What happened to Ethereum?

What happened to Ethereum?

@paramonoww

Peggy, BlockBeats

Editor’s note: Recently, Vitalik Buterin published a lengthy article pointing out that as Ethereum’s L1 scalability has significantly improved and L2 development has long lagged behind the “Phase 2” evolution, the previous notion of viewing L2 as “Ethereum brand sharding” has become untenable. He emphasized that L1 is accelerating its return to the main expansion axis and no longer needs L2 as a “crutch” for performance scaling.

This rewriting of L2 positioning has sparked widespread community discussion. Beyond price, this article shifts focus back to Ethereum itself: from the departure of the “Ultrasound Money” narrative, the repeated swings of the Rollup route, to the lack of financial incentives and the loss of core talent, the problems are not caused by external competition but stem from unclear direction and structural internal friction.

As Vitalik reflects on the existing route and the Ethereum Foundation pushes for internal reform, Ethereum stands at a critical turning point. Whether it can return to clear goals and improve execution efficiency will determine if it regains vitality or continues to drain market patience.

In this context, Vitalik suggests that L2 should reposition its value, focusing on privacy enhancement, deep optimization for specific applications, ultimate scalability, non-financial scenarios, ultra-low latency architectures, or built-in oracles—diverging directions; if continuing to handle ETH-related assets, at least reach Stage 1 and strengthen interoperability with the Ethereum mainnet as much as possible.

Below is the original text:

This article is mainly inspired by Vitalik’s recent tweet about change and the current market state. In a declining market, it’s hard to blame any one person, and I have no intention of doing so.

I write this article from a certain perspective: I have worked with many Ethereum teams, invested in multiple protocols built on Ethereum on behalf of a venture fund, and have long been a staunch supporter and advocate of Ethereum and its EVM ecosystem.

But unfortunately, I find it increasingly difficult to say the same now. Because I feel Ethereum is losing its way (and I’m not the only one feeling this).

I don’t want to discuss ETH’s price trends, but I cannot ignore this fact: as the second-largest cryptocurrency by market cap, ETH’s performance is full of uncertainty. Regardless of how the global markets move, ETH’s behavior is more like a stablecoin that is “de-anchoring.”

What I want to discuss is: what has Ethereum really been doing over the past few years, and why are more and more people losing confidence or already completely losing confidence? Ethereum isn’t losing to Solana or other projects; it’s losing to itself.

Rollup Centralization Roadmap

When Ethereum proposed a “Rollup-centric roadmap,” almost everyone was excited. The vision was: Rollups (and Validiums) handle scaling, with most user transactions happening on Rollups, while Ethereum serves as the validation layer—that is, prioritizing becoming a Rollup’s L1 rather than directly serving users.

Compared to developing a brand-new L1, Rollups are faster and cheaper to develop, so a future with “thousands of Rollups coexisting” seemed both realistic and optimistic.

What could go wrong?

It turned out, almost everything. All problems surfaced: pointless debates, ideology above real needs, long-term internal friction within the community, identity crises, and hesitation or delayed abandonment of the centralized Rollup vision.

All the issues appeared. Most in the community once saw Max Resnick as an incompetent and “evil” figure, until later realizing he was right on nearly all key issues.

During his time at Consensys, Max repeatedly pointed out the changes needed for Ethereum to move forward, but he faced almost only criticism, with very few genuine supporters.

The most absurd moment was when the entire industry seriously discussed questions like: does a certain L2 count as part of Ethereum? For example:

Point A: “Base is an extension of Ethereum; we contribute greatly to the Ethereum ecosystem.”

Point B: “Base is not an extension of Ethereum; it’s an independent system.”

What the hell are we even discussing?

How does such a debate help Ethereum and its ecosystem move toward a better future? Why are we so serious about arguing “what is Ethereum” and “what isn’t”? Don’t we have more important issues to solve?

If we accept that: because Rollups use ETH as gas, they are an extension of Ethereum—that sounds plausible; if we accept that: Rollups are not an extension but applications built on and benefiting from Ethereum—that also makes sense.

Right? Actually, it’s completely wrong.

This so-called “ideological debate” isn’t really a discussion; it’s two self-absorbed small circles shouting at each other, trying to prove they are right. We don’t need PvP; we need PvE. The problem isn’t “we oppose each other,” but “we face problems and the future together.”

But unfortunately, many prefer the psychological thrill and are unwilling to even consider: maybe their views aren’t entirely correct.

