Can Ethereum Win Again? (Part II)
Three Things #167: April 27, 2025
In a few weeks Ethereum will celebrate its tenth anniversary. Yet the project and the community continue to struggle amidst internal divisions and differences in opinion about the direction of the project, and growing competition. Last week I wrote about three reasons Ethereum has been struggling, and about how as a result sentiment is lower than I’ve ever seen. The reasons I wrote about last week are largely cultural. Here’s three more reasons that are a bit more pragmatic.
Thing #4: Talent 🧠
As I mentioned last week, I worked at the Ethereum Foundation in various capacities between 2017 and 2019. I’ve been a part of a number of dysfunctional, poorly run organizations over the course of my career, which seems to be unavoidable when working at early stage projects led by the brilliant but autistic builders in this industry. Even by these low standards, the Ethereum Foundation was by far the most dysfunctional organization I’ve ever been a part of (more on this below), and as a result of this dysfunction I saw major issues attracting and retaining talent.
Talented people tend to be attracted to meritocracies, where they know they’ll make progress and be rewarded for working hard and doing good work. What I saw at the Ethereum Foundation was the opposite of meritocracy: I saw a severe allergy to talent. Unfortunately, this is also representative of the broader Ethereum ecosystem. I said a similar thing last week, and this will become a theme throughout this series: Ethereum has succeeded in spite of an extremely broken talent pipeline, and not because it’s doing a good job of attracting or retaining talent. It’s not.
My own experience at EF is an exemplar of this, and a microcosm of the broader talent issues in the Ethereum ecosystem. In my experience the people in positions of power and authority within EF were, by and large, not the people who should’ve been there. They weren’t people who were hired or promoted for meritocratic reasons. By contrast, they were friends of Vitalik, people Vitalik trusted for various, idiosyncratic reasons, and people who were exceptionally good at virtue signaling. While most of the people I met at EF were good, hardworking people, some weren’t good people at all. Some were in fact quite depraved and power hungry.
This is not the way to select the leaders of an organization for two reasons. One, because it doesn’t select for strong, capable leaders, and two, because it’s demoralizing to everyone else. It sent the clear message that you don’t succeed or do well at EF, or in Ethereum more generally, by working hard or doing well. Instead, you do well by being in the right place at the right time, and by cosying up to decision makers including Vitalik and cargo culting his values and behaviors. By and large I saw that the people closest to and “blessed by” Vitalik enjoy positions of wealth and privilege, with little to no accountability, whereas people in less fortunate positions, even those who work hard and do well, simply never get ahead.
I don’t want to say much about my own experience at EF since this isn’t about me personally, but I have spoken about it and written about it a little bit. What I saw at EF was an extraordinarily dysfunctional organization where the leaders had no idea how many people worked for them at any given time, where PhD-level contributors were routinely paid as little as $25/hr., where staff were routinely not paid on time, and which was riven by political battles with rival factions and Machiavellian scheming. During my time there I was never afraid to speak the truth about what I saw and experienced, and this made a lot of enemies among people who didn’t want to hear or face these uncomfortable truths.
I know many incredibly talented people who previously worked at EF, or in other capacities in the Ethereum ecosystem, and decided to leave for similar reason. I also know talented people who tried to join but were turned away for various reasons. In some cases, they ran into issues like the ones I described at EF. In some cases, they simply couldn’t find a well run, functional project or organization to join in the Ethereum ecosystem, and ended up elsewhere. In some cases, they weren’t fairly compensated for their work and ended up migrating elsewhere for better, fairer compensation. In some cases, they were turned off by the chaos and slow pace of progress, something I wrote about last week.
There’s no shortage of high profile examples. In my opinion, the best case studies are Ethereum “adjacent” projects such as NEAR and Monad. Why do these projects exist in the first place? Why aren’t the brilliant, passionate, hard working entrepreneurs and founders behind these projects working on Ethereum instead of building competing projects and ecosystems? And why aren’t their investors investing in Ethereum rather than in competing projects and assets?
