Ethereum's real crisis lies not in price or competitors, but in the concentrated outbreak of long-term directional instability, incentive imbalances, and structural internal friction.

Article author: @paramonoww

Article compiled and sourced by Peggy, BlockBeats

Recently, Vitalik Buterin published a lengthy article pointing out that with the significant improvement in Ethereum's L1 scalability and the long-term lag in the evolution of L2 towards "Phase 2," the past assumption of viewing L2 as an "Ethereum brand shard" is no longer valid. He emphasized that L1 is rapidly returning to its core focus on scaling and no longer needs L2 as a "crutch" for performance scaling.

This rewriting of the L2 positioning has sparked widespread discussion in the community. Beyond price, this article turns its attention back to Ethereum itself: from the fading of the "ultrasonic currency" narrative and the repeated wavering of the Rollup route, to the lack of financial incentives and the loss of core talent, the problems do not stem from external competition, but rather from unclear direction and structural internal friction.

With Vitalik rethinking his existing path and the Ethereum Foundation pushing for internal reforms, Ethereum stands at the threshold of a critical shift. Whether it can return from ideology to clear goals and efficient execution will determine whether it regains its vitality or continues to erode market patience.

Against this backdrop, Vitalik suggested that L2 reposition its value and shift towards differentiated directions such as enhanced privacy, deep optimization for specific applications, extreme scalability, non-financial scenarios, ultra-low latency architecture, or built-in oracles; if it continues to handle ETH-related assets, it should at least reach Stage 1 and strengthen interoperability with the Ethereum mainnet as much as possible.

The following is the original text:

This article was primarily inspired by a recent tweet from Vitalik Buterin about change and the current market situation. Given the overall market downturn, it's difficult to pin the blame on any one person, and I have no intention of making such accusations.

I am writing this article based on my identity as someone who has worked with many Ethereum teams, invested in multiple protocols built on top of Ethereum on behalf of a venture capital fund, and has long been a staunch supporter and advocate of Ethereum and its EVM ecosystem.

Unfortunately, I can hardly say the same thing anymore. Because I feel that Ethereum is losing its direction (and I'm not the only one who feels this way).

I don't want to discuss ETH's price movement, but I can't ignore the fact that as the world's second-largest cryptocurrency by market capitalization, ETH's performance is fraught with uncertainty. Regardless of global market movements, ETH's behavior resembles that of a stablecoin that is "de-anchoring."

This article aims to discuss what has happened to Ethereum over the past few years, and why more and more people are losing faith, or have already completely lost faith. Ethereum didn't lose to Solana or any other project; Ethereum lost to itself.

Rollup Centralization Roadmap

When Ethereum proposed its "Rollup-centric roadmap," almost everyone was excited. Its vision was that Rollups (and Validium) would handle scaling, end-user transactions would primarily occur on Rollups, and Ethereum would exist as a validation layer—that is, prioritizing being the L1 layer for Rollups rather than the L1 layer directly serving users.

Compared to developing a completely new L1, Rollup development is faster and cheaper, so the future of "thousands of Rollups coexisting" looks both realistic and optimistic.

What other problems could arise?

As it turns out, all sorts of problems can arise, and almost all of them do: pointless arguments, prioritizing ideology over real needs, long-term internal strife within the community, an identity crisis, and hesitation and procrastination in abandoning the centralized vision of Rollup.

Every possible problem arose. Most people in the community initially viewed Max Resnick as an incompetent and "evil" figure, only to later discover that he was right on almost every crucial issue.

During his time at Consensys, Max repeatedly pointed out the changes Ethereum needed to move forward, but he was met with almost nothing but criticism and very little genuine support.

The most absurd moment is when the entire industry starts seriously discussing whether a certain L2 level should be considered part of Ethereum, for example:

Viewpoint A: "Base is an extension of Ethereum, and we have made significant contributions to the Ethereum ecosystem."

Viewpoint B: "Base is not an extension of Ethereum; it is an independent system."

What the hell are we even talking about?

How can this kind of discussion actually help Ethereum and its ecosystem move towards a better future? Why are people debating "what is Ethereum" and "what is not Ethereum" so seriously? Don't we have more important questions to address?

If we assume that Rollups are extensions of Ethereum because they use ETH as gas, that seems plausible; if we assume that Rollups are not extensions of Ethereum, but rather applications built on top of and benefiting from Ethereum, that also seems plausible.

Is that right? Actually, it's completely wrong.

This so-called "ideological discussion" isn't a discussion at all; it's just two self-absorbed little circles arguing and trying to prove themselves right. We don't need PvP; we need PvE. The problem isn't that "we're at odds with each other," but that "we're facing the problems and the future together."

Unfortunately, many people prefer psychological stimulation to even the slightest consideration that their views may not be entirely correct.

