Recently, some crypto holders cried out that they were "cheated"! They thought that the bull market had reached this point, and according to the "plot" of Ethereum, the big white horse, Ethereum should have outperformed Bitcoin. However, at this moment, facing the stable Bitcoin, Ethereum still could not be as strong as in the last round of market, so some people began to FUD, thinking that with the Bitcoin ecosystem in full swing in front and the fast competing public chain Solana blocking the way, Ethereum might not be able to survive!
So is Ethereum undervalued? Is there still hope for a breakthrough? Let’s talk about it from the following six perspectives today…
01
Ethereum is always growing & innovating
1) The number of addresses continues to grow
According to OKlink statistics (as shown below), Ethereum's total number of addresses, daily active addresses, and non-zero addresses on the chain have all shown a steady growth trend since 2017.
2) The core expansion technology of blockchain is mature and implemented
Previously, many people claimed that Ethereum has not made much progress in all these years. In fact, the expansion route of Ethereum, from side chains to the implementation of various Layer2 such as Rollups, has basically broken through the expansion bottleneck of blockchain technology safely and reliably. From the fact that various public chains including the Bitcoin ecosystem are also imitating and reusing Ethereum's OP-Rollup and ZK-Rollup technical solutions to build Layer2, it can be seen from the side that Ethereum Layer2 has successfully solved the most core problem of the industry, which is the expansion of the public chain.
Ethereum total locked value, source: L2beat
According to the L2Beat data chart, there are currently 50 well-known and active Layer2 projects in the Ethereum ecosystem, with a total locked value of approximately US$38 billion. Layer2 projects with a TVL of more than US$1 billion include Arbitrum one, OP Mainet, Base, Blast, Mantle, and Starknet.
Currently, the only public chains recognized as the strongest and most secure are Bitcoin and Ethereum. However, although both have Layer 2 solutions, Bitcoin cannot use smart contracts to directly verify Layer 2's anti-fraud proof data and zero-knowledge proof data like Ethereum. Therefore, the current Layer 2 solution is more suitable for Ethereum and is easier to implement under the premise of security.
Most of the Bitcoin Layer2 can only rely on off-chain centralization or third-party chain consensus mechanisms (POS-like oracles, POS multi-signatures, POW-UTXO isomorphic binding, etc.) to process conversions, and forcibly add EVM to Layer2. Such Layer2 is difficult to achieve the effect of almost completely inheriting the security of the Layer1 chain like Ethereum Layer2. The actual effect may not be as reliable as bridging BTC to the Ethereum chain to release the Bitcoin economy.
In general, the technological contribution brought by the Ethereum ecosystem is absolutely the first in the crypto industry.
02
Ethereum’s advantages that have never been surpassed
1) Ecological diversity and sustainability
Since the development of the Ethereum ecosystem, almost every track has accumulated some old projects, including the number one DEX Uniswap, the leading Lending AAVE, the most widely used decentralized stablecoin and RWA platform Maker, the Staking leader Lido, the synthetic asset leader Synthetix, the innovative Restaking EigenLayer, the NFT leading platform BLUR, etc. These have time-tested security and stability protocols, as well as innovative applications with tens of billions of TVL. They are not only the infrastructure of the Ethereum ecosystem, but also the mainstay of the entire crypto ecosystem. Only with these long-proven projects as the foundation can diverse and sustainable ecological applications be "grown".
2) The most complete infrastructure and experience
Thanks to the growing number of users in the Ethereum ecosystem, even though Ethereum is not the first public chain to be deployed, it may have the largest number of wallet developers and corresponding wallet applications. As the entrance and infrastructure of Web3 traffic, the Ethereum community and developers have done a lot of construction in this regard. In addition, among all DEX and CEX, the number of those supporting ETH and ERC-20 even exceeds the number supporting Bitcoin.
Source: ethereum.org
Currently, Ethereum wallets have a complete range of categories, with full coverage of multi-system platform clients such as plug-ins and APPs. At the same time, it also has functions such as domain name services, hardware wallets, offline signatures, multi-signatures, social recovery, and some wallets support fuel fee customization, remote procedure call import and other functions. It also covers support for nearly 60 languages worldwide, and users who use these languages around the world can find supported Ethereum wallets.
