Ethereum's "Winter": Can the Flames Reignite Amidst Doubts?Ethereum has recently become a focal point of various discussions and controversies, prompting even its founder, Vitalik Buterin, to publicly address concerns and the Ethereum Foundation to issue statements in response to community anxieties. This isn't baseless; Ethereum's underperformance during the current bull market has raised doubts about its position as the "King of Blockchain
Ethereum's "Winter": Can the Flames Reignite Amidst Doubts?
Ethereum has recently become a focal point of various discussions and controversies, prompting even its founder, Vitalik Buterin, to publicly address concerns and the Ethereum Foundation to issue statements in response to community anxieties. This isn't baseless; Ethereum's underperformance during the current bull market has raised doubts about its position as the "King of Blockchain."
Persistent Disagreements, Ethereum Needs to Reassert Authority
Despite the approval of Ethereum spot ETFs in the US, Ethereum's market performance has fallen short of expectations against the backdrop of the Federal Reserve's interest rate hikes. This has gradually undermined Ethereum's prestige among investors and the community, sparking questioning across various aspects.
Vitalik Buterin: DeFi Not the Savior?
Community members have challenged Vitalik Buterin's perspective on DeFi. Opinion leader @0xstrobe publicly pointed out that Vitalik seems to equate DeFi with the mining craze and Ponzi schemes of 2021, overlooking the value of healthy applications like Aave and RAI.
In response, Vitalik argued that DeFi's earnings stem from borrowers and transaction fees, essentially acting as a downstream of the ETH market. He believes it can't be a breakthrough innovation to drive a 10-100x growth in crypto technology. This viewpoint sparked further controversy, with some asserting that Vitalik's understanding of DeFi is too narrow, neglecting its potential in the financial sphere.
Transparency of the Ethereum Foundation Questioned
The Ethereum Foundation's transfer of 35,000 ETH has also raised concerns within the community, primarily due to the lack of transparency in the organization's annual spending reports. Josh Stark, a member of ETHGlobal, stated that the Ethereum Foundation is preparing a comprehensive spending report covering expenditures for 2022 and 2023, slated for release before the DevconSEA conference in November.
This report will detail the Ethereum Foundation's funding allocation, encompassing both internal and external expenses. Internal spending primarily supports the core Ethereum development team, including the Geth privacy and scaling exploration team, Solidity cryptography research team, and others. External spending primarily focuses on grants, aiding new organizations that contribute to the long-term strengthening and support of the Ethereum ecosystem, such as the Nomic Foundation, Decentralized Research Center, and L2Beat.
Ethereum's Development Progress Also Challenged
@MacroMate8, Head of Risk at Ethenalabs, pointed out that since 2021, there have been few new entrants joining the ETH ecosystem, while the SOL ecosystem is bursting with constantly developing young developers.
Josh Stark, citing data from the ElectricCapital developer report, refuted this claim, stating that Ethereum remains strong. Vitalik also believes that Ethereum's success is underestimated, considering L2s are classified as a separate category.
Can ETH Be a Store of Value?
Some voices have questioned whether Vitalik and most core developers perceive ETH as a store of value or a meaningful programmable currency. In response, Vitalik stated that if he didn't believe ETH was a SOV, he wouldn't hold approximately 90% of his net worth in it.
Expert Opinions: Ethereum's Future Outlook
Numerous experts and institutions have offered their predictions about Ethereum's future development, with varying perspectives.
The founder of CyberCapital believes Ethereum is in decline, while L2 networks are thriving amidst its decline. He argues that since the implementation of EIP-4844 (Proto-Danksharding), Ethereum's transaction fee revenue has significantly dropped, failing to keep pace with inflation. Meanwhile, L2 networks have witnessed record high transaction volumes and fee revenues. He believes that L2 networks may eventually migrate or become independent L1 networks, while Ethereum might gradually decline.
JPMorgan, in its research report, analyzed the reasons behind Ethereum's underperformance, highlighting the net outflow from Ethereum spot exchange-traded funds (ETFs) since their launch last month, whereas spot Bitcoin ETFs launched earlier this year have been more successful.
ZhuSu believes that the Ethereum Foundation's problem isn't selling valuable tokens prematurely but rather the lack of a clear roadmap and effective leadership.
However, some viewpoints remain optimistic about Ethereum. The CEO of CFBenchmarks believes that demand for Ethereum spot ETFs will continue to grow in the coming months, anticipating that more wealth management firms will offer such products to their clients.
The founder of 1confirmation believes Ethereum's market capitalization could surpass Bitcoin's within the next five years. He explains that Bitcoin has a clear positioning (digital gold), which institutional investors have embraced. Ethereum has been the most influential blockchain in the crypto space for the past five years, but the public's understanding of it remains relatively limited. Ethereum exhibits scarcity, the ability to generate income, and real-world use cases. Given its significantly smaller market cap compared to Bitcoin, Wall Street might be more inclined to gain exposure to it.
Conclusion: Ethereum's Future is Filled with Challenges
As a beacon of blockchain technology, Ethereum carries immense expectations and has propelled the emergence of numerous L2 solutions. However, the current crypto market cycle has seen Ethereum and its ecosystem seemingly fall into a lull, failing to showcase the expected vibrancy, leading to community dissatisfaction and criticism.
Despite this, Vitalik Buterin and the official Ethereum team have responded to these concerns with relative frankness and swiftness. Ethereum has faced more serious trust challenges in the past, so we should perhaps exercise more patience and confidence in this project hailed as the "King of Blockchain."
However, Ethereum's future is also fraught with challenges. Addressing scalability issues, attracting more developers, and enhancing the developer experience are all critical problems that Ethereum needs to tackle. Only through continuous innovation and actively addressing these challenges can Ethereum retain its leading edge and become an indispensable part of the blockchain landscape.
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