Global blockchain supervision and query platform

English
Download

Ethereum: Are fundamentals there?

Ethereum: Are fundamentals there? WikiBit 2025-04-28 04:14

The following is a guest post and analysis from Shane Neagle, Editor In Chief fromThe Tokenist.Since the fertile but somewhat fraudulent initial coin

BTC vs ETH vs SOL over one year performance. Image credit: CryptoSlate via TradingView

What is immediately noticeable is that alternative proof-of-stake Solana has large and frequent spurts of inflows, while Ethereum tends to go down without such rallies. Representing decentralized finance (DeFi), Ethereum now holds barely 52% market share, the lowest since May 2022.

Market shares of DeFi blockchains since August 2020. Image credit: DeFiLlama

In the meantime, Solana more than doubled its market share since May 2022, from 3% to nearly 8%. Considering there is no shortage of Layer 1 blockchains similar to Solana, is this a sign that

Ethereum will continue its slide, getting cannibalized by pure L1 chains that dont rely on L2 solutions?

In other words, how should one view Ethereums fundamentals? Could it be the case that Ethereum is actually poised to maintain or even increase DeFi market dominance, but that ETH price will still be lackluster?

To attempt to answer that, lets first revisit the big crypto picture.

What Is Ethereums Vision?

Ever since the internet became commercialized, it has been missing one obvious component – native value transfer. After all, if ebooks can replace books, and if emails can replace mail, why cant there be emoney replacement for fiat currency? More importantly, why cant contracts be automated to the extent of replacing banking services such as loans?

This has been the underlying push for blockchain technology, starting with Bitcoin. But for the internets native money transfer to be adopted at scale, it has to have three critical components:

  • It has to be trustless, eliminating the vulnerability of arbitrary human intervention. For something to be fully trusted, the spectrum of trust has to be minimized to near-zero.
  • It has to be user-friendly, implementing intuitive design, seamless interoperability, and frictionless user experience just as smartphones have accomplished to be mass-adopted.
  • It has to be scalable to handle the transition from legacy finance to blockchain finance.

Within this framework, Ethereum is positioned strongly as a theoretical edifice. Recently, one of top Ethereum developers, , filtered what Ethereum means across different venues of legacy human action.

Vitalik Buterin, the co-founder of Ethereum, endorsed this vision via retweet. Image credit: X

But in practice, what is the likelihood of this happening?

Is Crypto Actually Viable?

At face value, Ethereum is aiming to uproot entrenched power networks. To expect it to go without major friction would be an exercise in folly. This is why we have seen sustained effort to during the Biden admin.

When President Trump took office, and Elon Musk launched the Department of Government Efficiency (DOGE), it became even more apparent that the entire mediatic and political space runs on . And the underlying power of such a system is the lack of transparency in money flows.

In particular, what has been established is that:

  • If a power is threatened, conditions are erected to contain alternative power.
  • In the context of cryptos, the base of entrenched power is the need for fiat conversion.
  • DeFi apps may be useful, but are meaningless if one cannot spend money in the real world.
  • Therefore, for fiat-crypto conversion to be viable, all participants in the (block)chain have to comply with the conditions of entrenched power.

Case in point, what if a person believes climate change to be a systemic hoax, aiming to suppress wealth distribution via ? Such policies are funded and enforced via taxation. The exit from the funding for the perceived coercive policy would then require for laws to be broken.

This applies to any public policy perceived to be unjust or deceptive.

But if mass adoption of DeFi blockchains is to be successful and to get a proper rival, there would have to be consistent compliance with the laws, no matter what they are at a given moment. Thats because dApp usefulness equals regulatory compliance. In other words, even a trustless system would have to tether itself to the arbitrary trust framework it purportedly aims to exit.

But if that is the case, why wouldnt the entrenched power network implement on the internet? After all, it would enjoy full credibility for mass adoption, while also being more convenient.

