Ethereum's Authority Faces Challenge: How Are Vitalik and the Foundation Handling the Disputes?
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In the blockchain space, Ethereum has long been hailed as the "King of Public Chains" due to its breakthroughs in decentralized finance (DeFi) and smart contract technology, making it an industry benchmark. However, Ethereum is currently facing a series of challenges, including technical bottlenecks, community divisions, and issues of financial transparency. These factors are gradually diminishing its former glory. Concerns about its sustainability and technological outlook are growing, impacting Ethereum's reputation and future direction. Despite the negative voices, there are still positive views and hopes for its future.
1.The Controversy Between Vitalik Buterin and DeFi
Ethereum founder Vitalik Buterin’s recent statements on DeFi (Decentralized Finance) have sparked widespread controversy. DeFi, a key component of the Ethereum ecosystem, aims to provide financial services through blockchain technology. However, Vitalik's views on DeFi are not entirely accepted by the community.
KOL strobie reeeee publicly criticized Vitalik on social media for his poor communication on the topic of DeFi, stating: "Vitalik, I think one of the reasons ppl have confusion or frustration about your views on DeFi is due to a miscommunication - It seems that in your view, 'DeFi' means the 2021 farming craze ponzi schemes; but to a lot of other ppl (I would say the majority), 'DeFi' means lending/borrowing on money markets like Aave, CDP like RAI (you mentioned too!), synthetics, etc. Those are all healthy applications of decentralized finance - the yield comes from borrowers, trading fees, etc... I agree that lots of the 'ponzinomics' that got plugged into the DeFi eco can only mean temporary boosts in some metrics, but that is not all of DeFi."
In strobie reeeee's view, Vitalik's perspective overlooks the healthy applications within DeFi, particularly the real value of projects like Aave, RAI, and Synthetics. reeeee pointed out that Vitalik seems to equate DeFi with "Ponzi schemes" while ignoring its potential as a decentralized financial tool.
In response, Vitalik stated that he is concerned that the returns from DeFi primarily rely on fees paid by those trading crypto tokens. While he acknowledges that DeFi may have its merits, he believes its growth potential is limited and that it cannot become the "breakthrough innovation" needed to promote crypto technology to a broader market.
Vitalik's response did not quell the controversy; instead, it sparked further rebuttals. A partner at Electric Capital pointed out that Vitalik's views apply to all financial sectors, while KOL PaperImperium stated that Vitalik's comments reflect a misunderstanding of human economic history. Alphaverse Capital's CEO, @cryptohuntz, also questioned Vitalik's perspective, arguing that his argument does not hold up.
This controversy not only reflects differing views on Vitalik’s personal opinions but also reveals the community's varied expectations for the future development of DeFi. Vitalik’s concerns and the opposing views seem to indicate a cautious attitude toward DeFi's continued growth, whereas the community holds a more optimistic outlook. This divide could influence Ethereum’s future strategy adjustments and ecosystem development.
2.The Trust Crisis Triggered by Foundation Spending
The Ethereum Foundation’s recent financial operations have also become a point of contention. On August 25, the Ethereum Foundation transferred 35,000 ETH, raising concerns within the community about its financial transparency. Community members questioned the Foundation’s spending reports, believing that the Foundation’s financial situation lacks sufficient openness and transparency.
Josh Stark, a member of ETHGlobal, responded to these concerns, stating that the Foundation is preparing an updated spending report, expected to be released before the Devcon SEA conference in November. The report will cover expenditures for 2022 and 2023, including detailed information on both internal and external spending.
According to Josh Stark, the Foundation's expenditures are divided into internal and external categories. Internal spending includes funding for Ethereum core development teams, such as Geth, Privacy and Scaling Explorations (PSE), Solidity, cryptography research, Robust Incentives Group, and Devcon. External spending includes grants to related organizations like the Nomic Foundation, Decentralization Research Center, L2Beat, and 0xPARC Foundation.
