Is Ethereum becoming obsolete?

What Is Ethereum (ETH)?

Ethereum is a cryptocurrency conceived by Vitalik Buterin in 2013 and launched in July 2015. For years, it has maintained the second-largest market capitalization after Bitcoin, making it one of the most popular and influential projects in the global cryptocurrency market.

Ethereum’s defining feature is its smart contract functionality—automated agreements that execute when preset conditions are met. This technology enables developers to build a wide variety of decentralized applications (dApps) on the Ethereum blockchain. As sectors like DeFi (decentralized finance) and NFTs (non-fungible tokens) have experienced rapid growth, Ethereum has become the primary platform powering these innovations.

Ethereum’s blockchain delivers a transparent, secure environment without a central administrator, supporting not only financial services but also applications in supply chain management, digital identity, voting systems, and more. Over recent years, Ethereum has advanced both technologically and in market reach, establishing itself as a foundational element of the digital asset ecosystem.

Why Do Some Say “Ethereum Is Dead”?

Multiple factors contribute to the perception that Ethereum is “dead.” The following sections explain the main reasons in detail.

Price Stagnation and Inability to Reach New Highs

The cryptocurrency market experienced a major bubble in November 2021, with ETH hitting its all-time high of $4,900. After the bubble burst, prices plummeted. As the broader market languished, Ethereum showed little sign of sustained growth, prompting some investors to claim that “Ethereum is dead.”

Quinn Thompson, CIO of Lekker Capital, noted that “Ethereum (ETH) has seen a slowdown in trading activity, user growth, and fee revenue, making it a less attractive investment target.” ETH’s price at one point fell below $2,000, and its ETH/BTC ratio dropped to a multi-year low of 0.02210—marking a significant decline against BTC since Ethereum’s Proof of Stake (PoS) transition.

This price stagnation has shaken investor confidence and fueled concerns that “Ethereum may no longer have growth potential.”

High Volatility

Ethereum is known for its pronounced price swings—high volatility—which have led some to label it “dead.” Sharp crashes are common in the crypto market, and Ethereum is no exception. These dramatic short-term fluctuations have made some investors wary of the risks.

However, when viewed long-term, Ethereum’s chart shows consistent growth despite periodic sharp declines. Volatility is inherent to the crypto sector and doesn’t directly mean Ethereum is “dead.” In fact, heightened volatility often signals an active market and strong investor interest.

The Rise of “Ethereum Killers”

Numerous projects have emerged to challenge Ethereum’s market dominance—these “Ethereum Killers” are designed to address its perceived shortcomings. Notable competitors include:

• Solana (SOL): Offers fast transaction processing and low fees, gaining traction in DeFi and NFT markets.
• Avalanche (AVAX): Delivers scalability and interoperability, supporting diverse blockchain applications.
• Sui (SUI): An innovative, emerging blockchain project that has attracted developer interest.

These platforms combine low fees and high throughput, prompting some developers and users to migrate away from Ethereum. High gas fees remain a challenge for Ethereum, making these competitors increasingly attractive.

Still, none have yet threatened Ethereum’s market capitalization. Ethereum’s successful shift to PoS has addressed energy use and scalability concerns, earning praise and positioning it as a more eco-friendly, efficient blockchain.

Bear Market Conditions and the Rise of Stablecoins

Reports from leading exchanges and Block Scholes indicate that, historically, about 230 days after a Bitcoin halving, capital would flow from Bitcoin into altcoins, including Ethereum. However, after the most recent halving, Bitcoin’s dominance has persisted, limiting capital inflows to altcoins and making an “alt season” centered on Ethereum unlikely.

These reports also highlight the rapid growth in stablecoin supply. Stablecoins, which are pegged to fiat currencies, offer price stability that appeals to investors. The rise of stablecoins may have led to reduced allocations to volatile assets like Ethereum.

Stablecoins are widely used in DeFi protocols and international payments, playing a key role in the Ethereum ecosystem. However, their growth may also be dampening demand for ETH itself.

The Dilemma of “Utility” Versus “Store of Value”

Experts observe that as Ethereum’s smart contract capabilities improve, demand does not necessarily accrue to ETH itself. Instead, demand shifts to tokens issued on Ethereum, resulting in “cannibalization” of ETH’s value. As the platform’s features expand, attention shifts to the tokens and dApps built atop Ethereum, causing ETH’s relative value to decline.

Balancing utility and store of value (SOV) is inherently difficult. Bitcoin has solidified its role as “digital gold”—a store of value—while Ethereum has developed as a platform focused on functionality and utility. The direction Ethereum takes may hinge on which role it prioritizes moving forward.