Technical ideology takes precedence over user needs

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

Which one is better? Which one is the future? How should they connect?

“That one is the future.” “No, that one is the future.” “There’s no reason not to develop Based Rollup.” “Native Rollup aligns more with Ethereum; they will replace the entire ecosystem.”

All these debates… ultimately, Arbitrum and Base keep winning.

Technical superiority can indeed bring advantages, but only if you don’t overly distinguish apples from pears, or oranges from oranges. These solutions are similar enough that users don’t care. Outside of bubbles, no one cares about these details. Adding or removing a precompile doesn’t decide the outcome.

“Oh, we are truly aligned with Ethereum; we are closer to Ethereum, embodying its core values, and users will choose us.”

I want to ask: which values? And which users will choose you because of them?

@0xFacet became the first Stage 2 Rollup, a model “aligned with Ethereum.”

But where is it now? Its users? Developers? Tech influencers? Those who shout about Ethereum ecosystem alignment? How many have heard of Facet? How many applications are on Facet?

I personally have no prejudice against Facet. I’ve spoken with its founders multiple times and respect him very much; he’s a great person. But where are those who once shouted “We need more Stage 2 Rollups”? Where did they go? I don’t know, and you don’t either.

Financial incentives are far stronger than technical incentives. I was a loyal supporter of Taiko, especially admiring their research around Based Rollup: stronger resistance to censorship, neutrality, no risk of sequencer downtime, L1 validators can earn more.

Where’s the problem?

The problem lies in the economic model behind this setup: you can’t force others to give up their income just for the sake of “alignment.”

Arbitrum promised decentralization of sequencers; Scroll promised it too; Linea, zkSync, Optimism all promised it. Where are they now? Where are those sequencers?

Almost every Rollup’s documentation says: “We currently use centralized sequencers, but have a strong desire to decentralize in the future.” But few actually deliver on that promise. Metis did, but whether lucky or unlucky, almost no one cares about Metis.

Do I think they overpromised to please influential ETH purists? Yes.

Do I think they genuinely want decentralized sequencers? Yes. But economically, it doesn’t make sense.

Coinbase (Base) is legally obliged to maximize profits; other teams are the same. Why cut off your own revenue sources proactively? That makes no sense.

Only about 5% of Base’s revenue flows to Ethereum. Rollups have never been an extension of Ethereum.

Taiko once paid more fees to sequencers than it earned from user transactions. Companies like Taiko have huge operational costs besides paying Ethereum.

The vision of Based Rollup or “Ethereum-aligned” Rollup only makes sense if the team is willing to give up its own income.

I’m not denying the importance of decentralization, security, and permissionlessness. But if your only goal is “ideologically correct” rather than user-centric, all this is meaningless.

That’s why this fragility and the promise of “Ethereum alignment” attract a lot of speculators and scammers into the space.

Consequences of the Rollup Centralization Roadmap

Eclipse, Movement, Blast, Gasp (Mangata), Mantra: these protocols were never designed for a long-term future from the start. They are easily dressed up in “Ethereum alignment,” “making Ethereum better,” or “bringing SVM to Ethereum” narratives.

And unsurprisingly, all have “run away” in some form. All Rollups eventually realize: their tokens are almost useless because fees are paid in ETH, and their tokens have little real utility. Speculators also realize that by creating enough hype around centralized Rollup narratives, they can dump nearly worthless tokens on retail investors at high prices.

Ethereum has never officially recognized Polygon as an L2, despite its significant role in locking ETH and carrying value. If you believe Rollups are a “cultural extension” of Ethereum, why not recognize a project that is highly tied to Ethereum in security and usage?

Polygon was crucial during the 2021 bull market, contributing greatly to ETH’s asset growth. But because it’s “not an L2,” it doesn’t deserve recognition from the Ethereum community. If Polygon were an L1, its valuation would probably be much higher.

Rishi reviewed the long-standing controversy within the Ethereum ecosystem regarding Polygon: early on, Polygon was seen as a “sidechain,” criticized by parts of the Ethereum community as an unorthodox L2, but Polygon chose to prioritize scalability rather than catering to L2 semantics or community ideology. Seven years later, Rishi believes the facts prove “Polygon was right from the start”: a pragmatic, scalability-first approach has stood the test of time.

