Ethereum's 2024: litigation, ETF, technological upgrades, and Trump

Unlike BTC, Ethereum (ETH) did not break its price record, but a lot has happened this year - from ETF to technical upgrades and so on.

Article author: Mat Di Salvo

Article source: Decrypt

Article Compilation: Ada, MetaEra

For Ethereum, 2024 seems to be a year with a lot happening, yet it also seems like nothing much is happening.

Although there is a lot of innovation, those who only want to make money by investing in the native currency of Ethereum are a bit disappointed - if the atmosphere on Crypto Twitter (also known as X) can be taken as a reference.

Upgrades like Dencun make operations on the network more affordable, and even President Donald Trump fully supports projects built on the ETH platform. But regulators have also taken strict measures, leading many to believe that the U.S. Securities and Exchange Commission (SEC) has taken a tough stance on this ecosystem.

The unexpected approval of the spot ETH exchange-traded fund (ETF) has turned the tide, but it has not caused the asset price to skyrocket like similar BTC products.

However, for the blockchain behind the second largest token in the cryptocurrency field, this is still an exciting and worth watching year. Let's review how all of this happened.

Regulatory Crackdown

In April this year, after the Ethereum Foundation announced that it was under investigation by government agencies, there were rumors that the SEC might launch a comprehensive investigation into Ethereum.

Subsequently, a top regulatory agency on Wall Street engaged in a battle with Consensys, one of the largest companies in the Ethereum field and a software giant (disclosure: one of the 22 investors of Decrypt)

The incident began with the SEC issuing a Wells notice to the company, which is a warning of a potential lawsuit regarding the alleged securities violations by its popular ETH wallet, MetaMask. ConsenSys then counterattacked by preemptively suing the SEC.

The company claims that regulatory authorities have considered ETH as a security for over a year and that their actions 'will penalize Consensys, as the company has always acted based on the government's assurance that ETH is not a security'.

Subsequently, the SEC sued Consensys, accusing it of conducting unregistered securities issuance and sales through MetaMask Swaps and Staking services.

In September, Consensys' lawsuit was dismissed by a judge. Trump's victory has pros and cons for the company: if Paul Atkins, nominated by Trump, is confirmed, the SEC will have a new chairman who supports cryptocurrency, but before that, Consensys has to lay off 20% of its staff in October, which the company attributes to strict regulation and litigation.

ETFs have an impact

After the spot BTC ETF is expected to be approved and achieve large-scale trading in the first month of trading, industry observers believe that ETH will not receive the same approval - at least not immediately - because regulators are not clear whether the asset is a security or a commodity.

But to everyone's surprise, the SEC expressed its approval. Two months after approval, the spot ETF began trading in July. However, when the price of Ether did not rise, disappointment seemed to spread.

The approval of BTC ETF will push the price of BTC to a historic high, but ETH Ethereum is not so lucky: as of the time of publication, it still needs to make up a considerable gap to break the record of $4,878 in 2021.

While the price of Ethereum has not skyrocketed like a rocket, the approval of ETF has also brought an important victory: the SEC no longer refers to it as a security.

Despite previously stating in 2018 that the asset is not a security, outgoing SEC Chairman Gary Gensler has refused to address the token's classification issue for years, and he has filed lawsuits against cryptocurrency companies, accusing them of selling unregistered securities.

However, the approval of ETFs indicates that regulatory agencies consider this asset to be sufficiently decentralized and therefore not classified as securities. At the same time, Wall Street also acknowledges Ethereum and its blockchain as an asset class - even though traditional finance has long struggled to understand Ethereum's value proposition.

The support of some heavyweight figures has also played a role in driving this, such as Larry Fink, CEO of BlackRock. He said earlier this year that he saw the "value" of Ethereum ETF and considered it an important step towards "tokenization".

In March, the asset management company launched 'BUIDL' (a tokenized fund running on the ETH network), and then joined the competition by launching its own spot ETF.

Even Trump is developing ETH

When elected President Donald Trump promised to make the United States the 'global capital of cryptocurrencies'.

As part of his focus on the digital asset agenda, he helped launch a project running on... you guessed it, the Ethereum network.

World Liberty Financial is a decentralized financial project, first revealed by his son Eric in August. Decentralized finance (DeFi for short) aims to automate and simplify lending or borrowing through blockchain-based protocols.

Most DeFi projects are built on the Ethereum blockchain, so it is not surprising that the Trump team chose this project, but it is still big news for the community. The project team stated in an exclusive interview with Decrypt's sister company Rug Radio that WLF will provide cryptocurrency lending services.

The project has been launched, but the token issuance has been somewhat slow - only open to qualified investors - but it is still in the early stages. Sources told Decrypt that the team also plans to launch a native stablecoin, although this market is indeed crowded.

Layer-2 solution dominates

From a technical point of view, ETH has also become cheaper. The network's Dencun upgrade has dramatically reduced transaction costs for its Layer-2 network. Such networks are faster and less expensive than mainnets, and Dencun's added "proto-danksharding" technology further reduces costs for users.

This is good news. However, on the other hand, the usage of Layer-2 is continuously increasing, which has drained value from Layer-1 Ethereum, leading some in the crypto space to believe that this is the reason behind the price performance decline of Ethereum this year.

In fact, VanEck's digital asset research director, Matthew Sigel, said in October that he expects the price of Ethereum to reach only $7,300 by 2030, instead of the previously predicted $22,000, unless Ethereum achieves a 'model change'.

He proposed that the value extracted from ETH blockchain by Layer-2 networks is more than expected. Fortunately, ETH founder Vitalik Buterin and other industry experts are considering some changes, such as fee sharing models, which can provide more balance to the ecosystem and prevent Layer-2 networks from excessively extracting value.