Has Ethereum lost its way?

Is it possible that by trying to be everything to everyone, Ethereum loses its focus and ends up accomplishing nothing? Ethereum needs to refocus on its original ambition to be the world’s computer, says Covalent co-founder Ganesh Swami.

Ethereum has come a long way since its launch in 2015 under the codename “Frontier,” evolving from a grand idea to the foundation for thousands of decentralized applications today. However, as blockchains like Bitcoin and Solana compete for Ethereum’s developer and user base, the Ethereum ecosystem has begun to look shaky, lacking a clear direction, and gradually drifting away from its original goals. Even the value of Ethereum has seemed a little lackluster. Ethereum’s token price has so far failed to break through its all-time high of $4,700 set in 2021.

This begs the question: has Ethereum lost its way? And if so, how can we get it back on track?

As Confucius said, "He who tries two things at once loses both." While chasing Solana's faster execution speed and trying to compete with Bitcoin's concept of "hard currency", Ethereum has gradually forgotten its original intention of becoming a "global computer." Péter Szilágyi, head of the Ethereum team, said, "Ethereum has lost its way." Even the status of "ultrasonic currency" has been questioned, as Ethereum's inflation rate reached 0.74%, which is related to the decrease in transaction activity and the decrease in ETH burn rate. Although some people advocate that ETH should maintain its deflationary nature, we must remember that "ultrasonic currency" has never been the goal of Ethereum.

Ethereum infrastructure progress

Ethereum is more than just a currency. It has never pursued the highest TPS (transactions per second) or the lowest gas fee; its mission has always been to build a truly decentralized future. Vitalik Buterin and his co-founders created Ethereum to be the "world computer" - a global network of thousands of computers on which anyone can build decentralized applications at any time. However, in the pursuit of accessibility and interoperability, the ecosystem was distracted by various emerging trends and lost focus.

As prices fell below $2,500, many people believe that Ethereum's poor performance is related to the applications built on its network. Many dApps (decentralized applications) developed on Ethereum today often only gain short-term hype, but due to clunky user interfaces and underdeveloped platforms, these applications have limited usage and slow user growth. In addition, these applications often only attract the same user base scattered across different L2 (Layer 2) networks. Without practical applications, Ethereum will not be able to achieve its goal of becoming the world's computer.

Ethereum's primary goal should be to rely on strong infrastructure, not applications. Decentralized computing and secondary and tertiary networks that support Ethereum are actively being developed, which shows that Ethereum's infrastructure is constantly improving. Even enterprises are now beginning to prefer permissionless networks like Ethereum over private enterprise networks because it has become cheaper to develop on permissionless chains.

But even with these developments, Ethereum is still improving at a relatively slow pace and is currently in the middle of its expansion roadmap, a relatively quiet period where Merkle Trees, zkSTARKS, account abstraction, and integration of different L2 technologies are gradually being implemented.

Need to think less short-term. Like Bitcoin, Ethereum will eventually come out of its current trough of seemingly low activity. Ethereum is having its “lightning moment” and needs to abandon the “ultrasonic money” narrative and stop trying to catch up with Solana. Ethereum has a clear corrective path for those who are paying attention to its progress. For example, we still haven’t seen how people are utilizing “Blobs” other than as storage space for aggregate fraud proof challenge windows.

Future Outlook

After the Dencun upgrade in March 2024, Pectra will be the next major upgrade for Ethereum, which is expected to be launched at the end of 2024. There is also the "Purge" upgrade on Ethereum's long-term roadmap. This upgrade will help Ethereum keep up with the pace of other blockchains and handle the influx of activities that will follow after the chain achieves wider adoption. The Purge upgrade will simplify the protocol by cleaning up old historical data, thereby eliminating technical debt and reducing the cost of participating in the network.

While removing historical states brings many benefits, it also puts the Ethereum chain at risk of data being monopolized by centralized entities, turning Ethereum into a data-centralized chain. Ethereum may therefore be more like a billboard, reducing the trustless property. This problem hinders the next stage of development of the "global computer" because downstream activities such as multi-agent AI systems and decentralized computing cannot scale in the absence of data. This problem needs to be solved by a solution: decentralized long-term data availability.

Currently, Ethereum is indeed stuck in the middle of its scaling roadmap. However, Ethereum can get back on track by shifting its focus to infrastructure. This is the key to allowing the network to truly fulfill its role as the "world computer". As Ethereum completes its roadmap in the coming years and achieves decentralized computing, the world computer will rely on a strong global infrastructure to run smoothly.