How To Save Ethereum From Itself

Will fragmentation tear Ethereum’s booming ecosystem aside? Vitalik Buterin urges “alignment,” however is it too late? Specialists share their insights.

Buterin suggests ‘alignment’

Over the previous few years, Ethereum’s (ETH) ecosystem has expanded quickly. As of 2024, there are over 4,000 decentralized purposes and dozens of layer 2 options constructed on Ethereum, every with a singular workforce and imaginative and prescient.

Nonetheless, this variety creates a problem: fragmentation. How can such a big, decentralized ecosystem work collectively towards widespread targets with out shedding its distinctive id?

The danger of fragmentation is already turning into obvious. Take, as an example, layer 2 options like Arbitrum (ARB) and Optimism (OP). Whereas they intention to scale Ethereum by offloading transactions from the principle chain, they function considerably independently. This raises considerations about how effectively these L2s will have the ability to cooperate in the long term.

Vitalik Buterin, Ethereum’s co-founder, not too long ago addressed this difficulty, calling for ‘Ethereum alignment’ to unify the assorted initiatives and groups throughout the ecosystem.

The core drawback lies in guaranteeing that each one these unbiased efforts — whether or not by L2 groups, pockets builders, or neighborhood teams — contribute to a cohesive complete. 

With out alignment, Ethereum dangers turning into a group of remoted initiatives that don’t combine effectively, undermining its power as a decentralized community.

Buterin has advocated for establishing clear metrics to judge how effectively particular person initiatives align with Ethereum’s broader targets, thus decreasing the danger of social layer seize — the place success is predicated extra on private connections than on precise contributions to the ecosystem.

Let’s dive deeper into how the metrics Buterin suggests may also help Ethereum develop with out shedding its core values.

Three pillars of Ethereum alignment

Ethereum alignment rests on three core sorts:

• Values
• Technological
• Financial

Every kind serves as a guideline for guaranteeing initiatives contribute meaningfully to Ethereum’s long-term success.

Values alignment

The primary pillar of Ethereum alignment is values. Ethereum was based on the beliefs of openness, decentralization, and public items, and these values have to be shared by all initiatives throughout the ecosystem.

Open supply is a vital a part of this. In an ecosystem pushed by transparency and belief, code that’s proprietary or hidden from public view indicators a purple flag.

Ethereum’s base layer software program, equivalent to Geth and Prysm, is totally open-source, permitting anybody to examine and contribute to the code. Nonetheless, this normal wants to increase past the bottom layer. 

Buterin argues that each one core infrastructure initiatives ought to adhere to the Free Software program Basis’s and Open Supply Initiative’s definitions of open-source software program.

Take into account the DeFi area: initiatives like Uniswap (UNI) are open-source, which is a significant cause behind their sturdy neighborhood help. As of Oct. 10, the whole liquidity in Uniswap hovers round $3.4 billion, and its success isn’t simply as a result of being an incredible protocol — it’s as a result of anybody can construct on, fork, or enhance it.

Alternatively, initiatives that prioritize income over public items—those who introduce proprietary components — danger creating fragmentation. As an illustration, Polygon’s (POL) ZK rollups, whereas a significant step ahead in scaling know-how, nonetheless function largely inside a centralized framework.

Proprietary code or closed initiatives can change into single factors of failure, undermining decentralization and introducing pointless dangers. Values alignment implies that as these applied sciences evolve, they need to stay open and accessible to all, decreasing the danger of centralization creeping again into the system.

Technological alignment

Ethereum’s technological spine depends on shared requirements. With out these, the community would devolve right into a fragmented assortment of incompatible options. Technological alignment ensures that initiatives usually are not solely modern but in addition interoperable.

Take the ERC requirements for example. The ERC-20 token normal is broadly adopted, making it simple for wallets, exchanges, and purposes to work together with any token constructed on Ethereum. As of 2024, over 500,000 ERC-20 tokens exist, showcasing the ability of shared requirements. 

Equally, ERC-721 has change into the muse of the NFT ecosystem, enabling the creation of distinctive digital property throughout a number of platforms.

Nonetheless, Ethereum’s know-how is evolving quickly. L2 options, account abstraction (ERC-4337), and cross-chain bridges have gotten extra distinguished, and it’s essential that these improvements adhere to open requirements.