In the end, Ethereum‘s vision may be staring down a wall too high to scale. But now that we’ve painted the big picture of crypto containment, is Ethereum scaling competitive in the first place?

Ethereums Revitalizing Initiatives

Although Ethereums transition from proof-of-work to proof-of-stake , it could be argued that the 99% energy reduction was worth it for scaling sake. This way, Ethereum has the potential to become a global smart contract launching pad.

On that road, the adopted approach is reliance on Layer 2 solutions such as Optimism, Polygon, Arbitrum, Base, Starknet, zkSync and others to offload traffic and reduce transaction fees. And the lower the transaction fees, the lower the friction is for the end-user.

The problem is, this approach introduces an entirely new layer of frictions such as juggling multiple chains, bridges and wallets. This not only elevates the barrier to entry, as the average user always seeks simplicity, but it fragments the capital that wouldve otherwise flown into Ethereum itself.

On the scaling front, however, Vitalik Buterin noted that the L2 approach managed to boost the blockchains transaction processing capacity by 17x. The overarching goal is now to make Ethereum into a kind of operating system (OS) for DeFi:

  • Make L2s interactions “under the hood” by creating chain-specific addresses, common standards for cross-chain bridges, and reduce transaction finality from to minutes.
  • Double the blobs (temporary data) per block from 3 to 6 with . The increased blob throughput should expand L2 layers further while maintaining low fees.
  • To make ETH an appreciating asset, Buterin is hoping to entrench it as the primary collateral across DeFi apps.
  • In addition to the burning mechanism as ETH transaction fees are shared, this could make ETH a deflationary asset. At the moment, ETH has an of 0.754%, slightly lower than Bitcoins 0.829%.

However, Buterin also views privacy concerns as paramount, which is why the Ethereum ecosystem should move toward default one address per app. According to his , this would incur “significant convenience sacrifices, but IMO this is a bullet that we should bite”.

At a time when Ethereums ecosystem convenience level is dubious against pure L1s like Solana, it is yet to be seen if the “bullet” will backfire. Judging by the in late 2024, 85% of consumers are “taking at least one step to address their privacy and security concerns”, but this sentiment typically suffers erosion when colliding with convenience.

Ultimately, Ethereum will have to reach a stage in which users engage with dApps without knowing theyre using crypto. In such a scenario, adoption rate should offset potential crypto containment.

The problem is, in terms of real-time transactions per second (TPS) at 1,049 while Ethereum ranks 17th at 14.07 TPS (over one week) – a reminder that even can have major implications at scale.. Against Solana‘s theoretical 60,000 TPS, Ethereum’s roadmap is set for 100,000 TPS as the blockchain is sharded in “” phase of development.

The progress bar on Ethereums “The Surge” suggests less than half completion. Image credit: Ethroadmap

Accounting for all roadmap phases, users should not expect Ethereums mass adoption potential to materialize until 2030. That gives plenty of roadway for rival blockchains, including centralized ones from established financial institutions like .

The Bottom Line

Blockchain apps are currently in the clumsy era of flip phones with physical keyboards. To approach ubiquity, dApps must evolve into the era of smartphones — intuitive, seamless, and invisible to the user.

But such ubiquity may paradoxically rely on the very institutional support that the blockchain ecosystem set out to displace. Alongside technical hurdles, the has clearly demonstrated that much of the publics entry into crypto remains ill-informed and speculative.

As more people accrue negative experiences through token-based gambling, this misallocation of capital risks alienating broader adoption. It also creates a dynamic in which blockchain ecosystems become ripe for centralization, offering assurances and the perceived legitimacy of credentialed institutions.

This is the lens through which Ethereum and its rival chains must be viewed: as exciting, innovative platforms for decentralized finance, yet still navigating a precarious path between idealism and reality.

Disclaimer:

The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.

  • Crypto token price conversion
  • Exchange rate conversion
  • Calculation for foreign exchange purchasing
/
PC(S)
Current Rate
Available

0.00