This episode unpacks Ethereum's strategic crossroads, revealing how researchers Dankrad Feist and Ansgar Dietrichs are charting a course correction focused on L1 scaling and adapting the roadmap to reignite growth and competitiveness.
Defining Ethereum's Problem: Growth, Culture, and Leadership
- Co-host Mike Bledo frames potential issues as marketing deficits, a lack of a clear product "north star," or leadership gaps hindering decisive direction.
- Dankrad Feist, an Ethereum Foundation (EF) researcher, identifies the core issue as reduced activity—fewer apps, fewer users, and Ethereum losing its status as the default platform.
- He attributes this partly to the EF operating as an "ivory tower," focusing on high-brow research without sufficiently listening to or building for the immediate needs of app developers and users.
- Key Insight: Dankrad suggests Ethereum hasn't been treated enough like a "product that should serve its users," leading to a disconnect between research priorities and market demands.
- Quote (Dankrad Feist): "...fundamentally it stems from kind of a longunning problem of uh the EF and Ethereum kind of being an ivory tower... and not having at the same time a lot of people who like very actively listening to app builders and users..."
The Core Issue: Stagnation and Rejected Growth on Layer 1
- Ansgar Dietrichs sharpens the diagnosis, arguing Ethereum "never really took seriously the downstream consequences of decentralization."
- David Hoffman proposes the central problem is specifically the lack of growth on the Ethereum Layer 1 (L1), with marginal growth migrating to other ecosystems like Solana and L2s like Base.
- Key Insight: Ansgar posits that Ethereum didn't just struggle with growth; it actively rejected L1 growth by prioritizing the long-term rollup-centric vision prematurely, neglecting the immediate product-market fit of the L1 itself.
- Quote (Ansgar Dietrichs): "I don't think it's like that we have been struggling to have growth. It's that we rejected the growth."
- Strategic Implication: Investors should note this acknowledgment of past strategy potentially hindering near-term growth, signaling a potential shift in resource allocation towards immediate L1 improvements.
Layer 2 Growth: Perception vs. Reality
- The conversation addresses why growth on Layer 2s (L2s) like Base isn't universally perceived as Ethereum growth.
- Dankrad points out that L2s currently feel like separate products due to imperfect interoperability (interop) and distinct branding/fee structures.
- Key Insight: The lack of seamless integration and shared identity between L1 and L2s dilutes the perceived value accrual to Ethereum from L2 activity.
- Actionable Point: Researchers should monitor developments in L1-L2 interoperability solutions, as improvements here could significantly alter the competitive dynamics and value perception of the Ethereum ecosystem.
Inside the Ethereum Foundation: Culture, Responsibility, and Missed Voices
- Mike Bledo probes the internal EF culture, suggesting a potential lack of product and sales-oriented voices might have contributed to prioritizing long-term research over immediate market needs.
- Ansgar explains that historically, the EF didn't see itself as the leader responsible for Ethereum's overall direction but rather as one entity among many, primarily a public goods funder.
- Key Insight: A historical diffusion of responsibility and a research-centric culture within the EF contributed to strategic gaps. There's an ongoing shift towards the EF accepting more holistic guidance responsibility.
- Context: Ansgar emphasizes this past structure was likely necessary for decentralization theater and regulatory defense in earlier phases, but the environment has changed.
The Shifting Meta: From Research Dominance to Product Focus
- The discussion explores how the crypto landscape ("meta") has shifted. Early on, fundamental blockchain research provided high ROI, disproportionately benefiting Ethereum.
- Key Insight: Ethereum's historical strength (deep research) became less of a differentiator as the market matured and competitors emerged with strong product execution. The focus needed to shift towards integrating existing research into a competitive product.
- Ansgar's View: Ethereum possesses a "huge technology overhang"—pre-developed research pieces ready to be assembled into an attractive product bundle relatively quickly, now that focus is shifting.
