Ethereum price turning point moment?

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In this episode, we have invited Dr. Zhou from EthStorage, along with our researcher Lawrence. We will discuss a blue-chip asset that is of great concern to crypto investors—Ethereum. We know that Ethereum's overall performance in this cycle has not been very good; its exchange rate has consistently lagged behind BTC, and for most of the time, it has not been able to compete with its rival Solana. However, there have been many noteworthy changes in Ethereum recently, such as Vitalik becoming very determined on Layer1 scaling, and there have been restructuring efforts and layoffs, reflecting a more pragmatic approach to work. Is this a turning point for Ethereum to revive its price?

The Reasons Why This Round Ethereum Underperformed Compared to BTC and SOL

The main reasons why Ethereum has significantly underperformed BTC in this cycle, and also lost to Solana, may currently include what?

Qi Zhou: I think there are several reasons for this. The first reason is the entire Ethereum roadmap, especially the roadmap centered around Layer 2, which many people find is not very consistent with Ethereum's core values. This is actually something I discussed with Vitalik when I met him last month in East Asia; it’s also one of his thoughts. We can see that, for example, last year, before the launch of EIP 4844, Ethereum was still in a relatively deflationary state. However, after the upgrade of 4844, the fees for Layer 2 to submit data to Ethereum significantly decreased, which also led to many values on Layer 2 not being reflected in Ethereum itself. For instance, many Layer 2 projects, such as Base and Arbitrum, although they received a lot of user fees, these fees did not feed back the value of Ethereum itself. Therefore, a significant incentive incompatibility issue arose. The second aspect is from Ethereum itself; because it performed very well in the last cycle, it somewhat influenced its judgment, causing it to become relatively slow in certain areas, such as engineering progress. At that time, Ethereum did not have a true challenger, whether it was Bitcoin or Solana. In this wave, many people complained that Ethereum changed too slowly, that the roadmap planning took a long time, but there were no actual engineering achievements. Each upgrade requires one to two years to realize the corresponding functions. Compared to Solana’s more aggressive engineering advancement, Ethereum has always leaned towards research and has not prioritized engineering aspects particularly. This approach has caused a significant lag in Ethereum's overall development and upgrade roadmap. We have many personal experiences in this regard; for example, in previous years, we did a lot of EIPs for Ethereum, including EthStorage itself, which we can elaborate on later. In summary, these are the main two aspects.

Lawrence: The two points that Zhou Bo just mentioned are also the two points I wanted to raise. Another point that I think is relatively important is that, in this cycle, overall, there are relatively few new business models or innovations on-chain. The richness and activity of on-chain businesses have not improved significantly compared to 2021. In fact, if we exclude Meme trading, the activity and richness of on-chain businesses may have slightly declined. In contrast, the fundamentals on the BTC side have improved significantly. Therefore, under this circumstance, the overall performance of all public chains is not good. Even for Solana, which has performed relatively well, its exchange rate compared to BTC is still at least 50% lower than the high point in 2021, and this round's high point is also 50% lower than the previous round. I think this is a common problem faced by all Layer 1s in this round. The other two points are those mentioned by Dr. Zhou just now. One can say that the strategic issue of Ethereum in the last two to three years is the Layer 2 strategy. To be frank, it can basically be judged as a failure. Another point, I summarize, may be a structural problem that Ethereum has long faced, rather than a medium- to short-term strategic issue. Recently, I have seen many criticisms, especially a criticism from someone named Max Resnick, which I find very typical. This Max was previously a researcher at the Ethereum Foundation, and at the end of 2024, he switched to Solana and went to Anza, which is the team that Solana Labs split off for research and development. He has always opposed the Rollup strategy while at the Ethereum Foundation and has supported expanding Layer 1. He has some sharp criticisms of Ethereum, such as he believes that the people who set the roadmap for Ethereum, specifically Vitalik, have expertise in blockchain and cryptography research, but relatively little in computer science. This has led to many, in his view, basic factual deviations in Ethereum's judgment and research on how to improve blockchain performance, including deviations in direction. For example, the Ethereum Foundation has long believed that the bottleneck for improving Ethereum's performance is at the execution layer. However, according to his statement, the performance bottleneck is obviously at the consensus layer. He also mentioned that Vitalik or those who formulate the Ethereum roadmap pursue long-term goals that currently seem relatively ethereal and do not focus on current users. For instance, Vitalik himself has always talked about privacy applications and social applications on his blog, but has said relatively little about DeFi. However, in reality, DeFi has always been the most used on the Ethereum mainnet. This issue had a period of debate around July and August of last year, where Vitalik and several leading DeFi projects on Ethereum were discussing this matter. Including the reasons triggered by these, Zhou Bo also mentioned that the research and development efficiency of Ethereum is actually quite low. On one hand, there is a significant disconnect between its research team and development team, with a large gap between what the research team studies and what the development team develops. On the other hand, its R&D progress is indeed very slow, with basically only one major upgrade per year. For instance, the transition to POS was something Vitalik may have started proposing in 2015 or 2016, but it wasn't until the 2023 Shanghai upgrade that this matter was generally considered closed. Since 2021, the upgrades that people can name are actually not many: the Merge in 2022, the Shanghai upgrade in 2023, last year's Cancun upgrade, and the recent Pectra upgrade. Overall, the development progress is very slow, leading to a very high cost of error correction, especially in terms of time cost. For example, the Layer 2 strategic issue in the case of Ethereum is: in 2020, Vitalik proposed to center on Rollup, but in reality, it wasn't until 2022 that related matters were implemented, and now in 2025, everyone realizes it doesn't work and needs to be changed. The waste of time in between is quite substantial. Especially compared to Solana and some new Layer 1s, like Sui, the gap in their R&D progress is approaching an order of magnitude in efficiency difference. This means that Ethereum may take ten times longer than other public chains to make a decision and push this thing online. Of course, I think there are reasons for this, because Ethereum is the first influential public chain after Bitcoin, facing many problems, including previous considerations of many regulatory factors, and it has always adhered to decentralization relatively persistently. However, looking at the results, I think the problems mentioned above are all long-term structural issues belonging to the Ethereum Foundation or the core layer of Ethereum, which is the people who set the Ethereum roadmap. I feel that these are the main three points.

