With the ETH/BTC exchange rate once again plummeting below 0.05, Ethereum has found itself the target of widespread mockery.

The opaque spending of the Ethereum Foundation ignited the fire, which quickly spread to various FUDs about Ethereum. For a time, Ethereum’s supposed shortcomings—less activity compared to new public chains, a concentrated ideology, and a lack of innovative applications—became its original sins. Even Vitalik Buterin’s personal life came under attack. User disappointment with the price performance escalated into a systemic debate filled with criticism.

Looking back at Ethereum over the past year, aside from the endless nesting of staked assets, the promising narratives of Layer 2 solutions have also started to falter. With limited narratives, a sluggish price, and all-time low gas fees, even in the midst of Ethereum’s turbulent year, L2s have remained almost motionless. The reality of not following the price up or down has led to a continuous buildup of user discontent. Could Ethereum ultimately only remain standing on the grounds of its orthodoxy?

It’s time for Ethereum to find a new narrative.

Ethereum Foundation Under Fire

On August 23rd, the Ethereum Foundation made a significant transaction, transferring 35,000 ETH (worth approximately $94.07 million) to Kraken. While large-scale disbursements are common for the foundation, with data showing that they have sold 239,000 ETH since January 1st, 2021, this particular transaction ignited a firestorm of controversy within the market.

Speculation arose about the reasons behind such a massive sale and its potential negative impact on ETH prices. The Ethereum Foundation’s Executive Director, Aya Miyaguchi, promptly responded on X (formerly Twitter), stating that the transaction was part of the foundation’s fund management activities. She explained that the foundation’s annual budget of approximately $100 million primarily consists of grants and salaries, with some recipients only accepting fiat currency. Due to regulatory complexities, the foundation had been advised against conducting any financial activities for a significant portion of the year, and thus could not disclose their plans in advance. However, she emphasized that the ETH transfer did not equate to a sale and that a gradual sale might be planned in the future.

Far from calming the situation, this response only escalated the criticism. Despite holding over 270,000 ETH, the Ethereum Foundation had not disclosed detailed expenditure data in nearly two years, with the latest available report dating back to 2021. The executive director’s claim of a $100 million budget raised eyebrows, as the public questioned where such a large sum was being allocated. Ignas | DeFi further fueled the fire on X, revealing that the foundation had allocated a staggering $30 million in the fourth quarter of 2023, a more than threefold increase compared to the $8.9 million allocated in the third quarter. While the foundation’s support for innovative projects was acknowledged, the lack of comprehensive and transparent overall expenditure reports was heavily criticized.

Although several industry figures, including Sundial Mirage co-founder SIGNAL and former ChainNews editor-in-chief LiuFeng, expressed understanding of the $100 million budget, stating that considering the foundation’s massive scale, a $100 million operating budget is still within a controllable range. SIGNAL drew a comparison with Netflix, noting that Netflix, with a market value of $295 billion, pays $80 million in compensation for just two executives, while Ethereum’s market value is $332 billion, slightly higher than Netflix. In comparison, $100 million is already very prudent. However, the market still couldn’t suppress the barrage of criticism. The questioning of “non-transparent” spending refused to cease, and gradually escalated from lack of transparency to the foundation’s failure in discovering ETH’s value.

As the community’s discontent grew, the foundation finally responded. ETHGlobal member Hudson Jameson announced that the foundation was compiling a new expenditure report, consolidating data from 2022 and 2023, which would be released before the Devcon SEA conference in November.

Hudson provided a visual representation of the approximate expenditure allocation. In 2022, the largest expenditure was on L1 research and development, accounting for 30.4% of the total. This included funding for external project teams and internal initiatives, with internal spending constituting 38% and external spending making up 62%. Community development was another significant area, accounting for 21.8% of the budget.

