What happened to Ethereum?
How the rollup-centric roadmap failed due to infighting, misaligned incentives, and self-inflicted delays, leaving the network losing ground to itself.
This piece is mostly inspired by Vitalik’s recent tweet about changes and the current state of the market. While the whole market is down, it’s difficult to blame someone in particular, and I’m not here for it.
I’m here as someone who has worked with many Ethereum teams, invested on behalf of a venture fund in multiple protocols building on Ethereum, and was overall a huge fan of anything related to Ethereum and the EVM.
Unfortunately, I can’t say the same things anymore, as I feel like Ethereum doesn’t know where it’s going (and many people feel the same).
I don’t want to discuss the price action of ETH, but I also cannot ignore the fact that the number 2 cryptocurrency in the whole world behaves pretty uncertainly. No matter where the global market goes, ETH behaves more like a depegging stablecoin.
This essay is about what has happened to Ethereum over the past couple of years and why many are losing hope or have already lost it. Ethereum is not losing to Solana or something else, Ethereum is losing to itself.
Rollup-centric Roadmap
When Ethereum introduced a rollup-centric roadmap, literally everyone was excited. The promise was that rollups (and validiums) would scale, so transactions by end users would happen on rollups, while Ethereum would serve as a verification layer, a.k.a. focused on being L1 for rollups first, not for users.
Rollups are way faster and cheaper to develop than developing L1, so the future of 1000s of rollups seemed very possible and optimistic.
What could go wrong?
It turns out that everything could go wrong. Useless debates, prioritizing ideology over needs, constant fights within the community, an identity crisis, and abandoning the rollup-centric vision too late.
Anything that could go wrong went wrong. Most of the community saw Max Resnick as an absolutely incompetent evil person, only to find out that he was right in almost everything that he said.
Max, while working at Consensys, said a ton of things about what Ethereum needs to do to move forward, but only faced critics with very little support.
The peak of stupidity was when the whole industry started discussing whether some L2 is Ethereum or not, like:
Opinion A: “Base is an extension of Ethereum, we contribute a lot to the Ethereum ecosystem”
Opinion B: “Base is not an extension of Ethereum, it’s a separate one”
What the f*ck are we discussing here?
How does this conversation lead to a better future for Ethereum and its ecosystem? Why are people seriously arguing over what’s Ethereum and what’s not Ethereum? Don’t we have more important problems to solve?
If we decide that rollups are extensions of Ethereum because they use ETH as a gas fee, we’re on the right track. If we decide that rollups are not extensions of Ethereum, but apps that benefit from Ethereum, we’re on the right track.
Right? Absolutely not.
This ideological discussion is not really a discussion, but a confrontation between two circlejerks that are trying to prove who is right. We don’t need to PvP, we need to PvE. We need to understand that it’s not us against each other, it’s us together against the problem and the future.
Unfortunately, a lot of people prefer mental stimulation rather than even considering that their opinion may not be correct.
Prioritization of technical ideology over users’ needs
Based rollups, booster rollups, native rollups, gigagas rollups, keystore rollups.
Which one is better, what will be the future, how will they be connected
“this type is the future,” “no, this type is the future”
“there is no reason not to develop based rollups”
“native rollups will overtake the ecosystem because they are Ethereum-aligned”
All of these discussions... only for Arbitrum and Base to continue winning.
Technological superiority gives a lot of advantages to a player, but not when you compare apples to pears, or oranges to mandarins. It’s similar, it’s very similar, to an extent that users don’t really care about it. Nobody cares about it outside of the bubble. One precompile more, one precompile less — you’re not winning there.
“Oh, we’re actually Ethereum-aligned, we have an advantage, we’re very close to Ethereum and we reflect its core values, users are going to choose us.”
Which values, may I ask, and which users will choose you?
@0xFacet became the first Stage 2 rollup, they’re the definition of Ethereum alignment.