Ethereum's Adaptability Challenge: Pivoting the Roadmap
- David Hoffman frames the current friction as a "meta adaptability" challenge: Ethereum has a roadmap but struggles as a decentralized community to pivot that roadmap effectively when new information suggests a change is needed.
- Ansgar expresses optimism, believing the realization of necessary changes is now widespread, and the community can adapt, albeit with some delay.
- Key Insight: The challenge isn't just what changes are needed, but how a decentralized ecosystem implements strategic pivots. The current period tests this capability.
- Strategic Consideration: The speed and effectiveness of Ethereum's pivot will be a key indicator of its long-term resilience and competitiveness.
Short-Term Strategy: Prioritizing Layer 1 Scaling
- Dankrad confirms a major short-term strategic shift: scaling the L1 is now a top priority.
- Key Insight: There's now broad consensus among researchers to significantly increase L1 capacity, moving away from the previous ideological resistance to L1 scaling.
- Technical Context: This scaling is deemed feasible due to the maturation of technologies like ZK-VMs (Zero-Knowledge Virtual Machines), which allow verifiable computation off-chain, enabling L1 scaling without compromising core security properties like verifiability by lightweight nodes in the medium-term.
Deep Dive: L1 Gas Limit Increases and Technical Roadmap
- Dankrad outlines a potential L1 scaling roadmap aiming for roughly 3x capacity increases per year: targeting ~100M gas limit by end of 2024, ~300M gas in 2025, and potentially another 10x in the following two years.
- This relies on:
- 1. Near-term: Utilizing existing headroom (conservative past limits). Expect increases alongside the Folsom hard fork (targeting late 2024).
- 2. Mid-term (Glamsterdam hard fork, H1 2025): Implementing features like delayed execution, access list parallelization. Vitalic anticipates these could enable a 300M gas limit.
- 3. Longer-term (2-3 years): Leveraging ZK-based proving of the L1 state itself, effectively turning L1 execution verification into a rollup-like model where verifier nodes remain lightweight despite high throughput.
- Technical Terms:
- Gas Limit: The maximum amount of computational work allowed in a single Ethereum block. Increasing it allows more transactions per block.
- Hard Fork: A network upgrade requiring all nodes to update to maintain consensus. Pectra is the next, followed by Folsom, then Glamsterdam.
- Delayed Execution: A technique allowing parts of transaction execution to be processed later, potentially improving perceived latency and throughput.
- ZK-VM: Enables proving the correctness of program execution (like Ethereum transactions) using zero-knowledge proofs, crucial for scaling verification.
- Caution: Dankrad notes ZK tech is complex; ensuring its safety and reliability for load-bearing L1 use will be a gradual process.
Re-evaluating the L1-L2 Relationship: Services, Stickiness, and Integration
- Ansgar frames L2s fulfilling two roles: generic spillover space (requiring seamless interop) and specialized L2s (gaming, etc.).
- Dankrad emphasizes the need for L1 to provide compelling reasons (services, liquidity access) for L2s to want to stay anchored to Ethereum, especially if L1 activity remains strong.
- Mike Bledo introduces the idea of increasing L2 "stickiness" by offering valuable L1 services.
- Key Concepts:
- Based Rollups: L2s that potentially use the L1's sequencer, tightening integration.
- Native Rollups: L2s potentially using shared proving systems or deeper L1 infrastructure, aiming for near-seamless user experience and tighter coupling.
- Strategic Debate: Should Ethereum enforce criteria (like using ETH DA) for L2s to use the brand ("certification"), or rely purely on offering superior L1 services? Ansgar leans against enforced alignment, favoring product differentiation.
- Investor Takeaway: The evolution of L1 services for L2s (like shared sequencing or proving via native/based rollups) is a critical area to watch, potentially creating stronger network effects and defensibility for Ethereum.
Future Architecture: The EVM as a Canonical Rollup?
- Mike raises the possibility of the core Ethereum Virtual Machine (EVM) L1 eventually becoming a rollup itself on a base consensus/DA layer.
- Ansgar confirms this is technically aligned with the ZK-scaling roadmap: proving the L1 state with ZK proofs effectively makes its verification rollup-like.