Is Ethereum Really Dead? Strengths and Future Prospects

Despite these concerns, Ethereum boasts significant strengths and strong future potential. The following sections explore these advantages and prospects in depth.

Spot Ethereum ETF Approval and Growing Institutional Adoption

Recently, the U.S. Securities and Exchange Commission (SEC) approved several spot Ethereum ETFs filed by major asset managers such as BlackRock and Fidelity, marking a watershed moment for the crypto sector following Bitcoin ETF approvals. This move has prompted substantial institutional participation and billions of dollars in capital inflows to Ethereum ETFs.

ETF approval formally recognizes Ethereum as a legitimate investment product in conventional financial markets, making it accessible to not only retail investors but also institutional players like pension funds and hedge funds. Since launch, Ethereum ETFs have seen record cumulative inflows, sometimes spiking in response to political shifts and rising market optimism.

The SEC also approved options trading for BlackRock’s “iShares Ethereum Trust (ETHA),” enabling investors to hedge risks or apply leverage using ETHA options. This step is expected to increase institutional involvement, enhance liquidity, and accelerate the market’s maturation.

Adoption by Major Corporations

Ethereum is supported by the Ethereum Enterprise Alliance (EEA), a nonprofit with over 500 corporate members, including Mitsubishi UFJ Financial Group, Sumitomo Mitsui Banking Corporation, Toyota Motor Corporation, Microsoft, JPMorgan, and Intel. These firms use Ethereum’s blockchain to boost operational efficiency, cut costs, and develop new business models.

Visa, for example, has launched “VTAP,” a platform for issuing fiat-backed tokens using Ethereum, targeting financial institutions. Pilot tests on Ethereum are planned, with use cases like 24/7 fund transfers and cross-border payments. Adoption by major corporations validates Ethereum’s utility and drives further ecosystem expansion.

With growing enterprise participation, Ethereum’s ecosystem is poised for continued growth across sectors such as finance, supply chain management, and digital identity.

Staking Yield and Potential US Interest Rate Inversion

Ethereum’s staking yield (CESR: block rewards plus transaction fees) may soon exceed the effective federal funds rate (EFFR) in the US. FalconX reports that, while the spread has been negative, it is projected to turn positive due to expected declines in US rates and rising Ethereum transaction fees and staking returns.

Key factors include:

• Falling US Rates: Market data points to a sharp drop in US interest rates within months, reducing the appeal of risk-free assets and prompting investors to seek higher returns in crypto.
• Rising Staking Yields: As network usage spikes and DeFi/NFT activity grows, transaction fees increase, boosting staking rewards.

If the spread over US rates becomes positive, staking could offer better returns than traditional risk-free assets, making it highly attractive. However, FalconX notes that rising staking yields alone are unlikely to drive ETH price recovery—growth as a DeFi backbone is the bigger factor.

Staking is central to Ethereum’s PoS mechanism, supporting network security and stability. Investors can earn steady income by staking ETH, making it a compelling long-term strategy.

Dominance in the Tokenized Real World Asset (RWA) Market

Ethereum and its Layer 2 solution zkSync account for roughly 80% of the tokenized asset (RWA) market—including stablecoins, stocks, and bonds. Factoring in other Layer 2 networks, Ethereum’s share in RWA exceeds 80%.

RWA tokenization digitizes traditional financial assets on the blockchain to boost transparency and efficiency. Tokenizing assets like real estate, art, and bonds enables fractional investment and increased liquidity. Ethereum’s dominant share positions it as a leader in this market, with continued growth expected.

Financial institutions and corporations increasingly rely on Ethereum’s smart contracts for RWA tokenization, achieving transparent, automated transactions not feasible in legacy finance.

Scaling Enhancements

Ethereum’s core developers expect Layer 1 EVM scalability to jump from about 10 TPS to 10,000 TPS—a 1,000-fold increase—thanks to zkVM (zero-knowledge virtual machine) technology. Instead of re-executing all blocks, SNARKs (zero-knowledge proofs) enable rapid verification. Multiple zkVM project founders plan to share updates soon, making this one of the fastest-moving areas of development.

Scaling was long Ethereum’s biggest challenge, as rising transaction volumes caused network congestion and soaring gas fees. The introduction of zkVM and Layer 2 solutions is expected to substantially alleviate these issues.

Most users are expected to remain on Layer 2, with rollups, danksharding, and improved network speeds supporting up to 10 million TPS. Layer 1 EVM will handle only a small fraction, but maintaining Ethereum’s overall network effect remains the priority. Shared security (native rollups), interoperability (base rollups), and intrinsic ETH value are key.

Layer 2 solutions offload the main chain, enabling faster, cheaper transactions and smoother operation of DeFi, NFT, gaming, and other apps—significantly enhancing user experience.

