The Broken Loop
Ethereum’s 2021 price rally was driven by ETH being priced as the second monetary asset to emerge from crypto.
After trillions of post-COVID dollars flooded the market, people began realizing that “money” was more mythology than substance—and they started seeking new myths to believe in. Bitcoin was clearly one of them. But in 2021, the market began to see that a fixed monetary cap wasn’t the only way to generate “money” on a blockchain.
What they discovered in Ethereum was a positive feedback loop that captured value in the ETH asset itself:
Applications attracted users → which attracted more developers → which brought in more investors → which brought in more traders → all of which generated protocol revenue → which was priced into ETH.
Positive feedback loops are powerful. They squeal when a mic feeds into itself. They’re the runaway energy in a nuclear bomb. They’re pandemic lockdowns. A strong positive loop is impossible to ignore—even for the indifferent.
The market saw Ethereum’s positive loop and priced ETH accordingly. We had a good thing going.
So, What Happened?
When you hear a microphone screeching, how do you stop it? You cut the connection between the speaker output and the mic input. You break the loop.
That’s what Ethereum did—too early—by placing rollups at the center of its roadmap.
Ethereum’s strength came from L1 being the place:
- where builders found their first users,
- where users discovered the apps they wanted,
- where speculators and traders made the economy flow.
If you wanted to build in crypto, you went to Ethereum L1. There was no second choice.
But when the roadmap pivoted to rollups, the official message from Ethereum leadership and the implicit message from its community shifted focus to L2:
“Ethereum scales with L2s” became the ecosystem’s rallying cry.
What was not properly accounted for at the time was the cost of this shift:
- Builders suddenly had to pick winners from dozens of L2s.
- Users wondered where their friends (and liquidity) would move.
- Wallets and exchanges scrambled to keep up.
What was imagined as healthy competition among L2s turned into internal inefficiency and fragmentation.
Before rollups, accessing Ethereum was simple: just buy ETH.
But in the rollup-centric model, exposure to growth required holding a basket of L2 tokens and making directional bets on who would win. In that context, how can ETH still function as “money”?
When the Schelling point of L1 disappeared, Ethereum’s signal weakened.
Ethereum’s Globalization Is Real
The market stopped pricing ETH as a monetary asset and began valuing it like a tech stock—via discounted cash flow (DCF) models.
That’s a problem, because no L1 crypto asset looks good through a DCF lens. ETH stopped looking “cheap” compared to BTC, and started looking “expensive” compared to newer, faster-growing L1s.
Ethereum went from being the dominant L1 to just one of several—alongside smaller, faster, more centralized alternatives.
The difference between Ethereum having 90% vs. 60% market share is massive.
- At 90%, ETH is global internet money.
- At 60%, it’s just another tech platform.
It took time for that distinction to show in price action, but we all know the story:
Despite rising $700 in 3 days from May 8–10, ETH is still down 72% vs. BTC and 84% vs. Solana over the past 900 days.
Some argue ETH’s underperformance is due to external factors, not Ethereum’s strategy. But consider:
- Michael Saylor deployed $35B into BTC in three years.
- Solana memecoins locked up hundreds of millions in SOL via LP contracts.
Both are examples of capital Ethereum could have attracted—but didn’t.
Ethereum had no “Michael Saylor” moment because the feedback loop between its economy and its asset was broken. There was no compelling second “monetary crypto asset” to rival BTC.
Solana’s memecoin boom? More complicated. Ethereum will never support 400ms block times. But Solana’s faster dev ecosystem and community-led UX pulled in builders that Ethereum lost post-2022.
Ethereum’s Pivot
Ethereum is decentralized—there is no central brain. But strong signals emerge from the edges, and over time, they’ve begun to reach the right ears. As of 2024, changes are underway. Here’s a summary:
| Problem | What Went Wrong | The Fix | What’s Changing |
|---|---|---|---|
| Underinvestment in L1 | L1 deprioritized in favor of future rollups | Aggressive roadmap: 10x gas, ZK proofs, delayed execution | L1 regains its role as Ethereum’s economic & functional core |
| Weak product mindset | Built for ideals, not users | User- and app-focused thinking; new product roles | Ethereum viewed as product, not just protocol |
| Leadership vacuum | EF avoided directional leadership | New EDs (Tomasz, Hsiao-Wei); EF now owns strategic vision | EF now has structure and mission |
| Ivory tower culture | Research disconnected from builders & users | More openness, transparency, wider engagement | EF collaborates across entire ecosystem |
| L2 fragmentation | Rollups = siloed chains, poor UX | Interop standards, native rollups, L1-as-service-provider | Tighter L1–L2 integration; unified feel |
| Slow adaptability | Ethereum lagged while others optimized | Less ideological friction, faster execution, quick wins | Culture shift from passive to proactive |
There’s debate on whether this is a “pivot” or a “reprioritization.” But the semantics don’t matter.
What does matter: Ethereum must prioritize itself first—before its L2s.
Ethereum L1 should be the ecosystem’s top priority.
L2s should not lead the roadmap, especially not ahead of L1 demand. That’s the cart before the horse.
Ethereum’s New Priorities:
- L1 technical capacity + strength
- L1 app ecosystem + user base
- L2 interoperability standards
A weak L1 undermines everything: user experience, app growth, trading volume, even L2s. Everyone in the Ethereum economy benefits when L1 becomes strong again.
To truly serve users, developers, and financial services, Ethereum must put itself first.
Ethereum L1: The Economic Center of Crypto
Ethereum L1 must be the default destination for anyone who wants to build, use, or trade on-chain.
It’s the only truly decentralized, multi-client blockchain with near-perfect uptime. It’s where cypherpunk values can scale to everyday users.
The mission now: scale this incredible foundation as widely as possible.
We must restore Ethereum L1 as the default place to transact—its original purpose.
That means scaling L1 into the biggest tent possible, where ordinary users (not just whales) can transact, while preserving the censorship-resistance at Ethereum’s core.
Saying “L1 is only for the top 0.1%” weakens Ethereum’s mass appeal.
The right signal is this: **Ethereum is home—**for developers, for users, for assets.
- the 2017 ICO boom,
- the 2020 DeFi Summer,
- the 2021 NFT explosion—
happened on Ethereum because the audience was already here.
In 2024, Solana won the memecoin moment by offering faster, cheaper blockspace and capturing that same distribution edge.
Ethereum can’t afford to lose that again.
Scaling L1 restores the gravitational pull that brings apps and rollups back into its orbit.
Ethereum: The Best Ledger There Is
Blockchains are ledgers. Ethereum is the best ledger on Earth. It should aim to host the deepest liquidity, largest volumes, and tightest spreads.
Scaling L1 expands execution, attracting traders, issuers, and market makers seeking the most liquid venue. TradFi is already eyeing where to deploy RWAs.
There will be no second-best option after Ethereum.
