This weekend, the social network has been quite lively, and a new round of debate on ETH has begun. I think the reason should be two-fold. First, Vitalik's interview with ETHPanda has sparked widespread discussion in the Chinese community. Secondly, compared to SOL, the continued decline in the exchange rate of ETH against BTC has also caused widespread discontent.
Regarding this issue, I also have some views that I would like to share with you. Overall, I believe that the long-term trend of ETH is not problematic, because there is actually no direct competitor in the market. In the narrative of Ethereum, the key is "decentralization" rather than "execution environment", and this foundation has not changed. The core reasons that have led to the current bottleneck in the development of ETH are two-fold. First, the reStaking track has caused a vampire attack on the mainstream technical development path of Layer2, diverting a large amount of resources from the ETH ecosystem.
Constrained by the core mechanism of reStaking, which does not create incremental demand for ETH, the application side has been unable to obtain sufficient development resources and user attention, and the promotion and user education have stagnated.
Secondly, the key opinion leaders in the Ethereum ecosystem are becoming aristocratic, forming an interest class, which has led to the solidification of class mobility, and the developer ecosystem lacks sufficient incentives, so innovation naturally appears to be weak.
The vampire attack of reStaking on the resources of the Ethereum ecosystem has led to the inability of the application side to obtain sufficient development resources
In fact, I have discussed this point in one of my previous articles, and today I hope to reiterate the discussion.
We know that the official development path of Ethereum has always been to form a fully decentralized execution environment through Sharding, in simple terms, a fully distributed cloud that is not controlled by any party. Applications can compete for computing and storage resources on the cloud, and all resources are controlled by the supply and demand relationship in the market. Considering the complexity of the technology.
The reason for choosing Sharding is that you cannot tolerate 100% redundancy of the entire data, which would result in significant waste. Therefore, the only way is to process the data separately by different regions, and then finally aggregate the processing results by a relay.
Considering the complexity of technological iterations, the technical selection of Sharding has actually undergone some changes, and the community has finally decided on the Rollup-Layer2 solution as the mainstream direction.
In this solution, all applications can choose to be built on separate Layer2s, while the Ethereum mainnet sinks to become the infrastructure for all application chains. In addition to bringing data finality to the application chains, it can also play the role of information relay.
This master-slave architecture is a good solution in terms of efficiency and cost. It not only reduces the cost of application execution, but also guarantees "security" in terms of the degree of decentralization.
At the same time, Ethereum has also designed a relatively self-consistent business model, with a good economic model for ETH. On the one hand, the PoW consensus mechanism of the mainnet has been switched to the asset voting-based PoS mechanism, and in exchange, each participant can obtain the dividend right of the mainnet transaction fee income.
On the other hand, each application chain needs to confirm the data finality through transactions on the mainnet, and the transactions need to use ETH as gas. Therefore, as long as the various Layer2 application chains remain active, they will indirectly drive the activity of the Ethereum mainnet. This also gives ETH the ability to capture value from the entire Ethereum ecosystem.
However, the real problem started at the end of last year with the hot reStaking track represented by EigenLayer. The native creativity of this track is not actually very complex. Those who have participated in DeFi may know that a considerable part of the projects are around idle assets for innovation, the so-called "nesting".
However, reStaking is more bold, choosing to directly reuse the ETH participating in PoS Staking, and directly provide execution functions to the outside world, the so-called AVS. Although I highly recognize this direction in terms of entrepreneurial creativity, it is actually the most direct reason for the current predicament of Ethereum.
Because at that time, the technical selection of Layer2 was basically completed, and relatively mature technical solutions had also emerged. It should have been the time to focus on the application side, such as accelerating the iteration of related applications and having a more sufficient marketing budget.
However, the emergence of the reStaking track is actually a vampire attack on Layer2, directly causing ETH to lose its value capture capability. Because reStaking provides applications with a "second consensus solution" that does not require paying the mainnet ETH cost, the most intuitive understanding is to use the currently most landed AVS, DA layer as an example, where DA refers to data availability, that is, to make data tamper-proof through a technical solution, which can be equivalent to data finality.
In the previous description, we clearly know that the application chain obtains finality for its data by calling contracts on the mainnet, which creates demand for ETH. However, reStaking provides a new option, which is to purchase consensus through AVS, and in this process you don't even need to pay ETH, you can use any asset to pay for the consensus purchase fee.
This has turned the entire DA market, which was previously a monopoly of Ethereum, into an oligopolistic competition market shared by reStaking and Ethereum, which naturally causes Ethereum to lose its market pricing power and directly affects its profits.
Moreover, what is even more deadly is that it has occupied the precious resources during the bear market at that time. These resources should have been diverted to the application side for promotion and market education, but were instead attracted to the "repeated reinvention of the wheel" engineering for the infrastructure, and the current predicament of Ethereum is precisely due to the lack of sufficient active applications, leading to a downturn in the value capture system.
Those who have done projects may understand that the rhythm of project operations is very important. Launching the right product in the right market will allow the project to have long-term development, and any wrong decisions can lead to stagnation in development. So it is not without regret.
Of course, the essence of this problem can also be understood. This is actually a problem of the democratic system, that is, the efficiency problem caused by the separation of powers. In an organization that pursues decentralized decentralization, naturally all parties can develop and compete for resources based on their own will, which is more conducive to value capture in a bull market because the innovation potential is very large.
However, in the survival of the fittest in a bear market, the lack of unified resource scheduling has led to deviations in the route, and it is very understandable that development has stagnated. In contrast, Solana, an organization with a corporate structure, naturally enjoys the efficiency advantages of centralization and is more popular, and is more efficient in capturing hot spots and launching targeted measures, which is also the reason why the MEME summer appeared on Solana.
Key opinion leaders and vested interests in the Ethereum ecosystem are becoming aristocratic, forming an exclusive class of interests, and the developer ecosystem lacks sufficient incentives, making innovation naturally weak
In the Ethereum ecosystem, there is a phenomenon: there is a lack of active opinion leaders like those in the Solana, AVAX, or even the former Luna ecosystem. Although these leaders are sometimes seen as driving forces of FOMO (fear of missing out), it is undeniable that they play an important role in community cohesion and the confidence of startup teams.
However, in the Ethereum ecosystem, apart from Vitalik, it is difficult to think of other influential leaders. This phenomenon is partly due to the split of the original founding team, but also related to the solidification of the internal hierarchy of the ecosystem. The benefits of ecosystem growth have been monopolized by early participants.
Imagine if you had once participated in a fundraising worth 31,000 BTC (currently worth over $2 billion), even if you did nothing, you would already be very wealthy, not to mention that the wealth in the Ethereum ecosystem has long surpassed this figure.
Therefore, many early participants are starting to turn to more conservative strategies, and maintaining the status quo becomes more attractive than expanding the suite. To avoid risks, they have become more cautious, which also explains why they tend to adopt conservative strategies when promoting ecosystem development.
A simple example is that early participants only need to ensure the position of existing projects like AAVE, and lend their large holdings of ETH to leveraged borrowers to earn stable income, so why do they still need to vigorously promote the development of new projects?
But in the end, I think the long-term trend of ETH is fine, because there is actually no direct competitor in the market, because in the narrative of Ethereum, the key is "decentralized execution environment" rather than "execution environment", and this foundation has not changed. Therefore, as long as resource integration can be completed and application construction can be promoted, the future of Ethereum is still bright.
