Ethereum cannot simultaneously become the infrastructure layer for Wall Street and achieve the dream of privacy-first cypherpunks.

Written by: Thejaswini MA

Translated by: Luffy, Foresight News

Ethereum is trying to achieve a contradictory balance: the underlying protocol is solidifying (stopping changes, locking core rules, achieving predictability), but the entire system must maintain unprecedented operational speed. Layer 2 is scaling, Fusaka is paving the way for a tenfold increase in data capacity for the future, the Ethereum Virtual Machine (EVM) is being restructured, and validators are continuously adjusting the Gas limit. Everything is in motion.

The solidification theory posits that the underlying network (Layer 1) can be frozen, allowing innovation to occur above it. But is this really the case? Or is Ethereum merely repackaging continuous changes as "minimalism," simply because this phrasing sounds more responsible?

First, let's look at what the Fusaka upgrade has done. It introduced the PeerDAS mechanism, fundamentally changing how validators verify data. Validators no longer need to download complete Rollup data blocks; instead, they randomly sample part of the data and use erasure coding to reconstruct the complete content. This is a significant transformation in the network's operational architecture and is being deployed as part of the "Surge" expansion phase.

Additionally, there is a fork that only contains Blob parameters. This type of small hard fork aims to incrementally increase data capacity. After Fusaka goes live on December 3, the first BPO fork will be implemented on December 17, raising the blob target value from 6 to 10; a second fork will occur on January 7, further increasing it to 14. The ultimate goal is to support 64 blobs per block, an eightfold increase over the current capacity.

Is this solidification? Clearly not. This is an iterative capacity expansion on a fixed schedule, with rules still changing, just advancing in smaller, more predictable increments.

There is also the EIP-7918 proposal, which sets a minimum reserve price for blob Gas fees. Essentially, Ethereum controls the data availability market, and even in times of low demand, it will charge a base fee.

This reflects Ethereum's pricing power and serves as a means for it to capture value as a data layer dependent on Layer 2. This may be a wise business strategy, but it is by no means solidification; on the contrary, it is the underlying network actively managing its relationship with Layer 2 to extract more value.

So, what does solidification mean here?

It means the protocol wishes to stop modifying core rules while continuously adjusting various parameters:

• Freezing the consensus mechanism (maintaining Proof of Stake)
• Freezing monetary policy (retaining the EIP-1559 burn mechanism)
• Freezing core opcodes (smart contracts from 2020 can still operate normally)

But throughput, data capacity, Gas limits, and fee structures? These are still in constant flux.

It's like claiming the Constitution is "frozen" because amendments are rare, yet the Supreme Court reinterprets it every ten years. Technically valid, but practically always in a state of change.

The Ingenuity of the Ethereum Interoperability Layer (EIL)

If Ethereum wants to appear as a single chain while it is actually composed of dozens of Layer 2s, it needs some form of unifying layer. This is where the Ethereum Interoperability Layer (EIL) comes into play.

EIL aims to present independent Layer 2s as a "single Ethereum" experience without introducing new trust assumptions. Its technical mechanism is: users sign a single Merkle root to authorize synchronized operations across multiple chains; cross-chain liquidity providers (XLP) cover the required Gas fees and funds for each chain through atomic swap processes secured by staking on the underlying network.

The key is that XLP must lock collateral in the Ethereum underlying network and set an 8-day unlocking delay. This timeframe is longer than the 7-day fraud proof window of Optimistic Rollup. This means that if XLP attempts to cheat, the fraud proof mechanism has enough time to impose punitive deductions on its staked assets before it transfers funds.

This design is quite clever, but it also adds a layer of abstraction: users do not manually cross chains between Layer 2s but rely on XLP to complete the process. Whether the system can operate depends on whether XLP is reliable and competitive; otherwise, fragmentation issues will reappear on a new level.

The success of EIL also relies on the actual adoption of wallets and Layer 2s. The Ethereum Foundation can build the protocol, but if mainstream Layer 2s choose to confine users within their own ecosystems, EIL will ultimately become a mere decoration. This is the "HTTP dilemma": even if a perfect standard is designed, if platforms refuse to implement it, the network will remain fragmented.

BlackRock and the "Comfort Cage"

Meanwhile, Ethereum is attracting institutional funds on a large scale. BlackRock is launching the iShares Ethereum Trust ETF in July 2024, and by mid-2025, inflows have exceeded $13 billion; it has also submitted an application for a staked Ethereum ETF. Institutions not only want exposure but also seek returns.

BlackRock is also using Ethereum as infrastructure: its BUIDL fund tokenizes U.S. Treasury bonds and money market instruments and deploys them on Ethereum, extending to Layer 2s like Arbitrum and Optimism. In their view, Ethereum is akin to the TCP/IP protocol in the internet, a neutral settlement layer.

