Summary: This weekend, the social media landscape was buzzing with a new round of debates surrounding ETH. I believe there are two main reasons for this. First, Vitalik’s interview with ETHPanda sparked widespread discussion within the Chinese community. Second, the continued decline in the ETH/BTC exchange rate, especially in comparison to Solana (SOL), has led to significant dissatisfaction.

Regarding this issue, I have some thoughts that I would like to share. In general, I believe that the long-term outlook for ETH remains positive. There are no direct competitors in the market, and in Ethereum’s narrative, the core focus is on “decentralization” rather than simply the “decentralized execution environment,” and this fundamental aspect has not changed.

However, there are two main factors contributing to ETH’s current development bottleneck. First, the rise of the Restaking track has acted as a “vampire attack” on Layer 2 technologies, which diverts significant resources away from the Ethereum ecosystem. The core mechanism of Restaking, however, does not generate incremental demand for ETH, which directly prevents the application side from accessing sufficient development resources and user attention. As a result, promotion and user education efforts stagnate.

Second, key opinion leaders within the Ethereum ecosystem are becoming more aristocratic, forming a vested interest group. This has led to a stagnation of class mobility. Without sufficient incentives for developers, innovation has inevitably become sluggish.

Restaking’s Vampire Attack on Ethereum: How It Drains Resources, Hindering Application Development

This discussion has been touched upon in a previous article of mine, but I’d like to take the opportunity to revisit it today.

Ethereum’s official development strategy has consistently aimed to establish a fully decentralized execution environment through Sharding. In simple terms, this involves creating a distributed cloud infrastructure that is not controlled by any single entity. Within this cloud, applications can bid for computing and storage resources, and all resource allocation is governed by the laws of market supply and demand. Sharding was chosen as a solution because maintaining 100% redundancy of all data would be inefficient and wasteful. Instead, data is divided into separate “shards,” which are processed individually and then aggregated through a relay.

Given the complexity of technological iteration, the sharding strategy has undergone some changes. Ultimately, the community settled on Rollup-Layer2 as the mainstream approach. In this model, applications can be built on separate Layer2 chains, while Ethereum’s mainnet acts as the infrastructure for all application chains. The mainnet provides data finality and serves as a relay for information. This master-slave architecture is efficient and cost-effective, reducing application operating costs while ensuring security through decentralization.

At the same time, Ethereum developed a relatively self-consistent business model and economic framework for ETH. It switched from a PoW consensus mechanism to a PoS asset-based mechanism. In exchange, participants receive a share of the transaction fees on the mainnet. Moreover, each application chain must use the mainnet for data finality, paying gas fees in ETH. As long as the various Layer2 chains remain active, they indirectly drive the activity of Ethereum’s mainnet, thus enabling ETH to capture value from the broader Ethereum ecosystem.

However, the real issue began with the rise of ETH Restaking, exemplified by EigenLayer, which started gaining traction late last year. The native concept of restaking is not complex. For those familiar with DeFi, many projects focus on innovating around idle assets, often referred to as “nested” strategies. Restaking, however, is bolder, as it repurposes ETH staked in PoS and offers execution functionality through what is known as AVS (Alternative Validation Systems). While I appreciate the entrepreneurial creativity behind this direction, it has become the direct cause of Ethereum’s current predicament.

At that time, Layer2 technology had nearly completed its selection process, and mature technical solutions were already in place. It was a critical moment for applications to gain momentum—through faster iteration, increased market promotion budgets, and so on. Yet, the emergence of the Restaking sector has effectively acted as a “vampire attack” on Layer2. It strips Ethereum of its ability to capture value. This is because Restaking offers applications a “second consensus mechanism” that doesn’t require paying ETH on the mainnet.

For instance, using AVS and DA (Data Availability) layers, applications can purchase consensus without spending ETH; they can pay with any other asset. This shifts the entire DA market from Ethereum’s former monopoly to a duopoly with Restaking, which undermines Ethereum’s pricing power and directly impacts its profits.

Even more damaging, it siphons off scarce resources during the bear market. These resources should have been allocated to applications for promotion and user education. Instead, they were diverted into redundant infrastructure efforts. Today, Ethereum’s troubles stem from a lack of active applications, causing its value-capture system to falter. Those who have managed projects will know that timing is critical—releasing the right product in the right market at the right time is essential for long-term development, and any misstep can cause stagnation. It is a rather lamentable situation.

Of course, the core of this problem is also understandable—it’s a matter of the inefficiencies caused by decentralized governance. In a distributed and decentralized organization, different voices compete for resources and pursue development based on their interests, which benefits value capture during bull markets when innovation potential is high. However, in a bear market, the lack of unified resource management leads to strategic deviations and stagnation. In contrast, Solana’s company-style structure, which benefits from centralized efficiency, allows it to capture trends more quickly and implement targeted strategies. This is also why the Memecoin summer occurred on Solana.

Key Opinion Leaders and Stakeholders in the Ethereum Ecosystem Are Becoming Aristocratic, Forming an Exclusive Interest Group—The Developer Ecosystem Lacks Sufficient Incentives, Leading to Innovation Fatigue

In the Ethereum ecosystem, there is a notable phenomenon: the lack of active key opinion leaders (KOLs) like those in the Solana, AVAX, or even the former Luna ecosystems. While these leaders are sometimes seen as forces driving FOMO (fear of missing out), it is undeniable that they have played a crucial role in fostering community cohesion and boosting the confidence of entrepreneurial teams.

In Ethereum’s ecosystem, aside from Vitalik, it is challenging to identify other influential leaders. This issue partly arises from the early fragmentation of the founding team but is also tied to the internal class stratification within the ecosystem. A significant portion of the benefits from Ethereum’s growth has been monopolized by early participants. For instance, imagine being part of a fundraising round that raised 31,000 BTC (approximately $2 billion at current market prices)—even without doing anything, you would already have accumulated considerable wealth. The wealth generated within the Ethereum ecosystem has far exceeded this figure.

As a result, many early participants have adopted more conservative strategies. Maintaining the current status has become more appealing than pursuing further expansion. To minimize risk, they have become increasingly cautious, which explains their preference for conservative approaches when promoting ecosystem growth. For example, early participants only need to secure the stability of established projects like AAVE, while lending large amounts of ETH to leverage traders for consistent returns. In this scenario, there is little incentive for them to aggressively push new projects forward.

That being said, I believe the long-term trajectory of ETH remains sound. There is currently no direct competitor in the market. The core principle of Ethereum as a “decentralized execution environment” places greater emphasis on decentralization itself rather than the execution environment, and this fundamental positioning has not changed. Therefore, as long as resource integration is achieved and application development progresses, Ethereum’s future remains promising.

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