Ethereum Surges 2.296% Amid Scaling Concerns, Two Prime Drops Exposure

Ethereum's latest price was $1838.07, up 2.296% in the last 24 hours. Ethereum Foundation researcher Dankrad Feist has expressed concerns about the future relevance of Ethereum's base layer, suggesting that without a more aggressive roadmap for scaling and protocol overhaul, the network could become obsolete within the next decade. Feist's proposal, posted on the Ethereum Magicians forum, outlines a draft Ethereum Improvement Proposal (EIP) that aims to pre-commit the network to a multi-year schedule of significant gas-limit increases and complementary architectural changes. He argues that the current approach to Ethereum's development is too incremental and risks making the platform irrelevant in the face of competing ecosystems that offer high-throughput, single-layer user experiences.

Feist's primary concern is the strategic importance of maintaining the main chain as the economic center of Ethereum. He warns that as liquidity splinters across various Layer 2 networks, the platform's competitive position could be weakened. If the main chain loses its attractiveness, Layer 2 networks might also lose their incentive to remain attached to Ethereum. Feist highlights the rapid progress in zero-knowledge validity proofs, which have made proving Ethereum L1 blocks both possible and cost-effective. He notes that the ecosystem is on track to achieve single-slot proof latency later this year, and data-availability sampling through the PeerDAS initiative is also becoming a reality. These advancements open the door to significant scaling while maintaining verifiability and censorship resistance.

Feist also points out that Ethereum's node architecture, which mirrors Bitcoin's 2009 design, needs to evolve into differentiated roles. Some nodes could be lighter than today's full nodes, while others could be more robust builders or provers operating under a one-out-of-n honesty assumption. The key, he argues, is to ensure that all node types can still be run from home in some places, maintaining the decentralized nature of the network. Feist calls for a more aggressive and goal-oriented approach to Ethereum's development, suggesting that working backwards from a clear objective will yield better outcomes than incremental changes. He proposes that the forthcoming Glamsterdam upgrade should prioritize delayed execution, shorter slot times, and aggressive history expiry. Subsequent forks over the next two years would add features such as parallel transaction execution, erasure-coded blocks, an enshrined zkEVM, execution payloads inside blobs, and the FOCIL mechanism to enhance censorship resistance.

Feist dismisses the notion that a high-throughput roadmap would turn Ethereum into a "datacenter chain," arguing that the core value proposition of Ethereum is verifiability and censorship resistance. He acknowledges that most users already rely on custodial RPC endpoints but believes that zero-knowledge proof verification will make trust-minimized usage easier. Mechanisms such as FOCIL or Minimum Censorship Proposers (MCP) could deliver better censorship resistance than the current system. Feist emphasizes Ethereum's "huge moat in DeFi liquidity" and insists that colocated applications still derive network effects from Layer 1 proximity. He envisions an endgame where the base layer can process orders of magnitude more activity without sacrificing the protocol's defining guarantees, making it a formidable competitor in the blockchain space.

Algorithmic trading firm Two Prime has formally dropped its exposure to Ethereum, citing concerns about the asset's trading behavior and value proposition. The firm now exclusively manages and lends against Bitcoin, believing it to be the only digital asset that meets institutional standards for liquidity, predictability, and long-term investment viability. Two Prime's decision follows over a year of performance divergence between Bitcoin and Ethereum, during which the firm had issued more than $1.5 billion in loans backed by both assets. The firm concluded that Ethereum's current behavior no longer aligns with risk-adjusted return expectations suitable for institutional portfolios.

Two Prime's quantitative analysis shows that Ethereum's volatility and return structure have decoupled from Bitcoin since the November 2024 US election. While Bitcoin has shown classic mean-reversion characteristics, Ethereum has continued to trend lower with limited rebounds. Scatterplots comparing 30-day returns with 30-day forward returns reveal that Ethereum shows persistent negative momentum and lacks the symmetry observed in Bitcoin data. Additionally, Ethereum's volatility now resembles that of memecoins like Dogecoin, displaying sudden multi-standard deviation moves inconsistent with institutional-grade assets. Two Prime also pointed to a widening gap in institutional demand, with Bitcoin ETFs managing over $113 billion in assets compared to Ethereum ETFs' $4.71 billion. The disparity creates a reflexive environment where underperformance in Ethereum products leads asset managers to dedicate fewer resources to promotion, reducing visibility and investor allocation.

Two Prime questioned Ethereum's economic and technical model, noting that newer alternatives like Solana offer faster transaction throughput, lower costs, and a better user experience in latency-sensitive applications. The firm argued that Ethereum Layer-2 networks have cannibalized much of the value capture that was previously tied to the mainnet, and that Ethereum lacks a clear monetization model to support its valuation and utility claims. Two Prime also criticized Ethereum's governance and focus, describing the internal structure as bureaucratic, ideologically rigid, and slow to adapt to competitive market conditions. The firm now sees Ethereum as one among many speculative tech platforms with no durable edge, contrasting it with Bitcoin's focused use case as a decentralized store of value.

Ethereum developers are preparing to introduce two new token standards—ERC-7930 and ERC-7828—to enhance blockchain interoperability and security. The new standards aim to address the lack of a standardized format for crosschain address representation, which currently leads to a fragmented and confusing user experience. ERC-7930 defines a compact binary, machine-readable format for interoperable addresses, while ERC-7828 adds a human-readable format utilizing identifiers such as address@chain. These standards are designed to be easily processed by protocols that require a universal address format, improving the overall cross-chain user experience and reducing the risk of sending tokens to the wrong chain. The development of these standards is part of a broader effort by the Ethereum community to upgrade the platform's DeFi infrastructure and address long-standing pain points in the ecosystem.