Challenges and Opportunities of Ethereum: Reshaping the Leadership of Web3

After the Web3 craze has subsided, Ethereum is facing severe challenges. The market's shift in perception of Web3.0, along with fierce competition from emerging platforms like Solana, is putting immense pressure on Ethereum. Key issues such as the fragmentation of Layer 2, declining value capture ability, the decentralization of ecosystem control, and a lack of leadership are weakening Ethereum's user experience and economic value. As the influence of Layer 2 networks increases, Ethereum's impact is also being shaken. These factors have collectively led to a sharp correction in ETH prices.

However, opportunities and challenges coexist. By promoting L2 interoperability, optimizing infrastructure centered around Ether, and adopting a more decisive leadership approach, Ethereum still has the potential to rise again. Its solid underlying architecture and vibrant developer ecosystem are long-term advantages, but to reshape ETH's leading position, rapid strategic action is needed.

Core Challenges

The four urgent issues facing Ethereum are the fragmentation of L2 networks, declining value capture ability, dilution of ecological control, and lack of strategic leadership.

The fragmentation of Layer 2 networks seriously affects user experience and on-chain liquidity, eroding the composability advantage of Ethereum. Users have to deal with different protocols and standards, while developers bear the burden of maintaining multiple versions. This has led many consumer-facing applications to turn to single chains like Solana.

Worse still, outsourcing the scaling roadmap to L2 weakens Ethereum's control over the ecosystem. Over time, L2's influence relative to the settlement layer continues to grow, which may eventually lead to the mainnet becoming a commoditized service.

The rise of L2 has also affected the value capture of ETH, with a large amount of MEV and transaction fee revenue being occupied by L2 platforms. This has weakened the attractiveness of holding ETH as an investment asset. Although this is a common challenge faced by modular blockchains, Ethereum has experienced this phenomenon earlier due to its pioneering practice of the L2 route.

In addressing these challenges, Ethereum has also exposed flaws in strategic leadership. The community has long been trapped in a trade-off between efficiency and egalitarianism, delaying critical progress. The insistence on "trustworthy neutrality" often becomes a constraint on decision-making. ETH holders lack mechanisms to directly influence significant strategies and can often only express dissatisfaction by selling their tokens.

strategic response

To resolve the L2 fragmentation crisis, Ethereum should promote the establishment of strong interoperability standards to eliminate friction within the Rollup ecosystem. This will help regain the composability advantage of the mainnet era and compete with monolithic chains on the user experience level. Ethereum needs to act decisively to shape its own L2 ecosystem, ensuring that value and control are always tied to the mainnet and ETH.

In terms of value capture, positioning ETH as the "Internet-native currency" and the highest quality on-chain collateral is the most promising direction for the next decade. To achieve this goal, Ethereum must regain control of the universal execution layer in the ecosystem and prioritize the promotion of ETH adoption.

Re-establishing ecological ownership can be achieved by enhancing L1 performance and launching Ethereum native Rollups. This requires a shift from the "ETH-compatible" paradigm to an "ETH-dominant" ecological model, prioritizing direct control over core resources.

In terms of leadership, the Ethereum leadership needs to be performance-oriented and drive ecological development with a stronger sense of urgency. This requires abandoning the excessive adherence to "trustworthy neutrality" and being more decisive in key decisions. At the same time, it should shift from the model of "aligning with ETH" to a new model of "led by ETH", ensuring that core infrastructure achieves unity under a single token system.

The advantages of Ethereum

Despite facing challenges, Ethereum still possesses strong advantages that support its industry position:

1. Proven infrastructure that offers unparalleled decentralized security.
2. Forward-looking architecture design, with the ability to flexibly respond to future challenges.
3. The largest and most diverse developer community has built strong intellectual capital.
4. The modular path provides a unique solution for achieving scalable decentralized systems.
5. Highly customizable tech stack to meet the needs of vertical scenario applications and institutional adoption.

market signal

The recent price trend of ETH indicates a lack of investor confidence. This sharp decline has occurred only six times in the ten-year history of ETH, serving as an important warning signal for the mature stage of Ethereum. Historical data shows that strong rebounds often follow similar pullbacks, but whether this historical pattern can be replicated depends on the short-term strategic signals from Ethereum's leadership and future execution capabilities.

To reshape its industry leadership and restore market confidence, Ethereum must take immediate action: implement L2 interoperability standards, shift to an "ETH-dominant" ecosystem model, promote L1 scalability and native Rollups, and adopt a more decisive decision-making approach. If it cannot act quickly, Ethereum will face the risk of being eroded by competitors in the market.