Ethereum's "Soul Battle"

Ten years after its birth and established market dominance, Ethereum is facing a profound debate about its core identity.

The key to this "soul battle" is: Should Ethereum's future become a high-performance execution layer that directly competes with emerging rivals, or should it consolidate its unique position as the world's most secure and decentralized settlement layer, serving the thriving Layer 2 ecosystem above it?

Layer 2 refers to off-chain networks, systems, or technologies based on the underlying blockchain (often also called Layer 1), with the purpose of expanding the underlying blockchain network. Relevant data shows that Layer 2 transactions account for 85%, but large amounts of funds still mainly remain on the Ethereum mainnet. Facing this contradiction, several founders, CEOs, and key builders in the Ethereum ecosystem shared their perspectives with Cointelegraph at the recent EthCC conference in Cannes. These included Tomasz Stańczak, Co-Executive Director of the Ethereum Foundation (EF), Sandeep Nailwal, co-founder of Polygon, and Jerome de Tychey, President of Ethereum France. Stańczak stated that unifying the ecosystem, enhancing interoperability, and improving user experience have become top priorities over the past 18 months. Polygon Labs CEO Marc Boiron warned that attempting to compete with new-generation public chains like Solana on execution speed is "dangerous." Fredrik Haga, co-founder of Dune Analytics, noted that since the introduction of Blobs in March 2024, Layer 2 settlement fees to the mainnet have dropped to near zero. This is a technological breakthrough, but an economic setback for Layer 1 validators. Despite heated internal debate, market signals indicate strong confidence. BlackRock, the world's largest asset management firm, is tokenizing its assets on Ethereum, and over 90% of real-world asset (RWA) tokenization projects are built on Ethereum. This suggests that the market may have already provided an answer to Ethereum's "soul": an irreplaceable global settlement layer. The Cost of Scalability Since 2015, Ethereum's evolution has been fraught with trade-offs. With the "merge" from Proof-of-Work (PoW) to Proof-of-Stake (PoS), Ethereum successfully transformed its consensus algorithm, fundamentally altering how the protocol operates. However, with the surge in users and applications, the performance bottleneck of its underlying chain has become increasingly prominent. To address this problem, the community adopted a Layer 2-centric expansion roadmap, moving transaction execution to an independent second-layer network. This strategy optimizes scale, speed, and cost through cryptographic innovations such as zero-knowledge proofs (ZK-proofs). In particular, the "Blobs" feature introduced in the 2024 Dencun upgrade caused Layer 2 transaction fees to plummet by 90%.

This technological victory has, in turn, put pressure on the incentive income of Layer 1 validators.

Data shows that although 85% of transactions currently occur on Layer 2, 85% of funds still remain on Layer 1.

The Foundation's Balancing Act

Faced with the complex dynamics of the ecosystem, the Ethereum Foundation (EF) is trying to play the role of a balancer. After adjusting its organizational structure in 2025, the new team, led by Co-Executive Directors Tomasz Stańczak and Hsiao-Wei Wang, is fully committed to advancing a unified ecosystem vision. The Pectra upgrade, launched in May of this year, is the latest manifestation of this effort. The Pectra upgrade includes 11 Ethereum Improvement Proposals (EIPs) aimed at further improving scalability, user experience, and staking efficiency. Stańczak said that over the past 18 months, the foundation’s top priority has been to address issues of liquidity unification, interoperability, and improving user experience: “The focus now is on interoperability, tools, and standards so that all the chains around Ethereum feel like a single ecosystem, and users can naturally transfer assets between them.” Jerome de Tychey, chairman of Ethereum France, added that the future success of the protocol depends on prioritizing the development of Layer 1 mechanisms while maintaining the same Layer 2 He believes that the community is paying attention to both the sustainability of Layer 1 and the security and user experience of Layer 2, which is a positive sign that Ethereum is becoming easier to use. Competition or focus? The debate about the future of Ethereum ultimately comes down to a strategic choice: should it compete directly with high-performance public chains such as Solana, SUI, and Aptos at the execution level, or focus on its own core strengths? Marc Boiron, CEO of Polygon Labs, issued a clear warning about this. He believes that if Ethereum overinvests in the competition at the execution level, it is likely to be "surpassed" by competitors who have focused on this from the beginning. He said: "Trying to over-compete on execution is dangerous." Polygon co-founder Sandeep Nailwal was more direct, arguing that Ethereum's core value proposition has always been "a highly decentralized, censorship-resistant, permissionless settlement layer." He concluded: "Ethereum has been dragged into an execution race, which is not its strong suit. If Ethereum can play to its strengths and focus on being the best settlement layer, we already have enough network effects and momentum for the entire Web3 world to build around it." What's next for the next decade? Despite the criticism over the past year, the discussions at the EthCC conference generally conveyed optimism about Ethereum's future. This optimism isn't rooted in fanaticism, but rather in real utility and on-chain metrics. The strongest evidence comes from institutional adoption—over 90% of real-world asset (RWA) tokenization occurs on Ethereum. Asset management giant BlackRock has already tokenized its securities products on Ethereum, while Robinhood also announced the launch of its Ethereum-based Layer 2 network during the conference, specifically targeting RWA and security tokenization. These actions clearly demonstrate that large traditional financial institutions prioritize the security and decentralization of Ethereum as a settlement layer over simple transaction speed. "DeFi (decentralized finance) will dominate global markets, and it will happen on Ethereum," asserted Stańczak of the Ethereum Foundation.

Jerome de Tychey said more sharply:

"Everything else is a ghost train heading in the wrong direction."

This seems to imply that no matter how much internal debate there is, Ethereum's status as a trust anchor has been reached a consensus in the market.