Critique of Multicoin's Interview "Why is ETH Down So Bad?": From Ethereum's Vision and Development Roadmap to Current Challenges
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Critique of Multicoin's Interview "Why is ETH Down So Bad?": From Ethereum's Vision and Development Roadmap to Current Challenges
L2 and L1 are not in a competitive relationship but a master-slave relationship, and L2 does not dilute Ethereum's value capture capability because the legitimacy of L2 originates from L1.
Navigating Web3 tides with focused insightsAuthor: Web3Mario
Summary: Last Sunday I thoroughly read a Bankless interview with Multicoin titled "Why is ETH Down So Bad?"—a truly brilliant and profound piece that I highly recommend everyone to read. In the interview, Ryan clearly illustrates the difference between Web3 pragmatism and fundamentalism, though I've already discussed this in detail in previous articles. Still, many of his points deeply resonated with me and prompted significant reflection. Indeed, Ethereum has recently faced a certain degree of FUD (fear, uncertainty, doubt). The immediate cause, I believe, is that the approval of ETH ETFs failed to spark a rally similar to what followed the BTC ETF approval. This has led some to reevaluate Ethereum’s vision and development trajectory. I have some thoughts on these issues that I’d like to share. Overall, I fully support Ethereum's vision as a social experiment—an attempt to build a decentralized, authority-free, even trustless "cyber nation"—and its rollup-based Layer 2 scaling roadmap. However, Ethereum faces two real challenges: first, restaking competes with L2 scaling, diluting ecosystem resources and weakening ETH’s value capture. Second, key influencers like the Ethereum Foundation are becoming increasingly aristocratic—protecting their reputations and thus lacking proactive engagement in ecosystem development.
Evaluating Ethereum’s success solely by market cap is shortsighted
First, I want to discuss the philosophical differences between Ethereum and Solana, and explain why judging Ethereum purely by market capitalization is misguided. How many of you are familiar with the founding backgrounds of Ethereum and Solana? Let me briefly recap. Ethereum wasn’t originally as ideologically rigid as it is today. In 2013, Vitalik Buterin, then a core contributor in the Bitcoin ecosystem, released the Ethereum whitepaper—marking Ethereum’s birth. At the time, the industry narrative was “Blockchain 2.0.” Do you still remember this concept? It referred specifically to leveraging blockchain’s decentralization to create a programmable execution environment, thereby expanding potential applications. Besides Vitalik, Ethereum’s founding team included five other key members:
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Mihai Alisie: Co-founded Bitcoin Magazine with Vitalik.
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Anthony Di Iorio: Early Bitcoin investor and advocate who helped promote and fund Ethereum in its early days.
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Charles Hoskinson: One of the early core developers, later founded Cardano.
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Gavin Wood: Author of the Ethereum Yellow Paper (technical specification), designer of Solidity, later founded Polkadot.
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Joseph Lubin: Provided crucial financial backing for Ethereum, later founded ConsenSys, a major player in the Ethereum ecosystem.
In mid-2014, Ethereum conducted a public fundraising via ICO, raising approximately 31,000 BTC (worth about $18 million at the time) over 42 days—one of the largest crowdfunding campaigns ever. Ethereum’s original vision was to build a decentralized global computer capable of running smart contracts and DApps of arbitrary complexity—a universal, borderless programming environment free from control by any single entity or government. However, ideological rifts soon emerged within the core team:
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Governance disagreements: Vitalik favored a decentralized governance model, while others like Charles Hoskinson advocated for a more commercialized, centralized structure with professional management.
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Technical direction: Gavin Wood developed differing views on architecture and language design, eventually leaving to found Polkadot—a project focused on interoperability and on-chain governance.
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Commercialization path: Some believed Ethereum should prioritize enterprise adoption and partnerships; others insisted it remain an open, decentralized developer platform.
