Why do the voices in the market that belittle Ethereum always arise one after another?

Author: Haotian | CryptoInsight

Why do the voices criticizing Ethereum always resurface? Simply put: the Ethereum ecosystem is indeed facing a tense situation with both internal and external challenges. Internally, solutions like Layer 2 are struggling to stand tall, while externally, competitors like Solana are relentlessly aiming to outdo Ethereum. Ethereum is facing its most difficult moment under the pressure of weak innovation and competition.

Next, let me briefly share my thoughts:

1) The ecosystem of Ethereum Rollups has already taken shape. After the Cancun upgrade EIP-4844, the short-term technical benefits for Ethereum have been established. The long-term expectation for sharding chains has diminished under the impact of Rollups, while upgrades that reduce node costs, simplify protocols, and implement underlying ZK-SNARKs are merely additional enhancements. The entire blockchain industry is waiting for Ethereum to deliver a satisfactory Layer 2 solution, yet so far, Layer 2 has not met Ethereum's "growth" expectations.

2) To be frank, Rollups have stood out among various scaling solutions like Plasma, Validium, and even parachains because they adopt a layered interaction paradigm that separates execution, state, and settlement. Logically, after establishing a secure consensus for interaction with the mainnet, Layer 2 should enhance and amplify its performance advantages in the execution layer, thereby bringing incremental users and ecosystems to the Ethereum mainnet.

However, the reality is that most Layer 2 solutions have chosen to engage in commercial narrative-level leverage stacking, forming alliances through a Stack strategy, sharing components to involve Layer 3 application chains, and offering Rollup as a Service, DA as a Service, and even AVS as a Service, among others. These strategies, which at first glance seem to infinitely expand the commercial and narrative imagination of Layer 2, can only accumulate market expectations in the long run and do not yield immediate results in expanding application ecosystems or empowering token prices.

3) For a long time, there have been those who mock Ethereum's gas fees at 1 Gwei, using it to ridicule the failure of Ethereum's Layer 2 strategic direction. However, from another perspective, isn't this also a phased success for Ethereum in addressing congestion and high gas fees through Layer 2? Unfortunately, the downside is that Layer 2 has not only failed to bring the expected massive ecosystem and transaction volume to Ethereum but has also diverted some traffic away.

In fact, Layer 2 has been somewhat successful in addressing Ethereum's performance shortcomings, and the competition between the OP-Rollup and ZK-Rollup camps has reached a fever pitch. However, the choice to focus on infrastructure rather than pure application innovation has exposed an awkward reality within the Ethereum developer community: an over-reliance on VC funding to drive token issuance rather than genuine value innovation.

This is a direct result of the increasing influx of developer talent into the Web3 industry and the growing flow of VC funds, which has intensified competition. While the rising barriers to entry could be seen as a sign of market maturation, excessive competition in the early stages of crypto has become the culprit stifling innovation due to high FDV (Fully Diluted Valuation). Imagine a project burdened with a massive FDV, where all efforts are aimed at a rapid Go to Market; how can there be time to solidify value innovation? The most effective approach for VCs has been to stack B-end commercial narratives, while C-end applications, which are urgent yet less appealing, have remained lukewarm. Thus, the market perceives an imbalance favoring infrastructure over applications.

4) Although the sexy narratives of Ethereum killers were debunked in the last bull market, this round of high-performance public chains like Solana, Sui, Aptos, and Sei are directly targeting Ethereum EVM's "low-performance" Achilles' heel. While they no longer shout about killing Ethereum, it is undeniable that their high concurrency and unique Move language security mechanisms can indeed challenge Ethereum, especially as they may become fertile ground for the next generation of Web3 application ecosystems, such as DePIN, large-scale games, intent trading, AI agents, and more.

This is what I see as the biggest opportunity for the new generation of high-performance public chains: to rise based on applications rather than stacking infrastructure expectations and directly declare war on Ethereum.

Or rather, there is no need to declare war at all. By using a modular approach to reclassify Ethereum as a "settlement layer" in a thin narrative, and employing new modular execution layers, DA layers, and Unified liquidity layers to reconstruct the discourse power system established by Ethereum in the past, isn't that also a form of successful competition and cooperation? This applies to other chains, but what about Ethereum? However, this is a trend I see in other high-performance chains or modular and abstract chains, while Ethereum still seems to be in a "passive defense" posture. Even with the advanced benefits of ETFs, it has not managed to lower its guard to respond.

5) Many people still hold expectations for another DeFi Summer, but reflecting on the underwhelming performance of Ethereum Layer 2, I reluctantly accept the fact that DeFi Summer may never return.

Vitalik Buterin himself is well aware that Ethereum's biggest dilemma may be its excessive financial attributes. DeFi, as a perfect carrier of financial attributes, naturally aligns with human speculative preferences due to its past successes and the infinite nesting properties of DeFi combinations. What the Ethereum ecosystem needs to consider now is not to recreate DeFi Summer, but rather to step out of the shadow of pure DeFi culture.

The NFTs that emerged in the last bull market did not fully integrate into the DeFi framework, yet they did not hinder NFTs from leading Ethereum into a strong bull market. This time, PolyMarket's decentralized prediction market is gaining attention. Although it is not a new play and it is uncertain whether it can spark new vitality, it is good that it is not purely DeFi, or rather, it has already expanded and restructured DeFi. How to maximize Ethereum's integration with the Web2 world, moving from the virtual to the real, is where everyone should truly expect the new Summer to be.

That's all.

Note: As a long-term Ethereum holder, I sincerely hope that Ethereum can emerge from its difficult internal and external challenges. But I want to emphasize that the Ethereum ecosystem gathers the largest number of Geeks and is the most sensitive territory for innovation. As long as the market overcomes its current predicament, I believe Ethereum will still be the brightest star in turning the tide.

The above musings only raise some questions. As for how Ethereum Layer 2 can break the deadlock? Stay tuned for my next article.