TL;DR
The Web3 vision's fervor from 2021 has faded, and Ethereum is facing severe challenges. Not only has market perception of Web3.0 changed, but Ethereum is also experiencing fierce competition for remaining market share from emerging platforms like Solana. Key issues such as Layer 2 fragmentation, value capture erosion, ecosystem control dilution, and leadership insufficiency have further weakened Ethereum's user experience and economic value, and have shaken its influence with the rise of Layer 2 discourse. These factors ultimately led to one of the most drastic price corrections in ETH's history.
However, hope remains: by promoting Layer 2 interoperability, prioritizing infrastructure centered on ETH, and adopting a decisive, performance-driven leadership approach, Ethereum still has a chance to regain its glory. Ethereum's solid underlying architecture and vibrant developer ecosystem remain its enduring advantages, but to restore ETH's exceptional status, strategic actions must be taken swiftly.
The cognitive shift from the Web3.0 utopia to brutal reality forces the market to re-examine Ethereum's core value proposition. The once-anticipated ideal of a "user-autonomous decentralized internet" has now been replaced by a more ironic narrative: the crypto realm is either Bitcoin's store of value game or a digital casino. This emotional reversal is particularly impactful for Ethereum: self-proclaimed as the cornerstone of a new internet paradigm, it must now face growing skepticism.
More critically, Ethereum is no longer the sole spokesperson for the Web3.0 vision. Regardless of optimism or pessimism about the industry's future, it's evident that platforms like Solana are becoming new centers of crypto consumer activity. Against this backdrop, this article aims to dissect Ethereum's most urgent strategic challenges and propose practical solutions to help it regain its advantage in an evolving landscape.
Core Challenges
Ethereum faces numerous challenges, but this analysis focuses on the four most pressing issues—Layer 2 network fragmentation, declining value capture capability, ecosystem control dilution, and strategic leadership deficiency.
Layer 2 Network Fragmentation and User Experience Fragmentation
The most significant crisis is Layer 2 network fragmentation. Introducing multiple competing execution layers has fragmented user experience and on-chain liquidity, eroding Ethereum's mainnet's once-proud composability advantage, which remains clear in monolithic blockchains like Solana.
For users, they must navigate inconsistent protocols, standards, and cross-chain bridges, making the initially promised seamless interaction difficult to achieve. Developers bear the burden of maintaining multi-version protocols across multiple Layer 2s, and startup teams face complex market entry strategies due to resource allocation in a dispersed ecosystem. Consequently, many consumer-facing applications choose to migrate to Solana, where users and entrepreneurs can focus on entertainment and innovation without grappling with fragmented infrastructure.
Ecosystem Control Dilution: An Increasingly Severe Threat
More seriously, Ethereum's decision to outsource its scaling roadmap to Layer 2s is gradually weakening its control over its own ecosystem. General-purpose Layer 2 Rollups create powerful network effects while building their ecosystems and gradually evolve into insurmountable moats. As time passes, these execution layers' discourse relative to Ethereum's settlement layer will increase, potentially causing the community to gradually ignore the settlement layer's importance. Once assets begin to natively exist in the execution layer, Ethereum's potential for value capture and influence will be significantly diminished, with the settlement layer ultimately becoming a commoditized service.
Value Capture Erosion: A Structural Challenge
The rise of Layer 2s significantly impacts ETH's value capture, with these platforms increasingly occupying MEV and transaction fee revenues, drastically reducing value flowing back to the Ethereum mainnet. This shift redirects economic benefits from ETH holders to Layer 2 token holders, weakening the intrinsic motivation to hold ETH as an investment asset. Although this trend is an inevitable challenge for any Layer 1 token—whether modular Ethereum or monolithic integrated chains—Ethereum experiences this phenomenon earlier and more obviously due to its early implementation of the Layer 2 centralized route.
It can be anticipated that when application-layer MEV capture becomes the norm, not only monolithic blockchains will face similar challenges, but Layer 2s themselves will encounter value capture crises. While this is not unique to Ethereum, developing precise strategies to address this structural challenge remains a critical issue that urgently needs resolution.
Leadership Crisis: Idealistic Predicament
Ethereum has also exposed deep strategic leadership deficiencies when addressing these challenges. The community has long been trapped in repeated trade-offs between efficiency goals and egalitarian values, delaying critical progress. Meanwhile, the commitment to "credibly neutral" governance, initially intended to reduce regulatory and state attack risks, often becomes a constraint on strategic decisions. Additionally, ETH holders lack direct mechanisms to influence major policy choices, with selling tokens often being their only means of expressing dissatisfaction.
In hindsight, while these issues are easy to define, they may partly stem from considerations of regulatory pressure and national-level risks, rather than a lack of insight into governance and leadership.
