Review of Multicoin Interview "Why is ETH Down So Bad?": From Ethereum's Vision, Development Roadmap to Current Issues

 

L2 acts as a value capture agent for Ethereum in various fields. There are two ways for Ethereum to benefit from this system. Firstly, in order to obtain security, L2 needs to conduct final confirmation on L1, which requires ETH as the payment target. This creates a usage scenario for ETH, similar to a "final" tax levied by L1 from L2, or it can also be understood as a reward for L1's security guarantee. Secondly, due to the master-slave relationship between the two parties, ETH is more likely to be used as a value storage target by users in L2 compared to other assets, thus achieving a similar effect to seigniorage tax. Imagine in a lending agreement in L2, you will find that ETH has the highest collateral value.

 

The reason why this master-slave relationship is not easy to break, that is, the reason why L2 will not form a competitive relationship with L1 and lead to cooperation breakdown, is that the legitimacy of L2 comes from the ultimate provided by L1, just like the legitimacy of the colonial system comes from the military support of the suzerain. Breaking away from this cooperative relationship will make L2 lose its legitimacy, which will lead to the collapse of the overall business logic, because most of your users use you because you are provided with legitimacy by L1.

 

There are currently two problems encountered by Ethereum: ReStaking's vampire attack on the L2 development path and the Ethereum system's Key Opinion Leader becoming aristocratic

 

After discussing the above two arguments, I would like to talk about the real problems encountered in the current development of Ethereum. I think there are two core issues:

 

ReStaking is a vampire attack on the L2 development path.

 

Ethereum's Key Opinion Leaders are becoming aristocratic.

 

In my previous article, I have already introduced the vision and development direction of EigenLayer in detail. I have a high opinion of EigenLayer, but when I look at this project from the perspective of the Ethereum ecosystem, I will find that it is simply a "vampire attack", which has squeezed a large amount of resources that should have been guided to L2 construction and diluted them into the ReStaking track. However, at the same time, ReStaking fundamentally makes ETH lose its ability to capture value.

 

How to understand it? I just talked about how Ethereum obtains profits from L2. You will find that the same logic cannot be used to reuse the Restaking track. As another scaling solution, ReStaking and L2 are in principle in a competitive relationship. However, ReStaking only simply reuses Ethereum's consensus ability, but cannot establish enough incentive models to stimulate ReStaking builders to actively explore more usage scenarios. The core reason is that L2 operators use L1 consensus at a cost, and this cost is a fixed cost that does not affect the activity level of L2. Since ETH is needed as the final payment target, L2 operators need to actively build and explore in order to maintain a balance of income and expenditure and seek higher profits. However, for ReStaking, the consensus to reuse L1 is costless because they only need to pay a simple bribe to the Staker on L1, which can even be a future expectation. Think back to the Point farce, which I have analyzed in detail in my previous article. In addition, ReStaking assetizes consensus capabilities, allowing potential buyers to dynamically choose the cost of purchasing consensus services based on current needs. This allows potential buyers to use Ethereum's consensus services with targeted use, which is a good thing for buyers, but for Ethereum, it also loses the mandatory nature of L2.

 

With ReStaking and its derivative tracks attracting a large amount of capital and resources, the development of L2 has come to a standstill. This has caused resources in the ecosystem to be wasted on reinventing the wheel or creating square wheels. No one has thought about how to create richer applications and capture more revenue, but only indulged in the capital game brought by storytelling. This is really a mistake. Of course, from the perspective of EigenLayer, the mentality will undergo a 180-degree turn. I still admire the team's clever capture of the value of the commons!

 

In addition, another issue that worries me more is that the Ethereum system Key Opinion Leaders are becoming aristocratic. You can find a phenomenon that the Ethereum ecosystem lacks active opinion leaders like Solana, AVAX, and even the Luna ecosystem at that time. Even though they seem to be the creators of FOMO, there is no doubt that this is a good thing for community cohesion and the confidence of entrepreneurial teams. I do not agree with Ryan's historical perspective, but I do admit that the opportunity for historical progress cannot be separated from the efforts of individual geniuses. However, in the Ethereum ecosystem, it is difficult to think of other opinion leaders except Vitalik, which is naturally related to the split of the founding team. However, it is also related to the lack of liquidity in the ecological class. A large amount of ecological growth income is monopolized by early participants. Yes, imagine that you have completed a fundraising of 31,000 BTC, which is worth more than 2 billion US dollars at the current market value. Even if you do nothing, it is OK, let alone the success on Ethereum, which has created more wealth than this number. Therefore, for those early participants who should be opinion leaders, it is more attractive to start a conservative strategy and stick to it than to expand. In order to avoid risks, they have become more cautious and conservative in promoting ecological construction, which is understandable. The simplest way is to ensure the status of AAVE, and then lend a large amount of ETH you hold to leveraged demanders to earn considerable stable returns. So why do you need to incentivize other new products?

 

The reason why it has become the current situation, I think, is closely related to Vitalik's style. For Vitalik, I think he is better at being a religious leader and has constructive designs on some metaphysical issues such as value design. However, as a manager, he does not seem to be enthusiastic about this. This is also why the development efficiency of Ethereum is so slow. An interesting joke is that when the Ethereum community first designed the technical solution for Sharding, domestic public chains had already been divided. This is naturally related to Vitalik's management style. You may say that this is a problem that must be faced due to the pursuit of decentralization and non-profit. But I think for this ecosystem, Vitalik has the obligation to actively solve this problem.

 

However, no matter what, I am full of confidence in the development of Ethereum, because I recognize the public welfare and revolutionary vision behind this group of people. It was Ethereum and the people behind it that allowed me to enter this industry, establish my own industry awareness, and even have my current values. Even though I am currently facing some resistance, as an older youth, I think it is not so bad to pursue some ideals other than money!