Is Ethereum Stepping Down from the Throne?

In 2018, while writing Korea’s first Ethereum technology book, “Core Ethereum,” I developed both deep respect and, at times, frustration toward Ethereum, which ushered in the era of smart contracts. It was an innovative technology, but watching it face numerous challenges over time has been a bittersweet experience. Still, I remain hopeful for Ethereum’s successful evolution, believing it is essential for the healthy growth of the blockchain and cryptocurrency ecosystem.

 

But the reality is far from easy. Trying to overhaul Ethereum’s core structure without stopping the network-like “replacing the wheels on a moving train”-is almost impossible now that the platform has grown so large. Turning to Layer 2 (L2) chains to solve scalability issues is a logical move in this situation. However, it’s concerning that L2s are taking a significant share of revenue, and since the switch to Proof of Stake (PoS), Ethereum’s own profitability has weakened.

 

Why does Ethereum seem to be falling behind in the face of so many challenges? And why does the price of ETH keep dropping? Let’s explore the reasons together and look at the future strategies proposed by Ethereum’s creator, Vitalik Buterin.

 

Why is Ethereum losing ground to competitors?

• Faster, cheaper rivals: New blockchains like Solana, Cardano, and Polkadot are catching up quickly with faster transaction speeds and much lower fees. While Ethereum still boasts strong decentralization and a vast ecosystem, it’s clearly lagging in performance and cost.
• Performance and scalability bottlenecks: Even a slight uptick in network activity can slow down transactions and send gas fees soaring. As Ethereum focuses more on L2 solutions, critics argue that the mainnet (L1) itself is losing value and competitiveness. As a result, users and developers are starting to migrate to more efficient alternatives.
• Cooling on-chain activity: The explosive growth of NFTs and DeFi has slowed, and activity on the Ethereum network has visibly declined. This leads to lower network fee revenue and saps vitality from the ecosystem.
• Eroding market dominance: As new competitors offer better usability, speed, and economic sustainability, Ethereum’s market share continues to fall. Its once-unquestioned dominance is now in doubt, raising concerns about its long-term prospects.

Why is ETH price continuing to fall?

Beyond Ethereum’s own issues, several factors are driving ETH’s price down:

• Unstable macroeconomy and investor sentiment: Global economic uncertainty and external factors like US-China trade tensions have made investors wary of risk assets, putting downward pressure on the entire crypto market, especially ETH.
• Whale sell-offs and liquidations: Recently, large investors (“whales”) have sold significant amounts of ETH, triggering forced liquidations in derivatives markets and accelerating the price drop. The growing ETH balances on exchanges signal increased selling pressure.
• Disappointing ETF performance and institutional outflows: Despite high hopes for an Ethereum spot ETF, actual demand has been underwhelming. Instead, institutional investors are pulling money out, with substantial outflows from Ethereum-related funds in recent weeks.
• The downside of L2-centric strategy: As mentioned earlier, the focus on L2 scaling is seen by some as undermining ETH’s intrinsic value. Declining network usage and on-chain activity are major factors behind the price slump.
• Security incidents and declining trust: Recent bridge hacks and other security breaches have shaken investor confidence, creating a vicious cycle of distrust and further selling.

 

Ethereum at a Crossroads

 

Vitalik Buterin’s Solution: Make Ethereum Simpler! [Simplifying the L1]

In the midst of these challenges, Ethereum’s creator Vitalik Buterin published a thought-provoking blog post on May 3: “Simplifying the L1.”

 

In this post, Vitalik shared his ambitious plan to transform Ethereum over the next five years into a global infrastructure that is as simple and robust as Bitcoin. He aims to simplify the protocol, introduce a more efficient virtual machine (VM), and improve both consensus and execution structures. He emphasized that simplicity is the key to trust, resilience, and long-term survival.

 

Having analyzed Ethereum’s code in the past, I remember the complexity and the development difficulties it caused. Vitalik’s pivot toward simplicity seems like a rational move. Complex code slows down feature development and bug fixes, and a development process centered around Vitalik himself had its productivity drawbacks. While rebuilding from scratch would be most efficient, it’s extremely risky to overhaul the mainnet when so many assets and services already depend on it.

 

So, setting a direction toward “simplification” is positive. But the real challenge is time. Achieving such a massive transformation will take years, and if other L1 blockchains keep expanding their ecosystems rapidly, Ethereum’s future will remain uncertain.

 

 

Summary of Vitalik’s “L1 Simplification” Strategy

Here are the key points of Vitalik’s proposed L1 simplification strategy:

• The goal: a global ledger, the focus: scalability and resilience. To become the world’s ledger for important data (assets, records, finance, governance, etc.), Ethereum must keep improving scalability and resilience. Recent upgrades like the Merge and hard forks are steps on this path.
• “Simplicity is the answer.” Keeping the protocol simple, like Bitcoin, is crucial for trust, maintenance, security, and wider participation. Complexity increases development costs, the risk of bugs, technical monopolies, and security vulnerabilities. (Vitalik acknowledges Ethereum’s past complexity as a problem.)
• A simpler consensus layer: New consensus designs (like Beam Chain, 3-slot finality) are based on a decade of research (ZK-SNARKs, staking economics, etc.) and aim to drastically reduce code complexity and risk by cutting out unnecessary concepts, reducing the number of validators, using STARK technology, and simplifying P2P structures.
• Major overhaul of the execution layer: EVM → RISC-V? The current EVM (Ethereum Virtual Machine) is too complex, making development, maintenance, and security difficult. Replacing it with a minimal VM like RISC-V could boost performance (potentially 100x) and greatly simplify the system. Compatibility with existing smart contracts could be maintained by running an EVM interpreter on the new VM, and most precompiles (special operations) could be removed.
• Standardization for less complexity and more efficiency: Unifying standards for data recovery code, data formats (SSZ), and tree structures (binary trees) across layers will reduce overall complexity. Switching to more efficient binary trees, in particular, can improve verification and reduce data costs.
• Long-term roadmap and cultural change: Setting concrete goals, such as limiting Ethereum’s core code size to Bitcoin-like levels, and separating rule-handling code from core logic, will help foster a development culture that values simplicity and encapsulated complexity.

In Conclusion

Ethereum is undoubtedly at a critical crossroads. Amid fierce competition, technical limitations, and falling prices, Vitalik Buterin has chosen “simplification” as the way forward. This may be the essential step for Ethereum’s long-term survival and another leap forward.

However, this plan will require significant time and effort, and the path will be full of obstacles. Can Ethereum successfully “change the wheels on a moving train” and reclaim its position at the center of the blockchain ecosystem? That’s why we need to keep a close eye on Ethereum’s next moves.