Ethereum's Next Decade: Technological Innovation and Unsolved Problems

Author: Chain News Source: medium

Yesterday Ethereum turned ten years old. When the Genesis Block was launched in 2015, it was just an "experimental project", but now it manages over $44 billion in Layer 2 locked value and is one of the infrastructures that supports global cryptocurrency ETFs. The first decade of Ethereum has written the most magnificent evolutionary process in the history of blockchain, from the DAO fork to the merge upgrade, from the high gas fee to the promotion of Rollup, every crisis has become a stepping stone for technological leap.

But at the beginning of its second decade, Ethereum’s “coming of age ceremony” is not easy. Security vulnerabilities have emerged after the implementation of account abstraction and the Layer2 ecosystem has “separatist wars”. MEV has eroded fairness and global supervision is a “double-edged sword”. These four core problems are like the sword of Damocles hanging over its head. Institutional funds are pouring in through ETFs, while ordinary users are looking forward to a better interactive experience. Ethereum has to find a new balance between technological ideals and realistic compromises.

Account abstraction: a "life and death game" between convenience and security

In May 2025, a user shared his experience on social media: after clicking on authorization, the wallet balance was emptied within 15 minutes, and the other party didn't even get his private key. When the user used the "one-click upgrade account abstraction" function of a certain wallet, he accidentally authorized a malicious contract, and ETH worth 120,000 yuan was automatically transferred. This situation is not an isolated case. According to statistics from blockchain security company SlowMist, only two weeks after the Pectra upgrade, more than 100,000 wallets were stolen due to the EIP-7702 authorization vulnerability, with a total loss of 150 million US dollars.

The two sides of EIP-7702

The Pectra upgrade launched on May 7, 2025 achieved a major breakthrough in "account abstraction" through EIP-7702. Ordinary user wallets (EOA) are allowed to temporarily have smart contract functions to support "Web3 native experience" such as batch transactions, gas fee payment, and social recovery. In theory, Ethereum's "user experience problem" that has not been solved for ten years has been solved. Previously, two authorizations plus one transaction were required to complete a DeFi exchange, which can now be merged into a single step operation. In addition, developers can also advance gas fees for users, making "playing Web3 with zero ETH" a reality. Behind the convenience lies a fundamental reconstruction of the trust model. The CertiK security team pointed out that EIP-7702 breaks the underlying assumption that "EOA cannot execute contract code." Old contracts that rely on tx.origin==msg.sender are therefore at risk of reentrancy attacks. More seriously, hackers exploit users' novelty of "account abstraction" and use phishing links to trick users into authorizing malicious contracts. For example, the number one EIP-7702 delegation contract (0x930fcc37d6042c79211ee18a02857cb1fd7f0d0b) was found to automatically redirect funds. Novice users who first encountered account abstraction accounted for 73% of the victims.

Future breakthrough directions

The Ethereum Foundation is promoting the "Smart Account Security Standard". Wallets are required to display the open source status of the delegated contract and add a 72-hour cooling-off period. However, the real challenge is to balance "flexibility" and "security". Institutional users require complex permission management such as multi-signature plus time lock, while ordinary users hope to use it as easily as Alipay. Vitalik said at the Hong Kong Web3 Carnival that account abstraction is not the end, but a continuous game between "user sovereignty" and "safety guardrails".

Layer2 Ecosystem: The "Secession Crisis" Behind the Prosperity

On Arbitrum, it only costs $0.01 to transfer USDC, but on the main network it costs $5. Beijing developer Zhang Ming complained that it took 30 minutes to cross-chain assets when he bought NFTs on zkSync. This reveals the current situation of Layer2: in 2025, the total locked value of Ethereum Layer2 will exceed $52 billion and the daily transaction volume will reach 40 million transactions, but users still have to switch between different Rollups as if they are in multiple parallel universes.

Optimistic hegemony &ZK counterattack

The current Layer2 ecosystem is polarized. Arbitrum (TVL of US$17.8 billion) and Optimism (TVL of US$8.9 billion) in OptimisticRollup have become the developers' first choice due to their EVM compatibility, thus accounting for 72% of the market share. On the ZK-Rollup side, zkSync (TVL of US$3.8 billion) and Starknet (TVL of US$2.2 billion) are catching up rapidly, and their zero-knowledge proof technology enables them to shorten transaction confirmation time to 2 seconds, and the handling fee is 60% lower than that of OptimisticRollup. But beneath this prosperity lie hidden concerns: Liquidity fragmentation: Uniswap's liquidity on Arbitrum is eight times that of zkSync, and users are forced to repeatedly deposit funds when trading. Technological fragmentation: OptimisticRollup relies on fraud proofs, which means withdrawals require a seven-day period, while the cost of generating proofs for ZK-Rollup remains a barrier for ordinary developers. Centralization risk: Arbitrum's sequencer (transaction sorter) is controlled by OffchainLabs, and it once experienced a three-hour trading outage due to a server failure.

The “Superchain” dream and real obstacles

The “Superchain” plan proposed by Optimism aims to connect all OptimisticRollups through a shared security layer, but progress has been slow. By July 2025, only Base and Zora had completed cross-chain interoperability, and zkSync and Starknet jointly launched the “ZK Alliance” to achieve mutual recognition of proofs, but the compatibility of different ZK algorithms remains a problem. Blockchain analyst Wang Feng said that whether Layer 2 will eventually look like “a seamless network” or “multiple fragmented small territories” will determine whether Ethereum can support 1 billion users.