After internal struggles, Vitalik’s crypto-fundamentalist faction prevailed. Those favoring blockchain’s practical integration with traditional industries and commercialization left to build their own projects. These early divisions mirror today’s contrast between Ethereum and Solana—only now the pragmatic protagonist is Solana, better aligned with traditional finance.
Vitalik thus became Ethereum’s de facto leader. This “fundamentalism” aims to create a censorship-resistant “cyber nation” through a decentralized online execution environment—a distributed “cyber parliament.” Users would fulfill all digital life needs via Ethereum-based DApps, freeing themselves from reliance on authorities, tech oligarchs, or even nation-states.
Under this vision, Vitalik’s efforts focus on two areas:
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Applications: Promoting non-financial use cases to enrich user data dimensions and foster sticky, diverse products—boosting Ethereum’s penetration into everyday digital life. Key themes include DAOs (decentralized collaboration), NFTs (cultural value), SBTs (non-financial identity), and prediction markets (social cognition tools).
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Technology: Maximizing execution efficiency via cryptography while preserving decentralization and trustlessness. This is reflected in Vitalik’s advocacy for Sharding and Rollup-based L2 scaling—offloading heavy computation to L2/L3, leaving L1 to handle critical consensus tasks, reducing costs and improving performance.
In contrast, projects like Solana, which prioritize blockchain’s utility in expanding traditional finance, have a simpler, profit-driven goal: how to increase a company’s P/E ratio. Whether to uphold values like trustlessness depends entirely on potential profitability. Thus, Solana embraces CeFi integrations without hesitation, adopting an open, inclusive stance. As Wall Street capital floods in, traditional finance gains influence over crypto—and Solana stands as both beneficiary and evangelist of this trend. As a profit-seeking entity, it naturally adopts a customer-centric mindset, explaining its superior user experience.
With this context, consider: are Ethereum and Solana competitors? In some ways, yes—specifically in offering borderless, 24/7 crypto-based financial services. Here, Ethereum outperforms Solana in security and system robustness (no frequent outages), though current UX remains problematic. Multiple L2 chains confuse new users, and bridging funds carries significant risk and psychological burden.
Yet on cultural identity as a “cyber nation,” Ethereum is unique. For a non-profit, humanitarian public good, assessing value purely by market cap is myopic. Think of it as an internet-native sovereign state formed by an subculture enhancing its governance via technology. The core lies in upholding a universal principle: censorship resistance through decentralization. This is a belief, a faith. That’s why Ryan says Ethereum enjoys a “human advantage”—as humanity’s highest-value cultural product, it inspires people beyond mere profit, enabling cold-start success akin to political revolutions. Imagine evaluating early America solely by GDP—it would be absurd. Nation-building takes far longer and faces greater challenges than founding a company, but its rewards transcend corporate metrics.
L2 and L1 are not rivals but master-servant—the legitimacy of L2 derives from L1, so value capture isn't diluted
The second point I’d like to rebut is Ryan’s central critique: that L2 represents “execution outsourcing,” diluting Ethereum L1’s value capture, and that mature L2s may eventually compete with L1, breaking cooperation.
On the contrary, I believe Ethereum’s Rollup-L2 path is correct. L2s, as low-cost, high-efficiency solutions, expand Ethereum’s application potential without sacrificing decentralization. They reduce data redundancy on L1, making the network more environmentally sustainable. They also allow Ethereum to explore edge cases—like CeFi collaborations or privacy innovations—under isolated risk conditions.
Calling L2 “outsourcing” is misleading. In business, outsourcing involves delegating low-margin operations to third parties, letting firms focus on high-value activities and cut management costs. But downsides include losing technological iteration control and facing rising, uncontrollable outsourcing fees—similar to how TSMC’s rise impacted U.S. and Japanese semiconductor industries.
L2 cannot be viewed this way. Instead, I see L2s as Ethereum L1’s “colonial system.” The key difference lies in the nature and enforceability of the contractual relationship—the source of legitimacy. L2s don’t handle transaction finality; they rely on L1 for settlement via optimistic or ZK proofs. L2s act more like agents or enforcers for L1 in specific domains—a master-servant, colonial relationship.