As an illustration, cross-L2 transfers have to work seamlessly for customers transferring property between chains. Presently, this course of stays clunky and costly.

The ecosystem additionally faces challenges with newer applied sciences like ZK-rollups. Whereas ZK-rollups provide enhanced scalability and privateness, they introduce technical complexities that require cautious standardization.

To keep away from fragmentation, initiatives should collaborate to ascertain new ERCs and protocols that guarantee these improvements are totally built-in into Ethereum’s broader ecosystem reasonably than siloed off.

Financial alignment

The third pillar of alignment is financial. Ethereum’s financial system is anchored by ETH, and economically aligned initiatives ought to prioritize utilizing ETH because the native token wherever doable.

As of Oct. 10, the DeFi ecosystem holds over $81 billion in locked property, with ETH serving because the spine for a lot of protocols. 

Tasks like MakerDAO (MKR) and Aave (AAVE) depend on ETH collateral to safe loans, reinforcing its place as essentially the most trusted asset throughout the Ethereum ecosystem. This community impact drives additional adoption and strengthens the broader Ethereum financial system.

Nonetheless, financial alignment extends past merely utilizing ETH. Buterin means that initiatives ought to contribute to public items—initiatives that profit your complete ecosystem, not simply particular person initiatives.

Gitcoin, for instance, has raised over $50 million to fund open-source growth, supporting infrastructure that helps your complete Ethereum community thrive.

But, challenges stay. Many initiatives, significantly these dealing with excessive transaction volumes, more and more depend on stablecoins as an alternative of ETH. This pattern dangers fragmenting Ethereum’s financial mannequin, as ETH turns into much less central to the community’s every day operations.

In the end, financial alignment means guaranteeing ETH stays the core unit of worth throughout the ecosystem whereas contributing to Ethereum’s long-term success by reinvestment in public items.

Metrics to measure alignment

To keep away from making “alignment” a obscure or summary idea, Buterin proposes utilizing particular metrics to trace how effectively initiatives align with Ethereum’s values, know-how, and economics. Let’s dive into the 4 key metrics he suggests:

Open supply adoption

The diploma to which a undertaking adheres to open-source rules could be measured by how a lot of its code is on the market for public inspection. 

Tasks that rating extremely on this metric observe the OSI and FSF definitions of open-source, guaranteeing they continue to be clear and collaborative.

For instance, totally open-source initiatives like Aave permit anybody to overview their sensible contracts and confirm safety, aligning carefully with Ethereum’s core ethos of decentralization and transparency. 

In distinction, initiatives with closed-source code danger creating centralized management factors, which run counter to Ethereum’s imaginative and prescient.

Requirements compliance

Requirements compliance measures how effectively a undertaking follows established Ethereum requirements. Tasks that undertake requirements like ERC-20 or ERC-721 guarantee seamless interplay with different dApps and instruments within the ecosystem.

This metric additionally considers how actively initiatives contribute to new requirements by way of Ethereum Enchancment Proposals. Tasks contributing to such initiatives present a excessive degree of technological alignment.

Decentralization and safety

The walkaway check is an easy however efficient metric: if a undertaking’s workforce disappeared tomorrow, wouldn’t it proceed to operate? Decentralized exchanges usually move this check with ease as a result of their sensible contracts function autonomously while not having a government.

Moreover, the insider assault check evaluates a undertaking’s vulnerability to inside exploitation. Tasks closely reliant on centralized management rating poorly right here, as they’re extra inclined to insider assaults. 

In distinction, initiatives resilient to such dangers—as a result of decentralized governance—exhibit a powerful dedication to Ethereum’s decentralized imaginative and prescient.

Optimistic-sum impression

This metric assesses how a lot a undertaking provides again to the Ethereum ecosystem and past. Tasks that use ETH as their main token, contribute to open-source growth, or donate a part of their income to public items rating extremely on this space.

Specialists weigh in

As Ethereum pushes towards better scalability by L2 options, the stability between decentralization and effectivity turns into extra delicate.

The important thing query is how a lot decentralization could be sacrificed with out compromising Ethereum’s core values, and whether or not innovation in L2 know-how dangers fragmenting the ecosystem.

