Ethereum has been having a rough old ride lately. ETH's price has been left in the dust and there's been no shortage of FUD flying around. Some have even started to question whether other altcoins like Solana's SOL could overtake ETH to become the second-largest crypto by market cap.
But here's the thing, we wouldn't write Ethereum off just yet. In fact, ETH could be about to see a major move to the upside and leave everyone wishing they'd filled their bags. So today we'll address the top five complaints about Ethereum and help you avoid being left behind.
Before we go any further, though, you need to know that I am not a financial advisor and nothing in this post should be considered financial or investment advice. This post is purely for educational and entertainment purposes only. Also, this post seeks to make the bull case for ETH, so it will be a bit biased in that direction. As noted in the intro, it seeks to address the FUD. OK, so with that out of the way, let's address the elephant in the room right off the bat.
Table of Contents
Ethereum is Slow and Expensive
The most common Ethereum FUD is that the network is both slow and expensive. For context, the average transaction fee on Ethereum is around $4.60 at the time of shooting, whereas on Solana, Ethereum's biggest competitor, transaction fees cost around a cent. Likewise, Ethereum's speed is noticeably slower than competitors like Solana. Ethereum's current average TPS, or transactions per second, is around 15, whereas Solana's TPS can quite happily sit at around 4,000, assuming no outages or degraded performance.
Obviously, this is a huge difference, and at first glance, it looks like Solana is the no-brainer. However, when you dig a little deeper, you quickly see why Ethereum's apparent lack of appeal actually suggests the opposite. In short, high fees are proof that there is demand to use Ethereum and are intended to ensure that this demand doesn't get so high that its blockchain breaks.
Sure, it's not ideal, but the fact that so many people continue to use Ethereum despite the costs underscores its value. Consider for a moment that a substantial chunk of the crypto market exists on Ethereum. It's also important to remember that Ethereum transactions are much cheaper than they used to be.
Some of you who were around in the last bull market might remember having to pay anything up to $50 for a transaction while the network was most congested, sometimes more. The reason that gas fees have fallen isn't because Ethereum is being abandoned though. The real reason is that the network is now much less congested thanks to the proliferation of Layer 2 roll-up solutions, which have helped Ethereum on its path to the promised land of scalability.
That mission was made much easier after the Dencun upgrade, which was almost entirely focused on making Layer 2s much faster and cheaper. You can learn more about Denkun by Clicking Here. On top of this, we're likely to see new Layer 2s being added to Ethereum's ecosystem to compete.
Now, admittedly, the proliferation of Layer 2s has become a bit of a meme, but it doesn't change the fact that they've made Ethereum cheaper at the Layer 1 level. As for the speed, well, let's just say there's still work to be done on that front.
Also Read: If You Own ONDO & Hedera - You Must Check This Now
Ethereum is Too Complex
OK, so that's one bit of Ethereum FUD debunked, but this naturally ties into the second bit of FUD, and that's that Ethereum is too complicated. Now, this is understandable. After all, Ethereum tends to roll out major upgrades that contain multiple changes all at once.
On top of that, Layer 2s can make the Ethereum ecosystem seem confusing from a bird's eye view, there are technical intricacies that can be difficult to understand on both the Layer 1 and Layer 2 side and don't even get us started on Layer 3s. However, this is just one side of the coin, so to speak. The other side of the coin suggests that this is precisely what makes Ethereum so successful, and is why it's managed to stay as the second largest crypto by market cap for most of its existence.
But why is this?
Well, for one thing, Ethereum's complexity also opens doors to innovation. For instance, Ethereum's tech has given way to DeFi, allowing us to do things like swapping, lending or borrowing crypto, staking, and even yield farming without a centralized intermediary. Of course, there are plenty of other advantages too.
ERC20 tokens, which are tokens built on Ethereum's code, make up a massive portion of the market, and various stablecoins like DAI, Tether's USDT, and Circle's USDC were created on Ethereum before spreading to other blockchains. Then there are NFTs, tokenized real-world assets or RWAs, blockchain gaming, decentralized autonomous organizations or DAOs, and so much more, all of which have been made possible by Ethereum's complexities. It's also worth mentioning Ethereum has the largest active developer community of any crypto ecosystem.
Plus, it helps that Ethereum creator Vitalik Buterin is probably one of the smartest people on earth. This has given Ethereum a robust and battle-tested architecture that has made its network incredibly stable. Consider that since its launch way back in 2015, Ethereum has never once suffered an outage, which is more than we can say for some of its competitors looking at you, Solana, and Sui.
