jakiro
Author: The DeFi Investor Source: thedefinvestor Translation: Shan Oppa, Bitchain Vision
This round of market cycleETHQuite difficult.
existThe lowest point of bear market in 2022At that time, many people had predicted that ETH could easily break through this bull market$10,000.But now, the market is full of doubts about whether ETH can even hit a new high this year.
Considering the current market sentiment, this suspicion is reasonable.
Just asIgnasRecently mentioned in the post,Even ETC (Ethereum Classic) has surpassed ETH recently.
Don’t get me wrong, I have always been a loyal supporter of the Ethereum ecosystem.But in my opinion, the weak performance of ETH shows that it needs major change.
So, whyETH performs poorly in this cycle?
Why did ETH perform poorly in this cycle?
No one can give a definite answer, but I think there are mainly the following reasons:
1. There are too many ETH Beta tokens and funds are diverted
In the past, most ETH supporters would have held it directlyETH, but now,Almost all Ethereum L2 has issued its own tokens, many investors began to switch to L2 tokens instead of ETH.This leads to funds flowing into ETHA substantial reduction.
For example, if you are optimistic about Solana, you just need to buy itSOL, because it doesn’t have L2.But if you are optimistic about ETH, you haveDozens of L2 tokens to choose from.
2. Diversified liquidity of capital
The number of Ethereum L2 projects has exceeded 100, but between L2Interoperability and liquidity remain a big problem.
For senior DeFi users, between different L2sCross-chain bridge fundsNot a big problem, but for ordinary investors, this processExtremely complex, even a nightmare.Currently, L2 transactionsFast speed and low cost, but ifCross-L2 User Experience (UX)No significant improvement, L2 expansionCan’t really drive mainstream adoption (massive adoption).
3. Other L1 blockchains are catching up
In the last cycle, Ethereum was undoubtedly among all L1 public chainsAbsolutely King.
Although Ethereum still has the strongest DeFi ecosystem, L1s such as Solana have now surpassed Ethereum in indicators such as revenue and DEX trading volume.
This is becauseSolana and other L1 technology progresses fasterAlthough Ethereum has made some progress in the past few years,Some competitors are faster, and their user experience is far better than Ethereum.
How to make ETH great again?
Here are a few possible solutions:
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Encourage L2 to support ETH by destroying some transaction fees(Vitalik has suggested supporting more dApps using ETH as the main collateral)
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Strengthen the core position of ETH in the Ethereum economy(ETH should be the cornerstone asset of the L2 ecosystem, not the L2 token)
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Invest more resources to solve the problem of L2 liquidity dispersion and unify the L2 fund pool(This is the most priority)
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Accelerate the upgrade and iteration of Ethereum(Ethereum is destroyed more than every year$100 millionETH, but the upgrade speed is still lagging behind other L1s)
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Let the Ethereum Foundation establish a sustainable income model(For example, obtaining funds from transaction fees and staking income, avoid selling ETH)
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Simultaneously expand Ethereum L1(Although Ethereum’s main expansion direction is L2, L1 can still further improve performance through optimization)
If these changes can be driven, ETH may usher in a strong rebound.
The Ethereum Foundation and Community in the past few yearsIt seems a little complacent, and this may be in the long runWeak Ethereum’s competitiveness.
While ETH is still the leader in the L1 field, other L1s are catching up at a faster pace, and if Ethereum does not adjust its strategy, it may lose this L1 battle.
However, we have seen some positive progress, especially from projects within the ecosystem, which are working to improve market sentiment towards ETH:
MegaETH——Build high-performance Ethereum L2 with the goal ofSupports 100,000+ TPS, compete with high scalability L1.
Eclipse——The first Ethereum L2 based on Solana Virtual Machine (SVM), combining Solana’s speed with Ethereum’s security.
Pectra Upgrade——The next important upgrade of Ethereum,Native Account Abstraction will be introduced to greatly improve user experience.
Eric Trump publicly supports ETH——This raises a question:Will the United States establish “national-level Ethereum reserves”?
The first three technological upgrades will undoubtedly bePromote adoption (massive adoption) of Ethereum L2, but the real problem is:
Can they drive ETH prices to rise?
Can ETH prices recover?The key depends on two points
1. Solve the problem of L2 liquidity dispersion(The cross-L2 experience must be significantly improved)
2. Optimize the ETH token economic model(If L2 contributes part of the transaction fee to destroy ETH to reduce the supply)
At present, I don’t have a heavy position in ETH because I prefer to betFaster growth of DeFi tokens (such as FLUID).
But from a historical perspective,The rise in ETH often triggers a “copy season”, this is good for all investors holding altcoins.
