Original author | Mike Neuder (Ethereum Foundation researcher)
Compiled by Odaily Planet Daily (@OdailyChina)
Translator｜Azuma (@azuma_eth)
Editor’s note: This article is a personal opinion article published today by Mike Neuder, a researcher at the Ethereum Foundation. The article mainly re-examines Ethereum’s positioning, roadmap, value capture, etc.
According to Neuder, although this article only represents his personal views, it received comments and support from many Ethereum ecosystem "brains" including Vitalik during the writing process. At a time when Ethereum is rife with controversy, this article may help the market further understand Ethereum's operating ideas and development context.
1. The Essence of Ethereum: Property Rights
Ethereum is essentially a protocol for property rights. The Ethereum protocol creates a digital, self-custodial, permissionless asset whose value can be transferred globally and cannot be confiscated or censored. Ethereum's unwavering pursuit of decentralization is precisely to achieve this goal, and any compromise on decentralization may become an opportunity for confiscation or censorship, thereby fundamentally limiting the effectiveness of this property rights system.
The three basic pillars of this argument are:
The biggest difference between blockchain and traditional finance lies in property rights, that is, users have inalienable rights in the storage and transmission of value;
On a centralized blockchain, certain powerful entities can influence the outcome of the chain.
The value stored in a property rights system is directly related to the credibility of the property rights in that system.
In summary, a centralized system that can (and will) be coerced by a centralized censorship party cannot provide the same property rights as a decentralized system, and therefore has less value. There is a common misconception that Ethereum’s decentralization is only valuable in “World War III” or the “post-dollar era”, but this is actually wrong - decentralization is critical now.
Blockchain attack models must consider not only adversaries who want to reverse transaction finality, but also more subtle actors who seek to control economic outcomes without completely destroying the system. This attack behavior manifests itself in multiple ways, including coercing the behavior of validating nodes (see the recent staff report from the Federal Reserve Bank of New York) and enforcing strict KYC/AML requirements for on-chain activities (see details of Blackrock’s BUIDL fund).
Solana’s stated goal of enabling “the world’s best, most permissionless, and most accessible financial markets” and “a global shared state accessible to anyone without permission” cannot be achieved without a clear strategy for maintaining the credible neutrality of its block production. Failing to do so, the chain may end up being little more than a regulated but transparent financial transmission layer — potentially subject to government censorship restrictions. This prospect seems far less attractive, impactful, and valuable than a property rights system built around “censorship resistance” and “self-custody.”
In addition to the validator set, Ethereum has effectively decentralized many other parts of the ecosystem, including (i) early ETH distribution based on crowdsale and PoW mining; (ii) decentralized staking distribution; (iii) meaningful activity and transaction volume on L2; (iv) continuously improving client diversity… Ethereum’s decentralization initiatives at the “human” level are also impressive — the network is built openly by individuals and teams around the world, allowing many people to contribute and invest in the future of the protocol. This true decentralization of value, power, and intelligence is extremely difficult to replicate. In addition, because much of the technology is researched and developed in an open source and public domain environment, Ethereum can also inherit some of the advantages of an ecosystem focused on executing scaling. Technology can be commoditized, but Ethereum’s decentralization cannot.
However, it is worth noting that it is the market rather than values that determine the outcomes of these ecosystems. If the marginal cost of decentralization is too high in terms of L1 execution, user experience, and value accumulation, then the value of the most decentralized blockchain may also decrease. The bullish logic of Solana, Monad, BSC, and Tron is that these blockchains can provide relatively sufficient property rights utility for most users and applications with a lower degree of decentralization.
I tend to think that in the medium term, censorship, asset seizures, KYC/AML, node coercion, etc. will cause people to begin to question the robustness of centralized systems and may lead to the market for such systems being restricted to a single jurisdiction. In a multipolar world, where countries lack trust in each other and seek to regulate and monitor their citizens through capital controls and financial surveillance, it seems unlikely that global economic activity will naturally flow through a single system, but Ethereum has a unique claim to trusted neutrality, and ETH is an asset that derives its value from this trusted neutrality, and it is also the first choice for truly permissionless value storage in this system.
