Can Ethereum regain its glory? Three key problems

Author: Lane Rettig, former Ethereum core developer and former Ethereum Foundation employee; Translation: Jinse Caijing xiaozou

I have been immersed in the Ethereum community for nearly eight years and am an active member. From late 2017 to mid-2019, I worked for the Ethereum Foundation in different capacities. Then and still today, I am very invested in the Ethereum project and community at both social and financial levels, and I sincerely hope that Ethereum will succeed.

For a long time, Ethereum has been far ahead of the competition, and its technology and community have made it difficult for other projects to reach. But this advantage has always been shaky - despite the impressive surface data (high market value, huge TVL, full blocks, etc.), the underlying problems have always existed. Apart from DeFi and stablecoins, Ethereum has almost never had any truly useful applications, and users are basically limited to trading and speculation activities. Ethereum had a golden window of more than five years to consolidate its early achievements, and now this window of opportunity is closing rapidly, or perhaps it has disappeared completely.

Despite my deep commitment to the success of Ethereum and its community (or perhaps because of it), this topic is particularly difficult for me to write about. On the one hand, I have so many opinions to say about the pros and cons of Ethereum's current situation - especially compared to the performance of other crypto ecosystems. I have spent a lot of time thinking about this issue over the past eight years, perhaps more than any other topic.

On the other hand, writing this article requires an honest and critical attitude towards many current phenomena. After leaving the Ethereum Foundation in 2019, I had a strong desire to publicly criticize the Foundation and the entire Ethereum ecosystem, but I chose to remain silent in the end - not only because the time was not yet ripe, but also because I needed time to settle and observe from a distance. Now, it's time.

In addition, Ethereum's recent performance also contributed to my decision to write this article - multiple indicators show that it is in poor condition. As an asset, ETH has recently seriously underperformed the market, the ETH/BTC exchange rate is close to a historical low and has been falling for several years, and market sentiment is also depressed.

After communicating with many "veteran" friends who participated in Ethereum at the same time as me, I found that the current community sentiment is unprecedentedly low. I can’t even find one person who is genuinely bullish on Ethereum these days. We’ve been through multiple market cycles together, through the governance crisis, the FTX and Terra/Luna collapses, and the long bear market that followed, but the pessimism is now even greater than it has ever been. More worryingly, many of the old guard like me are uncomfortable speaking out about problems — a symptom of the current state of Ethereum.

I still think Ethereum can turn things around, but the chances are getting slimmer by the day. Here are the problems and directions for change as I see them. (This will be the first of a series of posts that will take several weeks to fully discuss, as there is so much to write about.)

Problem 1: Research Cult

If there is one thing that Ethereum has done wrong, it’s putting the cart before the horse and prioritizing research over applications. Since its inception, Ethereum’s culture, foundation, and core power have sanctified research at the expense of important dimensions like application development, usability, and simplicity. In the Ethereum ecosystem, researchers are in the spotlight - they get top speaking spots and podcast interviews, and enjoy almost complete freedom within the foundation: they can choose their own research direction, give lectures around the world, etc. Research-oriented projects receive the vast majority of funding. As a former Ethereum researcher, I admit that I enjoyed this preferential treatment at the time, but now I am clearly aware of the harm of this worship.

There is nothing wrong with the emphasis on research. Research is indeed crucial. Without research, there would be no Ethereum today! Breakthrough research in the fields of consensus mechanism, virtual machine design, zero-knowledge proof, optimistic rollup, P2P network, data structure and database design, and security mechanism has made Ethereum successful. Over the years, the Ethereum community has funded hundreds or even thousands of high-quality papers, giving birth to professional journals, conferences, and research institutions. Most of these achievements are public products: open source code, free publication of papers, and public lecture videos.

But the problem is that Ethereum is not just a research project. There are hundreds of billions of dollars of real assets and application value deposited here, and excessive research comes at a price. The designers of Ethereum are not application builders. They have never developed a production application on Ethereum, and most of them simply don’t have the skills to do so. They lack an understanding of the developer’s dilemma: how difficult it is to develop modern, secure and usable applications in Solidity, or the challenges of key management. They often overlook the knock-on effects of design decisions on the user experience and application layer. This recent tweet and its replies are a prime example.

While researchers are deified, product talent is relegated to a supporting role in the Ethereum ecosystem. There were no professional product managers at the Foundation during my time, and it may still be the case today. There is almost no funding for product talent in the ecosystem. Most Ethereum project teams follow the Foundation model and also do not hire professional product people. And real product talent is shunned by the industry due to the notoriety of cryptocurrency and the difficulty of development - even after all these years, the challenges of building usable products remain.

