Can Ethereum Win Again? (Part III)
Three Things #168: May 4, 2025
This is the third part in a series on issues facing the Ethereum project and community. The good news is that these days I’m far from the only person thinking seriously about Ethereum’s future and about how to get the project unstuck. This week Vitalik published an article on Simplifying the L1, and the community is talking about recent, big proposals, such as EIP-7940.
Be sure to read Part I and Part II as well.
Thing #7: Narrative 📣
I touched upon Ethereum’s ever-evolving narrative two weeks ago. As I highlighted at the time, this causes problems from a product perspective. Ethereum doesn’t know what it wants to be, and as a result it’s trying to be too many things to too many people rather than picking one thing to be the best in the world at. Even ignoring past narrative shifts and only looking at today’s narratives, this list includes a data availability layer, “ultra sound money,” an “infinite garden” (whatever that means), infrastructure for public goods, unstoppable applications, a global financial settlement layer… the list goes on and on.
But product isn’t the only problem here. It’s also a branding, marketing, and communications nightmare. If you poll 100 Ethereans and ask them to define Ethereum in one sentence, you’ll either get something so vague it’s essentially useless, or you’ll get 100 different, more concrete answers. Any successful entrepreneur or marketer will tell you that that’s a death sentence. It’s absolutely essential to get team, community, and customers on the same page about your product and the problem it’s solving.
Even assuming we could wave a magic wand and make all of Ethereum’s other problems go away—all of the other issues I’m discussing in this series—Ethereum would still struggle to attract attention from anyone other than its two core constituencies: the autistic builders actually working on it, and the investooors making money from it (or, recently, losing money). If you spend most of your time around these two groups, Ethereum tends to feel really big and significant, and you might actually start drinking the Kool-aid and believe that the world’s financial infrastructure might someday actually be built on Ethereum rails. But when you zoom out, you can see clearly that Ethereum is merely a tempest in a teapot. It has very limited mainstream appeal, and the lack of a clear narrative is a big part of the reason.
To be fair and to be charitable, marketing, branding, and narrative are always hard for infrastructure projects. That’s because the best infrastructure effectively fades into the background and just allows interesting things to be built: those things, the applications, are what get most of the attention.
But think about your favorite infrastructure company, platform, or product. Could you explain what AWS, Twilio, or Vercel do in one sentence? Of course you can. That’s because those companies and products have professional teams of marketers who have worked closely with management and the product team to define a clear product niche and a concrete value proposition, and communicate them clearly. Ethereum could and should have done the same thing.
As I keep saying in this series: it didn’t have to be this way. Ethereum started as a decentralized platform for running unstoppable applications. It could have continued to be that if it had stuck to the original Ethereum 2.0 roadmap, including sharding. Instead, the community decided to pivot to a “rollup centric roadmap,” whatever that means, and to chase inane, shiny, distracting things like “ultrasound money,” whatever that means.
Ethereum branding isn’t all bad. Actually, Ethereum has done a fantastic job of branding things internally, for autistic nerds. Concepts such as “The Merge,” “ultrasound money,” “rollup,” “data availability,” “infinite garden,” and everything else on the canonical Ethereum roadmap have done a fantastic job of nerd sniping lots of crypto builders. The problem is, literally none of these concepts make any sense whatsoever to an outsider. They’re far too right curve, and in fact they’re a huge turn off to anyone but a crypto builder audience. Seriously, try showing that roadmap to your grandma.
Solana, by contrast, has an extraordinarily clear, straightforward vision: to build a decentralized Nasdaq, where information propagates around the world at the speed of light. As Toly put it so succinctly, anything that reduces latency and increases throughput is Solana aligned. That’s a bite sized message that resonates both internally and externally: it focuses minds and it actually makes sense to a non-insider audience. And it’s a conversation starter, rather than a conversation finisher. More “Wow, that’s really interesting, how does Solana do that?”, less “Get me out of this room and away from these confused nerds as fast as possible.”
The solution to this branding crisis is closely related to the question I raised two weeks ago: What does Ethereum want to be when it grows up? The community first needs to answer that question, then figure out how to communicate it to the world clearly and succinctly. As I wrote, I personally think that Ethereum’s greatest unique strength lies in being a credibly neutral settlement layer for high-value applications. In other words, it should be the Bitcoin for all high-value applications that are too complex to run on Bitcoin.
