From Hong Kong to Denver: Challenges and Transformations of the Ethereum Ecosystem

The recent consensus conference in Hong Kong has sparked widespread discussion within the industry. Many attendees feel disillusioned about the industry's prospects, believing that it has entered a bear market phase. During the conference, short-term speculative behavior was rampant, and the attention economy became a hot topic. In stark contrast, the Ethereum ecosystem is in a sluggish state, lacking vitality and innovation momentum.

Many long-term supporters have begun to adopt a pessimistic attitude towards Ethereum and are turning their attention to other public chains. A major issue facing the Ethereum ecosystem is the lack of enthusiasm among developers. In contrast, the foundations of other public chains often manage to establish contact with developers and start collaborations more quickly. This situation seems to reflect a strategic misstep by industry leaders, failing to incentivize long-term holders in the current market cycle.

The prevalence of short-termism has led to a shake-up in industry values. Many participants have abandoned long-term ideals and positioned themselves purely as arbitrage tools. Trading platforms may lower listing standards to support their own projects; some well-known projects see initial coin offerings as a cash-out opportunity; market makers are reaping considerable profits thanks to their business development and brand advantages. This short-term speculative tendency is affecting entrepreneurs who are committed to long-term building.

The current situation is similar to the industry downturns in 2018 and 2022. Many practitioners have left due to a lack of hope. Teams that continue to persevere in entrepreneurship face immense pressure and need to maintain strong faith. Certain political events and the hype surrounding related tokens have further exacerbated the speculative atmosphere in the industry. When most participants view it as a short-term money game, the long-term development goals of the industry become unclear.

At the conference held in Denver, founders in the infrastructure sector generally held a pessimistic attitude, while founders in the applications and artificial intelligence sectors were relatively optimistic. Many founders and developers who have focused on the Ethereum ecosystem for years suddenly realized the challenges they are facing. Some projects only have 6-9 months of funding left and have to start rethinking how to develop products that truly have users and revenue.

It is estimated that the total financing of projects built on Ethereum and the EVM ecosystem exceeds hundreds of billions of dollars, with the total valuation of the primary and secondary markets exceeding one trillion dollars. The key question these projects face is: should they continue to stay within the Ethereum ecosystem? Even well-known projects like Lido are considering new development directions.

Some Ethereum ecosystem entrepreneurs who were once pioneers in industry technology are starting to feel weary of technical protocols that lack end-user demand. Many of them are turning their attention to new advancements in the field of artificial intelligence research. If a large number of these capable founders choose to leave, it could set back the development of Ethereum's infrastructure by several years.

Nevertheless, we have also seen some positive signs. At the Denver conference, the Ethereum community demonstrated a positive attitude towards emerging technologies such as artificial intelligence and made innovative attempts in areas like decentralized training, inference, and infrastructure. Some well-known investment institutions have begun to heavily invest in projects that combine Web3 and artificial intelligence. Smart developers and founders are exploring how to introduce AI agents into Web3 scenarios, showing the industry's ongoing innovative vitality.

In contrast to the Asian market, U.S. institutions generally hold an optimistic attitude towards the cryptocurrency policy environment. U.S. banks have potentially opened the door to using Bitcoin and Ether as collateral by adopting policies that accept the custody of crypto assets. This suggests that borrowing rates in the cryptocurrency industry may significantly decrease, bringing new liquidity to the sector. Recent favorable U.S. policies, such as a trading platform and a leading exchange considering the design of tokenized securities models, also help traditional investors better evaluate and purchase tokens.

The improvement of the regulatory environment may exceed market expectations, providing a favorable macro environment for the market outlook in the next two years. Although some believe that this bull market has already ended, considering the support from the macro market and the innovation potential of the cryptocurrency market itself, we may not have witnessed a true wave of innovation yet. In the next two years, we can expect more traditional companies and even national governments to enter Layer 2 networks and issue their own decentralized networks, which could drive the growth and value capture of the Ethereum Layer 1 network.

The Ethereum Foundation is undergoing organizational restructuring to meet new development needs. The new leadership team includes some core developers and well-known project founders who have long been deeply involved in the Ethereum ecosystem. This adjustment aims to help Ethereum better adapt to mainstream market and commercialization needs.

As the cornerstone of Web3, Ethereum is actively exploring layer two solutions and technical upgrades to meet the growing demand for applications. However, at this stage, the importance of applications may outweigh the technology itself. The next important milestone for Ethereum is whether it can incubate epoch-making super application products.

Industry participants should not overly rely on a single leader or project. Everyone should contribute to the future of the industry, whether by donating to open-source organizations or creating opportunities for young entrepreneurs. In the current environment, support for early-stage venture capital is particularly important. It is recommended that trading platforms consider allocating a certain percentage of their annual revenue to support the development and innovation of the Ethereum open-source ecosystem.

Despite the challenges, Ethereum, as the most successful decentralized organization in the Web3 industry, still holds a promising future. When viewed from a ten-year perspective, the current doubts and noise may seem trivial. Maintaining a long-term optimistic outlook, especially during difficult times, is crucial for the continuous development of the industry.