It can be informative to consider how things work in the Web2 economy. If a builder wants to build a better search engine, and has a credible ability to do so, they roughly have two choices. They could go work at Google, which might compensate them handsomely with cash and equity if they’re able to deliver. Or they could launch a competing company and product, which Google would later acquire for a handsome sum of cash and/or equity. Either way, the builder is rewarded, the innovation ends up getting incorporated into the Google product stack and its ecosystem wins.
Ethereum doesn’t have the capability to do either of these things. Neither EF nor any other organization in Ethereum can offer a talented builder a handsome compensation package, including equity or the equivalent, to contribute to the base layer. And mergers and acquisitions basically never happen. In short, the economics are broken: Ethereum has no way to compensate founders for taking risks and building ambitious things at the base layer. EF pays its R&D staff a pittance compared to what they stand to earn if they found their own protocol or go work for a competitor. In response to criticism about this, EF has always maintained that the glamor and prestige associated with its brand should more than make up for this lack of risk-based compensation.
Even if the community and ecosystem supported the idea of attracting builders like those behind NEAR and Monad, both of which executed on and improved upon aspects of the Ethereum roadmap years before Ethereum could, there is simply no mechanism by which this could happen. There’s no treasury to fund this sort of work, and no actor to manage it. So the most ambitious projects and builders are forced to compete, even when they don’t want to.
I cannot overstate the degree to which this has hurt Ethereum, and will continue to. NEAR effectively shipped the original Eth 2.0 roadmap, including shards, when Ethereum could not. It could’ve, and arguably should’ve, been launched as Ethereum 2.0. The same thing is happening again today with Monad, which is now two full technical generations ahead of Ethereum. Monad could be launched as Ethereum 3.0. True, neither NEAR nor Monad are as decentralized as the Ethereum mainnet, but they’re orders of magnitude more decentralized than the existing rollups, support massive transaction throughput, and are a much better way to scale Ethereum (more on why in a moment). It’s fun, and a bit depressing, to imagine a world where Ethereum itself developed fast enough to keep pace with projects like this rather than falling so far behind, and this speaks volumes about what’s wrong with Ethereum economics and governance.
To be clear, there are many talented people working very hard on Ethereum today; I don’t mean to suggest that there aren’t. That has always been the case, and Ethereum still has the lead in terms of talent, but we need to consider rate of change and not just how things stand today. Ethereum’s lead in terms of talent is shrinking and I don’t believe Ethereum will maintain it for very much longer. Momentum alone isn’t enough anymore. There definitely is, or was, a certain prestige associated with doing R&D on Ethereum, but that star dust is fading for all of the reasons mentioned in this series.
For better or for worse, at least as long as our ecosystem remains as immature as it still is today, talent is still mostly a zero sum game, and Ethereum’s loss is a win for one of its competitors. I’ve seen a lot of brain drain from the Ethereum ecosystem lately: many talented, ambitious people have left to work on other things, and many of the ones that remain are feeling depressed and frustrated and are considering leaving. Ethereum needs to completely rethink and redesign its talent pipeline if it wants to remain competitive. Why should talented people come to work on Ethereum today, and why should they remain when they’re treated and compensated better elsewhere?
Nothing I’m describing in this series makes me more worried for Ethereum’s future than this talent problem. Any successful founder can tell you that talent is the lifeblood of their project and is absolutely essential for success. As with a nation state, once a blockchain ecosystem begins to experience brain drain it’s very difficult to reverse. Ethereum is, for now, still the category leader, but as we’ve seen so many times before the fate of a blockchain ecosystem, even a big, successful one, can suddenly reverse, and Ethereum should be doing everything in its power to prevent this.
Ethereum would’ve addressed this problem long ago if it had more mature governance and a better incentive system to attract and retain talent—in other words, if it did the absolute basic things that successful startups have to do in order to be competitive.
