entire industry needs to achieve together.
For users and the industry, the fact that these issues are raised, widely discussed, and put into practice is a key point that makes Ethereum trustworthy. Because it can be seen that Ethereum has never avoided problems and has been actively solving them.
In summary, Ethereum is indeed a public chain with great vitality and innovation in the industry, and it is difficult to be surpassed at present.
