When the wall falls, everyone pushes; is Ethereum hitting a dead end? Does it still have a chance?
TechFlow Selected TechFlow Selected
When the wall falls, everyone pushes; is Ethereum hitting a dead end? Does it still have a chance?
Let's examine the seven controversial issues currently debated around Ethereum and assess their merits.
Navigating Web3 tides with focused insightsAuthor: Mu Mu, Baihua Blockchain
Recently, due to prolonged underperformance, criticism toward Ethereum has increased. Compounded by the poorly timed controversy surrounding the Ethereum Foundation's alleged "dumping" of ETH, it seems like when one wall falls, everyone pushes—once again raising concerns about Ethereum's "future." So this time, can Ethereum successfully overcome this hurdle?
01 Debate: Ethereum's "Seven Sins"
It seems that whenever the market turns sour, certain projects or institutions become scapegoats. This time, surprisingly, it’s Ethereum—the project consistently ranked second in market cap. Recently scrolling through social media, one can't help but notice prominent institutional partners and well-known KOLs voicing various criticisms against Ethereum, while die-hard supporters push back. Today, let's examine these debated "seven sins" of Ethereum and assess their validity:
1) Is Ethereum’s Layer2 roadmap flawed?
The development and deployment of Layer2 solutions have significantly reduced transaction fees within the Ethereum ecosystem—and also brought down ETH’s price, something many did not anticipate. After all, just a few years ago, there was great excitement and optimism around the Layer2 roadmap: finally, blockchain scalability issues were being resolved; technological bottlenecks were being broken.
Solving old problems created new ones. Critics now point to the Layer2 strategy as the core reason behind ETH’s price stagnation, arguing that Layer2s “parasitize” and “drain” Ethereum—they capture much of Ethereum’s liquidity while returning little value to the base layer, leading to diminished activity on Ethereum mainnet and thus weakening ETH’s performance.
This argument has been discussed many times before. On the surface, yes, Layer2s appear to have taken market share from Ethereum mainnet, making on-chain activity temporarily quieter. But ironically, this actually demonstrates the success of Ethereum’s Layer2 strategy. Both Ethereum mainnet and Layer2 are part of the broader Ethereum ecosystem. Most users and liquidity remain within the Ethereum ecosystem without truly leaving. Moreover, with Layer2s becoming increasingly attractive, we see almost no new competing public chains emerging anymore.
Consider a city plagued by traffic congestion. Several companies build subway lines, diverting people underground. Suddenly, road traffic declines, and taxi drivers protest against subways. But soon, the entire city benefits from improved infrastructure—becoming more competitive, attracting talent and investment. The expansion of underground transit revitalizes urban development. As the city grows larger, everyone wins.
Similarly, Ethereum’s scaling efforts aim to lay the foundation for mass adoption across its ecosystem. Moreover, fund transfers between Layer2s are highly efficient, and interoperability challenges are temporary. Short-term price weakness isn’t enough to discredit years of research into layered and modular scaling architectures.
2) Is inflation rising?
Ethereum’s EIP-1559 significantly lowered its inflation rate, and for a long period after transitioning to Proof-of-Stake (PoS), Ethereum even experienced negative inflation. However, as on-chain activity declined, gas prices dropped, and staking/restaking caused PoS participation rates to surge, the amount of newly minted ETH began exceeding the amount burned—leading Ethereum into an inflationary phase. According to Ultra Sound Money data, Ethereum issued 70,000 new ETH over the past 30 days, resulting in an annual inflation rate of 0.713%.
Critics seized upon this, claiming it as evidence of Ethereum’s impending doom—warning of a potential “death spiral.”
However, what many overlook is another data point from Ultra Sound Money: despite widespread bearish sentiment and extremely low on-chain activity, Ethereum’s current annual inflation rate remains lower than that of Bitcoin—a chain often hailed as “low-inflation.” While the difference may seem small, keep in mind that Bitcoin currently appears stronger both in market performance and ecosystem vitality compared to Ethereum.
In essence, today’s situation stems precisely from the successful rollout of Layer2 solutions resolving scalability, coinciding with a broader market downturn. We mustn’t ignore the immense long-term benefits of building foundational infrastructure.
3) Did the Foundation dump ETH at the top?
Because the Ethereum Foundation has historically sold ETH near market peaks, some treat “Ethereum Foundation selling” as a sell signal. Against this backdrop, on August 24, when the Ethereum Foundation transferred 35,000 ETH to Kraken, it was immediately interpreted as a top-dumping move, sparking fierce backlash across the crypto community. Numerous KOLs and media outlets amplified FUD narratives suggesting the Foundation was cashing out.
In response, Aya Miyaguchi, Executive Director of the Ethereum Foundation, clarified on X: “This is part of our treasury management. The Foundation operates on an annual budget of approximately $100 million, primarily covering grants and salaries. Some grantees only accept fiat currency. For much of this year, we’ve been advised not to conduct any financial activities due to complex regulatory considerations, which prevented us from sharing plans in advance. Additionally, this transfer does not equate to immediate selling. Going forward, we will gradually sell ETH in a planned manner.” (The non-profit Ethereum Foundation previously announced plans to withdraw up to 15% of its holdings annually—in USD value—to support ecosystem initiatives.)
