BTC fell back after hitting 65k yesterday, and has now retreated to below 63k. There is no sentiment in the market now. BTC rises and falls, and altcoins fall and fall. Ethereum (ETH), the largest Altcoin and leader of the public chain, has been falling in terms of BTC. ETH/BTC has completely lost the key psychological barrier of 0.5 and has come to the 0.4 level. This can't help but make many ETH heavy holders feel defensive. Even the photos of founder Vitalik Buterin busy with romantic activities some time ago were pulled out by the community, and he was accused of not doing his job properly.
The leeks of ETH are right to criticize. After all, Vitalik talked about the expenses of his girlfriend, and the Ethereum Foundation spent a lot of money on high salaries every year, all of which came from selling ETH in the secondary market. In other words, the leeks of ETH paid for it.
When the Ethereum Foundation raised funds through issuing tokens, it held a large amount of ETH at zero cost. Now it has to sell 100 million US dollars to the market every year to maintain its expensive operation. It has been 10 years since the project was launched in 2013.
If we compare it to humans, Ethereum is more than ten years old. According to [“8.25 Teaching Chain Internal Reference: Ethereum Foundation may run out of reserves in 8 years”], the foundation can still operate like this for another 8 years. 18 years old is just the age when a person leaves his parents and moves towards independence.
Before the age of 18, a person is still a child who is supported and cared for by his guardian. After the age of 18, he must start to be self-reliant.
According to this metaphor, the "leeks" who are now taking over the selling pressure of the Ethereum Foundation in the secondary market and actually paying for the foundation's expenses are the adoptive parents and guardians of Ethereum at this stage.
Parents scolding their children for not making progress is completely logical and in line with human nature. Not only are they getting further and further away from being a top student (BTC), but they are also in danger of being surpassed by other students who have caught up with them (such as SOL).
Bitcoin (BTC) is different. This child has been self-reliant since he left the arms of his biological mother Satoshi Nakamoto. He doesn't owe anyone anything. No one has the right to criticize him. He is like Sun Wukong, born to be the Great Sage Equaling Heaven and turn the old order upside down. (One more thing, why is Satoshi Nakamoto the biological mother (realizer), because the biological father (fertilizer) of BTC is David and Nick Szabo - Satoshi Nakamoto once said in a post on July 20, 2010 that Bitcoin is an implementation of Wei Dai's b-money proposal and Nick Szabo's Bitgold proposal)
Adolescence is a period of rebellion and confusion in life. We don’t know whether Ethereum will be able to rise to prominence after turning 18, or will continue to rely on his parents. These issues are still far away and not a headache yet. But what lies before us now is the problem of rebelliousness and unruliness in growth, which leads to a decline in performance.
The above chart is the trend of ETH/BTC since 2016. The wedge of the big cycle makes this psychological confusion of neither going up nor down vividly appear on paper. It was once expected to catch up with the first place, but now it seems that it is unable to even defend itself from retreating and declining.
Jiaolian specifically identified the most important "big tests" in recent years, namely the key upgrades of the Ethereum mainnet: the London upgrade on August 5, 2021 (introducing the EIP-1559 burning mechanism), the Paris upgrade on September 15, 2022 (PoW to PoS), the Shanghai upgrade on April 12, 2023 (opening PoS withdrawals), and the Cancun upgrade on May 13, 2024 (introducing EIP-4844 data sharding expansion).
Especially with the Cancun upgrade in May this year, data sharding was launched, giving greater support to the second-layer networks (L2), reducing the fees of the first-layer mainnet, reducing burning, and expanding inflation. After the Cancun upgrade, ETH/BTC plummeted, and it was about to become the culprit for breaking through the large cycle wedge.
With the recent sluggish market activity, the gas fee of Ethereum’s mainnet has remained below 1 gwei for several days! This made people who have experienced the 2021 bull market and burned gas crazily on this “noble chain” feel a little dazed for a while.
So some netizens said alarmistly: " Ethereum is heading towards extinction, and L2 is dancing on its grave. "
His logic is: Ethereum has mistakenly chosen the route of expanding to the second layer (L2). When all execution tasks are outsourced to the second layer, the first layer mainnet lacks usage and burning, and thus cannot consume the inflation caused by PoS. L2s have been advancing triumphantly, constantly setting new highs in user volume and fee income.