Where are they? Where are their users, developers, technical KOLs, and supporters of the Ethereum ecosystem and alignment? Where are those people? How many of you have heard of Facet? How many applications are available on Facet?
I have nothing against Facet personally. I talked to the founder multiple times and I respect him, he is a great guy. But where are all those people who said that we needed more Stage 2 rollups? I have no idea, and you have no idea as well.
Financial incentives are much stronger than technological incentives. I was a huge fan of Taiko and especially of their research around based rollups. Lots of benefits: stronger censorship resistance, neutrality, no sequencer downtime risk, L1 validators earn more money.
Where is the catch?
The catch is the financials behind the model. You can’t force people to give up their revenue just for the sake of “alignment.”
Arbitrum promised a decentralized sequencer. Scroll promised a decentralized sequencer. Linea, zkSync, and Optimism promised a decentralized sequencer. Where are they? Where are those sequencers?
Every rollup team had the line in their docs: “we currently have a centralized sequencer, but we have strong intentions to decentralize it in the future.” Almost nobody delivered. Metis delivered it, but people don’t care about Metis, fortunately or unfortunately.
Do I think that they specifically overpromised it to be liked by influential ETH maxis? Yes.
Do I think that they really wanted to decentralize their sequencers? Also yes, but it doesn’t make sense for them.
Coinbase (Base) is legally obligated to make as much money as they possibly can to deliver value to the company. The same goes for other teams, why would you kill your revenue source? It doesn’t make any sense.
Approximately only 5% of Base’s revenue goes to Ethereum. Rollups were never extensions of Ethereum.
Taiko had days when it paid more fees to Ethereum for sequencing than it received in fees from users’ transactions. And companies like Taiko had a lot of other expenses besides paying fees to Ethereum, obviously. Based rollups or any “Ethereum-aligned” rollup vision was only possible if teams gave up their revenue.
I’m not underestimating the importance of decentralization, security, and permissionlessness. But all of that doesn’t make sense when your only goal is to be ideologically right, not user-focused.
Not surprisingly, this weakness and the promises of Ethereum alignment brought grifters to this space.
Сonsequences of the rollup-centric roadmap
Eclipse, Movement, Blast, Gasp (Mangata), Mantra: these protocols were never meant to be built for the long-term future. It was really easy to hide behind the mask of Ethereum alignment, making Ethereum better, bringing SVM to Ethereum, etc.
All of them rugged in one way or another. All of the rollups realize that their token is almost useless because they pay fees in ETH, while their tokens have almost no utility. Grifters realized that you can create a lot of hype around the rollup-centric narrative and capitalize on that by dumping worthless tokens on retail.
Ethereum never recognized Polygon as a true L2, even though they played a significant role in securing more value for ETH. If you believe that rollups are “cultural” extensions of Ethereum, why not recognize something that is closely tied to Ethereum’s security and usage?
Polygon was very important for Ethereum in the 2021 bull market and contributed a lot to the growth of ETH as an asset, but yeah, it’s not an L2 and it doesn’t deserve to be appreciated by the Ethereum community. If Polygon were an L1, it would be valued way higher.
Even Paradigm, arguably one of the best VCs in crypto that contributed the most to the Ethereum ecosystem and even developed their own L2 (Ithaca), switched to developing an L1 (Tempo) with Stripe.
I think when your biggest believers go to build your competitor, you’re doing something wrong.
Ethereum Foundation doesn’t have direction
Even though Ethereum is technically decentralized, it’s culturally centralized around Vitalik. Ethereum’s inner circles are real, and as people say, all you have to do to succeed (however you define this word) is get the attention of people who are close to Vitalik and a couple of VCs who are influential in the space.
I’m not saying that you have to agree with everything Vitalik says, but his opinions basically define what’s good and what’s bad for Ethereum, and you cannot compete against that.