Thing #5: UX 🎨
I touched a little bit upon some of Ethereum’s usability issues last week, in the context of its research fetish and focus on ideological purity over practical usability. While Ethereum has always had, and still has, many usability issues—key management, time to finality, the cold start problem, all mentioned last week—in my opinion, by far the largest issue is fragmentation due to the complex rollup ecosystem.
Consider what travel used to be like 20 years ago. You’d show up in a foreign country and basically nothing worked. Your mobile phone didn’t work, and it wasn’t just a matter of installing a local eSIM from your favorite travel app: you needed a physically different phone in a different part of the world because global roaming standards didn’t exist yet. Your credit card wouldn’t work, and there was no tap to pay option: you needed to take traveler’s checks to a local bank to exchange them for mysterious local cash in order to buy anything. Of course there were no translation apps or map apps, either: you needed to do everything the old fashioned, slow, difficult way.
That’s what the experience of transacting on Ethereum feels like today, assuming by Ethereum we mean the entire ecosystem of rollups, each of which is its own sovereign domain. You need to manage dozens of accounts split among many different wallets, each of which has its own quirks and odd design choices and none of which are particularly well-designed or usable. Each rollup and each L2 has its own gas token, and it’s impossible to keep them all straight. Even when a rollup uses ETH for gas, even when using the same wallet address, it’s not easy to move your ETH from one chain to another. Needing to remember which accounts exist for which apps on which chains in which wallets is mind-numbingly frustrating, confusing, and error prone even for experts.
What’s more, bridges are a total disaster: they’re unreliable, insecure, charge high fees, and can take a long time to move assets (sound anything like traveler’s checks?). In fact, they’re so bad, most people use centralized exchanges like Coinbase or Binance as de facto bridges. Which sounds terrible and centralized, until you consider that not only are the bridges centralized, in fact so are the rollups themselves. They’re all centrally controlled by a small “security council,” which is a fancy name for a group of friends who, like Coinbase or Binance, could get together and arbitrarily shut down the chain or censor transactions anytime they like. In other words, they’re antithetical to everything that crypto stands for.
It gets even worse. There’s no seamless way to move data or assets among all of these different chains, leading to enormous fragmentation of liquidity. If you’re trying to design a usable, scalable system, the absolute worst, stupidest thing you could do is deploy a copy of precisely the same application on each shard, with no way for the apps to talk to one another or exchange data, but that’s exactly how Ethereum works today: projects like Aave and Uniswap are deployed on dozens of chains, and liquidity, users, and data are fragmented among them all.
To paraphrase an X post that I quoted last week, we’re not going to onboard anyone like this.
And, as I wrote a few days ago, it didn’t have to be this way. We tend to take all of these UX headaches for granted, and we tend to write off people who complain about them as “just not understanding how blockchain works,” but we’re wrong to do this because it’s our fault. These things aren’t inevitable and they aren’t incurable, they’re design decisions we made. We designed things to work this way, and we’ve chosen not to fix these problems. It didn’t have to be this way, and it still doesn’t have to be this way.
Ethereum chose this god forsaken path for a reason: in order to scale the base layer the lazy way. It became clear as early as 2017 that the Ethereum base layer would never keep up with the transaction demand. The original plan was to shard the base layer into dozens or hundreds of identical shards, such that accounts and transactions on one shard could still transact with other shards asynchronously. NEAR, which has functional, well designed sharding has shown what’s possible and why the design makes so much sense. Most or all of this complexity can be hidden from users and even from application developers, and users don’t even need to be aware of which shard their account lives on, or which shard they’re transacting with. Sharding is far from a new idea; all functional, mature, scalable systems, including web servers and databases, use a version of this, and have for a long time.