It could have been different. Many of the user experience problems we take for granted - slow final confirmation, cold start problems, dedicated gas tokens, key management, etc. - were not inevitable. We could have proactively designed Ethereum to be more friendly and easier to use, making it easier to build great applications. It’s not too late to choose to change now. For example, the native account abstraction scheme adopted by chains such as NEAR and Spacemesh solves problems such as cold start and simplifies key management; some new chains use stablecoins as native gas tokens to reduce fee volatility; the final confirmation time of the new generation of public chains is greatly shortened, forming a positive cycle of user experience.

But these changes will be extremely difficult now because they are deeply rooted in the design genes of Ethereum. A complete solution requires major innovations at the protocol layer, but new projects have proven their feasibility. More difficult than technological innovation is cultural change. Really solving the problem requires a fundamental shift: giving product talents the same respect as research stars. This also requires VCs to change toxic behavior and stop prioritizing funding for junk coins that can be quickly sold, and instead support truly usable products. And retail investors also need to stop speculating on worthless altcoins.

In other words, this is a complex multi-dimensional problem and a difficult coordination game. Unless we start over, the solution is still unclear. But I still believe in the Ethereum community's ability to solve coordination problems - as long as there is a will to reform, we will eventually find a way out.

Question 2: Ideological Purism

My recent thinking about the risks of ideological purism stems from my observations of Ethereum. We can rank blockchains such as Bitcoin, Ethereum, and Solana: one end is absolute purism, and the other end is thorough pragmatism. Bitcoin is the purest project in the world, adhering to the values ​​of cypherpunks - freedom, personal responsibility, decentralization, anti-censorship, sound money and security. This adherence makes it slow to evolve, new features are difficult to add, and any upgrade requires a hard fork and may destroy the existing system. This also causes Bitcoin to always maintain the lowest transaction throughput.

Ethereum is more practical. Its transaction processing capacity is significantly higher than Bitcoin, which is why it has attracted the most developers for a long time - it is easier to build interesting applications on Ethereum than Bitcoin. To do this, Ethereum sacrificed some of Bitcoin's values. A more complex virtual machine brings a larger attack surface, and there have been more vulnerabilities and attacks in history. In a sense, it is not as secure as Bitcoin. However, as the difficulty of node operation increases, the number of Ethereum nodes decreases relative to Bitcoin, and the degree of decentralization has also weakened - although the absolute value is still considerable.

On the other end of the spectrum, Solana (and other new high throughput chains) are extremely pragmatic and focused on delivering usable applications. Its transaction throughput far exceeds that of Ethereum, but at a heavy price: its overly radical technical solution has caused the network to crash many times and require manual restarts (developers call this "production environment testing"); the cost of running verification nodes is high, and the degree of decentralization is far lower than that of Ethereum; the system complexity is even greater than that of Ethereum, and the attack surface is larger. But this obsession with pragmatism has attracted a group of product-focused builders, forming the Solana culture of "quickly delivering what users need."

It should be clear that there is no absolute right or wrong. Each project chooses a different value ranking, and this diversity is healthy in itself. But it is necessary to be aware of the costs of each choice.

As I said two weeks ago, Bitcoin and Ethereum-style purism carries significant risks. It severely limits the innovation space of the base layer and the ecosystem, resulting in slow or even stagnant progress in change.

All of this is happening to Ethereum today. Despite its long-term lead, Ethereum has fallen behind in technology: its 12-second block time is far inferior to the sub-second confirmations common in modern smart contract chains; its minute-level final confirmation time is in stark contrast to the second-level confirmations of other public chains. The Ethereum ecosystem is not short of technical talent, and it is entirely feasible to implement these upgrades - the key is what you want and what you are willing to sacrifice for it.

Multi-client implementation has become a stumbling block for Ethereum. Each protocol change requires 12 production-level clients to implement simultaneously, and delays or rejections by any team will drag down the overall process. If the combination of consensus layer and execution layer clients is considered, 36 interaction scenarios need to be tested for each upgrade.

This is the main reason why Ethereum can only complete a network upgrade once a year, while public chains such as Solana can continue to iterate. Client diversity does help prevent a single culture and enhance the network's resilience to specific vulnerabilities or attacks, but Solana has proven that even a network that requires manual intervention to restart is still economically viable. This is a choice made by the Ethereum community, and it must come with a corresponding price. Solana and Ethereum's upgrade strategies are so different that they can be called two extremes - this comparison deeply reveals the essential difference between the two cultures.