Embracing this vision would mean dropping all of the other competing narratives, refining this one, and building a product that’s best in class for this use case. It would involve some difficult tradeoffs, and shutting down some avenues of R&D that Ethereum folks are quite invested in. I’m not sure whether the community is prepared to do this, but it would be a great start.
Thing #8: Technical Governance 🔩
In this series I already wrote a bit about some of the high level governance issues facing Ethereum, especially regarding governance of the Foundation. Governance is multifaceted and I want to highlight another important area where Ethereum needs to improve: technical governance.
I was first drawn to governance while working full time on Ethereum around 2018. At the time, I felt that the technical aspects of the project were quite well served relative to the social aspects, including governance. This should come as no surprise, given the amazing technical minds behind the project. What I saw over time, however, was that, while Ethereum’s technical governors are highly competent technically, they’re both unwilling and unable to weigh in on more politically sensitive questions. I’m referring to the “All Core Devs” responsible for approving proposals (EIPs) for inclusion into network upgrades, and for implementing those changes. When a controversial question came up, the vast majority of the All Core Devs participants would remain silent—or choose not to join in the first place—rather than debate these issues publicly, which is understandable.
The best previous example of this is Progpow, a controversial proposal from 2018 to change Ethereum’s proof of work mechanism (prior to the transition to proof of stake). The proposed change was relatively straightforward technically, which is why the core devs didn’t have a whole lot to say about it: it was a small, isolated change, that would’ve made certain types of specialized mining hardware obsolete on the network. It would’ve had no other technical impact.
Nevertheless it was debated endlessly, throughout 2019 and into 2020. Those who were active in Ethereum governance at the time still have PTSD from the yearslong struggle that Progpow led to. Interested parties, including incumbent GPU miners, lobbied very hard for its inclusion, while others, such as those who had invested in newer ASIC miners, pushed equally hard not to implement it. This had the effect of deadlocking the governance process, occupying an enormous amount of valuable time and bandwidth debating an issue that, in the grand scheme of things, was hardly critical given Ethereum’s impending transition to proof of stake. It caused me to state publicly at the time that Ethereum governance had failed.
Something very similar happened again just recently, with the proposed EOF (EVM Object Format) change, which was previously slated for inclusion into the next upgrade, Fusaka, tentatively scheduled for later this year. The change was always controversial because (unlike Progpow) it’s quite a deep technical change, and will require changes up and down the Ethereum stack to support it, including to the Solidity compiler and tooling, with basically zero visible benefit to application developers or users.
The developers who have been working on EOF for several years lobbied hard for a long time to include it. Eventually, after being rejected multiple times, the other core devs relented and it was added to the Fusaka upgrade. Then, belatedly, in the context of all of the other issues Ethereum faces, including the overall slow pace of technical progress, the broader community woke up to the scope of the change and to the fact that it has consumed an enormous amount of valuable developer bandwidth despite its limited benefits. It effectively blocks other essential upgrades, since only a limited number of changes can be bundled into each network upgrade.
The key issue is that EOF was in fact previously rejected multiple times on these grounds. However, Ethereum technical governance as it stands has no mechanism to reject a proposal for good. It’s Progpow all over again: since there’s no hard veto option, and since there’s no cost associated with bringing up a proposal for inclusion, nor any requirement to even substantially change or improve a rejected proposal, such proposals can be brought up and and again, in a form of DoS attack against Ethereum governance.
This, too, is a symptom of a deeper issue: the lack of strong technical leadership and direction. For many years Ethereum had no real roadmap, other than some hand-wavy notions such as proof of stake and fuzzy milestones like Serenity. A few years ago, Vitalik released his now-famous Ethereum roadmap, which (as mentioned above) is really a grab bag, a confusing jumble of half-baked ideas and clever memes with names like “The Purge” and “The Surge.” As many interesting technical ideas as the roadmap encompasses, many find it unhelpful for its lack of focus. Without a clear, straightforward, linear roadmap, it’s impossible to decide which upgrades should happen in which order—and which should be rejected as being off-topic or off the critical path.