Think of the British Empire in India: colonial administrators and local elites managed taxation and governance under imperial oversight. The empire extracted profits in two ways: First, exclusive trade laws forced colonies to export raw materials (e.g., tobacco in North America) and trade only with Britain, profiting from industrial value-add. Second, direct taxation funded the metropole, enforced by military presence.
L2s serve as Ethereum’s value-capture proxies. Ethereum benefits in two ways: First, L2s pay ETH to L1 for finality—a kind of “finality tax,” or compensation for security. Second, due to the master-servant dynamic, ETH becomes the natural store of value within L2s, yielding seigniorage-like benefits. In L2 lending protocols, ETH is invariably the top collateral asset.
This master-servant relationship is hard to break because L2 legitimacy stems from L1’s finality—just as colonial rule relied on imperial military power. Breaking away would strip L2s of legitimacy, collapsing their economic logic. Most users choose them precisely because they’re backed by L1.
Ethereum’s real problems: Restaking’s vampire attack on L2, and the aristocratization of key Ethereum figures
Having addressed the above arguments, let me now highlight Ethereum’s actual challenges. I see two core issues:
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Restaking’s vampire attack on the L2 roadmap;
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The aristocratization of key Ethereum influencers.
In prior writings, I’ve detailed EigenLayer’s vision and direction. I hold EigenLayer in high regard—but from an Ethereum ecosystem perspective, it’s essentially a “vampire attack,” siphoning resources that should go toward L2 development into the restaking space. Worse, restaking fundamentally undermines ETH’s value capture.
Recall how Ethereum captures value from L2s: L2 operators must pay ETH for finality on L1—creating demand and anchoring ETH’s utility. This cost is fixed, independent of L2 activity, forcing operators to innovate and grow usage to maintain profitability. But restaking reuses Ethereum’s consensus at near-zero cost—operators merely bribe stakers (sometimes with future promises, recall the Points fiasco). There’s no incentive to expand use cases.
Moreover, restaking commoditizes consensus—letting users dynamically purchase security based on need. While convenient for buyers, it removes Ethereum’s leverage over L2s. No mandatory payments, no forced alignment.
As restaking and its derivatives attract massive capital, L2 development stalls. Ecosystem energy is wasted reinventing wheels—even square ones. No one focuses on building rich applications or capturing real value; instead, they chase narratives for funding. This is a misstep. Of course, from EigenLayer’s view, this is genius—cleverly monetizing the commons!
Another growing concern: Ethereum’s key figures are becoming aristocrats. Notice the lack of energetic leaders like those in Solana, AVAX, or even the old Luna ecosystem. Yes, they often fueled FOMO, but they boosted community cohesion and startup morale. I don’t agree with Ryan’s historical view, but I acknowledge that progress often hinges on individual brilliance. Yet in Ethereum, beyond Vitalik, few influential voices emerge—partly due to the founding team’s split, but also due to stagnant social mobility. Early participants monopolize most ecosystem gains. Imagine closing a $20B+ fundraiser (31,000 BTC)—you’d be set for life. Add Ethereum’s broader wealth creation, and it’s clear why early insiders adopt conservative strategies. Growth is riskier than preservation. Why push innovation when you can simply maintain AAVE’s position and lend your ETH for steady yield?
This state of affairs ties back to Vitalik’s leadership style. He excels as a spiritual leader—offering visionary, philosophical guidance. But as a manager, he seems disinterested. Hence Ethereum’s slow development pace. A joke: when Ethereum started designing sharding, domestic blockchains had already finished theirs. While decentralization and non-profit ideals play a role, Vitalik bears responsibility to actively address this bottleneck.
Still, I remain confident in Ethereum’s future. I believe in the altruistic, revolutionary vision behind it—the very reason I entered this industry, shaped my understanding, and formed my values. Even amid setbacks, as someone past youth, striving for ideals beyond money doesn’t seem so bad after all.
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@web3_mario