Ethereum still has a window of opportunity to catch up, but if it continues to prioritize ideological purity (as it has always done), this opportunity will never be realized. The Ethereum community has never been willing to compromise on values ​​such as decentralization, censorship resistance, or client diversity. The obsession with decentralization means that full nodes must be able to run on cheap commodity hardware, and other public chains have achieved greater breakthroughs in scale, throughput, and availability by moderately relaxing these requirements. It is more difficult to run a Solana validator node than Ethereum, and there are fewer nodes. Whether Solana is decentralized enough is still unclear, and only time will tell.

In my opinion, Ethereum's success to date is not because of its values, but in spite of these values ​​- after all, cypherpunk ideas such as decentralization and censorship resistance are not valued by most people. If Ethereum wants to maintain its market leadership, it cannot continue to be uncompromising on its values.

The Ethereum community is therefore facing a difficult choice. This is about ambition and vision: Bitcoin does not need to innovate as fast as Ethereum because its vision is much more limited. Ethereum supporters need to ask themselves: Are you satisfied with the status quo? If the pace of innovation continues to slow or even slows down further, can you accept it? What is the ultimate vision for Ethereum? The answer is not clear yet, and the direction of the community is difficult to predict.

Of course, things are not black and white. The community should seriously consider more creative and rapid experimental solutions, such as deploying multiple experimental chains (see the relationship between Litecoin and Bitcoin, Kusama and Polkadot). The key is that we must start a serious discussion now, without any taboo issues, and break through the limitations of current thinking. Ethereum has successfully innovated itself, and we can do it again - as long as we are really determined.

This leads to the next topic.

Question 3: Growth Dilemma

Ethereum is like a talented but lost teenager, with unlimited possibilities but unable to do everything. The key factor hindering its development is its unclear positioning - it is still unclear what it wants to be and who it serves.

This state is almost innate, and is most directly reflected in the constantly changing narrative: from "world computer" to ICO platform, to DeFi chain, NFT platform, and then transformed into a hyper-scalable global financial settlement layer, "super sound currency", and finally the data availability layer of Rollup. Perhaps the dramatic changes in the industry do require narrative updates, or it may be because the previous attempts did not really achieve product-market fit. But even aside from the early exploration period, it is time for Ethereum, which is maturing, to establish a clear vision - and this key breakthrough has not yet occurred, and is increasingly becoming a shackle for development.

I often feel that Ethereum is technology for technology's sake, lacking an ultimate goal and reason for construction. It's like there is no North Star to guide (except for the values ​​mentioned above), and there is no specific product vision.

Ethereum's technological breakthroughs have always been multi-threaded: initially adding a Turing-complete virtual machine to Bitcoin, then turning to proof of stake, and now expanding the base layer while maintaining decentralization - this is extremely challenging. But infrastructure must serve specific use cases, and Ethereum's target application scenarios are always unclear.

The current "business model" (if you can call it that) is not working. After the shift to a "Rollup-centric roadmap" a few years ago, the execution layer and most innovations were pushed to various L2 chains, while the base layer focused on data availability. This is a departure from the original "Ethereum 2.0" roadmap of scaling through homogeneous sharding. Whether this decision was wise is controversial (will be discussed in a separate article later), but it is clear that the base layer cannot handle enough transactions on its own. As a result, transaction fees flow to L2 chains, which in turn pay L1 for data availability and settlement fees.

To create the best data availability base layer, Ethereum later introduced blob space, which greatly reduced Rollup storage costs, but L1 fee income also decreased year-on-year. As economic activity increasingly migrated to L2, the base layer failed to effectively capture its value. Although there are various improvement proposals, Ethereum is currently more focused on technical upgrades such as expanding blob space rather than solving economic model problems - problems that will only worsen as blob space supply increases and prices fall. Moreover, data availability has become increasingly commoditized after the emergence of competitors such as Celestia and EigenDA.

I believe Ethereum should play to its irreplaceable core strengths: building the most secure, decentralized, trusted and neutral basic settlement layer. This is the unique value that other public chains cannot replicate. Not all blockspaces are created equal - as the first lesson of marketing: Ethereum needs to find application scenarios that truly value its characteristics and provide premium services with high-end positioning. Although I am not sure which applications they are, I have heard that many builders, including large AI projects, have expressed that they only trust Ethereum's settlement and dispute resolution functions. Applications involving large amounts of money or politically sensitive applications may also be the most suitable scenarios.

This is just one of several possible visions for Ethereum. The existence of multiple competing visions is the feature of Ethereum. It is not as important to choose a specific vision as to make a clear choice - once you choose it, you must stick to it and maximize the value of that use case. But given its chaotic, slow, consensus-driven decentralized governance, the path to achieve this is not clear. Companies with CEOs are good at consolidating product visions, and Ethereum has historically lacked this ability.

In short, Ethereum tries to meet too many needs of too many people, using technology for technology's sake but ignoring practical applications and value capture. It's time to make changes, or face the consequences.