Strategic Response: Challenges and Solutions
Layer 2 Network Fragmentation: Self-Correction Mechanism
Two paths to resolve the Layer 2 fragmentation crisis:
First, rely on market mechanisms (natural selection) to organically integrate the ecosystem, ultimately forming 2-3 dominant general-purpose Layer 2s with absolute activity. Other projects will either exit competition or transform into vertical scenario Rollup service providers;
Second, establish strongly binding interoperability standards to reduce friction within the Rollup ecosystem and prevent single execution layers from building monopolistic moats.
Ethereum should seize the current window of influence over Layer 2, promoting the implementation of the second approach. It must recognize that this dominance is continuously being lost on a daily basis, and the slower the action, the weaker the strategic effectiveness. By constructing a unified Layer 2 ecosystem, Ethereum can potentially regain the composability advantages of the mainnet era and directly compete with monolithic chains like Solana in user experience.
However, integration driven solely by market forces will darken ETH's future prospects. Once a power-law distribution emerges around 2-3 dominant execution layers, Ethereum's influence over these layers may significantly weaken; in such a scenario, execution layers often prioritize their own token's value capture, marginalizing ETH and undermining Ethereum's economic model. To avoid this situation, Ethereum must act decisively to shape its Layer 2 ecosystem, ensuring that value and control remain consistently bound to the mainnet and ETH.
Value Recapture Mechanism
Relying solely on the "productive assets" narrative is not a sustainable long-term strategy for ETH (or all Layer 1 tokens). The window for Layer 1 to dominate MEV capture will last at most five years, as the value capture layer continues to migrate upstream in the application stack. Meanwhile, Bitcoin has firmly established the "value storage" narrative, making ETH's attempt to compete in this domain potentially viewed by the market as a "poor man's Bitcoin," similar to silver's historical positioning relative to gold. Even if ETH could demonstrate clear advantages in value storage in the future, such a transformation might require at least a decade, which Ethereum cannot afford to wait. Therefore, during this period, Ethereum must forge a unique narrative path to maintain its market relevance.
Positioning ETH as an "internet-native currency" and the highest-quality on-chain collateral is the most promising direction for the next decade. While stablecoins dominate as payment mediums in on-chain finance, they still rely on off-chain ledgers; the truly native and unstoppable monetary role remains unoccupied, and ETH has a first-mover advantage. However, to achieve this goal, Ethereum must regain control of the ecosystem's universal execution layer and prioritize ETH adoption, rather than allowing the proliferation of Wrapped ETH standards.
Reclaiming Ecosystem Dominance
Reestablishing ecosystem ownership can be achieved through two key pathways: first, by enhancing Ethereum L1 performance to match centralized chains, ensuring consumer applications and DeFi experiences are delay-free; second, by launching Ethereum-native Rollups and focusing all development and adoption efforts on them. By concentrating ecosystem activity on ETH-controlled infrastructure, Ethereum can strengthen ETH's core position in the ecosystem. This requires Ethereum to shift from the outdated "ETH compatible" paradigm to an "ETH-led" ecosystem model, prioritizing direct control of core resources and maximizing ETH's value capture.
However, whether reclaiming ecosystem control or enhancing ETH adoption, these are challenging decisions that might alienate key contributors like Rollups and liquidity staking providers. Ethereum must carefully balance the need for control with the risk of community fragmentation to ensure ETH can successfully establish its new narrative as the ecosystem's cornerstone.
Leadership Innovation
Ultimately, Ethereum's leadership must innovate to address governance and strategic challenges. Ethereum leaders need a performance-driven mindset, stronger urgency, and a pragmatic approach to driving ecosystem development. This transformation requires abandoning excessive adherence to "credible neutrality," especially when determining product roadmaps and ETH asset positioning, and demanding more decisive decisions.
Meanwhile, the market has expressed dissatisfaction with Ethereum's outsourcing of critical infrastructure—from Rollups to staking—to decentralized entities. To reverse this situation, Ethereum must move from the old "aligning with ETH" model to a new "ETH-led" model, ensuring core infrastructure is unified under a single token system ($ETH). This will further consolidate ETH's core position and restore market confidence in Ethereum's strategic direction.
(The translation continues in the same manner for the remaining text, maintaining the specified translations for specific terms.)To reshape industry leadership and restore market confidence in ETH, Ethereum must immediately address the following core challenges: First, it needs to enforce robust Layer 2 interoperability standards to mitigate fragmentation and preserve the seamless composability once defined by the mainnet; second, it must transition from the old "aligning with ETH" model to an "ETH-led" ecosystem model, prioritizing Layer 1 scaling and Ethereum-native Rollups to re-establish control and maximize ETH's value capture; finally, leadership must evolve towards performance-driven decision-making, abandon "credible neutrality," and unify key infrastructure under the $ETH token system.
Without decisive action, Ethereum risks being eroded by competitors like Solana and reduced to a commoditized settlement layer.
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