The following is an invited article and an analysis by Shane Neagle, editor -in -chief of the tokenist.
Since the fertile but somewhat fraudulent frenzy of the offer of initial parts (ICO) in 2017, Ethereum (ETH) remains second only behind Bitcoin, now at least 9x market capitalization. In the past five years, Ethereum has had an average annualized return to almost 60%which is neck and neck with bitcoin.
However, in the past year, there has been a notable change in the evaluation of Ethereum, in particular against rival blockchains like Solana (soil). Compared to Bitcoin, which made 33.73% over a period of one year, Ethereum resulted in a loss of almost 50%. At the current price, ETH returned to the price level October 2023.
What is immediately noticeable is that the alternative Solana of proof of assistance has large and frequent entrances, while Ethereum tends to drop without such rallies. Representing decentralized finance (DEFI), Ethereum now has barely 52% market share, the lowest since May 2022.
In the meantime, Solana has more than doubled its market share since May 2022, from 3% to almost 8%. Since there is no shortage of layer 1 blockchains similar to Solana, is it a sign that
Ethereum will continue its slide, being cannibalize by L1 pure chains which are not based on L2 solutions?
In other words, how should we see the fundamentals of Ethereum? Could it be that Ethereum is in fact about to maintain or even increase the domination of the Defi market, but that the price of the ETH will always be dull?
In an attempt to answer this, let us first revisit the great image of cryptography.
What is Ethereum's vision?
Since the Internet has been marketed, an obvious component is missing – the transfer of native value. After all, if electronic books can replace books, and if emails can replace the mail, why cannot be replaced by Emoney for fiduciary money? More importantly, why cannot contracts be automated in order to replace banking services such as loans?
This is the underlying push for blockchain technology, starting with Bitcoin. But for the transfer of native internet money to be adopted on a large scale, it must have three critical components:
- It must be without confidence, eliminating the vulnerability of arbitrary human intervention. In order for something to be fully reliable, the spectrum of confidence must be minimized to zero.
- It must be user -friendly, implementing an intuitive conception, transparent interoperability and a user experience without friction, as well as smartphones have accomplished it to be adopted en masse.
- It must be evolving to manage the transition from finance inherited to the finance of the blockchain.
In this context, Ethereum is strongly positioned as a theoretical building. Recently, one of the best developers Ethereum, Justin DrakeFiltered what Ethereum means in different places of inherited human action.
But in practice, what is the probability that it will happen?
Is the crypto really viable?
At its nominal value, Ethereum aims to uproot the rooted food networks. To expect that it goes without major friction would be an exercise in madness. This is why we have seen sustained efforts to paralyzes the expansion of services defined During the Biden administrator.
When President Trump took office and Elon Musk launched the Ministry of Government Effectiveness (DOGE), he has become even more obvious than all media and political space continues Social engineering and institutional deception. And the underlying power of such a system is the lack of transparency of money flows.
In particular, what has been established is that:
- If a power is threatened, the conditions are erected to contain an alternative power.
- In the context of cryptos, the basis of rooted power is the need for a Fiat conversion.
- DEFI applications can be useful, but do not make sense if you cannot spend money in the real world.
- Therefore, so that the conversion of Fiat-Crypto is viable, all the participants to the chain (block) must comply with the rooted power conditions.
Example, what happens if a person believes climate change be a systemic hoax, aimed at removing the distribution of wealth via Netzero policies? These policies are funded and applied by tax. The release of the funding of the perceived coercive policy would then oblige the rupture of the laws.
This applies to any public policy perceived as unfair or misleading.
But if the mass adoption of DEFI blockchains is to succeed and For credit cards To obtain an appropriate rival, it would be a consistent compliance with the laws, no matter what they are at some point. It is because The usefulness of the DAPP is equal to regulatory compliance. In other words, even a system without confidence should tackle the framework of arbitrary confidence which it allegedly aims to leave.