Ethereum’s “rough consensus” governance model has served it pretty well up to now, and it’s actually remarkable how much the project has been able to get done in spite of the inevitable chaos and disarray. But as the complexity of the network and protocol, and the number of competing interests continue to grow, it will face various attacks and diversions more and more often. It’s time for Ethereum to install a more mature governance system, even something as simple as a rotating, elected technical council that has the ability to veto proposals once and for all. Fortunately, the conversation about this has recently begun.
Thing #9: Economics 🏦
I’ve written quite a bit about blockchain economics and about the issues with Ethereum’s economics, but it’s worth succinctly making the case again here because it’s one of Ethereum’s biggest issues.
One of the biggest reasons for Ethereum’s success, often overlooked or misunderstood, is the fact that it got a lot of people very rich early on. Even more importantly, it was the right group of people: rather than professional investors, it was a motley crew of nerds, builders, and randoms who happened to learn about the project on Reddit, at a meetup, etc., and believed in it against the opinion of the self-proclaimed experts. I’ve met many of those people over the years, and I can attest to the fact that it’s a diverse, interesting, values-aligned group of people who genuinely care about Ethereum and what it stands for (or, at least, they did at the time).
What came next is less good. Around 60% of the total circulating token supply was allocated in the premine to early builders and supporters. The rest went to miners and, more recently, validators via inflation (block rewards). Of course the Ethereum Foundation, the cofounders, and to some extent other entities such as Consensys had some ETH that they could use to pay contributors, to fund valuable ecosystem projects, etc., but by the time Ethereum really took off in 2017, most of the value in the form of coins had already been taken off the table.
The best metaphor here, too, is a company. Imagine a company that issued one million shares at inception, gave them out to founders, early employees, and investors, then over time issued another 700,000 shares to pay service providers providing security. Imagine that there was no employee incentive pool of shares, and no way for future employees and contributors to earn shares other than buying them on the open market. That’s more or less the situation Ethereum finds itself in.
I already described one of the problems this causes when I talked about Ethereum’s talent issues: there’s no way to incentivize talented builders to take risks on Ethereum. They’re incentivized to go to other ecosystems, or to launch their own, competing chains and assets. Google can issue new stock to incentivize talent or pay for an acquisition. Ethereum, by contrast, has no way to do this.
I personally felt very demotivated by the economics while working on Ethereum. There were two clear economic classes at the Foundation and in the community more broadly. There was a small, elite group of presale folks who didn’t have to think about money and were instead focused on chasing their dreams. Meanwhile everyone else had to face economic reality and needed to make ends meet. The two groups simply didn’t understand each other and couldn’t see eye to eye. The elites didn’t care if people got paid on time, and probably didn’t even notice when salaries were paid late (which happened constantly), since they were “checked out” economically. They couldn’t understand why people needed a real salary to work on Ethereum full time, since they didn’t need one. Worst of all, some of them acted in an extremely entitled fashion, rudely pushing the core devs around, expecting us to work on their behalf to “pump their bags.” I was demotivated by the idea that my station in life was to make these assholes even wealthier, with very little upside personally.
What could Ethereum have done differently, and what should it do differently now? I grant that Ethereum was the first project to do a large ICO and therefore the founding team had to more or less write the playbook by themselves on the fly. Vitalik has said that he’s proud of handing out so much ETH to early supporters in the premine rather than to miners, a constituency which he and many other Ethereans always viewed as as predatory and commoditized.
I can understand why he felt this way at the time, but in hindsight I don’t think things turned out very well. For instance, there was no vesting imposed upon the coins allocated to the early team, and by the time I joined in 2017, nearly the entire team had already left the project.
In addition to vesting, it’s my opinion that the premine should’ve been smaller and proportionally more coins should’ve gone to miners. This is because of the fact that proof of work miners have ongoing operational costs and those coins tend to get sold and recycled via market mechanisms rather than hoarded by whales.
What’s more, the Ethereum Foundation could’ve and probably should’ve taken a page out of the startup playbook and set up an incentive pool of ETH to incentivize talented individuals in the future to take risks and add value to Ethereum. This wasn’t done in the past but Ethereum today should, and still could, issue new coins to compensate risk takers today and to leave more value on the table for future contributions, relative to early builders and investors.
This would be good for Ethereum, but as with so many other things in this series, Ethereum doesn’t presently have a governance mechanism that would allow it to do such a thing. Unless and until it does, it will continue to struggle to attract the best builders in the world.