Author : @Web3Mario
Abstract : This weekend, social networks were very lively, and a new round of debates on ETH began. I think there are two reasons. First, Vitalik's interview with ETHPanda has aroused widespread discussion in the Chinese community. On the other hand, compared with SOL, the continued decline in the exchange rate of ETH against BTC has also caused widespread dissatisfaction. Regarding this issue, the author also has some opinions and hopes to share them with you. In general, I think there is no problem with the long-term trend of ETH, because there is actually no direct competitor in the market. Because in the narrative of Ethereum, the more critical positioning of "decentralized execution environment" is "decentralization" rather than "execution environment", and this basic disk has not changed. There are two core reasons for the current bottleneck of ETH development. One is that the Restaking track has caused a vampire attack on Layer2 of the mainstream technology development path, diverting a large number of ETH ecological resources. However, due to the fact that the core mechanism of Restaking will not create incremental demand for ETH, it directly leads to the inability of the application side to obtain sufficient development resources and user attention, and promotion and user education have stagnated. The second is that the key opinion leaders of the Ethereum ecosystem are becoming aristocratic and forming a profit class, which makes class mobility solidified. The developer ecosystem lacks sufficient incentives, and innovation is naturally weak.
Restaking is a vampire attack on Ethereum's ecological resources, which makes it impossible for applications to obtain sufficient development resources.
I actually discussed this point a bit in one of my previous articles, and I’d like to take this opportunity to revisit it today.
We know that the official development path of Ethereum has always been to form a completely decentralized execution environment through Sharding. In layman's terms, it is a completely distributed cloud that is not controlled by any party. Applications can obtain computing and storage resources on the cloud through bidding, and all resources are completely regulated by the supply and demand relationship in the market. Considering the complexity of the technology. The reason for choosing Sharding is that you cannot tolerate 100% redundancy of all data, which will cause significant waste. Therefore, the data can only be processed separately according to different shards, and finally a certain relay will summarize the processing results.
Considering the complexity of technology iteration, Sharding's technology selection has actually undergone some changes, and the community finally finalized the Rollup-Layer2 solution as the mainstream direction. In this solution, all applications can be built in a separate Layer2, and the Ethereum mainnet sinks to become the infrastructure for all application chains. In addition to bringing data finality to the application chain, it can also play the role of information relay. Such a master-slave architecture is a good solution in terms of efficiency and cost. It not only reduces the cost of application operation, but also provides a good guarantee on the "security" based on the degree of decentralization.
At the same time, Ethereum has also designed a relatively self-consistent business model and a good economic model for ETH. On the one hand, the POW consensus mechanism of the main chain is switched to the asset voting POS mechanism. In exchange, each participant can obtain the right to share the main chain's fee income. On the other hand, each application chain needs to confirm the finality of the data through the main chain transaction, and the transaction needs to use ETH as Gas. Therefore, as long as the Layer2 of each application chain remains active, it 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 started at the end of last year when the ETH ReStaking track represented by EigenLayer became popular. The original idea of this track is not complicated. Friends who have participated in DeFi may know that a considerable number of projects are innovative around idle assets, which is the so-called "nesting dolls". It's just that Restaking is bolder and chooses to directly reuse the ETH participating in PoS Staking and directly provide execution functions to the outside world, which is the so-called AVS. Although I very much agree with this direction in terms of entrepreneurial creativity. But in fact, this is the most direct cause of Ethereum's current predicament. Because at that time, the technical selection of Layer2 was basically completed, and a relatively mature technical solution had been developed. It is time to exert efforts on the application side, such as faster iteration of related applications, more sufficient marketing budget, etc.
However, the emergence of the ReStaking track is actually a vampire attack on Layer2, which directly caused ETH to lose its value capture ability. Because ReStaking provides a "second consensus solution" for applications that does not need to pay the main chain ETH cost, the most intuitive understanding is to use the most current AVS and DA layers as examples. The so-called DA refers to data availability, that is, to make data tamper-proof through a technical solution, which can also be equivalent to data finality. In the previous description, we know that the application chain brings finality to its own data by calling contracts on the main chain, which creates demand for ETH. However, Restaking provides a new option, that is, to purchase consensus through AVS. In this process, you don’t even need to pay ETH, and you can use any asset to pay for the consensus purchase fee. This makes the entire DA market, from the previous Ethereum-exclusive monopoly market to an oligopolistic competition market shared by ReStaking and Ethereum, which will naturally make Ethereum lose its market pricing power and directly affect its profits.
Not only that, but what is even worse is that it squeezed out the precious resources in the bear market at that time. These resources should have been diverted to various application sides for promotion and market education. Instead, they were attracted to the "reinventing the wheel" project for infrastructure. The dilemma of Ethereum today is due to the lack of enough active applications, which has led to a downturn in the value capture system. Friends who have worked on projects may understand that the rhythm of project operations is very important. Only by launching appropriate products in the appropriate market can the project usher in long-term development. Any wrong decision may cause development to stagnate. So it is really sad.
Of course, the essence of this problem is understandable. This is actually a problem of the democratic system, that is, the efficiency problem caused by the lack of unified power. In an organization that pursues distributed decentralization, all parties can naturally compete for development and resources based on their own wishes, which is more conducive to value capture in a bull market because the innovation potential is very large. However, in the stock fight in the bear market, the lack of unified resource scheduling has led to deviations in the route, and it is understandable that development has stagnated. On the other hand, Solana, an organization operated by this corporate structure, will naturally be welcomed by virtue of the efficiency advantages brought by centralization, and the efficiency of capturing hot spots and launching relevant measures in a targeted manner is also higher. This is why Memecoin summer will appear on Solana.
The key opinion leaders and vested interests of the Ethereum ecosystem are becoming aristocratic, forming an exclusive interest class. The developer ecosystem lacks sufficient incentives, and innovation is naturally weak.
In the Ethereum ecosystem, there is a phenomenon: there is a lack of positive opinion leaders like in Solana, AVAX, and even the former Luna ecosystem. Although these leaders are sometimes considered to be the driving force of FOMO (fear of missing out), it is undeniable that they play an important role in the cohesion of the community and the confidence of the entrepreneurial team.
However, in the Ethereum ecosystem, it is difficult to think of other influential leaders besides Vitalik. This phenomenon is partly due to the split of the original founding team, but it is also related to the solidification of the internal classes of the ecosystem. Many benefits of ecological growth are monopolized by early participants. Imagine if you had participated in a fundraising worth 31,000 BTC (about more than 2 billion US dollars at the current market value), you would be very rich even if you did nothing, not to mention that the wealth in the Ethereum ecosystem has long surpassed this number.
Therefore, many early participants began to turn to conservative strategies, and maintaining the status quo became more attractive than expansion. In order to avoid risks, they became more cautious, which also 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 such as AAVE and lend the large amount of ETH they hold to leveraged demanders to earn stable returns, so why do they need to vigorously promote the development of new projects?
But in the end, I think there is no problem with the long-term trend of ETH, because there is actually no direct competitor in the market, because in the narrative of Ethereum, the key to the positioning of "decentralized execution environment" is "decentralization" rather than "execution environment", and this basic situation has not changed. Therefore, as long as the integration of resources can be completed and the construction of applications can be promoted, the future of Ethereum is still bright.