But if that is the case, why would the rooted food network not implement His own layer of money on the internet? After all, it would benefit from total credibility for mass adoption, while being more practical.
In the end, the vision of Ethereum can look at a wall that is too high on the scale. But now that we have painted the overview of the confinement of cryptography, has Ethereum a competitive scaling in the first place?
Ethereum revitalization initiatives
Although Ethereum's transition of proof of work to proof of proof lifted hacklesWe could argue that the 99% energy reduction was worth it for the scale. In this way, Ethereum has the potential to become a global intelligent contract launch ramp.
On this road, the approach adopted is the dependence on layer 2 solutions such as optimism, polygon, arbitrum, base, starknet, zksync and others to unload traffic and reduce transaction costs. And the lower the transaction costs, the lower the friction for the end user.
The problem is that this approach introduces a whole new layer of friction such as juggling with several channels, bridges and wallets. This increases not only the barrier at the entrance, because the average user always seeks simplicity, but it fragments the capital that would have otherwise stolen in Ethereum itself.
On the scale of the scale, however, Vitalik Buterin noted that the L2 approach had managed to increase the treatment capacity of 17x blockchain transactions. The primordial objective is now to make Ethereum a kind of operating system (OS) for DEFI:
- Make L2S interactions “under the hood” by creating addresses specific to the chain, common standards for transversal bridges and reducing the purpose of transactions from weeks a few minutes away.
- Double the blobs (temporary data) by block of 3 to 6 with Pectra upgrade. The increase in blob flow should further increase L2 layers while maintaining low costs.
- To make the ETH an asset asset, Buterin hopes the entry as the main guarantee between the DEFI applications.
- In addition to the combustion mechanism as ETH transaction costs are shared, this could make the ETH an active deflationary. For the moment, ETH has a inflation rate 0.754%, slightly less than 0.829% Bitcoin.
However, Buterin also considers confidentiality problems as paramount, which is why the Ethereum ecosystem should evolve towards a default address by appearance by application. According to his own wordsThis would lead to “important convenience sacrifices, but the OMI is a bullet that we should bite”.
At a time when the level of convenience of the Ethereum ecosystem is doubtful against the L1 pure as Solana, it remains to be seen if the “ball” will turn around. To judge by the Deloitte investigation At the end of 2024, 85% of consumers “make at least one step to respond to their confidentiality and security problems”, but this feeling generally undergoes erosion during collision with convenience.
In the end, Ethereum will have to reach a step in which users engage with DAPP without knowing that they use the crypto. In such a scenario, the adoption rate should compensate for the confinement of potential cryptography.
The problem is, Solana already ranks 1st In terms of real -time transactions per second (TPS) to 1,049 while Ethereum ranks 17th at 14.07 TPS (more than a week) – a reminder that even Differences measured in a single tick may have major large -scale implications. Unlike 60,000 theoretical TP of Solana, the Ethereum roadmap is set at 100,000 TPS while the blockchain is disconnected “the push“Development phase.
Taking into account all the phases of the roadmap, users should not expect the mass adoption potential of Ethereum to materialize before 2030. Jpmorgan.
The bottom line
Blockchain applications are currently in the clumsy era of rocking phones with physical keyboards. To approach ubiquity, the DAPPs must evolve towards the era of smartphones – intuitive, transparent and invisible for the user.
But such ubiquity can paradoxically rely on the very institutional support that the blockchain ecosystem has decided to move. In parallel with technical obstacles, the mania even has clearly shown that a large part of the public entry into the crypto remains poorly informed and speculative.
While more and more people accumulate negative experiences by the token game, this poor allocation of the risks of capital alienating a broader adoption. It also creates a dynamic in which blockchain ecosystems become ripe for centralization, offering insurance and perceived legitimacy of accredited institutions.
This is the objective through which Ethereum and its rival channels must be considered: as exciting and innovative platforms for decentralized finance, while always sailing a precarious path between idealism and reality.
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