Ethereum feels like a stumbling, aging wealthy woman, refusing any innovation while distributing money to the descendants that parasitize her.

Author: Pavel Paramonov

Translation: Shenchao TechFlow

Shenchao Introduction: Ethereum is undergoing a profound identity crisis. Veteran crypto researcher Pavel Paramonov raises a deafening question in this article: why is this former market leader gradually losing the support of the community? From being accused of "drawing a pie in the sky" with the Rollup roadmap, to endless ideological debates within the community, to the loss of core talent and lack of incentives, Ethereum seems to be trapped in the "right for the sake of being right" dilemma. This article confronts the growth dilemma of Ethereum under the guise of technical superiority, analyzing why even great leaders like Vitalik struggle to mask the fatigue of the ecosystem. In this fiercely competitive market, will Ethereum rise from the ashes, or will it become, as the author describes, a "wealthy old woman" that refuses innovation?

The full text is as follows:

This article is primarily inspired by Vitalik's recent sharing about the current state of the market and its changes. While the entire market is currently in decline, it's hard to blame any one person, and I'm not here to pass the buck.

My identity here is that of someone who has worked with multiple Ethereum teams, represented venture capital funds to invest in several protocols built on Ethereum, and is overall a staunch fan of everything related to Ethereum and EVM.

But unfortunately, I can no longer say the same, as I feel Ethereum has lost its way (many share this sentiment).

I don't want to discuss the price trends of ETH, but I cannot ignore the fact that the world's second-largest cryptocurrency is behaving extremely erratically. Regardless of the global market direction, ETH's performance resembles that of a stablecoin that is losing its peg.

This essay is about what has happened to Ethereum over the past few years and why many people are losing hope or have become completely despairing. Ethereum is not losing to Solana or other competitors; Ethereum is losing to itself.

Rollup-Centric Roadmap

When Ethereum introduced the "Rollup-Centric" roadmap, almost everyone was excited. The promise at the time was that Rollups (and Validiums) would solve scalability issues, with end-user transactions occurring on Rollups, while Ethereum would serve as the verification layer. In other words, it would focus on being the L1 for Rollups rather than directly serving users.

Developing Rollups is much faster and cheaper than developing L1, so the future of "thousands of Rollups" seemed very feasible and optimistic.

So, where did things go wrong?

It turns out everything went wrong. Endless debates, prioritizing ideology over actual needs, constant infighting within the community, an identity crisis, and giving up on the "Rollup-Centric" vision too late.

Everything that could go wrong did go wrong. Most of the community once viewed Max Resnick as an utterly incompetent villain, only to find that almost everything he said was correct.

During his time at Consensys, Max made numerous statements about what Ethereum needed to do to progress, but he faced nothing but criticism and received almost no support.

The peak of absurdity was when the entire industry began discussing whether a certain L2 was actually "Ethereum," such as:

• View A: "Base is an extension of Ethereum, and we have made significant contributions to the Ethereum ecosystem."
• View B: "Base is not an extension of Ethereum; it is independent."

What on earth are we discussing?

How can this dialogue lead to a better future for Ethereum and its ecosystem? Why are people arguing over "what is Ethereum and what is not Ethereum"? Don't we have more important issues to address?

If we define Rollups as extensions of Ethereum because they use ETH as gas fees, then we are on the right track. If we define Rollups as not extensions of Ethereum but as applications benefiting from Ethereum, we are also on the right track.

Right? Absolutely not.

This ideological discussion is not a discussion at all; it is a confrontation between two "mutual admiration societies" (circlejerks) trying to prove who is right. We do not need infighting (PvP); we need to output externally (PvE). We need to understand that this is not a confrontation between us, but a challenge we face together regarding problems and the future.

Unfortunately, many would rather pursue spiritual self-indulgence than consider that their views might be wrong.

Technical Superiority Beyond User Needs

Based Rollups, Booster Rollups, Native Rollups, GigaGas Rollups, Keystore Rollups.

• Which is better, what will the future hold, and how will they connect?
• "This type is the future," "No, that type is the future."
• "There is no reason not to develop Based Rollups."
• "Native Rollups will take over the ecosystem because they are Ethereum-aligned."

All of these discussions… yet the end result is that Arbitrum and Base continue to sweep the market.