This is both recognition and control. When BlackRock designates Ethereum as the infrastructure layer for tokenized assets, it undoubtedly serves as a vote of confidence, but it also means Ethereum begins to optimize itself to meet BlackRock's needs: predictability, stability, compliance-friendly features, and the boring yet reliable attributes of infrastructure.

Vitalik has warned of this risk. At the DevConnect conference, he mentioned the potential issues if the underlying network's decisions primarily cater to Wall Street's "comfort": if the protocol leans towards institutions, the community that upholds decentralization will gradually dissipate; if it leans towards the cypherpunk community, institutions will withdraw. Ethereum is trying to balance both sides, and this tug-of-war will only intensify.

There is also the speed issue: some proposals advocate reducing block time to 150 milliseconds, which is extremely beneficial for high-frequency trading and arbitrage bots, but ordinary people cannot effectively participate in governance or form social consensus at such a rapid pace. If the network operates too quickly, it will become a "machine-to-machine" tool, and the political legitimacy that gives Ethereum its value will gradually erode.

Quantum Computers and the Vanishing Elliptic Curves

Another threat comes from quantum computing. Vitalik stated at the DevConnect conference: "Elliptic curves will eventually vanish." He was referring to the elliptic curve cryptography (ECC) that secures user signatures and validator consensus. Quantum computers running Shor's algorithm could derive private keys from public keys, thus breaking ECC.

Timeline? Possibly before the next U.S. presidential election in 2028. This means Ethereum has about 3-4 years to migrate the entire network to quantum-resistant cryptography.

In this scenario, solidification is meaningless.

If quantum attacks become a reality, Ethereum must undergo a large-scale, disruptive hard fork to survive. No matter how much the protocol seeks stability, once the cryptographic foundation collapses, everything will be in vain.

Compared to Bitcoin, Ethereum is in a more favorable position:

• Public keys are hidden through address hashing, only exposed during transfers
• Validator withdrawal keys are also hidden
• The roadmap includes replacing ECDSA with quantum-resistant solutions like lattice-based cryptography or hash-based signatures

However, implementing this migration faces enormous coordination challenges: how to complete key conversion for millions of users without jeopardizing fund security? How to set a deadline for wallet upgrades? What will happen to old accounts that have not migrated? These are not just technical issues but also social and political questions about who has the authority to decide the network's future.

The quantum threat confirms a rule: solidification is a choice, not a physical law. Ethereum's "skeleton" can only remain frozen if the environment allows it; when the environment changes, the network must either adapt or perish.

Additionally, Vitalik donated $760,000 to the encrypted communication applications Session and SimpleX, stating that privacy "is crucial for protecting digital privacy," and set the next goal as permissionless account creation and metadata privacy protection.

The Ethereum Foundation has established a privacy task force dedicated to making privacy a default feature rather than an afterthought. Projects like the Kohaku wallet are developing user-friendly privacy tools that do not require users to understand complex cryptographic knowledge.

The core idea is "privacy is hygiene," as ordinary as handwashing. People should pursue financial privacy without special justification; this should be the default state.

However, this contrasts with the demands of regulators, who require transparency and traceability. Stablecoins, tokenized Treasury bonds, BlackRock's BUIDL fund—all come with compliance expectations. Ethereum cannot simultaneously become the infrastructure layer for Wall Street and achieve the cypherpunk dream of "privacy-first." Perhaps there is a way to have both, but it requires extremely precise design.

The Shark Desiring to Freeze

Can Ethereum achieve this balance?

• Solidifying the underlying network while allowing Layer 2 to continue innovating?
• Meeting the needs of both BlackRock and cypherpunks?
• Completing the cryptographic upgrade before the arrival of quantum computers?
• Ensuring default privacy without alienating institutions?

It may be feasible. The modular design is quite clever: the underlying network is responsible for security and settlement, while Layer 2 handles execution and experimentation; this separation of responsibilities holds promise. But this requires EIL to unify the Layer 2 experience and for institutions to trust that the underlying network will not undergo changes that disrupt their expectations.

It also requires the Ethereum community to accept: solidification means relinquishing some control. If the protocol is frozen, the community will not be able to fork to fix issues or add features. This is a trade-off: the cost of stability is the loss of flexibility.

Sergey believes Ethereum needs to continue evolving, which is not incorrect; but Vitalik's assertion that the protocol cannot change forever is equally valid. The key is to allow innovation to happen at the edges while keeping the core stable.

The shark claims it wants to freeze, cryptographers say the skeleton needs replacing, Wall Street wants a docile tool, and cypherpunks want wild freedom.

Ethereum is trying to play all roles at once, while blocks continue to be produced. This is Ethereum: cold bones, a moving shark.

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