The Next Upgrade: “Pectra”

The upcoming “Pectra” upgrade will launch in two stages. “Pectra 1” will enhance network efficiency, security, and transaction convenience, making Ethereum even more user-friendly. The “Prague” upgrade will improve the execution layer, while “Electra” will reinforce the consensus layer and introduce technologies like “PeerDAS” for better data consistency and availability.

EIP-3074 will boost wallet functionality and streamline transactions, allowing multiple actions to be combined into a single transaction and enabling “sponsored transactions,” where third parties pay gas fees so users can transact without holding ETH. This makes Ethereum more accessible for newcomers.

The maximum stake per validator will rise from 32 ETH to 2,048 ETH, allowing large-scale stakers to participate more efficiently and strengthen scalability and stability. This change will help institutional investors and major staking operators contribute more effectively, further enhancing Ethereum’s security.

Ethereum’s Challenges and Outlook

CoinShares, a leading digital asset investment firm, notes that while Ethereum’s ecosystem is evolving, network transactions remain concentrated in areas like NFT trading and minor cryptocurrencies, with Uniswap dominating fee revenue.

Key challenges ahead include expanding practical use cases across the network and providing lasting value to users—such as diversified DeFi protocols, enterprise blockchain solutions, and financial infrastructure for emerging markets. For Ethereum to move beyond speculation, broad recognition as a practical platform is essential for future growth.

Staking Demand

SEC approval of spot Ethereum ETFs has affected staking demand. Although spot ETFs have been approved, issuers are reluctant to mention staking due to regulatory uncertainty.

Institutional staking demand is currently subdued, but future trends will depend on regulatory clarity and market conditions. Real Vision analyst Jamie Coutts suggests large-scale institutional staking is unlikely until regulations around ETFs become clearer.

If staking via ETFs is permitted, however, large-scale institutional capital could flow into Ethereum. This would drive higher staking participation, reinforcing network security and stability.

Conclusion: Ethereum Is Not Dead

Ethereum faces challenges and competition, but it retains a robust network and significant growth prospects. Issues such as stagnant prices, high volatility, competition from “Ethereum Killers,” the end of the NFT boom, and declining overall crypto interest have been cited.

Yet, Ethereum has many promising drivers: spot ETF approval in the US, adoption by major corporations, rising staking yields, ongoing upgrades (Dencun, Pectra), and Layer 2 expansion. Its dominant share in the RWA market, major scaling improvements, and expanding institutional participation are key to its long-term growth.

Ethereum’s developer community remains exceptionally active, powering ongoing innovation. The PoS transition, zkVM rollout, and advancement of Layer 2 solutions keep Ethereum at the cutting edge among blockchain projects.

In summary, declaring “Ethereum is dead” is premature. Continued upgrades are likely to drive sustainable growth, ensuring Ethereum remains central to the cryptocurrency sector. For investors, developers, and enterprises, Ethereum remains an attractive and promising platform.

FAQ

What Are Ethereum’s Advantages and Disadvantages Compared to Other Public Chains Like Solana or Polygon?

Ethereum stands out for its smart contract functionality and ecosystem diversity. Solana and Polygon provide faster and lower-cost transactions, but Ethereum offers the strongest security and decentralization.

How Have Performance and Costs Changed With the Ethereum 2.0 Upgrade?

The Ethereum 2.0 upgrade delivered a major boost in transaction speed and reduced gas fees by over 90%. This has dramatically improved usability for DeFi and NFT transactions and strengthened Ethereum’s competitive position in the public chain market.

How Are DeFi, NFT, and Other Applications Evolving in the Ethereum Ecosystem?

Ethereum’s total DeFi project value exceeds $25 billion, with daily transaction volumes topping $1 billion and around 300,000 active addresses each day. The NFT market is also growing rapidly.

Why Is Ethereum Sometimes Considered Outdated? What’s the Basis for This View?

Ethereum is called outdated due to competition from newer platforms and slower upgrade cycles. Still, it maintains a leading position as a smart contract platform and has solid institutional backing. Over time, innovation and ecosystem expansion may drive renewed value appreciation.

What Is the Outlook for Ethereum in Web3 and the Metaverse?

Ethereum’s prospects for Web3 and metaverse applications are extremely promising. The widespread adoption of smart contracts and DeFi protocols is driving innovation in decentralized finance and new business models, accelerating the growth of metaverse ecosystems.

Has Ethereum’s Gas Fee Problem Been Solved?

Ethereum’s gas fee issue hasn’t been fully resolved, but major upgrades—including Layer 2 solutions and EIP-1559—have greatly improved the situation. Further optimization is planned.