Talking about Ethereum’s current “dilemma” from the perspective of the primary market

Original author: Lao Bai, ABCDE investment research partner

Since @jason_chen 998s angry at their lack of competition ETH article fermented, there have been many articles discussing the dispute between ETH and Solana on the Internet in the past few days. I dont intend to repeat or elaborate. Let me add a perspective (not Fud), that is, from the perspective of primary market innovation and financing. After all, many of these projects have not yet entered the public eye and are still being intensively organized.

In the two years at ABCDE, I have talked about more than 1,000 projects. Although it certainly cannot cover the overall status of the primary market, the number of samples should not be small. In 2023, ETH and Solana will develop independently in the primary market. Even because of the expectations of Eigenlayer and the entire Restaking+LRT ecosystem, ETH will have a higher momentum in the primary market.

In 2024, there was a relatively big turn. The entire market stopped paying for the completely oversupplied Infra projects, and the ghost chain phenomenon caused everyones disgust. Vitalik himself also changed his tone in The Next Decade of Ethereum in August, saying Basically, I think the tools we have or will have are enough to build the best applications in every field suitable for Ethereum.

In the early second half of 2024, V Gods change of tone, the seed round financing of nearly 100 million US dollars for an AI Infra project, and the opening of FDV with only more than 100 million downloads of Matr1x with 2.5 million downloads – the superposition of three independent but close-in-time events is a turning point in my personal eyes – the peak of Infra and the bottom of application. After that, Infra began to turn downward, and application began to slowly improve. Of course, this is a timeline that stretches to the next few years and will not be achieved overnight.

In the past, Crpyo has made several major innovations, including the ICO in 2017, Defi Summer in 2020, Play 2 Earn in 2021-22, NFT, etc., all of which happened on ETH, and more importantly, on ETH L1. This has also made the prEs of ETH soar. But the current market sentiment, from the perspective of the price, everyone is confident that Solana will break the previous high, and there is endless worry about ETH returning to 4,000, not to mention the previously mentioned ETH breaking 10,000. Solana PumpFun is booming in the secondary market. Although ETHs TVL is still far ahead, the applications are still the same old faces from 20-21, and more and more users are going to L2, and L1 Gas has remained low all year round.

The primary market is actually facing the same problem. In the past 6 months, I have personally felt that there are more application-oriented projects, including various prediction/gambling markets, AI applications, Depin, micro-innovation Defi, Payfi, 3A game masterpieces, etc. It is not sure which track the next big innovation breakthrough point will be. I just made an ecological distribution map of the project based on my impression. This is generally the situation.

– Prediction/Betting Markets – Ton/Solana/Monad
-AI – Solana/Base/Monad
-Depin – Solana/MegaETH/Monad
-Defi – Arbitrum/Berachain/MegaETH/Monad
-Payfi – Ton/Solana/Monad/MegaETH
-Game – Sui/Ronin/Immutable X
-RWA – ETH/Solana

It can be seen that no matter where the next big innovation in the application level is, Solana currently has the greatest opportunity, followed by Monad and MegaETH. Except for some RWA-related projects, it is rare to see new projects that run entirely on ETH L1. Arb and Base are the most powerful in L2 (referring to the application level alone, OP has basically taken the path of launching chain Infra), but even if there are popular or even phenomenal applications running on them, the value that ETH L1 can capture in them under the existing architecture is probably very limited.

I personally think the most promising new track is AI and PayFi. Solana and Base are currently far ahead in AI. Base previously completed the first AI-to-AI payment in history, and recently launched a new set of fully on-chain AI agents, which can create an Al Agent with a built-in encrypted wallet and Twitter account (optional) in 3 minutes. Solana is even more so, as it directly gave birth to the new track of AI Meme. Of course, if you really study Goat and ACT carefully, you will know that they are by no means as simple as memes, but have the potential to create a brand new track and paradigm.

Payfi is a competition between two veterans, Ton+Solana, and two newcomers, Monad+MegaETH. This is a track that is almost impossible to be disproven. Basically, everyone knows that Crpyto is actually most suitable for payment, which is also the original intention of Satoshi Nakamoto to invent Bitcoin. It just depends on which chain/project can finally realize his long-cherished wish at which time point. (Finally, several projects based on the Lightning Network for Payfi have also appeared recently. Lets see whether this round of Lightning can rise).

Having said so much, I am not trying to follow ETH. I personally do not think that Solana can really flip ETH with this round of momentum. ETH is enough to hold the second place with its current community + technology accumulation. My only worry is whether ETH is content with the status quo, willing to let innovation and value capture happen in L2, and L1 itself can do DA and settlement with peace of mind (while facing competition from projects such as Celestia), and the price of the currency has been so calm. But I really don’t have an answer. It is an established fact that ETH L1 is currently weak in value capture for L2, and L1’s GAS and TPS are indeed not enough to carry Mass Adoption type applications. The old Defi + possibly the new RWA track alone does not seem to be enough for everyone to see ETH rush to the peak of 10,000 US dollars. If BTC is 150,000-200,000, Solana is 500-1000, and ETH is still hovering around the price of 3,000 or 4,000 in the next few years, the confidence and status accumulated in the past 10 years will surely be slowly worn out.

How to break through? This is probably not the responsibility of VCs. We look forward to ETH developers and entrepreneurs telling us the answer.

Tautan asli

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