MEV: The Fairness Dilemma of the Blockchain "Dark Forest"

On March 24, 2025, Uniswap user Michael wanted to exchange $220,000 worth of USDC, but suffered a typical "sandwich attack". The MEV robot first bought USDT to raise the price, and then sold it immediately after Michael's transaction. As a result, Michael actually only received 5,272 USDT and lost $215,000. On-chain data showed that the validator bobTheBuilder received a $200,000 "tip" for packaging this transaction, and the attacker only made a profit of $8,000. Ordinary users became the biggest victims.

MEV Industrialization and Network Fairness

After Ethereum switched to PoS, MEV (Maximum Extractable Value) changed from a "miner privilege" to a professional industry. Arbitrage scripts are written by searchers and builders are responsible for packaging transactions, and the optimal block is selected by validators. In the first quarter of 2025, the total MEV extraction of Ethereum reached US$520 million, of which DEX arbitrage and liquidation accounted for 73%. 15%-20% of the transaction costs of ordinary users are paid as "hidden taxes" for this. Even more serious is "MEV centralization": 65% of block construction rights are controlled by top builders, Flashbots. Validators, seeking higher returns, often choose high-MEV blocks, making it difficult for small and medium-sized builders to survive. MIT professor Muriel Medard has warned that if block sorting rights are monopolized by a few institutions, Ethereum may become "Wall Street's high-frequency trading playground." The solution: From technical defense to mechanism design The Ethereum community is promoting multiple solutions: Encrypted memory pool: hiding transactions outside the public memory pool to prevent MEV robots from pre-monitoring. MEV-Burn: Destroy part of the MEV revenue to reduce the rent-seeking incentive of the validator. In the Proposer-Builder Separation (PBS) mode, only validators are allowed to propose blocks and builders compete for sorting rights, thereby reducing the risk of single point manipulation. However, it is still necessary to balance "fairness" and "efficiency" in these plans. Ethereum core developer Dankrad Feist said, "MEV is not a loophole, but an inevitable result of blockchain transparency. Our goal is not to eliminate MEV, but to distribute the benefits more fairly to the entire network."

Regulation and financialization: "Soul-searching" after institutional entry

In July 2025, the Ethereum ETF approved by the US SEC had a net inflow of US$2.2 billion and institutional holdings of ETH soared from 5% to 18%. The EU's "Smart Contract Transparency Act" allows Rollup to disclose trading algorithms and Hong Kong requires all crypto service providers to perform KYC. Ethereum is facing the ultimate conflict between "compliance" and "decentralization." The "Crossroads" of Global Regulation The United States: The CLARITY Act will usher in a wave of DeFi compliance, defining ETH as a "commodity," allowing bank custody, and requiring DeFi platforms to register as "exchanges." The EU: MiCA regulations require stablecoin issuers to hold 100% fiat currency reserves and privacy coin transactions to undergo additional approval. China: While restrictions remain high in mainland China, cross-border settlement of digital RMB is expected to exceed 3.5 trillion yuan by 2025. Hong Kong, as a "testing ground," has already opened up the free flow and trading of digital assets, and the stablecoin law has further revitalized the Hong Kong market. Regulatory differences have spawned a series of "regulatory arbitrage" scenarios: for example, a leading DeFi protocol deployed a KYC module in the EU while retaining an anonymity pool in Singapore. Compliant trading pairs are only accessible to US users. This fragmented compliance not only increases developer costs but also undermines Ethereum's vision of a "global unified infrastructure." The Double-Edged Sword of Financialization: While the influx of institutional capital has created liquidity, the correlation between Ethereum's price fluctuations and US stocks has increased from 0.3 to 0.6. When the Federal Reserve raised interest rates by 0.5% in June 2025, ETH saw a single-day drop of 8%, while Bitcoin only saw a 5% drop. This would have been unimaginable five years ago, and it has even more far-reaching implications. The "value capture mechanism" has shifted. Previously, ETH's price was driven by on-chain gas fees and ecosystem growth, but now ETF flows and macro interest rates are the dominant factors. Wanxiang Blockchain Chairman Xiao Feng pointed out that Ethereum's second decade must find a balance between "innovation within a compliant framework" and "staying true to its original decentralization mission." Hong Kong may be the best testing ground, as it can both connect with mainland China's digital RMB and attract global crypto companies. Finding a Balance in the "Impossible Triangle" In Ethereum's first decade, upgrades such as "mergers," "Shapella," and "Dencun" answered the question of "whether it can survive." In its second decade, it must answer the question of "how to become a truly global infrastructure." The four major challenges of account abstraction security, Layer 2 ecosystem integration, MEV fair distribution, and regulatory compliance are essentially a continuation of the "Impossible Triangle" of "decentralization, security, and scalability." This time, the trust of one billion users is at stake. In Ethereum's 10th anniversary speech, Vitalik said, "We don't need a perfect blockchain, we just need an 'evolving blockchain.'" Perhaps Ethereum's ultimate value isn't to solve all problems, but to prove that decentralized networks can continue to move forward amidst the tug-of-war between technological ideals and practical realities. The curtain has risen on the second decade, and the answer will be written in every line of code, every upgrade, and every user's wallet!