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- Paradigm, a research-driven crypto investment firm, has published an article raising concerns that Ethereum’s slow development pace, driven by its focus on decentralization, is hindering its progress.
- Paradigm warns that Ethereum must leverage its strengths or risk being overtaken by competitors like Solana and Cardano.
Ethereum (ETH), the second-largest cryptocurrency by market capitalization of $369 billion, faces mounting pressure from fast-evolving blockchains like Solana SOL and Cardano (ADA). In a detailed article authored by Paradigm co-founder Matt Huang, CTO Georgios Konstantopoulos, and general partners Dan Robinson and Charlie Noyes, the firm highlighted key areas where Ethereum risks falling behind.
According to Paradigm, one of the leading crypto venture capital and research firms, Ethereum must accelerate its development pace to maintain its competitive edge.
The Challenge of Ossification
A key challenge for Ethereum is the push for protocol ossification, which slows updates to maintain decentralization. While Ethereum currently implements about one major update per year, Paradigm suggests accelerating development with more ambitious goals. Upgrades like Dencun in 2024, which reduced data fees and improved scalability, and the 2023 “Shanghai” upgrade, which allowed ETH to unstaking and focus on Layer-2 solutions like rollups, show Ethereum’s efforts to remain competitive.
In comparison, competitors like Solana and Cardano are rolling out innovations at a faster pace, which could attract applications and users away from Ethereum. Paradigm notes, “Ossifying the core protocol would mean abandoning Ethereum’s governance mechanism and its ability to evolve in response to market changes.”
While ossification can bring stability, Paradigm warns that it could make Ethereum less adaptable to evolving market demands, such as Layer 2 scaling solutions and MEV (Maximum Extractable Value) dynamics. To move faster, Paradigm suggests empowering client teams without giving them veto power, improving the All Core Devs (ACD) process, and investing more in DevOps and testing. These changes can enable Ethereum to deliver frequent, reliable upgrades while maintaining its core values.
Key Areas for Improvement
Paradigm emphasizes the need for Ethereum to prioritize non-controversial improvements that can be implemented more quickly to maintain its competitiveness. Key areas of focus include scaling and securing Layer 2s (L2s), where rollups relying on Ethereum’s base layer require clearer roadmaps for demand accommodation, such as advancements like PeerDAS or Blob-Parameter-Only hardforks.
Additionally, strengthening Layer 1 (L1) security and censorship resistance for rollups, through measures like Native Rollups, is deemed essential. For Layer 1 scaling, repricing L1 opcodes could help scale Ethereum without increasing the block gas limit, while research into safely increasing the L1 gas limit through solutions like history expiry and statelessness is critical to avoid overburdening node operators.
Furthermore, wallet user experience (UX) and security could be improved with account abstraction. Although EIP-7702 has helped bridge the gap between Externally Owned Accounts (EOAs) and Account Abstracted wallets, Paradigm believes that there is still room to enhance the user experience by making batched and sponsored transactions more seamless and reducing reliance on private keys.
Analyzing the post, CNF found that Paradigm is committed to contributing to Ethereum’s development through Ethereum Improvement Proposals (EIPs), data analysis, and code development, with a focus on practical proposals like EIP-7862. Their research examines ways to safely scale the network and increase the gas limit while maintaining security and decentralization. As we wait for the Pectra Upgrade to go live in March, Ethereum is currently experiencing a downturn. The asset has dropped by a staggering 7.29% in the last 24 hours and is currently trading at $3,061.