In addition, the "account abstraction" proposed by the Ethereum community is also being launched one after another. Ethereum wallets will soon be able to provide a better experience, more convenience, greater security, and lower barriers to entry.
The reason why many public chains use EVM, in addition to the advantages of EVM itself, is that EVM chains can use Ethereum wallets and other infrastructure for free, and it is easier to build interoperability with Ethereum without changing user habits and experience. The Ethereum ecosystem is also very easy to copy, which can not only use existing technical resources and solutions but also introduce more developers, and achieve twice the result with half the effort in building its own ecosystem. Previously, some ecosystems that proposed "Interoperability 2.0" tried to use Ethereum wallets for free to manage their own wallets as an upgrade of interoperability.
At the same time, mainstream ERC-20 assets issued on Ethereum can gain more support while being secure and sustainable. Thanks to the perfect infrastructure, it is easier to list on CEX and DEX.
3) More than 8 technical teams developing multiple clients in parallel
Multi-client parallel development, this kind of technical lineup is rarely seen in other infrastructure projects. In the previous vernacular article "The World's Top 10 Web3 Technology Teams", we mentioned:
In fact, for a long time, the Ethereum community has maintained multiple interoperable open source execution clients, which are developed by multiple independent teams using different programming languages. It can be said that a large amount of development work of the Ethereum core team is mostly participated by these multiple teams.
There are currently eight teams working on the development of the Ethereum 2.0 client, namely ChainSafe Systems, PegaSys, Harmony, Parity Technologies, Prysmatic Labs, Sigma Prime, Status, and Trinity.
It is precisely because of these diverse clients and multiple technical teams with different directions that the network has become more powerful, diverse and decentralized.
03
EVM has become a standard
EVM (Ethereum Virtual Machine) is becoming one of the universal blockchain technology standards, and more and more new blockchain projects, including top CBDC projects of central banks of various countries, are actively compatible with EVM. Some time ago, the Paradigm policy team collected data from 63 blockchain-related experiments led by G20 central banks and found that a large number of projects (47% of the sample) for different use cases (such as CBDC, tokenization, DeFi, etc.) are compatible with Ethereum EVM. In addition, more and more projects are being launched on public blockchains, proving that public, permissionless infrastructure is not incompatible with the needs of regulated institutions.
The current proportion of EVM-compatible and EVM-incompatible devices in the market, source: https://policy.paradigm.xyz
Although EVM has become a standard, some people think that it is just a solution and may not be helpful to Ethereum itself. It seems that there is no direct connection, but in fact, there are great benefits to be gained through open source and open technology solution standards.
As mentioned above, many benefits and capabilities can be obtained through compatibility with Ethereum EVM, and of course, the difficulty of cross-chain between "isomorphic" EVM chains is reduced, which enables a large number of compatible EVM blockchains to be closely linked together to share technological innovation and infrastructure, user adoption education, liquidity, etc. Ethereum, as the EVM chain with the strongest consensus, naturally becomes the center of the interconnection of thousands of chains.
Ethereum has become the center of cross-chain capital flow, receiving the most capital inflow. Source: Cryptoflows
Let's take a very similar example: Google's Chrome browser open source project Chromium is like EVM to Ethereum. Google almost unconditionally open-sourced the core of its own browser product Chrome, Chromium, and continued to maintain and update it with global developers. Because of its open source nature, it has won the favor of many Internet companies, making browsers based on the Chromium core spread all over the world and quickly occupying the market share. Previously, the browser hegemon represented by "closed" Microsoft IE was losing ground. Until 2018, when Microsoft announced that its new browser Edge would be launched with the Chromium core, everyone knew that this meant that the future of the Web was in the hands of Google.
From the current situation, Edge and Chrome are both homologous and somewhat competitive; however, on the Windows platform, Chrome will no longer face hostility from Microsoft. The competition between Microsoft Edge and Chrome in terms of technical standards and ecological platform has disappeared, and all are included in the Chrome ecosystem. With the disappearance of competition, Google's influence in the entire Web ecosystem is growing.
Similarly, if EVM becomes the public chain standard, Ethereum's influence will dominate the entire Web3 market.
As the saying goes, "A man who eats someone's food will be soft-hearted, and a man who takes someone's money will be short-handed." From the moment Ethereum "killers" became compatible with EVM, they themselves have become part of the Ethereum ecosystem.
