Original Author:@Web3 Mario
This weekend, the social network has been quite lively, and a new round of debate on ETH has begun. I think there are two reasons for this. 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 dissatisfaction. On 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, because in the narrative of Ethereum, the key is "decentralization" rather than "execution environment" in the positioning of "decentralized execution environment", and this basic foundation has not changed. The core reasons that have led to the current bottleneck in the development of ETH are two-fold: first, the vampire attack on the mainstream technical development path of Layer 2 by the reStaking track has diverted a large amount of resources from the ETH ecosystem; and second, the core opinion leaders in the Ethereum ecosystem are becoming aristocratic, forming a vested 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 Ethereum Ecosystem Resources
In fact, I have discussed this point in one of my previous articles, and today I hope to take this opportunity to reiterate it.
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 bid for computing and storage resources on the cloud, and all resources are regulated 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 cause significant waste. Therefore, the only way is to process the data separately by different regions, and then have a relay to summarize the processing results.
Considering the complexity of technological iteration, the technology selection of Sharding has actually undergone some changes, and the community has finally decided on the Rollup-Layer 2 solution as the mainstream direction. In this solution, all applications can choose to be built on separate Layer 2s, 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 pretty good solution in terms of efficiency and cost, as it not only reduces the running cost of applications, but also provides a good guarantee of "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 mainchain has been switched to the asset voting-based PoS mechanism, in exchange for which each participant can obtain the dividend right to the mainchain transaction fee income. On the other hand, each application chain needs to confirm the data finality through transactions on the mainchain, and the transactions need to use ETH as Gas, so as long as the various Layer 2s serving as application chains remain active, they will indirectly drive the activity of the Ethereum mainchain. 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 that complicated, those who have participated in DeFi may know that there are quite a few projects that are innovating around idle assets, the so-called "nesting". But 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, but in fact this is the most direct reason for the current predicament of Ethereum. Because at that time, the technology selection for Layer 2 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 Layer 2, directly causing ETH to lose its value capture capability. Because reStaking provides applications with a "second consensus solution" that does not require paying the mainchain ETH cost, the most intuitive understanding is to use the currently most landed AVS, DA layer as an example, the so-called 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 narration, we clearly know that the application chain obtains finality for its data by calling contracts on the mainchain, which creates demand for ETH, but reStaking provides a new option, that 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 the consensus purchase fee. This has turned the entire DA market, which was previously a monopoly market of Ethereum, into an oligopolistic competition market shared by reStaking and Ethereum, which naturally causes Ethereum to lose its market pricing power, directly affecting its profitability.
Not only that, but the more fatal thing is that it has occupied the precious resources of the bear market at the 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 today's predicament of Ethereum is precisely due to the lack of enough active applications to support a healthy value capture system. Those who have done projects may understand that the rhythm of project operations is very important, launching the right products 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 a sigh.
Of course, the essence of this problem can also be understood, this is actually a problem of democratic system, that is, the efficiency problem caused by the separation of powers. In an organization that pursues distributed 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. But in the bear market's struggle for the stock, the lack of unified resource scheduling leads to deviations in the route, and the resulting development stagnation is also very understandable. In contrast, Solana, as an organization operating in a corporate structure, naturally enjoys the efficiency advantage brought by centralization, and is more efficient in capturing hot spots and launching targeted initiatives, which is also the reason why the MEME summer appeared on Solana.
The Key Opinion Leaders and Vested Interests in the Ethereum Ecosystem are Becoming Aristocratic
In the Ethereum ecosystem, there is a phenomenon: there is a lack of active opinion leaders like Solana, AVAX, or even the former Luna ecosystem. Although these leaders are sometimes seen as driving forces of FOMO, 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 hard to think of other influential leaders. This phenomenon is partly due to the split of the original founding team, but also has to do with the solidification of the internal hierarchy of the ecosystem. Many of the benefits of ecosystem growth have been monopolized by early participants. Imagine if you had once participated in a fundraising of 31,000 BTC (worth over $2 billion at the current market value), even if you did nothing, you would already be very wealthy, let alone the wealth in the Ethereum ecosystem has long surpassed this figure.
Therefore, many early participants have started to turn to more conservative strategies, and maintaining the status quo has become more attractive than expansion. To mitigate risks, they have become more cautious, which also explains why they tend to take conservative strategies in driving 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 returns, so why do they still need to vigorously promote the development of new projects?
However, in the end, I believe that the long-term trend of ETH is not problematic, because there is actually no direct competitor in the market, because in the narrative of Ethereum, the key thing in the positioning of "decentralized execution environment" is "decentralization" rather than "execution environment", and this basic foundation has not changed. Therefore, as long as the integration of resources can be completed and the construction of applications can be promoted, the future of Ethereum is still bright.