- Key Insight: The long-term technical roadmap inherently involves L1 verification becoming similar to how L2s are verified today, potentially leading to a unified tech stack across L1 and tightly integrated L2s.
- Potential Benefit: This convergence could enable shared infrastructure and significantly improved UX, like near-instant pre-confirmations and seamless cross-L2 composability.
Beyond Capacity: The Importance of Faster Block Times
- While L1 capacity (gas limit) is increasing, David Hoffman stresses the importance of reducing L1 block times (currently 12 seconds).
- Faster blocks improve DeFi product UX, reduce MEV, and allow tighter market maker quotes. Dankrad acknowledges this is crucial but technically harder and less developed than capacity scaling.
- Key Concepts:
- Finality: The point at which a transaction is irreversibly confirmed on the blockchain. Faster finality benefits L2s and exchanges.
- Censorship Resistance: The guarantee that valid transactions can eventually be included in the chain. Current slot structure gives proposers temporary monopoly.
- Pre-confirmations: Optimistic, fast guarantees (potentially crypto-economic) that a transaction will be included, improving perceived UX before actual finality.
- Roadmap Ideas:
- Reducing slot time (e.g., to 6 seconds) is considered feasible medium-term.
- Integrating pre-confirmations (like Justin Drake's work) into the core stack.
- Longer-term staking changes or ideas like PEPC (formerly PBS/crLists/MEV-Boost++) could enable faster finality and censorship resistance.
- Current Priority: While important, immediate focus seems more on capacity increases and pre-confirmations than drastic block time reduction, though a reduction to ~6s might be targeted for Glamsterdam.
Organizational Shift: Changes and New Leadership at the Ethereum Foundation
- The discussion addresses the recent leadership transition at the EF, with Aya Miyaguchi moving to President and Tomas Zago and Hsiao-Wei Wang becoming co-Executive Directors.
- Key Insight: The new leadership structure reflects a move towards a more unified, CEO-like function aimed at cohesive strategy across EF teams, integrating the previously missing product focus.
- Ansgar's Mental Model: Hsiao-Wei focuses more on continuity with past EF roles, while Tomas drives the new product/strategy capabilities with high energy.
- Dankrad's Caution: While attitudes have shifted towards a product mindset, execution is key. "The proof is in the pudding."
Hopes and Concerns: Assessing the EF's Transformation
- Asked for a "rose" (hope) and "thorn" (concern), Dankrad highlights improved communication (internal and external) as a major positive shift, citing Tomas's openness.
- The thorn remains execution—translating the new mindset into tangible engineering and product outcomes. Ansgar echoes the hopefulness around activated internal energy and the potential for new voices (like PMs) to gain prominence.
- Ansgar's Concern/Upside: Ethereum is now on a clearer path; success requires execution, but this clarity focuses efforts. "If we don't execute, we will not win."
- Investor Signal: The EF's internal restructuring and communication style are leading indicators of its ability to execute the strategic pivot discussed.
The Turning Ship: Cautious Optimism for Ethereum's Future
- David concludes that the "Ethereum ship" feels like it's turning, perhaps more than previously apparent.
- Ansgar agrees, suggesting the rate of change might be faster than perceived, with changes expected on a 3-month, not 3-year, timeline.
- Dankrad concurs on the mindset shift but emphasizes that actions and workflows still need to fully align.
- Ansgar adds a final crucial point: while change is needed, Ethereum's core strengths (decentralization, principled tech) remain significant differentiators if its weaknesses are addressed.
- Key Takeaway: There's strong consensus among key researchers and momentum within the EF for a strategic pivot focusing on L1 scaling and product coherence, but successful execution remains the critical challenge.
Ethereum is actively pivoting towards L1 scaling and a stronger product focus to regain momentum amidst a changing competitive landscape. Investors and researchers must track execution on the scaling roadmap and L1-L2 integration, as these are critical indicators of future competitiveness and infrastructure viability for complex applications.