In 2023, the largest allocation shifted to funding for new institutions, including projects like Nomic Foundation, 0xPARC, and L2BEAT, which accounted for 36.5% of the total. Interestingly, founder Vitalik Buterin revealed in the comments that his annual salary was 182,000 Singapore dollars, sparking further discussion. Many supporters praised Buterin as a true builder for making such a significant contribution at such a modest salary.

Public opinion seemed to be shifting, but the underlying reason for the controversy remained the disappointing price performance of ETH in recent years. The scrutiny of the Ethereum Foundation was merely the surface-level catalyst.

Ethereum Without A New Narrative

Ethereum has lacked a compelling narrative since last year.

When looking back at the development of blockchain, besides Bitcoin as the value anchor, Ethereum is truly the one that has been widely adopted in applications. This world computer has undoubtedly played its role. From the DeFi frenzy in 2020, to the NFT and GameFi hype in 2021, and then the MEME craze, Ethereum has been an indispensable part of every industry breakthrough. Data supports this: as of August 29th, according to DefiLlama, Ethereum’s TVL reached $47 billion, accounting for 56.37% of all public chains, making it the undisputed leader. Naturally, ETH’s price has also soared from a few hundred dollars to around $2500 today, firmly securing its position as the second-largest cryptocurrency after BTC.

So, what narrative does Ethereum have now? Since Ethereum’s transition from POW to POS, technical upgrades have been the primary narrative, and Layer 2 has been the focus of ecological hype. However, after that, the internal narrative effect weakened, and ETFs became the new external narrative. But in reality, regardless of the narrative, none of them have been able to truly drive the key indicator—the price of ETH. In sharp contrast is the continuous strengthening of BTC as a value currency. The weakening of ETH relative to BTC is evident from the exchange rate, currently only 0.042, compared to 0.07 a year ago.

Even without comparing it to BTC, in terms of price trend, ETH’s growth has begun to frequently underperform other coins like SOL and BNB. The weakening of the coin price can be seen as a reflection of the decline in activity, while the decrease in Gas directly reflects the weakening of the ecosystem. According to Etherscan data, Ethereum’s average Gas is currently 0.758 Gwei, reaching a historical low. Of course, the introduction of “Blob” in the Cancun upgrade played a role, but such low Gas most directly reflects the lack of popular applications on Ethereum. The Block’s data also shows that Ethereum’s monthly transaction volume is at its lowest level in months.

Reality also confirms this. The DeFi Summer is temporarily difficult to replicate, NFTs and GameFi have plummeted, and even the MEME narrative has been besieged by Solana. With the rise of ecosystems like Ton and Base, the market is inevitably filled with pessimistic voices, and the narrative of Solana surpassing Ethereum is constant. Additionally, being ranked third in token holder count, seventh in monthly active users, and eleventh in transaction count, the data seems to not match Ethereum’s leading position.

Under this background, discussions about the feasibility of the Ethereum system have gradually fermented, and the transition to POS has become a new point of contention. Regardless of in-depth discussions about security, the increasing complexity of the protocol due to scaling needs, the complexity of the development direction, the complexity of MEV and Flashbot, and the complexity of governance have all formed a dense cloud over the Ethereum building, further increasing its vulnerability.

Discussion of Ethereum by industry insiders on X, source @NPC_Leo

Taking Rollup, which now accounts for 87% of all daily transactions, as an example, under this scaling solution, Gas fees have been successfully reduced significantly, but the inflation that was avoided through the mechanism has reappeared. Some analysts believe that centering on Rollup can drive L2 to absorb Ethereum’s space, bringing long-term traffic and fees. However, in actual use, L2 may develop unique ecosystems and split into independent chains, reducing L2’s contribution to Ethereum fees.

It is undeniable that most of Ethereum’s L2 currently tends to choose a commercial narrative-level staking leverage nesting doll, introducing shared components to layer 3 application chains. Even if this path is not chosen, the L2 narrative has gradually diminished, the technical upgrade dividend has decreased, on-chain data has not met expectations, and ZKS and Blast have performed poorly after token issuance.

