Ethereum is at a crossroads. Will it become the Linux of blockchains or fade into obscurity?

A version of this article appeared in our The Decentralised newsletter on April 1. Sign up here.

A version of this article appeared in our The Decentralised newsletter on April 1. Sign up here.

Good morning, and welcome to Monday Morning Web3, your digest of the week's hot topics in the industry.

Ethereum is at a crossroads.

Over the past decade, the top smart contract network has established itself as the de facto home of the $113 billion decentralised finance ecosystem.

It has batted away competition from well-funded rivals, and navigated a host of complex technical challenges along the way.

But now, many of Ethereum’s most faithful adherents are beginning to feel that the energy and dynamism which once defined the network is slowly draining away. The uniting goal of bringing Ethereum to the masses is becoming a distant memory as the network’s troubles mount.

It’s the culmination of months of bad news.

The vision of outsourcing transactions to separate so-called layer 2 blockchains has backfired, detractors say, knocking the network’s token economics and syphoning value to other projects.

Others argue that the network is overvalued at its $221 billion valuation and is largely uninvestable.

Some even assert that the transition to Proof of Stake, arguably Ethereum’s proudest achievement which cut its energy use by some 99.5%, was ultimately a mistake.

Activity on Ethereum is stagnating, and there’s no clear catalyst that could bring back growth.

The lack of enthusiasm has manifested in the price of Ether, the network’s native token that users must pay with to send transactions. It has dropped 50% over the past year, and is trading at its lowest level in 16 months.

In a recent post on X, previously known as Twitter, David Liebowitz, a long time DeFi builder and current executive at stablecoin developer CAP, drew on an old metaphor from Ethereum co-founder Vitalik Buterin to describe the bleak situation.

If Ethereum can’t turn itself around, he said, it could go the way of the operating system Linux – a small but significant piece of infrastructure, but not nearly at its potential and the lofty goal of reaching mass adoption.

Despite the general malaise among Ethereum’s diehard fans, there are some pretty influential figures who are espousing its potential.

One of them is Robert Mitchnick, head of crypto at fund giant BlackRock (BLK).

He recently said that concerns surrounding Ethereum were “overdone,” and that there’s still a lot for Ethereum bulls to be optimistic about – such as the addition of staking yield to Ethereum exchange-traded funds.

What’s more, BlackRock’s tokenised treasuries fund, BUIDL, has grown 361% on Ethereum this month alone to over $1.7 billion, while the fund’s growth on other blockchains remained minimal.

If Ethereum is good enough for Wall Street’s biggest player, maybe DeFi degens shouldn’t count it out just yet.

Top DeFi stories of the week

This week in DeFi governance

VOTE: Lido Finance (CRYPTO: LDO) DAO mulls re-endorsement of wstETH on Starknet.

VOTE: Arbitrum (CRYPTO: ARB) DAO picks members for new oversight and transparency committee.

VOTE: Uniswap (CRYPTO: UNI) DAO votes to give unrepresented delegates more tokens.

Post of the week

Crypto Twitter reacts to Ethereum co-founder Vitalik Buterin interacting with a robot dog.

Vitalik tried to bond with the robot using “meow” and it still walked awayWe are so cooked pic.twitter.com/3P0g2V25iN

Got a tip about DeFi? Reach out at tim@delphidigital.io.