Amidst the crypto market downturn, Hazeflow founder Pavel Paramonov published a lengthy article, " What Happened to Ethereum? ", reviewing the challenges Ethereum has faced in recent years from the perspectives of builders and investors. He points out that Ethereum's current predicament does not stem from competition from other public chains, but rather from an imbalance in its own path selection, economic incentive design, and community culture, leading to a gradual erosion of market confidence.
From Faith to Skepticism: Why Has Ethereum Lost Popular Support?
Paramonov stated that he has long collaborated with multiple Ethereum teams and has invested in various Ethereum ecosystem protocols on behalf of venture capital funds. He has also been a staunch supporter of the EVM and Ethereum in the past.
However, in recent years, he has gradually felt that Ethereum lacks a clear direction. Not only is there endless debate within the community about its future path, but ETH, as the second largest cryptocurrency by market capitalization, also exhibits a high degree of uncertainty in its market performance, making it difficult to establish a stable narrative.
He outlined the changes Ethereum has undergone in the past few years and the reasons why many supporters are losing confidence.
The Rollup-centric Expansion Path: The Gap Between Ideal and Reality
First, Ethereum initially pursued a "Rollup-centric" scaling approach, which was seen as a solution that could simultaneously achieve decentralization and scalability. However, Paramonov points out that in reality, the economic models of most L2 networks have not brought significant value return to Ethereum as expected.
He argues that since Rollup operating teams mostly retain key revenue streams, such as sequencer fees, and the actual percentage paid to Ethereum is limited, the claim that "Rollups can be used as Ethereum extensions" is economically untenable.
Only about 5% of Base revenue flows to Ethereum; Rollups are never an extension of Ethereum.
Furthermore, the ideological debate within the crypto community surrounding "which L2s belong to Ethereum" has failed to substantially resolve core issues such as user experience or scaling efficiency.
The debate over technological purity failed to translate into user incentives.
Paramonov further points out that the Ethereum community is overly focused on standards such as "technical alignment" and "decentralization stage," while ignoring the actual needs of ordinary users for speed, cost, and convenience: "Economic incentives are far stronger than technological incentives."
I'm not saying that decentralization, security, and permissionlessness are unimportant, but when your only goal is ideological correctness rather than being user-centric, none of this makes sense.
He cited several highly decentralized and technologically aligned Rollups as examples, pointing out that their ecosystems and user base have always been limited, demonstrating that technological ideals have not naturally translated into market competitiveness.
Rollup narratives are being misused, undermining ecological trust.
After Rollups became the mainstream scaling narrative for Ethereum, Paramonov pointed out that some projects attract funds by claiming to "serve Ethereum," but lack a sustainable economic model. Their tokens have limited meaning and use, ultimately only harming retail investors.
Protocols like Eclipse, Movement, Blast, and Mantra were never built for the long-term future. They hide behind the mask of "being on the same side as Ethereum" and claim to make Ethereum better, but in reality, they are just scams of varying degrees.
Economic incentives failed to work, and the Ethereum Foundation suffered a loss of talent.
Paramonov argues that both Rollup teams and Ethereum core contributors face insufficient economic incentives. He points out that most Rollups struggle to promote decentralization of the sorter without sacrificing their own revenue, and the Ethereum Foundation's (EF) compensation and incentive mechanisms for core engineers are also difficult to compete with other technology industries or emerging protocols.
Against this backdrop, some long-term EF developers have gradually moved to projects or infrastructures such as Tempo or EigenLayer, raising concerns about Ethereum's governance and talent retention capabilities.
Governance and narrative divergences exacerbate market uncertainty
Paramonov also points out that Ethereum has failed to establish a consistent narrative. ETH has been portrayed as a deflationary asset, a store of value, or something akin to a tech stock, but these narratives are increasingly being questioned.
First, ETH's inflation rate is already positive; second, Bitcoin is used as a store of value, making it difficult for ETH to compete; and finally, Ethereum's limited revenue structure has prevented it from being priced like a tech company.
He believes that when a product tries to play multiple roles at the same time but lacks a clear priority, it makes it more difficult for the market to establish long-term expectations.
Reforms are on the right track, but can investor trust be regained?
At the end of the article, Paramonov acknowledged that the Ethereum Foundation has recently undertaken organizational and governance adjustments, including management changes, increased financial transparency, and a restructuring of its R&D capabilities. Meanwhile, Vitalik Buterin also publicly reflected on past scaling strategies and signaled a return to focusing on L1 to enhance scalability.
However, he also warned that whether the reforms will be enough to reverse market sentiment depends on the speed of implementation and actual results.
Ethereum didn't lose to Solana or any other competitor; Ethereum lost to itself. Reform must be accelerated; Ethereum needs to sprint at full speed.
For Ethereum, the key going forward is not just technology choices, but whether it can rebuild a clear direction and a sustainable economic structure.
This article, "Hazeflow Founder's Analysis of Ethereum's Dilemma: Why Did ETH Lose to Itself?", originally appeared on ABMedia, a ABMedia .