But there is such a thing as too much complexity. That's why Ethereum's developers are working on simplifying some aspects of the Ethereum roadmap and even introducing new features that will greatly improve user experience.
Ethereum is Becoming More Centralized
Now another pain point for Ethereum is the growing concern that it's becoming more centralized. This FUD is coming from two angles. The first of these ties into concerns around validators.
Basically, because staking requires a minimum of 32 ETH and delegation isn't possible, this has resulted in lots of de facto delegation. In turn, this has led to a concentration in staking power among a few wealthy entities, the largest being Lido Finance by a wide margin. Put frankly, this concentration of power raises concerns about network resilience and the potential for censorship or collusion.
The second area of concern is that Ethereum's growth is increasingly coming from its Layer 2s, which carry their own centralization risks. For those unaware, most Layer 2s run on a single sequencer node. This means that, in theory, each Layer 2 has a single point of failure, which poses a risk to the security of the network.
So let's start with that first point, the concentration of validators. While the 32 ETH requirement is high, this is by design. It's essentially intended to force ETH whales to spin up new validator nodes, since the minimum is also the maximum, at least for now.
The result is that there are over a million active validators on the network, which obviously increases decentralization. Of course, this does mean that the little guy is priced out from running a validator, which is where liquid staking comes in. While it's true that liquid staking protocols, like Lido Finance, account for a substantial amount of the ETH being staked, it's also true that they have to spin up multiple validator nodes too, because of that 32 ETH requirement.
Lido and others who offer de facto ETH delegation have also been careful not to surpass the one-third-staked ETH limit that could theoretically risk disrupting the Ethereum blockchain. As for concerns around Layer 2 sequencer nodes, we won't sugarcoat it folks, this is arguably Ethereum's biggest problem. The trade-off here though is efficiency.
That's because these single sequencers are the reason why Layer 2s are much faster and cheaper than the Layer 1. However, that's not to say that Layer 2 developers are unaware of this issue and many of them are actively working on decentralizing their sequencer nodes.
One such solution could be the introduction of wild-based roll-ups, which were first proposed by Justin Drake, a prominent Ethereum Foundation researcher who played a critical role in Ethereum's transition from proof-of-work to proof-of-stake. And if you read our recent post covering DevCon, you'll know that Justin continues to propose critical changes to Ethereum's architecture.
However, while wild-based roll-ups could be the ideal solution, getting them rolled out is easier said than done, but we'll come back to that in a moment.
Ethereum Suffers From Fragmented Liquidity / Inflation
Now, the next two FUD factors go hand-in-hand. Ethereum's fragmented liquidity due to its Layer 2s and the fact that ETH could become inflationary because of lower transaction volumes. The reason for the liquidity fragmentation is simple. Because Layer 2s are so much faster and cheaper, many users will simply avoid the Layer 1 and transact solely on the Layer 2s.
The problem is that they won't all use the same Layer 2s and there are dozens of Layer 2s. This essentially creates silos where users and liquidity are locked away from each other and from Ethereum, which isn't always easy to bridge to and from. The reason for the inflationary effects is likewise simple.
Fewer transactions on the Layer 1 mean fewer fee burns and that means more ETH inflation. The silver lining is that all of the Layer 2s will still create demand for ETH overall, as ETH is still used as the primary trading pair for things like meme coins, and is still the primary form of collateral on DeFi protocols. What this means is that the overall demand for ETH won't change because of Layer 2s.
In fact, it should increase. Anyway, speculation aside, something we touched on earlier could help with Ethereum's fragmented liquidity and that's based rollups. Without getting too technical, based rollups try to address the centralization problems we mentioned earlier by running on multiple sequencer modes and by enabling better communication between different Layer 2 chains, boosting interoperability.
Not only would this seemingly solve the Layer 2 sequencer conundrum, but based rollups also return much more revenue back to the Ethereum base chain. In fact, the first based rollup went live back in June of this year and it's reportedly returning roughly 5x more revenue to Ethereum than other Layer 2 solutions. Sounds great, right? We should get these rolled out across the board.
Only there's just one problem, and it's a pretty big one. You see, in order to get based rollups to work on a large scale, other Layer 2 protocols would have to adopt their tech. This isn't likely to happen because those single sequencers we mentioned earlier also happen to rake in lots of money for the Layer 2s running them.
Getting them to give up this revenue for the sake of some core values isn't a realistic expectation. However, we wouldn't be at all surprised if this based rollup approach becomes more standardized in the future.