In short, the Foundation explained that the 35,000 ETH transfer was routine treasury management, and depositing funds into an exchange doesn’t mean they’ll be dumped all at once—it’s a gradual, structured process.
On August 30, the Ethereum Foundation released its Q2 funding allocation report, showing around $8.5 million distributed to nearly 100 community events and projects—including categories such as community education, technical R&D, innovation initiatives, developer tools, academic research, and ecosystem growth. Detailed information including project names, descriptions, and links were clearly listed. Browsing just a few of these funded project websites reveals global community tech conferences, university research teams working on cutting-edge topics, and tools enhancing developers’ experience on Ethereum—all reflecting a vibrant, globally active, and technically rigorous Ethereum community—an atmosphere rarely seen in other ecosystems.
So, is the Foundation’s $100 million annual budget justified? That’s subjective.
4) Are spot ETFs useless?
After Bitcoin’s spot ETF approval, BTC’s price made significant gains. In contrast, Ethereum’s spot ETF approval seemingly had little positive impact on ETH’s price.
Recall that a few years ago, Vitalik Buterin expressed skepticism about spot ETFs for crypto assets, suggesting we shouldn’t eagerly pursue large institutional capital—before gaining mainstream attention, the ecosystem needs time to mature.
Perhaps while Bitcoin and Ethereum’s mainstream adoption brings new capital inflows, it also invites tighter centralized regulation.
One thing is certain: institutional investors dominate U.S. stock market participants investing in crypto spot ETFs. These institutions aren’t exactly benevolent actors. As ETFs grow in size, they will increasingly influence the crypto market—both positively and negatively. If the market performs well and shows growth potential, they’ll pour money in; if conditions worsen, they’ll aggressively dump. Thus, spot ETFs merely follow trends. Under current conditions, they’re unlikely to provide meaningful upside support in the short term.
5) Lack of innovation?
Some so-called “Ethereum killer” communities have claimed Ethereum suffers from stagnant innovation and slow progress. To that, one can only say Ethereum is deeply misunderstood. The truth is, over the years, the Ethereum community has consistently led technological innovation in the crypto space. Innovations in token economics and technology—from EIP-1559, staking, restaking, Layer2, zero-knowledge proofs (ZK), data availability (DA), to modular and layered architecture—all originated within the Ethereum community. To this day, whether Bitcoin, Solana, or any other public chain, nearly all benefit from the open-source solutions and technological breakthroughs pioneered by Ethereum.
6) Does Vitalik run a dictatorship?
There are always those who accuse Vitalik of having too much control over Ethereum. Undeniably, Vitalik holds high stature as Ethereum’s co-founder, but that doesn’t mean the community lacks diverse voices. As a decentralized community operating transparently, while Vitalik’s opinions carry weight and receive attention, final decisions emerge only after broad discussion among developers and contributors.These outcomes result from extensive collaboration.Compared to founders of most crypto projects—with the exception of the vanished Satoshi Nakamoto—few are as humble and disinterested in fame and fortune as Vitalik.
At the end of August, Vitalik revealed in a comment that his annual salary from the Ethereum Foundation is 182,000 Singapore dollars—mere pocket change compared to CEOs of major international corporations earning hundreds of millions.
Additionally, the U.S. SEC has long investigated the Ethereum Foundation and related entities—including Vitalik himself. This year, however, the SEC dropped the investigation, indirectly confirming that the Ethereum Foundation and the network itself are sufficiently decentralized. As a founder, Vitalik cannot possibly wield unilateral power.
7) Did PoS lead to centralization?
This age-old debate still persists. Refer to this earlier article (Section 01). Anyway, nearly two years since Ethereum’s transition to PoS, looking back, Ethereum’s stable operation has already proven the security and reliability of PoS.
02 Summary: Tough macro environment leads to internal friction
The world works in strange ways. During bear markets, when Ethereum held strong, everyone praised it: “Impressive! Unmatched innovation! Bullish on the future!” Now that prices are down, everything it does is suddenly wrong.
Ever since Ethereum’s inception—from the DAO hack, to DApps being labeled as unproven, to the rise of DeFi—it has faced endless scrutiny. Yet the intensity of each debate precisely reflects how much Ethereum is watched and valued. It has long represented Web3 and the crypto market as an indispensable pillar.
The current state likely results mainly from insufficient external liquidity due to U.S. interest rate hikes. In such conditions, look at traditional internet giants already mired in trouble—even AI-focused unicorn startups can collapse due to lack of funding. Compared to previous bear markets, today’s crypto market is actually in relatively decent shape.
Limited liquidity means fewer new funds entering. Even though sophisticated “old money” investors with deeper crypto knowledge favor Ethereum, Bitcoin’s “digital gold” narrative better fits the current climate. Meanwhile, the meme coin frenzy diverts scarce new capital elsewhere—making things even harder for Ethereum.
Whether it’s macroeconomic downturn or liquidity crunch, these phases will pass. Innovation, real-world applications, and adoption in crypto and Web3 will accelerate to fill the gap. Eventually, everything will return to the right track.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
白话区块链
