Ethereum’s modular strategy has been a hot topic in the Web3 space. On November 12, Web3 venture capital firm Hack VC released an in-depth research and analysis report exploring the potential impact of this strategy on Ethereum and its native token ETH.
Alex Pack, managing partner at Hack VC, noted in the report that while Ethereum’s modularity may have an adverse impact on ETH prices in the short term due to lower transaction fees and reduced token burns, this is not the whole story.
Long-term perspective on Ethereum modularization strategy
Since 2020, Ethereum has begun to implement a modular architecture transformation, delegating key infrastructure functions such as execution and data availability to the Layer 2 network. The goal of this change is to increase the network's decentralization and scalability.
While this transition has brought some challenges in the short term, such as lower mainnet fees leading to fewer token burns under EIP-1559, which in turn affected ETH’s scarcity and price, this is not the whole story of Ethereum’s development.
Researchers said that ETH's recent performance has been slightly worse than competitors such as Bitcoin and Solana, partly due to the increase in L2 tokens in the Ethereum ecosystem, which has distracted investors from ETH.
However, Ethereum’s modular strategy looks to the future, ensuring that the network can adapt to technological changes such as zk-rollups and emerging shared security models like EigenLayer. This flexibility is expected to prevent Ethereum from becoming obsolete, thus avoiding the mistakes of former tech giants such as AOL or Yahoo.
The researchers believe that Ethereum’s modular strategy could be key to maintaining its dominance as a smart contract platform as it lays the foundation for the next wave of innovation in blockchain technology.
Meanwhile, Ethereum’s investments in the broader ecosystem could make it a stronger player in the long run.
Alex Pack of Hack VC concluded that the modular strategy may have paved the way for ETH’s sustainable growth and market dominance.
Ethereum Price Trends
The price of ETH experienced a significant rise this week, rising by more than 30%, and its market capitalization even exceeded the entire Solana network in a short period of time.
Although the overall market has subsequently corrected, with ETH prices down slightly at $3,205 at the time of writing, ETH prices have still achieved nearly 18% growth compared to the same period last week.
In addition, the spot Ethereum ETF saw significant capital inflows on November 12, with total flows turning negative for the first time to net positive. In particular, BlackRock's ETHA fund saw capital inflows of $131.4 million, second only to Fidelity's $673 million in capital inflows that day, making it the second-largest Ethereum-related ETF in terms of capital inflows that day. This funding movement reflects the market’s continued interest and confidence in Ethereum.
Conclusion:
Although Ethereum’s modular strategy has brought some volatility to ETH prices in the short term, in the long run, this transformation is crucial to the network’s technological adaptability and the expansion of its ecosystem.
At the same time, the recent rise in ETH prices and the trend of capital inflows into spot Ethereum ETFs further prove the market's confidence in the future development of Ethereum.
As blockchain technology continues to advance, Ethereum’s modularity is expected to be key to maintaining its leading position in the industry.