ETH Has Been Underperforming
To be honest, this underperformance can be seen on multiple levels. Firstly, we saw the approval of spot Ethereum ETFs earlier in the year, and to say they've been a nothing burger would be putting it politely. And this relates to ETH's price, which at the time of shooting has yet to reclaim its previous all-time high of almost $4,900.
But this underwhelming price action in dollar terms pales in comparison to ETH's underperformance against BTC, where it's been bleeding since September 2022. The thing is, though, it isn't completely fair to say that Ethereum is to blame for its ETF underperformance. Sure, Ethereum can be a little tricky for no-coiners to wrap their heads around, and sure, the ETF hype seems to have been solely focused on Bitcoin.
However, the spot Ethereum ETF underperformance has likely been influenced by difficult market conditions rather than Ethereum's fundamentals. Take a second to consider that for the most part, most altcoins haven't had the same sort of success as BTC has in the charts, albeit with a few notable exceptions. This is because, as far as macro conditions are concerned, there hasn't been much to reassure investors and boost their confidence.
There also hasn't been much retail interest in crypto, at least not yet. And I should say here that we don't just mean retail interest in crypto. To give an example that's hopefully not too political, consider that while the crypto industry seems to have welcomed Donald Trump back with open arms, there are still many people outside of crypto who are worried about him being, shall we say, a little unpredictable.
Add the recent escalations in the Russia-Ukraine conflict, the ongoing fears of an impending recession, and a whole plethora of other macro concerns into the mix, and what you have is a recipe for uncertainty. Put simply, people will hedge against this uncertainty with assets like BTC while avoiding more speculative plays like Ethereum, at least in the short term. In the longer term, Ethereum is likely to attract more institutional investors as most of them start to realize that Ethereum is focused on the core aspects of blockchain.
Not only is Ethereum's technology some of the best out there, but innovation, decentralization and security remain constant priorities. This not only puts Ethereum ahead of the pack in this regard, but the fact that it has its own spot ETFs also means it's going to be easy for tens of billions of dollars of BTC to rotate from the spot Bitcoin ETFs into ETH, something that's not possible for most other altcoins. From our perspective, it's not a question of if Ethereum's ETF demand will increase, but when.
Recent Developments, Future Outlook for Ethereum
OK, so hopefully at this point you have a few new perspectives to consider. The question now is what comes next for Ethereum and how this could impact ETH's price. Well, as we touched on earlier, the future outlook for Ethereum is looking incredibly bullish.
This is thanks to something we mentioned earlier in the post, the upcoming Petra upgrade, which is due in the first half of 2025. And you can learn more about Petra by Clicking Here. The TLDR for now, though, is that Petra will enhance the network's scalability and efficiency while also improving Ethereum's UX by improving smart contract functionality and increasing the so that validators can consolidate their ETH.
This may reduce decentralization somewhat, but it could set the stage for increasing Ethereum's scalability. There will even be special upgrades to Ethereum's smart wallets, which will give them a lot more user-friendly functionality. And not only is Petra bullish for Ethereum, but it's just half of what's to come.
That's because Petra sets the stage for Ethereum's following upgrade, Fusaka, which will bring developments even more bullish than the ones introduced by Petra. The only catch is that there's about a year between the deployment of Petra and the deployment of Fusaka. As for ETH's price, meanwhile, the good news is that it looks like it could finally be gearing up for a massive move to the upside.
And this is for several reasons. One of these is something we touched on earlier. The recent Trump victory has set the stage for positive crypto regulations in the US in 2025, specifically when it comes to things like stable coins and DeFi, which drive most of the demand for smart contract cryptos like ETH.
I'm not sure if you've noticed, but Ethereum is home to most of the stablecoins and DeFi protocols by TVL. And this relates to the second reason, which is that Bitcoin dominance could well have topped out, which signals an impending rotation into altcoins. And the most common altcoin to see this rotation first? Yep, you guessed it, ETH.
That's simply because it's the largest altcoin by market cap, which theoretically makes it the safest bet for many investors looking to avoid taking on too much volatility risk. And if you need further persuasion, just take a look at ETH's BTC pair. Pro-tip, set the chart to monthly.
You don't have to be a wizard at technical analysis to see that ETH is at a key support level against its BTC pair and a melt up to the upside could be imminent. Of course, we could be dead wrong, and this is precisely why we haven't given any price predictions. But while we don't have a crystal ball, it does seem that Ethereum is about to take everyone by surprise.