Ethereum Gave Away Too Much for Too Long. Will Its Pivot Be Enough? - Ep. 829

Unknown Source May 06, 2025 88 min

artificial-intelligence investment startup microsoft

🎧 Listen to Original

67 Companies

137 Key Quotes

3 Topics

4 Insights

1 Action Items

🎯 Summary

Podcast Episode Summary: Ethereum Gave Away Too Much for Too Long. Will Its Pivot Be Enough? - Ep. 829

This 88-minute episode of Unchained, hosted by Laura Shin, features Tarun Chitra (CEO of Gotlin) and Max Resnick (Lead Economist at Anza) discussing the recent strategic pivot within the Ethereum ecosystem, contrasting its historical approach with competitors like Solana, and analyzing the implications for ETH’s future and price.

---

1. Focus Area

The primary focus is the Ethereum Ecosystem’s strategic pivot, specifically addressing:

• The historical economic model of Ethereum (giving away transaction economics via L2s).
• The perceived failure of the L1-to-L2 pivot strategy in maintaining competitiveness.
• The necessity and implications of recent proposed changes to the Ethereum Layer 1 (L1) roadmap, including gas limit increases and consensus layer simplification.
• A direct comparison of Ethereum’s development philosophy versus that of Solana.

2. Key Technical Insights

• Gas Limit Increase as a Major Shift: The willingness to dramatically increase the L1 gas limit (from minor increments to potentially 100x) is seen as the most significant quantitative change, signaling a pivot away from catering strictly to solo stakers.
• Bottleneck Misdiagnosis: Max Resnick argues that Ethereum developers historically misidentified the bottleneck. They focused heavily on ZK-rollups to solve execution constraints, when the real constraint, especially relative to competitors, was consensus and block time/latency.
• Vertical vs. Horizontal Scaling: The discussion highlights the debate over prioritizing horizontal scaling (L2s) over vertical scaling (L1 capacity). Experts suggest that scaling vertically and horizontally simultaneously is optimal, a path Ethereum delayed.

3. Market/Investment Angle

• Revenue Collapse Post-EIP-4844: The implementation of EIP-4844 (Proto-Danksharding) caused Ethereum’s revenue to drop “overnight” by pricing blob space too low, demonstrating a lack of short-term revenue forecasting during the pivot.
• Competitive Pressure: The sustained performance improvements of competitors (like Solana reaching a “10x better” threshold) forced Ethereum’s hand, suggesting that network effects alone are insufficient if the underlying product quality degrades significantly.
• ETH Price Impact: The pivot is framed as necessary for ETH’s long-term value proposition, as the previous strategy of giving away 90% of economics while failing to improve the core product was unsustainable.

4. Notable Companies/People

• Vitalik Buterin: His recent blog posts proposing L1 simplification (e.g., three-slot finality, reducing active validators) are heavily scrutinized. Max Resnick criticizes the timing, suggesting these ideas should have been implemented years ago, indicating a lag in adapting to new data.
• Solana: Frequently used as the benchmark for performance, highlighting how its design choices led to significantly faster block times and capacity despite only moderately higher hardware requirements (10x hardware vs. 100x capacity improvement).
• Bitcoin Maxis: Mentioned in the opening comment as an example of an extremist reaction to industry “scum,” contrasting with Ethereum’s more ideological approach.

5. Regulatory/Policy Discussion

• The discussion touches on the historical context of Ethereum’s early days, where the team was highly concerned about SEC scrutiny (leading to maximal decentralization efforts), contrasting with Solana’s launch environment where competitors were more willing to accept regulatory risk for performance gains.

6. Future Implications

The conversation suggests that Ethereum is finally recognizing the need to aggressively improve its core L1 performance (vertical scaling) alongside its L2 strategy. If the community successfully implements these changes—especially the gas limit increase and consensus simplification—it could halt the loss of ground to competitors. However, the delay in adaptation means Ethereum is playing catch-up, having lost years focusing on solving non-existent problems (like execution bottlenecks) while neglecting existing ones (latency and throughput).

7. Target Audience

This episode is most valuable for Crypto Professionals, Blockchain Engineers, Investors, and Strategists deeply involved in Layer 1 architecture, competitive analysis within the smart contract platform space, and understanding the economic trade-offs in decentralized network design.

🏢 Companies Mentioned

BlackRock ✅ Institution (Traditional Finance engaging with Crypto)

Coinbase ✅ Exchange/User

DeFi protocols ✅ DeFi Protocol

Succinct ✅ Infrastructure/ZK Tech

Anza ✅ Organization/Company

Gotlin ✅ Organization/Company

So Christine Tim ✅ unknown

If I ✅ unknown

And ETH ✅ unknown

United States ✅ unknown

Ryan Sean Adams ✅ unknown

When I ✅ unknown

And Coase ✅ unknown

Is I ✅ unknown

Doctor Jekyll ✅ unknown

💬 Key Insights

"Ethereum has an infinite trade deficit with the L2s. It's like basically giving away everything it has for free and taking back peanuts in return."

Impact Score: 10

"tariff the L2s. First off, you should be getting economic value back from them."

Impact Score: 10

"Ethereum token price... it's mainly you have to keep application developers. And you also have to think about statistics, like application developer retention, liquidity retention, user retention."

Impact Score: 10

"ETH was sold as the smart contract platform. And if people no longer want to use it as a smart contract platform, then the part of the valuation that was, 'Hey, ETH is the future of smart contracts,' is going to go to zero."

Impact Score: 10

"Hey, you can't just do nothing for four years, give a subsidy to Coinbase, and check out. Like, you have to actually keep building a blockchain, or people are not going to want to keep building on your blockchain."

Impact Score: 10

"No, the price went down because they didn't do anything for four years that impacted these L2 experiences whatsoever, and everybody else was doing things, and then all the users left."

Impact Score: 10

📊 Topics

#artificialintelligence 131 #investment 10 #startup 1

🧠 Key Takeaways

💡 make consensus simpler

💡 optimize the blockchain for trading, I probably should work on a block statement optimizes for trading

💡 slash the prices of L2 blob gas to zero? That's not credibly neutral at all

🎯 Action Items

🎯 effectively investigation