Ethereum (ETH) has been performing under parenting for some time, and that raises fundamental questions. What is the function of Ethereum within the current crypto landscape?
The second largest cryptocurrency is struggling with a so -called narrow crisis: there is no consensus within the community about what exactly represents ETH – is it a source of income or a digital value storage?
Ethereum loses grip on its identity
Zach Rynes van Chainlink paints a worrying picture of the division in the Ethereum camp. According to him, a clearly economic narrative is missing:
“We still have two camps: those who think that income is the most important story, and those who think that Store of Value is the most important story.”
That internal division makes Ethereum vulnerable. Where the narrative of Ultrasound Money was still powerful in 2021 – partly thanks to high transaction costs and solid yields for the network – that has since weakened. Layer-2 solutions such as Arbitrum and Optimism are responsible for a large part of the gas fees, so that Ethereum as Layer 1 loses its economic dominance.
Rynes explains this:
“Ethereum has handed over the most valuable part of the stack to L2s, while it optimized for the least valuable part. Now a insanely high on-chain volume is needed to keep the economic basis closing.”
Store of Value as the last rescue?
On the other side of the debate, Ethereum-Educator and investor Sassal argues for a positioning of ETH as a digital value storage.
“If ETH is only appreciated on the basis of generated income, it will never be worth much.”
In ETH he sees a potential ‘digital gold’, similar to Bitcoin. But it is difficult to convey narrative convincing. Criticism of the central management of Ethereum undermines that trust. Since the switch to proof-of-stake in 2022, ETH should be deflationary, which makes it attractive on paper as a scarce value storage.
Yet that scarcity strongly depends on the activity on the network. Since the merge, the Etheum inflation rate is on average only 0.066%, compared to 1,379% at Bitcoin. ETH is So technically scarce – but the narrative of Ethereum as a ‘Digital Store of Value’ hardly lives.
Increasing pressure from competitors
As if that is not enough, it also rumbles internally. There is disagreement among developers about the future roadmap and the vision of Layer-2 integration. This administrative noise also contributes to the narrative vacuum.
In the meantime, rivals such as Solana (SOL) and BNB Chain are gaining ground. They present themselves as fast, scalable and clearly positioned networks. Ethereum, on the other hand, is struggling with its identity. Rynes is clear:
“ETH must become its own asset with its own story, and nobody has really found that story so far.”
The central question is: can Ethereum unite its narrative before users and investors switch to simpler alternatives? For now, ETH remains the undisputed number two in the crypto world – but the question is: for how long?
Source: https://newsbit.nl/ethereum-kampt-met-identiteitscrisis-wat-is-de-functie-van-ethereum/
