Reviewing the Fundamentals of Ethereum.

Written by: Mu Mu

Lu Xun never said, "No matter what sins were committed in the past life, holding Ethereum counts as paying them off." This round of Ethereum holders never expected Ethereum to perform so poorly, once ranking at the bottom among mainstream projects. However, it is too early to draw conclusions; the overall market does not seem to have ended. If we say that Bitcoin's adoption has just begun, then Crypto and Web3 as a whole are still in their early stages. Can Ethereum "recover" by 2025? What "events" and "breakthroughs" are worth looking forward to?

Inflows of Spot ETFs

Currently, Ethereum spot ETFs have been approved for listing in the U.S. stock market for some time. Compared to the inflow speed and volume of Bitcoin spot ETFs, there is a significant gap. Besides the fact that Ethereum does not have the same level of "outreach" and widespread consensus as Bitcoin, another important reason is that the spot ETF, which incurs management fees without any additional returns compared to directly holding Ethereum and earning staking rewards, does not have any advantages.

However, the good news coming in 2025 is that relevant financial institutions are actively promoting the listing of Ethereum spot ETFs that allow for staking operations to earn additional returns. The motivation behind this is strong, as financial giants are the main beneficiaries of the "hot" trading demand for crypto asset spot ETFs. Staking Ethereum spot ETFs not only has potential demand, but with Trump's administration bringing a friendly regulatory environment, it is easier to get approved.

Ethereum as a Strategic Reserve

Currently, the U.S. is advancing a Bitcoin strategic reserve, which is one of the main driving forces behind Bitcoin and the crypto market. It is worth noting that among the important strategic reserve assets of the U.S., besides gold, there is also oil. Therefore, Bitcoin, known as "digital gold," has certain feasibility and significance as a strategic reserve, while Ethereum, once referred to as "digital oil," also has the potential to be listed as a strategic reserve asset.

In comparison to Bitcoin, the Trump-supported Trump family WLFI project, which is deployed on the Ethereum mainnet, primarily operates based on the support from the Ethereum DeFi ecosystem AAVE and Chainlink. Additionally, the project's treasury has begun to accumulate a large amount of ETH and tokens from the Ethereum ecosystem, recently converting a significant amount of WBTC to ETH. Analysis of the project's treasury, which consists of seven multi-signature wallets, reveals that some wallet addresses are already "veterans" on the Ethereum DeFi ecosystem chain, indicating that the project team has a high level of understanding of Ethereum and its ecosystem, and operates relatively professionally.

Given that the team behind Trump is the first to launch an adoption project in the Ethereum ecosystem, we can infer that they have a high level of recognition for the subsequent development of Ethereum and its ecosystem, supporting the development of high-tech industries like Web3, which aligns with Trump's "America First" philosophy. Therefore, the possibility of Ethereum being mentioned as a strategic reserve asset in 2025 is quite high.

Ethereum's Next Major Upgrade

Due to Ethereum's unsatisfactory performance, the attention on its next major upgrade, named "Pectra," is low. It is reported that ten EIPs (Ethereum Improvement Proposals) have already been added to this upgrade plan, mainly involving user experience and optimization support for Layer 2. The main highlights are as follows:

1) Optimization of Account Abstraction

This upgrade will optimize the user experience of wallets, allowing regular wallet addresses to have the complex functions and flexible operations of "contract wallets," such as "gas payment, social recovery, multi-signature," etc. These optimizations will further lower the usage threshold for users, enabling them to have an experience similar to Web2 applications when using Web3 applications. This lays the foundation for the large-scale adoption of future Web3 applications.

2) Optimization of Layer 2 Support

Providing more data space (blob) for Layer 2 solutions to enhance Ethereum's scalability. Reassessing and adjusting the costs of calldata, optimizing block throughput and storage. In simple terms, this means expanding data space for Layer 2 and optimizing costs, making the supported Layer 2 capacity larger and the fees lower.

3) Enhancing the Security and Flexibility of Validators

Optimizing the voting processing, extraction, and other operations of validators to improve security and efficiency, while also increasing the staking limit to 32 ETH, effectively merging the operational validator nodes. This reduces operational pressure and improves efficiency while alleviating the pressure of point-to-point message transmission and data storage among numerous nodes in the network.

In summary, Ethereum's Pectra upgrade will provide support for a more user-friendly experience, higher scalability, and a more stable node network in the Ethereum ecosystem at the technical level.

Ecosystem Application Explosion and Technological Progress

At present, more and more major institutions, such as the Trump family's DeFi project, Sony's Layer 2, and Deutsche Bank's Layer 2, are building Web3 applications and infrastructure solutions on Ethereum, making the Ethereum ecosystem the first choice.

The Ethereum ecosystem is mature, rich, diverse, and leading in terms of technical resource reserves, development history, developer team support, on-chain capital volume, client security, and wallet user experience. Similarly, in the next phase of the major market in 2025, whether it is the strong recovery of DeFi or the booming sectors like AI Agents, Ethereum, as a foundational infrastructure, will significantly benefit from the adoption of these ecosystem applications and the prosperity of on-chain activities, with benefits including but not limited to capital inflows, gas consumption, and token supply deflation.

With the launch of Unichain, the OP superchain family has added another heavyweight player, and Layer 2's cross-chain liquidity is expected to make progress in 2025. At that time, combined with the upgrade optimizations of Ethereum itself, the momentum formed by various Layer 2 groups will create unprecedented competitive pressure on some high-performance new public chains.

In the past, there were always claims that Ethereum's Layer 2 was a failure, draining the mainnet without bringing any benefits to it. However, recently we have seen the prosperity of Layer 2. Data from ultra sound money shows that Layer 2's blob fees have become one of the major contributors to gas burning on the Ethereum mainnet, indicating the success of Layer 2 scaling solutions.

Real-time statistical charts from L2Beat also reflect that the funds flowing into Layer 2 have exceeded $55 billion, with a total scaling increase of over 2500% compared to the original mainnet in terms of transaction volume.

For major companies and institutions outside the crypto space, such as Sony and Deutsche Bank, Layer 2 is an excellent entry point for Web3 business, allowing them to launch without a large amount of technical reserves and resource investment, while gaining native support from the Ethereum ecosystem community. Therefore, under the successful leadership of these institutions, the true institutional adoption wave of Layer 2 will soon arrive.

Conclusion

In fact, many people know that Ethereum and its ecosystem have significant advantages in various aspects. However, they did not expect that the current scale of Ethereum is no longer something that can be quickly driven by the same amount of capital as in the previous two market cycles. Clearly, this is not an easy task; just like Bitcoin's scale, the rapid rise is only possible with a large inflow of institutional funds from spot ETFs and strong expectations of being a strategic reserve asset in the U.S. However, compared to Bitcoin, Ethereum still has the additional support of technological upgrades and the development of the Web3 ecosystem. There are still many highlights to look forward to in 2025, so let's wait and see.

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