04
Ultrasonic currency: ETH
Ethereum has become a crypto asset with the potential to become deflationary in the long run due to the recent promotion of EIP-1559 and the shift from POW to POS, which has led people to call it "ultrasonic money". This concept was proposed by Justin Drake, a researcher at the Ethereum Foundation, and has been widely promoted with the support of Bankless.
Simply put, through the previous upgrades and mergers, Ethereum is currently the only public chain that can provide stable and sustainable incentive security support for nodes without a large amount of additional issuance (even deflation), while also feeding back to all Holders. Before this, it was generally believed that pure deflation is conducive to value aggregation but not conducive to ecological development, while inflation is conducive to ecological development but value will be diluted. Currently, Ethereum has achieved a good balance between these two aspects.
Ethereum supply, source: ultrasound.money
05
Layer2 weakens Ethereum’s value capture? Probably not true
Many people believe that the implementation of Layer2 has achieved high speed and low fees. After many transactions were transferred to Layer2, Ethereum's own value capture was weakened, which greatly affected the system's Gas "income". Others cited the example of Layer2's growth after the Cancun upgrade, which led to a "divided rule by lords".
At first glance, these people's analysis makes sense, but it may not be correct. On the surface, Layer2 diverts Ethereum's GAS value capture, but in fact, GAS only accounts for a small part of ETH's value source. The simplest example is that for a long time in the past, Bitcoin's transaction fees were much lower than Ethereum's transaction fees, but Bitcoin's market value was much higher than Ethereum's, because Bitcoin is not only used for Bitcoin payment system fees, it is also a digital gold with value storage and anti-inflation functions.
Ethereum, as another hard currency of crypto assets, has different functions from Bitcoin. The value of ETH, known as "digital oil", is more reflected in its liquidity and adoption. When a currency is flowing, it can create more and more value. With the deployment of more and more Layer2 in the future, Ethereum's position will be further consolidated. In addition, when the pledge rate of Ethereum, which has first-class security and stability, becomes the benchmark rate, stETH and other LSTs have become "treasury bonds" in crypto assets because of mortgaging ETH.
In fact, the so-called "division among the princes" has always been an excellent means of consolidation. Openness and inclusiveness have always been the value concept of Ethereum. The Layer2 expansion solution will only make the Ethereum ecosystem grow faster and more closely connected.
06
Is Ethereum a Security?
Is Ethereum a security? This is the focus of recent debates provoked by the US SEC. It can be simply understood that the US SEC wants to gain jurisdiction over Ethereum. If it is defined as a security, it may bring about confusion about the legality of the issuance of a large number of crypto tokens. Of course, the reason why it was raised at this time is that the application submitted by the potential issuer of the Ethereum spot ETF is so aggressive that the US SEC has to step up its implementation and launch a series of investigations against Ethereum.
Currently, many analysts believe that the Ethereum spot ETF will not be approved in May and may be further delayed.
In addition, the reasons why the US SEC classified Ethereum as a security are not sufficient. If the reasons are for financial security or to protect investors, then the Ethereum futures ETF that has been approved long ago would make these reasons self-defeating.
Of course, there are also differences between various departments/agencies in the United States. For example, recently, Patrick McHenry, chairman of the U.S. Financial Services Committee, criticized the SEC's investigation into Ethereum, saying that the chairman deliberately misled Congress. Patrick McHenry pointed out that this incident highlights the urgency for Congress to pass the bipartisan "21st Century FIT Act" to provide a clear regulatory framework and strong consumer protection for the digital asset market. Republicans on the committee will continue to hold the U.S. SEC, led by Gary Gensler, accountable for its excessive regulation, which has stifled innovation, left American consumers unprotected, and endangered our national security.
07
summary
Although Ethereum has shown many irreplaceable advantages, the market is often not as rational as imagined. Perhaps it is because people are "fancy the new and tired of the old" or perhaps it is the spread of FUD sentiment, but many things will reveal more shortcomings after the novelty wears off. The value will always return, so just wait patiently.
In the long run, there is no need to worry too much about how the US SEC will "cause trouble". Even XRP has not been successfully defined as a security by the SEC, and Ethereum's current status and influence cannot be easily controlled by a certain department. The fact that Web3 and cryptographic innovation it represents are the future has long been indisputable.
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