Author: @Web3Mario
Summary: This weekend, social networks have been quite lively, with a new round of debates about ETH starting. I believe the causes are twofold. Firstly, the interview between Vitalik and ETHPanda sparked widespread discussion in the Chinese community. Secondly, compared to SOL, ETH's continued decline against BTC has also triggered widespread dissatisfaction. Regarding this issue, I have some opinions to share with everyone. In general, I believe the long-term trend of ETH is sound because there are actually no direct competitors in the market. In the narrative of Ethereum, the key aspect of the positioning of 'decentralized execution environment' is 'decentralization' rather than 'execution environment,' and this fundamental situation has not changed. The core reasons leading to the current bottleneck in ETH's development are twofold. Firstly, the ReStaking track has caused a vampire attack on the mainstream technological development path of Layer2, siphoning off a large amount of resources from the ETH ecosystem. Secondly, the core mechanism of ReStaking does not create incremental demand for ETH, directly resulting in the application side being unable to obtain sufficient development resources and user attention, leading to stagnation in promotion and user education. Secondly, key opinion leaders in the Ethereum ecosystem are becoming aristocratic, forming an interest class, which causes class mobility to solidify, and the developer ecosystem lacks sufficient incentives, making innovation appear weak.
Restaking’s vampire attack on Ethereum ecosystem resources has resulted in the application side being unable to obtain sufficient development resources.
Regarding this discussion, there has actually been some discussion in a previous article of mine, and today I hope to take this opportunity to readdress it.
We know that Ethereum's official development path has always been to form a completely decentralized execution environment through Sharding. Simply put, it is a fully distributed cloud not controlled by any one party. Applications can bid for computing and storage resources on this cloud, and all resources are completely regulated by the supply and demand relationship in the market. Considering the complexity of technology, the reason to choose Sharding is that you cannot tolerate 100% redundancy of all data, which would lead to significant waste. Therefore, data must be processed separately by different shards and then ultimately aggregated by a relay.
Considering the complexity of technological iteration, the technical selection of Sharding has indeed undergone some changes, and the community ultimately confirmed the Rollup-Layer2 solution as the mainstream direction. In this solution, all applications can choose to build on separate Layer2s, while the Ethereum mainnet serves as the infrastructure for all application chains, providing not only data finality for application chains but also acting as an information relay. This master-slave architecture is a good solution in terms of efficiency and cost, as it reduces the operational costs of applications and provides 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 gain dividend rights from the main chain's transaction fee income. On the other hand, application chains need to confirm data finality through transactions on the main chain, and transactions require ETH as Gas. Therefore, as long as the various Layer2s of the application chains remain active, they will indirectly promote the activity of the Ethereum main chain. This also allows ETH to have the ability to capture value from the entire Ethereum ecosystem.
However, the real problem began last year at the end of the year, with the ETH ReStaking track represented by EigenLayer becoming hot. The native idea of this track is actually not complicated. Those who have participated in DeFi may know that a considerable number of projects are innovating around idle assets, which is so-called 'nested investment.' However, Restaking is bolder, choosing to directly reuse the ETH participating in PoS Staking and directly providing execution functions, known as AVS. Although I highly agree with this direction in entrepreneurial creativity, in fact, this is the most direct cause of Ethereum’s current predicament. Because at that time, the technical selection of Layer2 had basically been completed, and a relatively mature technical solution had already emerged. It was indeed the time to exert efforts on the application side, such as accelerating the iteration of related applications and providing more sufficient marketing budgets.
However, the emergence of the ReStaking track is, in fact, a vampire attack on Layer2, directly leading to ETH losing its value capture ability. Because ReStaking provides applications with a 'second consensus solution' that does not require paying main chain ETH costs. The most intuitive understanding can be exemplified by the currently most practical AVS and DA layers, where DA refers to data availability, meaning a technical solution that makes data immutable, which can also be equated to data finality. In previous descriptions, we clearly stated that application chains achieve data finality by calling contracts on the main chain, creating a demand for ETH. However, Restaking offers a new option, which is to buy consensus through AVS, and in this process, you don't even need to pay ETH; you can use any asset to pay for the consensus purchase fees. This transforms the entire DA market from a previously monopolized market dominated by Ethereum into an oligopolistic competition market shared by ReStaking and Ethereum, which will naturally cause Ethereum to lose market pricing power and directly affect its profits.
Moreover, the more critical issue is that it has crowded out the precious resources that were available during the bear market. These resources should have been diverted into various applications for promotion and market education. Instead, they have been attracted to the 'reinventing the wheel' projects for infrastructure, and today’s predicament of Ethereum is precisely due to the lack of sufficient active applications leading to a slump in the overall value capture system. Those who have worked on projects may understand that the rhythm of project operations is very important; launching the right product in the right market is crucial for long-term development. Any wrong decision can lead to stagnation. So it is indeed lamentable.
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 distributed decentralization, naturally various voices can develop and compete for resources based on their own will. This is more favorable for value capture during a bull market due to the enormous potential for innovation. However, in the stock battle of a bear market, the lack of unified resource scheduling leads to deviations in the roadmap, and it is quite understandable that this causes development stagnation. In contrast, Solana, as an organization that operates under this company structure, will naturally be favored for its efficiency advantages brought by centralization, and its efficiency in capturing hotspots and launching related initiatives is also higher, which is why Memecoin summer appeared on Solana.
Key opinion leaders and vested interests in the Ethereum ecosystem are becoming aristocratic, forming an exclusive interest class, and the developer ecosystem lacks sufficient incentives, making innovation appear weak.
In the Ethereum ecosystem, there is a phenomenon: the lack of proactive opinion leaders like those in Solana, AVAX, or even the former Luna ecosystem. Although these leaders are sometimes seen as driving the FOMO (fear of missing out), it is undeniable that they play an important role in community cohesion and in building the confidence of entrepreneurial teams.
However, within the Ethereum ecosystem, apart from Vitalik, it is hard to think of other influential leaders. This phenomenon partly stems from the split of the original founding team but is also related to the solidification of internal class structures within the ecosystem. Many of the benefits of ecosystem growth have been monopolized by early participants. Imagine if you had participated in a fundraising of 31,000 BTC (approximately over 2 billion USD at current market value); even if you did nothing, you would already be very wealthy, let alone the wealth within the Ethereum ecosystem has long surpassed this figure.
Therefore, many early participants have started to turn towards conservative strategies. Compared to expansion, maintaining the status quo has become more attractive. To avoid risks, they have become more cautious, which also explains why they tend to adopt conservative strategies when promoting ecosystem development. A simple example is that early participants only need to ensure the status of existing projects like AAVE and lend out large amounts of ETH they hold to leverage seekers to earn stable returns, so why would they need to vigorously promote the development of new projects?
But in the end, I believe the long-term trend of ETH is sound because there are actually no direct competitors in the market. In the narrative of Ethereum, the key aspect of the positioning of 'decentralized execution environment' is 'decentralization' rather than 'execution environment,' and this fundamental situation has not changed. Therefore, as long as resources can be integrated and application development is promoted, the future of Ethereum remains bright.
