Can ETH make a comeback? How to make ETH great again?

Author: The DeFi Investor Source: thedefinvestor Translation: Shan Oppa, Golden Finance

This market cycle is quite difficult for ETH .

At the lowest point of the bear market in 2022 , many people had predicted ETH to easily break through $10,000 in this bull market. 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.

As Ignas recently mentioned in his 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, why does ETH perform 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 ETH directly, but now, almost all Ethereum L2 has issued their own tokens , and many investors have begun to switch to L2 tokens instead of ETH. This has resulted in a significant reduction in funds flowing into ETH.

For example, if you are optimistic about Solana, you just need to buy SOL because it doesn't have L2. But if you are optimistic about ETH, you have dozens of L2 tokens to choose from .

2. Diversified liquidity of capital

The number of Ethereum L2 projects has exceeded 100 , but the interoperability and liquidity between L2 are still a big problem .

For senior DeFi users, cross-chain bridge funds between different L2s are not a big problem, but for ordinary investors, this process is extremely complicated and even a nightmare . Currently, L2 transactions are fast and low in cost , but if the cross-L2 user experience (UX) does not significantly improve, L2 expansion cannot truly promote Ethereum 's mainstream adoption (massive adoption) .

3. Other L1 blockchains are catching up

In the last cycle, Ethereum was undoubtedly the absolute king of all L1 public chains.

Although Ethereum still has the strongest DeFi ecosystem, L1 such as Solana has now surpassed Ethereum in indicators such as revenue and DEX trading volume.

This is because the technology of L1 such as Solana is progressing faster , and although Ethereum has made some progress in the past few years, some competitors are faster and the user experience is far better than Ethereum .

How to make ETH great again?

Here are a few possible solutions:

• Encourage L2 to support ETH by destroying some transaction fees (Vitalik once suggested supporting more dApps using ETH as the main collateral)

• Strengthen the core position of ETH in the Ethereum economy (ETH should become the cornerstone asset of the L2 ecosystem, not the L2 token)

• Invest more resources to solve the problem of liquidity dispersion of L2 funds and unify the L2 fund pool (this is the most priority thing)

• Accelerate the upgrade iteration of Ethereum (Ethereum destroys more than $100 million in ETH every year, but the upgrade speed is still lagging behind other L1s)

• Let the Ethereum Foundation establish sustainable revenue models (such as obtaining funds from transaction fees and staking income, avoiding selling ETH)

• At the same time, expand Ethereum L1 (although the main expansion direction of Ethereum 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 the community have seemed somewhat complacent over the past few years, and this may undermine Ethereum’s competitiveness in the long run.

Although 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 of supporting 100,000+ TPS , competing with high-scalability L1.

Eclipse - The first Ethereum L2 based on Solana Virtual Machine (SVM) , combining Solana's speed and Ethereum's security.

Pectra Upgrade - Ethereum's next important upgrade will introduce Native Account Abstraction, greatly improving the user experience .

Eric Trump openly supports ETH — which raises the question: Will the United States establish "national Ethereum reserves"?

The first three technological upgrades will undoubtedly promote the adoption (large-scale 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 diversification (the cross-L2 experience must be significantly improved)

2. Optimize the ETH token economic model (such as letting L2 contribute part of the transaction fee to destroy ETH to reduce supply)

At the moment, I don't have a heavy position in ETH because I tend to bet on faster-growing DeFi tokens (such as FLUID) .

But historically, the rise in ETH often triggers a "copy season" , which is good for all investors holding altcoins.