Alex: OK, I might want to add a little more here. Just now, Lawrence also mentioned that the top-level concept of the Ethereum Foundation's insistence on decentralization is very persistent. Until the last cycle, everyone still believed that it was one of the elements of blockchain orthodoxy. However, this time there have been quite a few changes. One of the most important changes is that the governing body of the United States has undergone a significant transformation. The current U.S. government is very friendly towards crypto, and regulation is very relaxed. This result means that at least during this governance cycle, the crackdown on crypto projects and the urgency of anti-censorship have diminished. The Ethereum Foundation's strong insistence on decentralization has become less necessary in this round of government. Instead, projects like Sol and Sui, which may not be highly decentralized, have excellent efficiency and performance, thus becoming an advantage. Moreover, in the long term, I feel that even if the next government shifts to the Democrats, they will recognize that the voting bloc of crypto investors in the U.S. is very important. Under such a premise, I believe they won't conduct such a brutal crackdown on crypto projects as during the previous term of Gary Gensler. Therefore, the necessity of decentralization is generally decreasing as the industry changes. We see that many projects emerging this round, such as Ethena, including the narrative RWA, which many investors now consider very important, are actually products of the combination of CeFi and DeFi, which is the trend of the times. The decreasing importance of this narrative has also weakened Ethereum's consensus to some extent. This is also one of the reasons why it doesn't perform as well as SOL in terms of narrative this round.

Consensus and Non-Consensus on Ethereum Issues

We just talked about many issues regarding Ethereum, including its engineering capabilities, some insights into its development direction, and the relatively slow speed of error correction, among other things. So we have raised so many questions; what is the consensus among the leaders, community, and developers of Ethereum regarding these issues? What are the non-consensual points? To put it simply, which issues are commonly recognized as problems from the core management of Ethereum to the community and developers? And which ones are there disagreements on? For example, we think this is a problem, an obstacle, but Ethereum's current stance is that it is not an issue, which is a characteristic we are very concerned about. What do both of you think about this?

QiZhou: I think an important point in this wave is that there has been a significant change in Ethereum's definition of decentralization. I can say that a few years ago, Ethereum still held a very idealistic, even somewhat religiously fanatic approach to pursuing decentralization. I remember chatting with some people from Ethereum at that time, and they said they hoped Ethereum L1 would become a minimal trust layer, allowing devices like smartphones, or even very simple embedded devices, to run an Ethereum validator. But clearly, after the challenges posed by Solana and others this time, especially in the upgrade roadmap for L1 scaling, including continuously increasing gas limits and introducing block-level access lists to accelerate the transaction speed of the execution layer, they are actually seeking a balance between decentralization and execution efficiency in a more practical way. This also implies that we might need slightly more powerful computers. The direct issue everyone faces is: if you now design a consensus for Ethereum, allowing a smartphone or a device worth 100 yuan to run a validator, you would still need at least 32 Ether. At current prices, that’s nearly 100,000. This is actually mismatched. Your device does not cause the bottleneck for the validator; the main issue is that the number of Ethers you need is too high. So under this premise, why can’t we relax this assumption a bit? For example, we could allow computers worth 1,000, 2,000, or 3,000 dollars to also run nodes, while Ethereum's L1.