Under this background, the market’s dissatisfaction and disappointment with Ethereum have gradually accumulated, finally erupting against the foundation. Three Arrows Capital founder Zhu Su frankly stated that the problem with the Ethereum Foundation is not that they are selling tokens when they have not yet discovered value, they were born to be dumpers, the biggest problem is that they cannot provide a coherent roadmap and effective leadership for the ecosystem.

Web3 risk investor @LordWilliamUK was even more aggressive, listing six sins of the Ethereum Foundation, claiming that the foundation has been politicized and besieged by capital, focusing on paper research rather than actual innovation, having opaque spending, ignoring application scenarios to maintain orthodoxy, losing quality potential projects, and having slow iteration.

Some people even went as far as targeting Vitalik personally, hoping that he would pay more attention to the coin price and ecosystem development, rather than his personal life. Vitalik responded interestingly by directly posting the code he had written in the past two months.

Ethereum: Without Price, It’s Just a Fish Out of Water

Despite numerous challenges facing Ethereum, its idealistic founder seems rather optimistic. He has repeatedly called for the team to focus on development while leaving the price to fate. He has also stirred controversy by stating that Ethereum’s biggest problem is its “excessive financialization.” Recently, he faced backlash for expressing his dislike and criticism of DeFi. Some industry insiders have jokingly remarked, “If it weren’t for DeFi, Ethereum’s price might still be stuck at $400.”

Is Ethereum truly failing? Opinions vary. Undoubtedly, Ethereum has an incredibly strong community, and ETH-related assets remain a crucial cornerstone of the entire market. ETH is also the only cryptocurrency besides BTC that has been recognized by institutions and successfully included in ETFs. Even in the mainstream world, Ethereum is highly regarded. Standing tall amid waves of new public chains touted as “Ethereum killers” proves Ethereum’s solid foundation, and its builders remain committed to long-term cultivation, focusing on technical utility and conveying values.

However, as Ethereum has evolved, it has transitioned from an early, enthusiastic geek culture to a mature, stable phase of large-scale development, and its growth rate has gradually slowed. When Ethereum was rapidly developing, any problem could be solved by focusing on technology. But as development began to slow down, issues surfaced, occasionally poking at users’ sensitive nerves with tiny barbs.

Especially in the current market with limited liquidity, finding new stories and new applications has become more important, even for Ethereum. My friend Xiao Ye once mentioned, “There’s no need to change. Even without fancy things like Layer 2, BTC can benefit from the overflow of US dollar liquidity. But all coins other than BTC must grow. Only growth can bring in new liquidity. Once growth stops, it will slowly fall behind…” These words are not unfounded. The poor performance of the ETH ETF since its launch and institutions’ somewhat negative views on Ethereum also indirectly confirm this point.

In September 2018, when Vitalik was pressed at an industry summit about his views on the sharp drop in ETH prices, he mentioned that the price was not that important and helplessly stated, “Stop asking about the price.” He later concluded the discussion by saying, “If ETH has no future, then neither do other digital currencies.”

Four years later, he might still answer the same way, but is that really the case? Ethereum’s orthodoxy implies a promise that needs to be fulfilled: project parties hope to obtain Ethereum’s technology and traffic to get a piece of the pie; users hope that ETH can always go up to meet their growth expectations. And all of this requires Ethereum to always be on the move. Without actual benefits, it is not impossible for both parties to scatter like birds and beasts at the fall of a tree.

Recently, Matrixport trader “Miner Zhaobei” wrote an article on his public account stating that his strategy fund, “Liu Yuan,” which has stable unilateral risk control, had wiped out all of its bull market gains in just one week due to Ethereum’s one-way free fall. “Now, the net worth is gone, but the position is still there.” Although many comments jokingly blamed “little V” and not the teacher, it also reveals a glimpse of users’ narrow-minded view of Ethereum.

Vitalik might be wrong about the importance of price. In a world driven by profit, a cryptocurrency without a price fluctuation is like a fish out of water.

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