The reports of Ethereum’s death are greatly exaggerated

Digital assets are going mainstream. How else would you describe an asset class being issued, developed, and openly supported by projects associated with a septuagenarian US president? Despite this, the price of Ethereum (ETH) is underperforming versus expectations. This is a sentiment that is reflected throughout social media.

You might also like: The Ethereum paradox: Too big to fail or too slow to matter? | Opinion

There are many theories as to why this is, ranging from shorts by hedge funds to a lack of a north star or the rise of competing blockchains like Solana. There is an element of truth in all of the above. However, I will focus on what is more interesting: the future of Ethereum and why I remain very positive.

The newer alternatives

A good starting point is to look at newer, faster platforms, and Solana (SOL) is often mentioned; however, its genesis block was back in 2020, and 5 years is a long time in this industry. There are even newer, faster blockchains—including Sui, Aptos, Monad, and Fogo—with more to come.

Technology is an enabler, but it alone does not dictate success (remember Betamax?). From a software point of view, success is even less certain as new ideas can be integrated into existing products. Focusing on Ethereum, when it was launched, it was a proof-of-work blockchain similar to Bitcoin (BTC) but has since undergone a number of major upgrades (with zero downtime), including its move to proof-of-stake. These upgrades will continue over the next five years, improving areas including performance, usability, and developer experience. Pectra, the next upgrade, will provide greater transaction capacity and improve Ethereum staking functionality.

Many of these changes are new and reflect changes from the previous roadmaps. The Ethereum ecosystem is fortunate to have a large number of expert researchers in fields such as distributed systems and cryptography. Whilst sometimes accused of operating in “Ivory Towers,” what they have consistently shown is deep thought in the direction that Ethereum should take and this often leads to changes in direction. Move fast and break things may work in some environments, but probably not with a multibillion dollar compute platform. A key example here was the move from a scaling technology known as sharding to what we have now with the layer-2-centric roadmap.

The key differences

L2’s will turn out to be a key differentiator for Ethereum, even if the path to get there feels long. They enable disparate teams to build their own scaling solutions using different technologies, all tied back to the core Ethereum protocol. If you believe Solana has made all of the right design decisions, Eclipse is an L2 that plugs Solana technology into Ethereum. Similarly if you want Meta’s Move programming language, you can build on an L2 such as Movement.

L2s open up new programming languages and can optimize for different characteristics, whether that be speed, privacy, decentralization, alignment with a corporation (such as Sony), or something else entirely. This means that developers and users of Ethereum can decide what is important and use the corresponding L2 whilst still benefiting from the liquidity, security, and existing applications built on Ethereum.

Whilst we already have a huge number of L2s, development is still ongoing to improve interoperability between them with the goal of enabling the frictionless transfer of assets and composability of applications. To this end, there are a number of technical standards (both Ethereum Improvement Proposals and Rollup Improvement Proposals) aimed at both short-term and longer improvements to the user experience.

So, does the L2 roadmap make sense? The number (over 140 L2s) suggests that an awful lot of people (and engineering investment) think it does! In addition, whilst the “total value locked” metric has many flavors and many flaws, it indicates that L2s are achieving product market fit with $42bn of assets being held. This is getting close to the $166bn worth of tokens issued on Ethereum and significantly more than the tokens issued on other chains (excluding the protocol’s own tokens).

Whilst L2s will offer many improvements, using Ethereum itself is getting faster with protocol-led improvements but then also infrastructure such as “transaction pre-confirmations,” providing users with sub-second confirmation of their transactions, comparable to the fastest alternative blockchains.

Regarding value, the tokenization of real-world assets is a key use case for blockchains, and we are now seeing significant progress. Stablecoins representing USD are valued at $216bn, with 58% of those issued on Ethereum (the next biggest are Tron (TRX) with 28% and Solana with only 5%) and with a focus of the current US administration on stablecoin growth, those numbers are set to climb! With regards to more complex assets, BlackRock’s BUIDL fund tokenizes $500mm USD of Treasury Bills on Ethereum but is only one of over 150 tokenized assets with a combined value of over $3.8bn (excluding stablecoins!). This is also set to increase with issuers such as Ondo finance and Backed tokenizing more assets on Ethereum. No other chain or L2 comes close to this level of tokenized value.

Opinion Slva stable

Developers are the answer

If an institution is looking to build a crypto project, its starting point will be the technical community. With over 10k developers working on Ethereum Virtual Machine based projects (3x more than the next closest ecosystem), it is likely developers will recommend Ethereum. As seen with a stream of projects from institutions ranging from Deutsche Bank through to President Trump’s World Liberty Finance.

More important than developers is security and stability. One of the reasons that Ethereum has a lower transaction throughput and longer development cycle is the focus on decentralization, uptime, and resilience. The network is run on nodes using six different software stacks, meaning a bug in one will not halt the network. Similarly, the network is designed to survive regional catastrophes, with around 10,000 nodes running in countries all around the world on computers as simple as a mobile phone. These design goals are reflected in the 100% uptime of the network since genesis.

This illustrates that there is space for different blockchains to focus on their respective strengths. Ethereum is the premier smart contract platform being adopted for use in decentralized finance and for institutions building new financial rails and tokenized products. Bitcoin is easily understood as a store of value, and Solana is currently leading the way for higher-performance, low-value transactions such as meme coin trading.

If there is one benefit to the noise around the ETH price, it could be that it has galvanized a more outward-looking effort by the Ethereum ecosystem. There is a realization that focusing purely on building may not be enough. The Ethereum Foundation has reactivated their X.com accounts, leaders in the space are being more vocal, and organizations such as Etherealize are advocating for Ethereum in Washington and on Wall Street. The leader in any industry can never afford to stand still, and digging beyond the headlines, Ethereum is continuing to drive innovation.

Read more: Ethereum’s lowered yield might signal a paradigmatic shift in the ecosystem | Opinion