SuperEx丨The Dilemma Facing ETH Explained

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This year, the crypto market has undergone a fundamental shift in direction, moving away from an emphasis on redundant infrastructure projects to a focus on application-driven projects. Vitalik expressed a similar sentiment in his August article “The Next Decade of Ethereum”, stating, ‘I believe we already have or are on the brink of having the tools needed to build the best applications in every domain suitable for Ethereum.’

This is a trend beyond human control, and faced with this shift, ETH seems somewhat uncertain. At this stage, ETH L1 has limited ability to capture value from L2 solutions, and its current gas fees and TPS struggle to support large-scale applications. Old DeFi and potentially new RWA (Real World Asset Tokenization) sectors alone may be insufficient for ETH to make substantial progress toward aligning with future trends. Ethereum must quickly adapt to this new market direction or risk being outpaced by new blockchain competitors. Growth in DeFi users has slowed, and with innovation in DeFi and NFTs also decelerating, ETH’s growth is limited, while the new RWA sector has yet to achieve any breakthrough applications.

Bottlenecks in Decentralized Finance (DeFi)

DeFi was a major driver of ETH ecosystem growth, but it now faces challenges in user growth stagnation and a lack of new application scenarios. Some DeFi protocols, such as Uniswap and Aave, have become leaders in the field but are experiencing difficulty attracting new users. Many users have become skeptical of returns during the bear market, and interest in high-risk projects has waned.

In this context, ETH must expand the application scenarios of DeFi, aligning it with real-world needs to attract new users and capital. For example, by integrating DeFi protocols with real assets (such as real estate and commodities), creating new models for asset circulation. Additionally, the ETH ecosystem could explore more innovative and practical financial tools to provide users with a diverse range of financial products, promoting market growth and ecosystem vitality.

Potential of Real World Asset Tokenization (RWA)

RWA is an emerging sector that the market is optimistic about. It involves bringing traditional assets on-chain, introducing the transparency and global accessibility of blockchain, thereby creating new application scenarios for ETH. Potential applications in the RWA sector include real estate, bonds, stocks, and artworks, and bringing these assets on-chain requires a robust blockchain infrastructure. However, ETH’s high gas fees and relatively slower transaction speed limit its potential in this area.

ETH could consider optimizing network mechanisms to reduce RWA transaction costs and improve on-chain transaction efficiency to meet the high-frequency demands of RWA. Additionally, ETH can promote the implementation of RWA applications on its network through partnerships. For example, by collaborating with traditional financial institutions, leveraging ETH’s smart contract capabilities to enable on-chain transfers and management of tokenized assets. These measures could give ETH a leading edge in the RWA sector, making it a key bridge for integrating real assets with blockchain.

Ongoing Technological Improvements are Key

As the market’s demand for efficient applications grows, Ethereum must continue to innovate to meet these changing needs. The ‘Danksharding’ mechanism and Ethereum Improvement Proposal (EIP)-4844 are Ethereum’s strategies for addressing scalability and high gas fee issues. Danksharding can significantly increase network processing capacity through sharding technology, while EIP-4844 introduces a Data Availability Layer to help reduce gas fees and improve network efficiency. These improvements support large-scale application scenarios, potentially enabling larger-scale user growth on the Ethereum network.

However, these technologies require time to mature, and developers and users need to adapt and learn. To ensure the smooth implementation of these technology upgrades, Ethereum should strengthen education and training within its ecosystem to help developers understand the potential of new technologies. Additionally, the Ethereum community should actively promote the deployment of these technologies on the mainnet, establishing appropriate testing and feedback mechanisms to ensure a smooth transition during the upgrades.

Ongoing Development of Community and Governance

Ethereum’s community vitality and decentralized governance are strengths of its development. However, as competition intensifies, Ethereum’s governance model also faces pressure. For example, new proposals often require extensive consensus from the community, which slows the progress of technical upgrades. To address this, Ethereum can explore more efficient proposal review and implementation mechanisms, under the premise of retaining decentralized governance, to adapt more quickly to market changes and technological demands.

Furthermore, Ethereum could attract more developers and users to participate in its ecosystem’s governance and development through community incentive programs. Building a more transparent and open governance system, giving community members a greater sense of involvement and decision-making power, would enhance user loyalty and the platform’s sustainable development.

Conclusion: Adapting to New Circumstances and Seizing New Opportunities

Overall, ETH faces multiple challenges amid the current market transition, including L2 solutions, real-world asset tokenization applications, technological upgrades, and governance structures. However, Ethereum’s technical foundation and community resources still provide it with a strong support base. Going forward, ETH needs to accelerate its technological upgrades, improve network efficiency, actively expand new application areas like RWA, and enhance community governance efficiency to maintain its core position in the blockchain space.

If Ethereum can make breakthroughs in these areas, it has the potential to once again lead the industry in the new market wave, injecting new vitality into the development of the decentralized economy.”