At the same time, he added: The emergence of a large number of separate L2s has made the entire Ethereum ecosystem more and more fragmented - traffic fragmentation, liquidity fragmentation, user fragmentation,... There is almost no realistic possibility to reintegrate these fragmented things.
Moreover, he went on to say: In fact, the top ten L2s are all centrally controlled. In theory, they can steal users' assets at any time. And the roadmap to complete decentralization is nowhere in sight...
In addition, he believes that since L2s are almost all driven by VC capital (venture capital), they have formed a powerful interest group that will have a huge influence on Ethereum, making it almost impossible to return to the old path of directly expanding the first layer, because that will directly destroy the living space and capital value of L2s.
Finally, he concluded: L2s are effectively stealing Ethereum's user and fee revenue. And we can't go back. In the best case, L2s will become competitors. In the worst case, L2s will become vampire attacks, slowly sucking the life out of Ethereum. The moment Ethereum dies, L2s will move to other layer chains to continue sucking blood, or simply transform themselves into a layer chain.
Undoubtedly, the above logical deduction and narrative are dark, melancholy and pessimistic.
He seems to have forgotten that L2s still need to package transactions and write them back to Ethereum.
In this sense, when Ethereum discovered that the old ETH 2.0 expansion plan was not feasible and chose to expand to L2, it had quietly changed the positioning of Ethereum: from a general computing layer to a secure storage space provider layer.
Anyone who opposes expanding to the second layer and insists on expanding on the first layer may really not understand how huge a challenge computing sharding and parallelization is for current human technological capabilities, not to mention having to accomplish it under a decentralized architecture.
Knowing that this problem is almost unsolvable, Jiaolian made a clear prediction in the third prediction of the article "Three Predictions" on December 20, 2020, " Regarding ETH's expansion route, 2.0 or 1.0+rollup. I think the original eth2 vision and route are likely to fail and will be forced to change the technical route. At this stage next year, the second-layer rollup expansion will be a more pragmatic and more optimistic route. Between optimistic and zk in rollup, I am optimistic about the former (at the current visible stage). "
In 2021, two optimistic rollups, Arbitrum and Optimism, were launched one after another.
On December 3, 2021, Ethereum founder Vitalik Buterin tweeted and officially announced the new roadmap for Ethereum's subsequent development. This announced the complete abandonment of the old 2.0 route and the official turn to the new expansion plan. (See the article "The Great Merger: Ethereum's Patriotic War" on December 4, 2021 by Jiaolian)
On this issue, Jiaolian still believes in the technical level of Vitalik and the Ethereum Foundation he leads. If they can’t directly expand the capacity of the first layer, other public chains will definitely not be able to achieve it without paying extra costs.
However, no public chain or new public chain that claims to have high performance will ever tell the investors what the extra price they have to pay is.
They are very secretive and keep their mouths shut.
Jiaolian can tell you that no matter what the specific technical form of this cost is, they almost all point to one thing: more centralization.
The problem is that sacrificing decentralization in favor of centralization is a fallacy that can continue to slide.
If people can accept three-point centralization, they can also accept ten-point centralization.
If you can accept centralization, then why not use the Internet system? Isn't it faster, better and cheaper?
The coldness of Ethereum after the expansion is more of a success than a failure. After all, the goal of expansion is to increase supply. According to the basic principles of market economy, if supply exceeds demand, it will inevitably mean a drop in prices.
The only problem is that Ethereum is taking a big step:
First, the transition from PoW to PoS has expanded the supply of incremental ETH. (Although the stock is burned, the chain has analyzed that the two cannot offset each other)
Second, expand capacity to L2 and expand the supply of the execution layer. L2s emerge in an endless stream, and there are not enough users to share them.
Third, the expansion of data sharding has increased the supply of one layer of block space.
These three steps will be launched in the years 2022-2024, and they coincide with a new bear market cycle. Can the market digest it?
All problems ultimately come down to insufficient user volume and activity. The solution to all problems also depends on all second-layer ecosystems prospering several times or even dozens of times, bringing in more users and activity.
The dilemmas in life can only be solved through growth, and the problems of development can only be solved through development.