Rishi reviewed the long-standing controversy within the Ethereum ecosystem regarding Polygon: early on, Polygon was seen as a “sidechain,” criticized by parts of the Ethereum community as an unorthodox L2, but Polygon chose to prioritize scalability rather than catering to L2 semantics or community ideology.

Seven years later, Rishi believes the facts prove “Polygon was right from the start”: a pragmatic, scalability-first approach has stood the test of time.

First is the “Ultrasound Money” narrative: after EIP-1559 and The Merge, ETH’s economic model was shaped into a deflationary asset, claiming it would become a better store of value than Bitcoin. But by 2024, ETH’s annual inflation rate has turned positive again.

In other words, the “Ultrasound Money” vision only lasted three years? In this way, it can’t become a store of value. This narrative is dead—and more importantly, it was never valid from the start. ETH was never designed as a “store of value”; that’s Bitcoin’s mission, and you can’t compete with it on that dimension.

Then, Ethereum can’t even decide what its token is:

Is it a commodity? No—because supply is dynamic, and there’s staking;

More like a tech stock? Also no—because Ethereum doesn’t generate enough revenue to be valued like a tech company.

Some even outright say ETH isn’t “money” at all. So what’s really happening? We must pick a side.

Ethereum can’t be everything at once—either you have a clear, unified global direction, or you fall behind.

Financial incentives… once again

I still can’t understand why chief engineers like Péter Szilágyi earn only about $100,000 a year. He’s been involved since the earliest days, helping Ethereum grow from almost zero to a $450 billion market cap, yet he’s only received a return of about 0.0001% of that.

After Bitcoin, one of the most influential and successful protocols in crypto history, he receives no incentives and no equity. It’s easy to defend this with the ideals of “decentralization, open source, permissionless”: “We’re not here to make money; we’re here to push progress.”

But the problem is, even the most loyal soldiers need incentives; otherwise, they leave or secretly join other projects. Péter left, Danny Ryan left, Dankrad Feist went directly to Tempo.

In 2024, Justin Drake and Dankrad took advisory roles at EigenLayer and received token allocations, and immediately, the community started attacking them.

Those who earn “meager salaries” within the Ethereum Foundation (compared to FAANG companies and AI research labs), just because they want to earn some money and help an independent protocol that “isn’t Ethereum itself but hopes to make Ethereum better,” face collective hostility.

Isn’t that absurd? Sometimes I really think: if you’re honest and diligent in Ethereum, it seems you’re not allowed to make money, only to work hard for the “recognition” of the Ethereum community.

The Ethereum Foundation has been selling ETH to fund operations, projects, and research. But maybe, they should first pay their researchers well?

Zero tolerance for adaptability

“Day One. Ethereum will definitely win. It’s the most decentralized, most online blockchain.”

We hear this every day, as if Ethereum is constantly justifying itself.

Yes, Ethereum is expensive and slow. But we have Rollups; with Rollups, everything is fine; Rollups are Ethereum!

Yes, ETH’s price has underperformed everything. But Ethereum has the largest developer ecosystem, a strong foundation, and demand will eventually catch up.

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

Ethereum is 100% online! Solana is terrible; it has gone down multiple times.

Ethereum’s network activity is less than Solana’s? That’s because Solana is full of junk transactions and meme traders; we are the “moral chain”!

Over the years, it’s always the same excuses, the same answers, the same self-reassurance. Besides Ethereum and Rollups, everything else 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 than Ethereum.

Everyone is tired of these repetitive excuses from the community.

Ethereum is increasingly like an aging, wealthy grandmother who can barely walk but refuses any innovation, just keeps giving money to her children and grandchildren, letting them parasitize on her.

Reform

Just hours before finishing this article, Vitalik tweeted admitting: the Rollup-centric roadmap has failed, and new paths are needed—shifting focus back to expanding L1.

You know what? I’m actually happy when people realize their mistakes. Publicly admitting errors takes courage. But I worry it might be a bit late. Ethereum has once again found a long-term direction, but overall progress remains slow.

Recently, the Ethereum Foundation has undergone some changes: new leadership, transparency in the treasury, restructuring R&D, etc. Meanwhile, the foundation is also starting to bring in some younger faces in developer relations and market strategy, like Abbas Khan, Binji, Lou3e, and others.

But change must be fast enough. Ethereum must sprint to prove everyone wrong.

Let’s wait and see: after these reforms and changes, can Ethereum become an exciting project again, rather than just a realm of blind faith and disappointment?

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