- Ethereum supporters worry that the network is dying.
- They point to layer 2 blockchains syphoning value as one of several causes.
- If Ethereum can’t turn itself around it could go the way of the operating system Linux.
A version of this article appeared in our The Decentralised newsletter on April 1. Sign up here.
GM, Tim here.
Ethereum is at a crossroads.
Over the past decade, the top smart contract network has established itself as the de facto home of the $113 billion DeFi ecosystem.
It has batted away competition from well-funded rivals, and navigated a host of complex technical challenges along the way.
But now, many of Ethereum’s most faithful adherents worry that the energy and dynamism it once thrived on is fading. The uniting goal of bringing Ethereum to the masses is becoming a distant memory as the network’s troubles mount.
It’s the culmination of months of bad news.
The vision of outsourcing transactions to separate so-called layer 2 blockchains has backfired, detractors say, knocking the network’s token economics and syphoning value to other projects.
Others argue that the network is overvalued at its $221 billion valuation and uninvestable.
Some even assert that Ethereum’s transition to Proof of Stake, arguably the network’s proudest achievement which cut its energy use by some 99.5%, was a mistake.
Activity on Ethereum is stagnating, and there’s no clear catalyst that could bring back growth.
The lack of enthusiasm has manifested in the price of Ether, the network’s native token that users must pay with to send transactions. It has dropped 50% over the past year, and is trading at its lowest level in 16 months.
In a March X post, David Liebowitz, a long time DeFi builder and current exec at stablecoin developer CAP, drew on an old metaphor from Ethereum co-founder Vitalik Buterin to explain the situation.
If Ethereum can’t turn itself around, he said, it could go the way of the operating system Linux — a small but significant piece of infrastructure, but far from its potential and the lofty goal of reaching mass adoption.
Despite the general malaise among Ethereum’s diehard fans, there are some pretty influential figures who are espousing its potential.
One of them is Robert Mitchnick, head of crypto at fund giant BlackRock.
He said that concerns surrounding Ethereum were “overdone,” and that there’s still a lot for Ethereum bulls to be optimistic about — such as the addition of staking yield to Ethereum exchange-traded funds.
What’s more, BlackRock’s tokenised treasuries fund, BUIDL, has grown 361% on Ethereum this month to over $1.7 billion, while the fund’s growth on other blockchains remained minimal.
If Ethereum is good enough for Wall Street’s biggest player, maybe DeFi degens shouldn’t count it out just yet.
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