In contrast, the US dollar stablecoins issued by centralized institutions do not provide any property rights guarantee for holders. As Sreeram, founder of Eigenlayer, said, any USDxxx holder may face the risk of being "harvested" by Circle or Tether at will - you cannot truly own programmable currency with counterparty risk. I hope that ETH and stablecoins and derivatives mortgaged with ETH can become the default option for protecting the sovereignty of digital property.
2. Ethereum and Rollups
Ethereum’s neutrality and censorship-resistant properties make it the best place to settle, store, and express value. However, L1 settlement alone does not fully describe the goals of Ethereum’s Rollups-centric roadmap. Ethereum also serves as the settlement and data availability layer for Rollups.
I would view Rollups (and their corresponding Rollup platforms, such as Optimism Superchain and Arbitrum Orbit) as independent fiefdoms. Each territory will compete to provide users with what they want - fast transactions, low fees, simple on-chain processes, etc., but this comes at the expense of a certain degree of decentralization.
I call it territories because it seems that for now, the Rollups teams responsible for creating and expanding the ecosystem will continue to have huge influence in their respective fields, but this seems acceptable. The significance of Rollups is that they make trade-offs that Ethereum L1 is unwilling to make. If Rollups all need to be as decentralized as Ethereum, then why establish this symbiotic relationship in the first place? Rollups rely on the security and decentralization provided by Ethereum, and Ethereum relies on Rollups to expand economic activity within the ecosystem.
An important premise here is that Rollups must reach Stage 2, that is, the rules for upgrading bridge contracts are extremely sound and provide a clear exit path for bridged assets. However, it should be noted that Stage 2 does not emphasize (i) the degree of decentralization of Rollups sorters; (ii) the destination of the fees and MEV (miner extractable value) generated by Rollups activities; (iii) the interoperability between Rollups ecosystems.
Stage 2 sets a standard for how Rollups can leverage Ethereum’s security and decentralization, while not prescribing much about other dimensions of Rollup design. I won’t get into the debate about how or when Rollups should implement sorter decentralization (although I generally agree with Max — I don’t see the motivation for them to do so). Still, I agree with Vitalik that this shouldn’t be a top priority. I think the most important tasks for Rollups right now are (i) inheriting Ethereum’s security by implementing Stage 2, and (ii) inheriting Ethereum’s censorship resistance by having a transparent and efficient forced inclusion mechanism that doesn’t have time delays as it currently does. In my opinion, these are the key elements, and they all go back to the theme that Ethereum can provide the most robust property rights system for both L1 and L2 assets.
(2.1) Data Availability (DA) of Ethereum
A key element of Rollups design is where to publish transaction data (i.e. which DA service to choose). In fact, we can see that some new projects have used alternative data availability layers (alt-DA) from the beginning.
I do not support the practice of some community members trying to use social pressure or coercion to force projects to use Ethereum's data availability layer (DA). This practice is unsustainable in any case. Instead, we should examine what unique advantages Ethereum's DA service can provide and consider potential network effects. The main advantage of using Ethereum DA is that it inherits Ethereum's property rights utility and censorship resistance (do I sound like a repeater...). I like to describe this feature as enabling the "free flow" of Rollup assets. As an on-chain user, if I know that my assets will not be confiscated and I can enjoy the same level of self-custody protection, then I will be happy to conduct most of my daily financial activities on a Rollup that is slightly less decentralized than Ethereum. With this in mind, let's think about the following scenarios:
Scenario Design: For a user who bridges ETH to L2 via a standard smart contract bridge, under what circumstances can they withdraw funds to a different address on L1 through the bridge?
The ability of L2 to escape depends on where L2 publishes the data.
If the L2 is a Rollup based on Ethereum DA and publishes transaction data to Ethereum's Blob, users will be able to use the "escape" mechanism unconditionally. Because the data behind each state update on the bridge contract is submitted to Ethereum's Blob, this ensures that Rollups users can prove the validity of withdrawals and use L1 to package transactions (they always retain sovereignty over L2 assets).
If the L2 chooses a resolution scheme that publishes transaction data to other DAs, then the "escape" mechanism will only be available when the Rollups are active. By publishing the L2's transaction data to a different chain, the bridge contract's state updates on Ethereum need to be tied to the availability of transaction data on the alt-DA chain. In other words, if someone publishes an invalid state root to the bridge contract without publishing transaction data to the alt-DA chain (commonly known as a "data withholding attack"), then L2 users cannot prove that their withdrawals are valid and therefore cannot withdraw ETH to L1 (they will lose sovereignty over their L2 assets).