Instead, Ethereum chose the lazy path: to only execute on the very first two phases of the proposed Ethereum 2.0 roadmap, give up on sharding, and instead, let others scale Ethereum their own way by deploying many heterogeneous layer two chains (rollups). This is The Ethereum Way: do the thing that’s maximally open and decentralized, i.e., the thing that requires the least centralized coordination or vision setting, and let the market sort the rest out.
Fast forward a few years, and the market did just this: we now have dozens or hundreds of competing chains and standards. It seems like a new one pops up every day or two. Users, applications, and liquidity aren’t the only things that are fragmented: so is the attention of the Ethereum community. There are dozens of large, high profile L2 projects competing for attention and builders, rather than working together towards a coherent, shared Ethereum narrative and vision. There are no global interoperability standards, leading to the horrible UX mess I just described. The role of the Ethereum Foundation and those in charge of the Ethereum roadmap should, at the very least, have been to set standards and basic ground rules that everyone needs to follow to be allowed to play on the field, but that didn’t happen here.
Ethereum folks like to criticize Solana and the other high-throughput chains by saying that the only way you achieve scalability is through modularity rather than through vertical scaling, i.e., arbitrarily increasing the throughput of a single node. They’re correct, but this isn’t the way to do it.
The Ethereum community is just beginning to wake up to why this is such a problem, but most Ethereans are still in denial. When I describe this mess, the most common response I get is, “Don’t worry, interoperability project X is just around the corner and it’s going to fix this once and for all.” I’ve been hearing this for years, and have yet to see a usable project X that I can trust, or that really improves this UX in any meaningful way without introducing lots more complexity and lots more centralization vectors. I’ve seen too many broken attempts, and I know that the problem exists at a deeper layer. Ethereum won’t be competitive unless it ditches this broken scalability model and moves to a saner, more usable, more coordinated design.
By far the best interoperability solution that works today is NEAR intents, which allows you to control assets on a variety of chains from a single place, using a single account. When it’s more mature, it may go some way towards addressing the liquidity fragmentation issue, by allowing liquidity to move around more or less automatically in response to market conditions. But Intents are designed to achieve interoperability among different ecosystems, such as Bitcoin-Ethereum-Solana-NEAR, and can’t fix the things that are broken in the EVM ecosystem on its own.
The only reasonable path forward is to re-embrace shards. This idea is just starting to catch on in the context of proposals like native, based rollups, which closely resemble shards. I’m not sure the Ethereum ecosystem will be able to coordinate around a real solution to this issue because it would require bold leadership and deep changes, but it’s definitely worth trying.
Thing #6: Governance 🗳️
I want to give credit where credit is due: the Foundation team was instrumental in successfully executing major network upgrades, including EIP-1559 and The Merge. While I understand that grants are hard, and I disagree with a lot of EF’s grant giving, it has also supported a number of important initiatives. And some of its researchers are doing work that’s valuable beyond Ethereum.
Having said that, EF governance has always been a mess, and as EF goes, so goes Ethereum. I already touched upon some of the dysfunction at EF, at least as I experienced it a few years ago. I don’t know what things are like at EF today, and but I continually hear stories of similar dysfunction from friends and acquaintances.
The issues I mentioned above are symptoms of something deeper. When an organization isn’t able to retain talent, when it isn’t able to fairly compensate people, and when the wrong people are elevated to positions of authority, that’s a sign of a deeper malaise. In the case of the Ethereum Foundation, one of those issues is governance. As he admitted recently, Vitalik effectively controls the Foundation, and always has. The Foundation always had three board members, but Vitalik had three votes so he had de facto single handed control. If this has changed, it hasn’t been announced.
The Foundation’s core problem is that there’s no accountability mechanism. Vitalik isn’t accountable to a board, and unlike a for-profit company, there are no shareholders who can step in and fix things if they get really bad (as they have). Unlike a traditional nonprofit, the Foundation and its board aren’t even accountable to donors. Vitalik is certainly a remarkable individual and a capable technical leader, but this isn’t about him personally. It doesn’t matter how good of a leader you are: any organization that has zero accountability and zero transparency simply isn’t going to function well.