Technological ideology takes precedence over user needs

Based Rollup, Booster Rollup, Native Rollup, Gigagas Rollup, Keystore Rollup.

Which one is better? Which one represents the future? How should they be connected?

"This is the future." "No, that's the future." "There's no reason not to develop Based Rollups." "Native Rollups are more aligned with Ethereum; they will replace the entire ecosystem."

All these arguments... ultimately resulted in Arbitrum and Base continuing to win.

Technological superiority can certainly bring advantages, but not when trying to excessively differentiate apples from pears or oranges from oranges. These solutions are similar enough that users don't care. Beyond the bubble, nobody cares about these minor details. Having one more or one less precompile won't determine the outcome.

"Oh, we are the truly Ethereum-aligned ones. We are closer to Ethereum and embody its core values. Users will definitely choose us."

I want to ask: What kind of values ​​are you basing your approach on? And which group of users will choose you because of that?

@0xFacet became the first Stage 2 Rollup, setting a precedent for "Ethereum alignment".

But where is it now? Where are its users? Where are its developers? Where are its tech KOLs? Where are the supporters who loudly proclaim the Ethereum ecosystem and alignment narrative? How many people have heard of Facet? How many applications are on Facet?

I personally have no prejudice against Facet. I've spoken with its founder many times and have great respect for him; he's a wonderful person. But where are all those people who used to shout, "We need more Stage 2 Rollups"? I don't know, and neither do you.

Financial incentives are far stronger than technical incentives. I was a big supporter of Taiko, and I especially appreciated their research on Based Rollups: stronger censorship resistance, neutrality, no risk of sorter downtime, and L1 validators earning more money.

So where is the problem?

The problem lies in the fact that the economics behind this model don't make sense. You can't force someone to give up their income for the sake of so-called "alignment".

Arbitrum promised a decentralized sorter; Scroll promised one; Linea, zkSync, and Optimism all promised one. Where are they now? Where are those sorters?

Almost every Rollup's documentation includes this statement: "We currently use a centralized orderer, but have a strong desire for decentralization in the future." However, almost none actually deliver on this promise. Metis did, but whether by luck or misfortune, almost no one cares about Metis.

Do I think they over-promised in order to appease influential ETH fundamentalists? Yes.

Do I think they genuinely want a decentralized sorter? Yes. But it doesn't make economic sense.

Coinbase (Base) is legally obligated to generate as much profit as possible for the company, as are other teams. Why would they intentionally cut off their own revenue stream? It makes no sense.

Of Base's revenue, only about 5% goes to Ethereum. Rollup has never been an extension of Ethereum.

Taiko once had a time when the fees it paid to Ethereum for ordering were more than the transaction fees it collected from user transactions. And companies like Taiko have numerous other operating costs in addition to paying Ethereum.

The vision of a rollup based on Ethereum alignment can only be realized if the team is willing to give up its own revenue.

I'm not denying the importance of decentralization, security, and permissionlessness. But if your only goal is to be "ideologically correct" rather than user-centric, then all of this is meaningless.

This very fragility and the promise of "Ethereum alignment" have attracted a large number of speculators and scammers into the field.

The consequences of a centralized rollup roadmap

Eclipse, Movement, Blast, Gasp (Mangata), Mantra: These protocols were never designed for the long-term future. They are easily disguised as "Ethereum alignment," "making Ethereum better," or "bringing SVM to Ethereum."

Without exception, they all "ran away" in different forms. All Rollups eventually realized that their tokens were almost useless because fees were paid in ETH, and their tokens had virtually no practical utility. Speculators also realized that as long as they created enough hype around the centralized narrative of Rollups, they could dump their almost worthless tokens at high prices onto retail investors.

Ethereum has never truly acknowledged Polygon as an L2 blockchain, despite its significant role in locking and holding value for ETH. If you believe Rollups are a "cultural extension" of Ethereum, why not acknowledge a project that is highly tied to Ethereum in terms of security and usage?

Polygon was crucial to Ethereum during the 2021 bull market, making a significant contribution to the growth of ETH as an asset. However, because it is "not L2," it doesn't deserve the recognition of the Ethereum community. If Polygon were L1, its valuation would likely be much higher.

Rishi reviewed the long-standing controversy surrounding Polygon within the Ethereum ecosystem: In its early days, Polygon was criticized by some in the Ethereum community as not being "orthodox" enough as a "sidechain," but Polygon chose to prioritize solving scalability issues rather than catering to L2 semantics or community ideology. Looking back seven years later, Rishi believes that "Polygon was right from the start": its pragmatic, scalability-first approach has stood the test of time.