It is worth noting that the second outcome would require L2 to permanently stop producing blocks in order to seize all assets on the standard bridge contract, a rather extreme level of intervention. Based on the above scenario assumptions, we can draw a simple conclusion - only Ethereum Rollups that have reached Stage 2 and publish transaction data to Blob can provide the same level of property rights protection for assets bridged to L2.
The above scenario highlights the first network effect of Ethereum DA services (and what I consider to be the best effect): a Rollup that publishes data to Ethereum DA can benefit from other Rollups that do the same, because all assets on all chains will share the same trust assumptions. Sreeram calls this the “trustless composability network effect” — I like the name, although the value of this from a user perspective is not yet clear. We are still in the very early stages of L2 adoption, and it seems unnecessary to speculate too much on this. It is perhaps more important to ensure that Rollups have no immediate incentive to use external DA services. The goal of scaling Ethereum DA performance through PeerDAS and Danksharding is highly consistent with the vision of providing a large number of blobs for Rollups, so it was a simple decision.
In the future, we can imagine that Ethereum DA will have other network effects. For example, in the scenario of real-time proof of transaction validity and pre-consensus (preconfs), Rollups using Ethereum DA may have better cross-chain user experience, more liquidity, and more users. These arguments may be too futuristic for many people to have a firm belief in them.
The network effect of DA only becomes critical if we truly view DA fees as a core component of the value of the ETH asset. Let’s explore this question a little deeper.
(2.2) Value capture of ETH
So far, we haven’t discussed fees and how they add value to Ethereum (ETH) as an asset, despite this being a major topic over the past few weeks. In the structure of this article, I consider this to be secondary to (1) Ethereum’s property rights utility and censorship resistance as a settlement layer, and (2) Ethereum’s ability to scale security and decentralization to Rollups as a DA layer. That being said, it’s still worth thinking about more “direct” forms of ETH value accretion.
Personally, I agree most with what Dankrad Feist (another Ethereum Foundation researcher) said in a recent AMA on the topic of DA fees:
“I don’t believe fees from Blobs will be the best value capture mechanism for Ethereum. The data availability market is too volatile — while Ethereum offers the best security, it’s too easy to get something ‘close enough’ and that will never be a good way to extract value.”
Fundamentally, I don’t think Ethereum DA will be very sticky. The network effects mentioned above are not strong enough to continuously require L2 to pay higher Blob fees, but I don’t think this is a problem. By providing cheap DA services to Rollups, Ethereum encourages them to build and grow the amount of economic activity in the Ethereum ecosystem. Therefore, proposals that seek to drive short-term burn rates by increasing Blob pricing seem to be completely the wrong direction (again agreeing with Dankrad here). Francesco (Ethereum Foundation Researcher) also gave a great talk on this in a recent AMA, outlining how many L2 transactions can be carried out under the proposed DA expansion.
Another source of ETH value accumulation is the destruction of L1 execution fees. Max Resnick (Ethereum Foundation researcher) and colleagues have started a campaign to bring all DeFi execution back to L1; at the same time Justin Drake (Ethereum Foundation researcher) believes that L1 execution "has no future"; my views are somewhere in between the two. I would like to quote Dankrad again here.
“Ethereum L1 will be the intersection between all of these subdomains, and a lot of very valuable activity will continue to occur on it, which will generate valuable fees. (For this to happen, some degree of L1 scaling will be required.)”
It seems that valuable activity will always happen on Ethereum, and creating a platform that facilitates a lot of L2 economic activity will also drive usage of the underlying chain. Therefore, it is necessary to scale the L1 execution layer to facilitate the growth of these activities, but I think this matter is less urgent than "maintaining and improving Ethereum's properties as a settlement layer and DA layer." This once again highlights my core point that Ethereum should maximize economic activity within its platform (including Rollups), and ETH should be positioned as a truly permissionless store of value, not just an interest-bearing asset.
The focus on ETH’s store of value naturally leads to the question: “Why shouldn’t I choose BTC?”
I will end this question with a brief answer.