In these situations, in the absence of transparency and accountability, power and authority tend to end up in the hands of people who are power hungry, and that’s precisely what I personally witnessed at EF. That would be bad enough at any organization, but it’s doubly hypocritical for an organization that sits at the center of an ecosystem that’s literally all about incentives, mechanism design, and building fairer, more open, more transparent human systems and networks. This hypocrisy is the biggest reason I left Ethereum. I simply couldn’t stand it any longer, and it was literally keeping me awake at night.
EF previously had strong leadership in its original Executive Director, Ming Chan, but Ming was a very difficult person to work with, she was very outspoken, and she made a lot of enemies. Eventually, Vitalik and other decision makers at the Foundation decided they couldn’t work with her any longer, which probably had something to do with the fact that they couldn’t control her. During my time at EF I saw other independent, outspoken people in positions of authority get fired for similar reasons. (If this story is interesting to you, I encourage you to read The Cryptopians, which tells the story in much greater detail.)
The next Executive Director, Aya, was in many ways the opposite of Ming: she did her best to steer a steady course over the past seven years, but she definitely wasn’t hired to be a changemaker. The Foundation recently, belatedly and in response to intense criticism, introduced a new dual-ED structure, appointing Tomasz Stańczak and Hsiao-wei Wang as co-directors. While I like both of these individuals, and I know that they’re both good people and both have the best intentions to fix things, it’s not at all clear to me that this is going to make any difference. Like Vitalik, Hsiao-wei is primarily a researcher, not a leader of big, bureaucratic organizations—which is a big part of how EF got into this situation in the first place. And Tomasz, given the proper mandate, could probably get things done and make the difficult changes that need to be made, but my gut feeling is that he doesn’t have that mandate and he’ll struggle to get permission to make difficult changes. I suspect EF will continue to stumble along and be an embarrassment to the broader Ethereum ecosystem for some time.
It didn’t have to be this way, either. When the Foundation was established, the plan was to dissolve it after a few years, once the Ethereum ecosystem was healthy and thriving. I don’t know if this was ever stated publicly, but I have it on very good account from multiple people involved in the founding of the Foundation that it was only supposed to exist for a few years, to bootstrap the ecosystem. The EF played a critical role early on, but in my opinion Ethereum would be better off today if it were dissolved as it was supposed to be. At this stage it’s more of an obstacle to things happening independently than it is a catalyst. This would make room for lots of other people, and teams, to step up and take responsibility to get more things done.
You may also be wondering, why not just ignore the Foundation and get things done in other ways? Of course this is happening: at this point there are dozens of large, well-funded organizations that are independently driving Ethereum R&D, community building, and other critical initiatives. One problem is that EF is so big, wealthy, and respected in spite of its flaws that it’s very difficult to compete with its diktats when it comes to the Ethereum roadmap. Another problem is that most of these organizations are for-profit companies, and each of them has its own competing vision and incentives. This is exactly how we ended up with such a fragmented ecosystem in the first place. An open, public goods project like Ethereum needs a responsible, well-governed, centralized, credibly neutral coordinating entity that can set standards, at the very least; witness the existence of organizations such as the Linux Foundation, W3C, IETF, and RISC-V International. Those organizations are imperfect and have their issues, too, but at least they have accountability mechanisms in place and are able to course correct.
If the Ethereum ecosystem wants to get its groove back, it needs to start by finding a way to work around the EF. For the past few years Ethereum has succeeded in spite of poor leadership from EF, and not because of its strong leadership. The process of working around its failings is just now beginning in tiny ways, such as with the birth of Etherealize, but it feels like too little, too late. There are no simple answers here, but the fact that the Ethereum community has never been able to have an honest conversation about the problem that is EF and what to do about it speaks volumes about its broader issues. Unless and until this changes, Ethereum will continue to struggle.