Rishi reviewed the long-standing controversy surrounding Polygon within the Ethereum ecosystem: In its early days, Polygon was criticized by some in the Ethereum community as not being "orthodox" enough as a "sidechain." However, Polygon chose to prioritize solving scalability issues rather than catering to L2 semantics or community ideology.

Looking back seven years later, Rishi believes that "Polygon was right from the start": its pragmatic expansion-first approach has stood the test of time.



First, there's the narrative of "ultrasound money": After EIP-1559 and The Merge, ETH's economic model was shaped into a deflationary asset, touted as a better store of value than Bitcoin. But by 2024, ETH's annual inflation rate had turned positive again.

In other words, the vision of "ultrasonic currency" only lasted three years? In this way, it could never become a store of value. This narrative is dead—and more importantly, it was never valid in the first place. Because ETH was never designed as a "store of value," that's Bitcoin's mission, and you can't compete with it on that level.

Then, Ethereum was unable to decide what its token should be:

Is it a commodity? No – because supply is dynamic and there's also a pledging mechanism;

Is it more like a tech stock? Not really—because Ethereum doesn't have enough revenue to be valued like a tech company.

Some people even argue that ETH isn't a "currency" at all. So what's going on? We have to choose sides.

Ethereum cannot be something that can be everything at the same time—either you have a clear, unified global direction, or you will fall behind.

Financial incentives... once again

I still can't understand how a lead engineer like Péter Szilágyi could only earn about $100,000 a year. He was involved in the project from its very early stages, helping Ethereum grow from almost nothing to a market capitalization of $450 billion, yet he only received a return equivalent to 0.0001% of that market capitalization.

The most influential and successful protocol in crypto history after Bitcoin offers neither incentives nor equity. It's easy to defend this with the principles of "decentralization, open source, and permissionless": "We're not in it for the money; we're in it to drive progress."

The problem is, even the most loyal soldiers need incentives, otherwise they'll either leave or take on other projects on their own. Péter left, Danny Ryan left, and Dankard Feist went straight to Tempo.

In 2024, Justin Drake and Dankrad accepted advisory roles at EigenLayer and received token allocations, which immediately led to attacks from the community.

These people at the Ethereum Foundation, who receive "meager salaries" (compared to FAANG companies and AI research labs), are being targeted by a mob simply because they want to earn some money and help an independent protocol that is "not Ethereum itself, but hopes to make Ethereum better."

Isn't this absurd? Sometimes I really feel that if you are an honest and hardworking person in Ethereum, you seem to be not allowed to make money and can only work hard for a lifetime for "recognition" from the Ethereum community.

The Ethereum Foundation has been selling ETH to fund various operations, projects, and research. But perhaps they should pay the researchers' salaries first?

Zero tolerance for adaptation

"Day 1. Ethereum will definitely win. It's the most decentralized blockchain with the highest online rate."

We hear this rhetoric every day, just like we hear Ethereum defending itself every day.

Yes, Ethereum is expensive and slow. But we have Rollups, so we can use Rollups—Rollups are Ethereum!

Yes, ETH's price has lagged behind everything. But Ethereum boasts the largest developer ecosystem and a strong foundation; demand will catch up sooner or later.

Ethereum is the most decentralized blockchain! Solana is terrible; it lacks client diversity.

Ethereum is 100% online! Solana is terrible; it has crashed several times.

Ethereum's network activity is lower than Solana's? That's because Solana is full of spam transactions and meme gamblers. We are an "ethical chain"!

Over the years, it's always the same excuses, the same answers, the same self-comfort. Everything except Ethereum and Rollups is garbage; if Ethereum underperforms on any metric, we say, "It's still Day 1," we know what we're doing, and there's no better place in the world than Ethereum.

Everyone is tired of the community repeating these excuses over and over again.

Ethereum is increasingly resembling an elderly and wealthy grandmother who is almost unable to walk, yet refuses to innovate and simply continues to give money to her children and grandchildren, allowing them to live off her.

reform

Just hours before I finished this article, Vitalik tweeted that the Rollup-centric roadmap had failed and that a new path needed to be found, shifting towards expanding L1.

You know what? I'm actually happy when people realize their mistakes. It takes courage to publicly admit errors. But I worry that it might be a little too late. Ethereum has once again found a direction it must take in the long term, but overall progress remains slow.

The Ethereum Foundation has indeed undergone some changes recently: new leadership, increased transparency in its treasury, and adjustments to its R&D structure, among others. At the same time, the foundation has also begun to bring in some young, new faces in developer relations and marketing, such as Abbas Khan, Binji, and Lou3e.

But change must happen fast enough. Ethereum must sprint at full speed to prove everyone wrong.

Let's wait and see: after these reforms and changes, can Ethereum become an exciting entity again, instead of something that only inspires blind faith and disappointment?