3. About Bitcoin
There is a lot to discuss about Bitcoin (BTC), especially as it has revitalized the research and development ecosystem in areas such as ordinals, runes, Rrollups, BitVM, etc., but this article is not intended to go into those details, and I am not the right person to discuss them. However, I will point out a few key points that are closely related to the Ethereum vision mentioned above.
First, there is the question of Bitcoin’s fixed supply cap of 21 million coins. This revolutionary concept of actively creating digital scarcity is extremely powerful and has made Bitcoin one of the most valuable assets in the world (10th in market cap at $1 trillion as of September 2024). However, I believe the 21 million cap commitment is a fatal flaw in the Bitcoin system because I believe Bitcoin’s fork selection rule is inherently “not stable enough” in the face of a decreasing block reward. The common market response to this view is that fee revenue will become high enough to incentivize honest mining behavior, but I don’t agree with this view.
The chart below shows the fluctuations in Bitcoin network fees over the past six years. I don’t believe that mining entities can remain profitable with such an unstable income stream. For example, in the two years from mid-2021 to mid-2023, Bitcoin network fees have been below 1 BTC per block. In a more optimistic scenario, most BTC will be held by ETF issuers, who may choose to subsidize mining and continue to earn fees through asset management business models, but this is obviously not the result expected by the cypherpunk spirit. In addition, the view that fee income will incentivize mining seems to conflict with the mainstream concept of "buy hodl". If everyone just holds, where will the fees come from?
The second is about the potential for Bitcoin to subvert itself into a settlement layer and a data availability (DA) layer. The most feasible answer I've heard to solve the problem of Bitcoin's fee sources is that Bitcoin can become the settlement layer and data availability layer for the L2 (payer). This is theoretically possible and is very similar to the path Ethereum is taking, but there are two significant differences.
The core security model of the Ethereum network does not rely on fees generated by settlement and DA, thanks to Ethereum's issuance mechanism. I even mentioned above that I don't think DA fees are a key component of ETH's value. For Bitcoin, continued fee generation will be a necessary condition for survival, which seems to form a strange cycle: "L1's security depends on L2's fees, and L2 depends on L1's security."
Bitcoin has neither a scaling roadmap nor a standard practice for upgrading the network. This is both an advantage and a disadvantage. While stability and predictability are core features of the Bitcoin system, they may also hinder Bitcoin's ability to transform into a settlement layer and DA layer. This seems to be a classic innovator's dilemma, as the system may be too large and successful to make large-scale improvements, such as adding OP_CAT and increasing the block size, which are necessary to provide L2 with the necessary resources to achieve meaningful scaling.
I am happy to be proven wrong on these points, as my knowledge of the Bitcoin ecosystem is relatively limited and the above points are based on my current understanding.
There is a lot more to discuss about Bitcoin, but I will stop here. BTC is viewed as digital gold for good reason — a very valuable but relatively static asset. I believe ETH will have a more dynamic future as a censorship-resistant, programmable store of value that underpins a larger digital economy by providing permissionless settlement, DA, and execution.
Conclusion
Ethereum is firmly committed to decentralization, with the goal of building the most secure and censorship-resistant infrastructure for the on-chain economy. The development blueprint centered on Rollups aims to expand the economic activities of the platform without sacrificing the key features of the settlement layer. As a DA layer, Ethereum can provide a low-cost and highly trustless solution for Rollups, allowing them to attract more users by reducing decentralization to a certain extent without sacrificing the sovereignty of user assets.
I agree with Myles Oneil that regardless of how the specific mechanisms for value capture change, the value of ETH will grow as economic activity within the ecosystem increases - so it is too early to discuss optimizing value capture. Finally, while I believe that maintaining settlement properties and expanding data availability are the most important features in the roadmap, I also agree that the expansion of the L1 execution layer should be promoted in parallel, which needs to be built on the technology and innovation of the entire field.
Fundamentally, I believe that ETH’s value is primarily derived from its role as a global, permissionless store of value, and that the value accumulation story we are discussing, while closely tied to the expansion of the ecosystem, long-term user and developer growth should take precedence over short-term focus on token mechanics. A roadmap centered around Rollups makes perfect sense: settlement first, DA second, and L1 execution last — in that order.
