As a Tokyo-based analyst with a global perspective, I've been watching Ethereum's evolution with a mix of admiration and growing concern. We have all seen what it can do technologically, the move to PoS, and the boom in its roll-up ecosystem. Beneath the surface lies a "dangerous divergence," a growing disconnect between Ethereum's technological prowess and the ETH token's perceived value. This isn’t merely another market cycle correction, but rather a strategic inflection point. The critical choices Ethereum decides on now will only aid Ethereum’s long-term survival. Are we witnessing the slow decline of a once-dominant empire, or does Ethereum have what it takes to adapt and reclaim its throne?
Narrative Problem: Is ETH Just Boring?
Let's be brutally honest: the ETH narrative is weak.…shilling innovation and disruption in a collective yet rampant echo chamber of speculative excitement and hype, Ethereum just feels…boring. Remember the ICO craze? Or the DeFi summer? Those were organic, powerful narratives that increased demand for ETH. Where's the new story?
Alon Muroch of SSV Network makes a very good point — Ethereum is too far gone to rest its laurels on its past successes. Institutions, which used to be a sure bet on Ethereum’s dominance, are now being courted by the Solanas, Cosmos and Polkadots of the world. And quite honestly, some of those suitors have better pickup lines.
Because this isn’t merely an exercise in marketing this is deeply tied to their identity. What does it mean to be an ETH holder in 2024? Is it simply fuel for gas fees? A stake in a decentralized network? Or something more? Ethereum needs to redefine its value proposition. It needs to become interesting again. Consider Apple’s brilliant narrative, or Tesla’s daring moonshot. Ethereum will require that same level of narrative ambition.
Imagine Ethereum as a once-beloved rock band. Sure, they’ve dropped a full lineup of critical and commercial smash albums, but their new effort is…whatever. For one thing, they haven’t lost the technical prowess, but the spirit, the feel is totally different. They need to rediscover their passion, write some killer new songs, and remind the world why they were the best in the first place.
Institutional Investors: The Lost Tribe?
It’s really that easy At one time, drawing in the big institutional investors was a foregone conclusion for Ethereum. Their deep pockets, paired with their validation of the technology, were viewed as key for explosive growth. That's no longer the case. Institutions have become more sophisticated, requiring crystal clear returns and clear value.
- Data: Market share data proves the shift. Ethereum's dominance is being chipped away by competitors offering faster transaction speeds and lower fees.
- Surveys: Institutional investors are voicing concerns about ETH's lack of a compelling yield and the regulatory uncertainty surrounding cryptocurrencies.
The problem isn't just technical. It's political. The new regulatory landscape with regards to crypto is a bit of a minefield. Vague rulemaking and arbitrary regulation are killing innovation and making large, institutional investment impossible. This is where Ethereum should be at the forefront. Second, it must be prepared to fight hard for clear operating rules by engaging vigorously with regulators, while showing its commitment to playing by the rules.
Think of attracting institutional investors as convincing a venture capitalist to invest in your startup. You need a deep business plan, a clear plan to profitability, and an experienced team that can deliver. Ethereum must signal that it is a serious and trustworthy long-term investment opportunity, rather than just a speculative investment asset.
Validator Power: Unleash the Based Apps!
Ethereum’s validator set is a huge, largely-environmentally-determined resource. Muroch’s idea of “based applications” is an exciting one. Overall, it’s a smart way to tap the security and infrastructure of the validator set to create new revenue streams.
This is where Ethereum has the potential to really put itself ahead. Different from Eigenlayer, which indirectly leverages restaked capital, restaking applications directly use Ethereum validators. This is more scalable, more secure and ultimately much more profitable.
The possibilities are endless. By creating these based applications, Ethereum can pull a ton of value back to ETH. Besides advancing its own interests, this strategy will affirm its position as the trust and security layer for the growing internet of value.
- Data storage
- Secure computation
- Decentralized identity
Think of the Ethereum validator set as a massive, underutilized factory. Right now, even with the tremendous ability to create amazing works, it’s only firing on about a quarter of its cylinders. “Place based applications” are arguably the new product lines that will unlock its full value.
Ethereum is at a crossroads. The choices it makes in the coming months will decide its fate. It needs to:
The clock is ticking. Ethereum must take the lead and take it boldly, or forever be left second best and out of the conversation. The decentralised future of this internet of value depends on it.
Ethereum is at a crossroads. The choices it makes in the coming months will determine its fate. It needs to:
- Craft a compelling narrative for ETH.
- Actively engage with regulators and attract institutional investors.
- Unleash the power of its validator set through "based applications."
The clock is ticking. Ethereum needs to act decisively, or risk fading into irrelevance. The future of the internet of value may depend on it.