Technical advantages can indeed bring many benefits to players, but only if you do not compare apples to oranges or oranges to tangerines. They are too similar, so similar that users do not care about the differences. Outside this bubble, no one cares. One more precompile, one less precompile—you cannot win based on that.

"Oh, we are actually 'Ethereum-aligned'; we have advantages, we are very close to Ethereum, embodying its core values, and users will choose us."

I would like to ask, what values are those? And which users will choose you?

@0xFacet became the first Stage 2 Rollup, and they are practically the definition of "Ethereum alignment."

But where are they? Where are their users, developers, technical KOLs, and supporters of the Ethereum ecosystem and alignment? Where have these people gone? How many of you have heard of Facet? How many usable applications are there on Facet?

I personally have no bias against Facet. I have talked to their founder many times, and I respect him; he is a great person. But where have those who once insisted that we need more "Stage 2 Rollups" gone? I don't know, and you don't either.

Economic incentives are far more powerful than technical incentives. I was once a loyal fan of Taiko, especially for their research on Based Rollups. This model has many advantages: stronger censorship resistance, neutrality, no risk of sequencer downtime, and L1 validators can earn more money.

So, where is the pitfall?

The pitfall lies in the financial logic behind the model. You cannot force people to give up their income for the sake of so-called "alignment."

Arbitrum promised sequencer decentralization. Scroll promised sequencer decentralization. Linea, zkSync, and Optimism all made promises. But what happened? Where are those sequencers?

Every Rollup team writes in their documentation: "We currently have a centralized sequencer, but we have a strong desire to decentralize it in the future." Almost no one has delivered. Metis delivered, but fortunately or unfortunately, people do not care about Metis.

• Do I think they overcommitted to win the favor of influential "Ethereum extremists" (ETH Maxis)? Yes.
• Do I think they genuinely want to decentralize the sequencer? Absolutely, but it makes no sense for them.

Coinbase (Base) is legally obligated to make as much money as possible to create value for the company. Other teams are the same; why would you kill your own source of income? It makes no logical sense.

About 5% of Base's revenue flows to Ethereum. Rollups have never been extensions of Ethereum.

Taiko once experienced a period where it paid more in fees to Ethereum for sequencing than it collected from user transactions. Clearly, companies like Taiko have many other expenses besides paying fees to Ethereum. The vision of "Based Rollups" or any "Ethereum-aligned" Rollup can only be realized if teams are willing to forgo income.

I do not underestimate the importance of decentralization, security, and permissionlessness. But when your only goal is to pursue "ideological correctness" rather than being "user-centered," all of this becomes meaningless.

Not surprisingly, this weakness and the commitment to "Ethereum alignment" attracted a group of grifters into the space.

Results of the Rollup-Centric Path

Eclipse, Movement, Blast, Gasp (Mangata), Mantra: These protocols were never built for the long-term future. It is too easy to hide behind "Ethereum alignment," making Ethereum better, and introducing SVM to Ethereum.

They all "rugged" in one way or another. All Rollups realized that since users pay fees in ETH, their tokens are almost useless and lack utility. Grifters realized that you can create a lot of hype around the narrative of "Rollup-Centric" and then profit by selling worthless tokens to retail investors.

Ethereum has never acknowledged Polygon as a true L2, even though they played a significant role in locking ETH value. If you believe Rollups are a "cultural" extension of Ethereum, why not acknowledge something that is closely tied to Ethereum's security and usage?

Polygon was crucial to Ethereum in the 2021 bull market, making significant contributions to the growth of ETH as an asset, but yes, it is not an L2, and it does not deserve the appreciation of the Ethereum community. If Polygon were an L1, its valuation would be much higher.

@ri5hitripathi tweeted: The people in the Ethereum Foundation (EF) ecosystem accuse Polygon of being a sidechain because they prioritize scalability over the semantic logic of L2 and pleasing the Ethereum community. Looking at today, seven years later, we find that "Polygon has always been right."

Even Paradigm—the top crypto venture capital firm that has arguably contributed the most to the Ethereum ecosystem and even developed its own L2 (Ithaca)—has turned to collaborate with Stripe to develop L1 (Tempo).

I believe that when even your most steadfast believers are off building your competitors, you must be doing something wrong.

The Ethereum Foundation Lacks Direction

While Ethereum is technically decentralized, culturally it is highly centralized around Vitalik. The "inner circle culture" of Ethereum is real; as people say, if you want to succeed (however you define that word), all you need to do is gain the attention of those around Vitalik and the favor of a few influential venture capital firms in the circle.