Firstly, it was ultrasound money, where the economics of ETH became deflationary with EIP-1559 and The Merge, and it would be a better store of value than Bitcoin. In 2024, ETH’s annual inflation rate turned positive.
So the ultrasound money vision only lasted 3 years? It can’t become a store of value this way. The narrative was dead, moreover, it was never true, because ETH wasn’t designed to be a store of value, it was the purpose of Bitcoin, and you can’t compete with it.
Then Ethereum couldn’t decide whether its token is a commodity (not applicable because of dynamic supply changes and staking mechanisms) or more like a tech stock (not applicable because there’s not enough revenue to value Ethereum like a tech company).
Other people argue that ETH is not money at all. What’s happening here? We need to pick a side.
Ethereum can’t be multiple things at once — you either have a globally defined direction, or you lag behind.
Financial Incentives… Again
I still cannot imagine how a Lead Engineer like Péter Szilágyi was paid around $100k per year for his contributions to Ethereum. The person who was there from the beginning and helped Ethereum reach $450b from almost zero was paid only 0.0001% of the market cap.
The most influential and most successful protocol in the history of crypto (after Bitcoin) didn’t offer any incentives or equity. It’s easy to justify this by hiding behind the decentralization, open-source, and permissionless ethos: “we’re not here to make money, we’re here to move forward.”
But you have to incentivize even your most devoted soldiers, or they will leave or take deals on the side.
Péter left, Danny Ryan left, Dankrad Feist went straight to Tempo.
Justin Drake and Dankrad accepted advisory roles with EigenLayer in 2024, where they were allocated tokens, and the community started hating them for it.
Poor guys making peanuts in the EF (compared to FAANG companies and AI research labs) got hate because they’re making money and helping a protocol that is not Ethereum, but the separate protocol that wanted to make Ethereum better.
Are you stupid? Sometimes I feel like if you’re an honest and hard-working person in Ethereum, you’re not allowed to earn money and are just expected to be a slave for the sake of “recognition” from the Ethereum side.
EF was constantly selling ETH to fund different operations, initiatives, and research. But maybe pay your researchers first?
Zero tolerance for adaptability
“Day 1. Ethereum is going to win. The most decentralized blockchain with the highest uptime.”
We hear this every day, just as we hear excuses from Ethereum every day.
Yes, Ethereum is expensive and slow. But we have rollups, use rollups, rollups are Ethereum!
Yes, ETH’s price lags behind everything. But Ethereum has the largest developer ecosystem, we have a strong foundation, the demand will follow.
Ethereum is the most decentralized blockchain! Solana sucks, they don’t have client diversity.
Ethereum has 100% uptime! Solana sucks, it went down multiple times.
Ethereum has lower network activity than Solana. Well, that’s because Solana’s activity is spam and memecoin gamblers. We’re an ethical chain!
Same excuses, same answers, same responses over the last years. Everything is shit besides Ethereum and rollups. If Ethereum underperforms in any metric, we say it’s day 1, we know what we’re doing, there is no place better than Ethereum.
Everyone is tired of the excuses that the community makes over and over again.
Ethereum feels like an old rich grandma who can barely walk and denies any innovation, but gives money to her kids and grandkids who parasite on her.
Reforms
I was finishing this essay just a few hours before Vitalik tweeted that the rollup-centric roadmap was a failure and that they needed to find a different path and scale L1.
You know what, I’m happy when people realize their mistakes, it takes bravery to say this out loud. But I think it might be too late. Ethereum has found a path it needs to take over the long term again, but things are still moving slowly.
The EF had some changes recently: new leadership, treasury transparency, R&D restructuring, and lots of other things. The EF started hiring new young talents from the devrel and marketing side like Abbas Khan, Binji, Lou3e, and others.
But changes need to happen fast. Ethereum has to sprint to prove everyone wrong.
Let’s see if, after those reforms and changes in the EF, we can see Ethereum becoming an object of excitement rather than an object of blind delusional belief and disappointment.