Challenges and Opportunities of Ethereum in the New Web3 Landscape

Core Challenges

Ethereum is currently facing four key challenges: fragmentation of layer two networks, declining value capture capability, weakened control over the ecosystem, and insufficient strategic leadership.

The fragmentation of layer two networks severely affects user experience and on-chain liquidity, weakening the composability advantage of Ethereum. Users have to deal with various inconsistent protocols and standards, while developers need to maintain multiple versions of protocols across several layer two networks. This has led many consumer-facing applications to turn to other platforms.

Outsourcing the scalability roadmap to layer two networks is weakening Ethereum's control over its own ecosystem. Over time, the influence of these execution layers relative to Ethereum's settlement layer is increasing, which may ultimately reduce Ethereum to a commoditized service.

The rise of layer two networks has also significantly impacted the value capture capability of ETH. These platforms have gradually taken over a large portion of MEV and transaction fee revenue, greatly reducing the value flowing back to the Ethereum mainnet. This trend weakens the intrinsic motivation to hold ETH as an investment asset.

In addressing the challenges mentioned above, Ethereum has also exposed a deep-seated lack of strategic leadership. The community has long been caught in a tug-of-war between efficiency goals and egalitarian values, which has hindered critical progress. The insistence on "trustworthy neutrality" in governance, although well-intentioned, often becomes a constraint on strategic decision-making.

Strategic Response

To address the fragmentation of layer two networks, Ethereum should promote the establishment of strongly binding interoperability standards, reducing internal friction within the ecosystem and preventing a single execution layer from building a monopolistic moat. This is expected to regain the composability advantage of the mainnet era and compete with other public chains on the user experience level.

In terms of value capture, positioning ETH as the "internet-native currency" and the highest quality on-chain collateral is the most promising direction for the next decade. To achieve this goal, Ethereum must regain control over the universal execution layer within the ecosystem and prioritize the promotion of ETH adoption.

Re-establishing ecological ownership can be achieved through two key pathways: enhancing the performance of Ethereum Layer 1 to reach levels comparable to centralized chains; launching Ethereum-native Rollups, focusing all business development and adoption efforts on this. This requires a shift from the "ETH-compatible" paradigm to an "ETH-dominant" ecological model.

In terms of leadership, Ethereum leaders need to adopt a more pragmatic approach to promote ecological development. This shift requires abandoning the excessive insistence on "trustworthy neutrality" and being more decisive in determining the product roadmap and the positioning of ETH assets. At the same time, it is necessary to say goodbye to the old model of "aligning with ETH" and shift towards a new model of "led by ETH," ensuring that core infrastructure is unified under a single token system.

Advantages of Ethereum

Despite facing challenges, Ethereum still has deep advantages that support its leading position:

1. Proven infrastructure that offers unparalleled decentralized security.

2. Forward-looking architectural design with a more robust transition plan against quantum attacks.

3. The largest and most diverse developer community in the blockchain field.

4. Modular design has made significant progress in balancing decentralization, scalability, and security.

5. The most customizable technology stack makes it the preferred platform for vertical scenario applications and institutional adoption.

Market Signals and Future Outlook

The recent price trend of ETH shows that it has entered a historically oversold range, which serves as a warning signal to the entire ecosystem. However, historical data indicates that strong rebounds often follow similar pullbacks.

To reshape its industry leadership and restore market confidence, Ethereum must immediately address core challenges: implementing sound Layer 2 interoperability standards, shifting to an "ETH-led" ecosystem model, and adopting performance-driven decision-making. If decisive action is taken and these strategies are effectively executed, Ethereum is expected to usher in a strong recovery, consolidating its core position in the new landscape of Web3.