To discover this crucial intersection, crypto.information consulted main trade specialists, whose insights reveal that Ethereum continues to be going through uncharted challenges—and that the longer term could demand trade-offs that problem the community’s founding rules.

Ulyana Skladchikova, Head of Product at Blockscout, acknowledges the realities of Ethereum’s evolving ecosystem. She sees Ethereum’s present state as certainly one of speedy experimentation, the place decentralization and scalability are consistently examined in opposition to one another.

Decentralization is a course of—it’s consistently evolving. Proper now, we’re in a part the place L2 options are launching ceaselessly, testing completely different hypotheses, and iterating based mostly on what works. There are trade-offs occurring as we stability effectivity with Ethereum’s core decentralization targets, however transparency should stay non-negotiable.

But, whereas Ethereum’s decentralized id is being examined, the journey towards full decentralization is much from full. 

We’re nonetheless years away from totally decentralized methods like sequencers and fraud-proof submissions. It’s not nearly know-how—it’s additionally about neighborhood engagement. We want extra lively participation. Decentralization can’t be pushed by a small group of super-users; it requires a wider base to make sure its success.

Roy Hui, Co-Founder and CEO of LightLink, gives a extra pragmatic perspective. Whereas he values decentralization, he argues that not all initiatives have to pursue it with the identical depth.

The significance of decentralization is dependent upon what targets a undertaking is aiming for. Gaming chains, for instance, don’t want the identical degree of decentralization as monetary purposes. At LightLink, whereas effectivity may take priority in some areas, we make certain person autonomy isn’t compromised. Customers ought to all the time have the ability to management their property, even when some trade-offs round centralization are made.

Hui agrees that decentralization stays the last word objective—it’s simply not one thing that may be achieved in a single day.

Decentralizing a series is like making an attempt to rebuild an airplane mid-flight — it’s extremely difficult. By aligning with Ethereum’s safety requirements and decentralizing processes like fraud-proof submissions, we’re discovering a stability between efficiency and decentralization with out sacrificing both. It’s a gradual journey, however we’re getting there.

Each Skladchikova and Hui additionally raised the difficulty of fragmentation inside Ethereum, significantly with respect to L2-L2 bridging. As Skladchikova factors out:

The largest blind spot proper now could be L2-L2 bridging. With out safe and clear bridges, we danger creating remoted ecosystems the place completely different L2s don’t talk effectively with one another. This might result in fragmented options, the place L2s aren’t working as a part of the broader Ethereum ecosystem. Bridges have to be safe and clear, or else your complete community might face severe fragmentation dangers.

Whereas Skladchikova focuses on structural dangers, Hui highlights the person expertise, arguing that the complexity of cross-chain asset transfers must be simplified to reduce friction.

Cross-chain possession and asset transfers are primarily a UX problem now. Customers shouldn’t want to consider the complexities of which chain they’re interacting with. The method needs to be seamless and intuitive. Customers ought to have the ability to transfer property with out worrying in regards to the underlying technicalities.

As Ethereum continues to develop, each specialists additionally expressed considerations about social seize—the danger of energy and affect turning into concentrated within the palms of some insiders, reasonably than being evenly distributed throughout the ecosystem.

“Ethereum’s neighborhood continues to be comparatively small, and early relationships play a giant position in what will get constructed and promoted,” Skladchikova explains. 

However because the ecosystem matures, initiatives constructed on favoritism will start to fall away. Innovation will in the end win out, however we have to make sure the system stays open and clear to stop social seize.

Hui and Dan Enright, Ecosystem Lead at LightLink, are actively working to stop social seize inside their very own platform.

We’re forming a DAO that may oversee decision-making and useful resource allocation. By decentralizing governance, we’re ensuring affect inside LightLink is distributed pretty. It’s not nearly who has early entry—it’s about creating alternatives for everybody to take part.

Enright provides:

Our objective is to make governance accessible, so it’s not dominated by insiders. We’re working to empower unbiased builders and provides them the instruments they should deliver their initiatives to life. The longer term needs to be about benefit, not connections.

Specialists acknowledge that decentralization stays the last word objective, however the highway ahead would require compromise, innovation, and a agency dedication to preserving Ethereum an open, honest, and clear ecosystem.