I’m not saying you have to agree with everything Vitalik says, but his views essentially define what is good for Ethereum and what is not, and you cannot compete with that.

Initially, the narrative was "Ultrasound Money." Through EIP-1559 and The Merge, ETH's economic model became deflationary, and it was set to become a better store of value than Bitcoin. However, by 2024, ETH's annual inflation rate turned positive.

So, the vision of "Ultrasound Money" only lasted for 3 years? This cannot serve as a store of value. This narrative has collapsed, and it never really existed because ETH was not designed to store value; that is Bitcoin's mission, and you cannot compete with it on that front.

Then, Ethereum became entangled: is its token a commodity (which is not entirely applicable due to dynamic supply and staking mechanisms), or is it more like a tech stock (which is also not quite applicable due to insufficient revenue to support valuations like tech companies)?

Some argue that ETH is not even a currency. What is going on? We need to choose a direction.

Ethereum cannot have it both ways—you either have a globally recognized defined direction, or you will fall behind.

Financial Inspiration

I still cannot imagine that a chief engineer like Péter Szilágyi, who has contributed so much to Ethereum, has an annual salary of only around $100,000. This person, who has been here from the beginning, helping Ethereum's market cap grow from nearly zero to $450 billion, receives compensation that is only 0.000001% of the market cap.

As the most influential and successful protocol in cryptocurrency history (after Bitcoin), it has not provided any incentives or equity. It is easy to hide behind the tenets of decentralization, open source, and permissionlessness to justify: "We are not here to make money; we are here to drive progress."

But you must incentivize your most loyal warriors; otherwise, they will leave or take side jobs.

• Péter left, Danny Ryan left, and Dankrad Feist went directly to Tempo.
• Justin Drake and Dankrad accepted advisory positions at EigenLayer in 2024 and received token allocations, resulting in the community beginning to resent them.

These poor souls at the Ethereum Foundation (EF) who earn meager salaries (compared to FAANG companies or AI labs) are attacked simply for wanting to make some money and help an independent protocol aimed at improving Ethereum.

Are you all crazy? Sometimes I feel that if you are an honest and diligent person in Ethereum, you are not allowed to make money; you are only expected to work like a slave for a bit of "recognition" from Ethereum.

The EF continuously sells ETH to fund various operations, initiatives, and research. But maybe you should first pay researchers enough?

Zero Tolerance for Adaptability

"Day one. Ethereum will ultimately win. The most decentralized and longest-running blockchain."

We hear these words every day, just as we hear Ethereum's excuses every day:

• "Yes, Ethereum is expensive and slow. But we have Rollups; go use Rollups; Rollups are Ethereum!"
• "Yes, ETH's price lags behind everything. But Ethereum has the largest developer ecosystem; we have a solid foundation, and demand will always come."
• "Ethereum is the most decentralized blockchain! Solana is garbage; they have no client diversity."
• "Ethereum is 100% operational! Solana is garbage; it has gone down several times."
• "Ethereum's network activity is lower than Solana's. Oh, that's because Solana's activity is all spam and memecoin gamblers. We are a moral chain!"

For the past few years, the same excuses, the same answers, the same responses. Everything except Ethereum and Rollups is garbage. If Ethereum performs poorly on any metric, we say we are still in "day one," we know what we are doing, and there is no better place than Ethereum.

Everyone is tired of the community making excuses over and over again.

Ethereum feels like a stumbling, aging wealthy woman, refusing any innovation while distributing money to the descendants that parasitize her.

Is it too late to mend the fold?

Just hours before I finished this essay, Vitalik tweeted that the "Rollup-Centric" roadmap is a failure, and they need to find a different path and expand L1.

You know what? I am glad to see people realizing their mistakes; it takes courage to say it out loud. But I think it may be too late. Ethereum has once again found a long-needed path, but progress remains slow.

The EF has recently undergone some changes: new leadership, treasury transparency, restructuring of the R&D department, etc. The EF has started hiring young talent from developer relations (DevRel) and the market side, such as Abbas Khan, Binji, Lou3e, and others.

But the change must be swift. Ethereum must sprint to prove everyone wrong.

Let’s wait and see. After these reforms and changes in the EF, can we see Ethereum become exciting again, rather than just a synonym for blind delusion and disappointment?

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