Original author: @Web3 Mario
This weekend, social networks have been quite lively, and a new round of debates about ETH has begun. I think there are two reasons for this: first, the interview between Vitalik and ETHPanda has sparked extensive discussion within the Chinese community; second, compared to SOL, ETH's exchange rate against BTC continues to decline, which has also caused widespread dissatisfaction. Regarding this issue, I also have some opinions and hope to share them with everyone. Overall, I believe that the long-term trend of ETH is not in question, as there are no direct competitors in the market. In the narrative of Ethereum, the key point of the positioning of 'decentralized execution environment' is 'decentralization' rather than 'execution environment'; this fundamental situation has not changed. The core reasons for ETH's current development bottleneck are twofold: first, the ReStaking track has vampire attacked the mainstream technical development path of Layer 2, diverting a significant amount of resources from the Ethereum ecosystem. And due to the core mechanism of ReStaking not creating incremental demand for ETH, it directly leads to the application side being unable to obtain sufficient development resources and user attention, causing promotion and user education to stagnate. The second is that key opinion leaders in the Ethereum ecosystem are becoming aristocratic, forming a vested interest class, which leads to a phenomenon of class mobility becoming entrenched, and the developer ecosystem lacks sufficient incentives, making innovation naturally appear weak.
ReStaking's vampire attack on Ethereum ecosystem resources.
There has actually been some discussion on this point in a previous article of mine, and today I hope to take this opportunity to reiterate it.
We know that Ethereum's official development path has always been to form a fully decentralized execution environment through Sharding. In simple terms, it is a fully distributed cloud that is not controlled by any party. Applications can acquire computing and storage resources on this cloud through bidding, and all resources are completely regulated by the supply and demand relationship in the market. Considering the complexity of the technology, Sharding is chosen because you cannot tolerate 100% redundancy of all data, which would cause significant waste. Therefore, data can only be processed separately by different segments and then summarized by a relay.
Considering the complexity of technological iteration, the technical selection of Sharding has indeed undergone some changes, and the community ultimately finalized the Rollup-Layer 2 scheme as the mainstream direction. In this scheme, all applications can choose to build on separate Layer 2s, while the Ethereum mainnet becomes the infrastructure for all application chains, providing not only data finality for application chains but also serving as an information relay. Such a master-slave architecture is a good solution in terms of efficiency and cost, reducing the operating costs of applications while providing a good guarantee of 'security' based on the degree of decentralization.
At the same time, Ethereum has also designed a relatively self-consistent business model, creating a good economic model for ETH. On one hand, it has switched the main chain's POW consensus mechanism to an asset voting-based POS mechanism, allowing participants to obtain dividends from the main chain's transaction fee revenue in exchange. On the other hand, each application chain needs to confirm data finality through main chain transactions, and transactions require ETH as Gas. Therefore, as long as the various Layer 2s of the application chain remain active, it will indirectly promote the activity of the Ethereum main chain. This also allows ETH to capture value from the entire Ethereum ecosystem.
However, the real problem began when the ETH ReStaking track, represented by EigenLayer, started to gain popularity at the end of last year. The original idea of this track is not complicated; those who have participated in DeFi may know that a considerable number of projects innovate around idle assets, which is known as 'nested investment'. However, Restaking is bolder, choosing to directly reuse ETH involved in PoS Staking and directly providing execution capabilities, referred to as AVS. While I highly recognize this direction in entrepreneurial creativity, it is, in fact, the most direct cause of Ethereum's current predicament. Because at that time, the technical selection for Layer 2 had basically been completed, and relatively mature technical solutions had emerged. It was right at the moment when the application side should be focusing on accelerating relevant applications and increasing market promotion budgets.
However, the emergence of the ReStaking track is, in fact, a vampire attack on Layer 2, directly leading to the loss of ETH's value capture capability. Because ReStaking provides applications with a 'second consensus scheme' that does not require payment of main chain ETH costs, the most intuitive understanding is to take the currently most grounded AVS and DA layers as examples. DA refers to data availability, meaning making data immutable through a technical solution, which can also be equated to data finality. In previous narrations, we clearly stated that application chains achieve data finality by calling contracts on the main chain, creating a demand for ETH. However, Restaking provides a new option: purchasing consensus through AVS, during which you don't even need to pay in ETH; you can use any asset to pay the consensus purchase fee. This changes the entire DA market from a previously monopolized market exclusive to Ethereum into an oligopoly competition market shared by ReStaking and Ethereum, which naturally causes Ethereum to lose market pricing power and directly affects its profits.
Moreover, what's worse is that it has occupied the precious resources during the bear market. These resources should have been diverted to various application sides for promotion and market education. Instead, they have been drawn into redundant infrastructure projects, and today, Ethereum's predicament is precisely due to the lack of sufficient active applications, leading to a downturn in the value capture system. Those who have worked on projects may understand that the rhythm of project operation is very important; launching the right product in the right market will lead to long-term development for the project. Any wrong decision can cause stagnation in development. Therefore, it is quite regretful.
Of course, the essence of this problem is also understandable; it is actually a problem of the democratic system, which is the efficiency issue caused by the lack of unified authority. In an organization that pursues decentralized distribution, voices from all sides can naturally compete for development and resources based on their own will, which is more conducive to value capture during a bull market due to the significant potential for innovation. However, in the survival battle of a bear market, the lack of unified resource scheduling leads to deviations in the roadmap, making stagnation in development quite understandable. In contrast, Solana, as an organization operating with such a corporate structure, will naturally be favored for its efficiency advantages brought by centralization, and the efficiency of capturing hotspots and launching relevant measures is also higher, which is why the Memecoin summer appeared on Solana.
Key opinion leaders and vested interests in the Ethereum ecosystem are becoming aristocratic.
In the Ethereum ecosystem, there is a phenomenon: the lack of proactive opinion leaders like those in the Solana, AVAX, or even the former Luna ecosystems. Although these leaders are sometimes seen as forces driving FOMO (fear of missing out), it is undeniable that they play an important role in community cohesion and the confidence of entrepreneurial teams.
However, within the Ethereum ecosystem, aside from Vitalik, it is hard to think of other influential leaders. This phenomenon partly stems from the split of the original founding team, but it is also related to the entrenchment of internal hierarchies in the ecosystem. Many of the benefits of ecological growth have been monopolized by early participants. Imagine if you had participated in fundraising worth 31,000 BTC (around 2 billion USD at the current market value); even if you did nothing, you would already be very wealthy, not to mention that the wealth in the Ethereum ecosystem has long surpassed this number.
As a result, many early participants have begun to turn to conservative strategies; maintaining the status quo has become more attractive than expansion. To avoid risks, they have become more cautious, which explains why they tend to adopt conservative strategies when promoting ecological development. A simple example is that early participants only need to ensure the status of existing projects like AAVE and lend out the large amounts of ETH they hold to leverage seekers to earn stable returns, so why do they still need to vigorously promote the development of new projects?
However, in the end, I believe that the long-term trend of ETH is not in question, as there are no direct competitors in the market. In the narrative of Ethereum, the key point of the positioning of 'decentralized execution environment' is 'decentralization' rather than 'execution environment'; this fundamental situation has not changed. Therefore, as long as resource integration can be completed and application construction can be promoted, the future of Ethereum is still bright.
