An Analysis of the Market Predicaments Facing the Ethereum Ecosystem

Author: Haotian

Following this discussion, I would like to add my thoughts on the current predicament of Ethereum @VitalikButerin as follows:

1. The "ivory tower" mindset restricts innovation: the Ethereum Foundation ( EF) during the period from 2020 to 2024 has a certain detachment from the market due to its elite cultural orientation, continuously stacking technical concepts while ignoring the real needs of users. In the face of overwhelming criticism and directional guidance, the EF management chose to "ignore", which caused them to miss the critical time window to fix issues, allowing competitors like Solana and Sui to escape the oligopoly effect of the Ethereum ecosystem and grow wildly.

2. The excessive stacking of technical narratives leads to market fatigue: From DeFi, NFT to various Layer 2 scaling solutions, the Ethereum ecosystem resembles a narrative production factory, constantly launching new technical narratives but failing to form effective value capture. This has led users to gradually feel fatigued by a development path that is purely technology-oriented yet does not reflect in the ecosystem and token prices. Ethereum has always hoped to stimulate a market build-up trend by raising the technical threshold, but the fact is that relying solely on technical narratives is difficult to sustain ongoing market prosperity.

3. Layer 2 strategy leads to ecological fragmentation and liquidity dispersion: Although Layer 2 projects such as Optimism, Arbitrum, and Base have technically solved certain scaling problems, such as reducing gas fees to non-inductive levels and increasing TPS, they have caused complex abstraction of user experience and excessive liquidity dispersion. The compatibility of cross-chain standards between OP Stack, ZK Stack, and Ethereum native camps, as well as the interoperability barriers, made these market darlings once become vampires who issue coins for the sake of issuing coins, which not only did not bring effective nourishment to the Ethereum ecosystem, but caused the continued malaise of the Ethereum ecosystem;

4. $ETH value capture model failure: After the implementation of the EIP-1559 burning mechanism, the value capture effect of ETH has not continued to function as expected. ETH lacks a value accumulation mechanism directly linked to network usage, and the prosperity of the layer2 market has not fully transmitted transaction fees to the mainnet. The modular architecture concept advocates for the separation of the base layer and application layer, resulting in ETH becoming a basic infra settlement layer rather than a necessary "value hub." Therefore, when competitors like Solana achieve several times growth in a short period, ETH still fails to effectively break through its historical high.

5. The Geek Community Culture is Detached from the Mainstream Market: Ethereum's community, dominated by geeks, has long embraced technological purism, creating a rift with current mainstream market players. By rejecting seemingly "low-level" innovative forms such as "Meme culture", it has resulted in a cognitive gap with the new generation of users. In contrast, the Solana ecosystem, with its inclusive and diverse attitude towards innovation, has successfully attracted a large influx of fresh talent and market attention, forming a positive feedback loop.

That's it.

However, just like many friends who love and hate Ethereum deeply, even though they can clearly see the various problems that Ethereum faces, they still believe that the current predicament of Ethereum is not irreversible. It is undeniable that its active developer ecosystem and the accumulated security consensus of DeFi infrastructure remain the strongest.

When the main theme of the market is set by the narrative of technology + long-termism, Ethereum will still occupy a core position. For most Ethereum enthusiasts and HODLers, giving up the overly ambitious expectations of being the 'second in the crypto universe' and viewing ETH purely as a decentralized network asset from a global market perspective may lead to better choices.