Nevertheless, the issue of the Foundation's financial transparency remains unresolved. Many community members hope that the Foundation will provide more detailed and transparent financial reports to restore trust in its management and use of funds. Resolving this issue is critical not only for the Foundation's credibility but also for Ethereum's future development and community support.
3.Challenges and Opportunities in Ecosystem Development
The development of the Ethereum ecosystem is another key topic of discussion. Since 2021, the number of new developers in the ETH ecosystem appears to have decreased, raising concerns about the construction of the Ethereum ecosystem. In contrast, other platforms, such as Solana, have attracted a large number of young developers and innovative projects. Data shows that the SOL/ETH growth rate reached 300% over the past year (right chart), while the ETH/BTC ratio dropped by 50% over the past two years (left chart), with Ethereum’s market capitalization relative to Bitcoin halving during this period.
MacroMate8, the Head of Risk at Ethenalabs, pointed out that the rapid development of platforms like Solana and their active developer communities are putting increasing competitive pressure on Ethereum. However, Josh Stark cited data from the Electric Capital Developer Report to refute this view. He argued that Ethereum's success cannot be measured solely by the number of developers, and that the introduction of Layer 2 (L2) solutions will enhance Ethereum's overall performance and scalability.
Additionally, the CEO of CF Benchmarks holds an optimistic outlook for Ethereum's future. He believes that in the coming months, demand for Ethereum spot ETFs may continue to grow, and more wealth management firms could offer related products to their clients. CF Benchmarks suggests that once wealth managers and financial advisors complete the educational process regarding Ethereum, the inflow of capital into Ethereum spot ETFs will increase, further driving Ethereum's development.
These perspectives indicate that despite the competition and challenges Ethereum faces, it still has significant market opportunities and potential. The construction and expansion of its ecosystem will be crucial for Ethereum's future growth, and how it responds to challenges from other platforms will determine whether Ethereum can maintain its leadership in the blockchain space.
4.Future Outlook: Patience and Hope
Despite the multiple challenges Ethereum is currently facing, some remain optimistic about its future. There are views suggesting that the 100,000 ETH sold by the Ethereum Foundation in 2020 has experienced significant price appreciation, indicating that Ethereum still holds potential value. Therefore, even after facing a greater trust crisis, Ethereum may still achieve breakthroughs in the future.
Nick Tomaino, founder of 1confirmation, is also positive about Ethereum's future. In his Q2 2024 LP letter, he clearly stated that Ethereum's market capitalization could surpass Bitcoin's within the next five years. He explained that while Bitcoin has a clear narrative as "digital gold," Ethereum has been the most influential blockchain in the crypto space over the past five years. As more wealth management firms enter the market, Ethereum’s value and application potential may gain further recognition.
Mads Eberhardt, Senior Cryptocurrency Analyst at Steno Research, offered suggestions for Ethereum’s recovery. In a post on X, he stated: "Looks like DeFi's Total Value Locked trails the USD one-year forward interest rate by three months-moving in the opposite direction. In short, the USD rate is the key driver for DeFi." He believes that interest rates are the key factor influencing DeFi's appeal, as they determine whether investors are inclined to seek high-risk opportunities in decentralized finance markets. Changes in interest rates could affect the performance of the DeFi market, thereby impacting Ethereum's overall development.
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5.Conclusion
Overall, Ethereum, as a representative of blockchain technology, was once endowed with boundless expectations. However, current controversies and challenges indicate that Ethereum will need to address many complex issues in its future development. Nonetheless, Ethereum has weathered greater trust crises before, so maintaining patience and hope for its future development might be the most appropriate attitude at present. Ethereum's future will depend on how it addresses current challenges, adjusts its strategies to adapt to the ever-changing market environment, and continues to attract and support developers and users. Only through continuous innovation and improvement can Ethereum maintain its leading position in the blockchain field and realize its potential in decentralized finance and smart contracts.
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