1. Introduction: Ethereum's Sluggish Performance and Future Concerns

Ethereum's recent market performance has been underwhelming, raising concerns among community members. Since the beginning of this year, Ethereum's price growth has significantly lagged behind Bitcoin and Solana. Particularly since Ethereum adopted a modular architecture strategy, the network's value growth appears to have fallen short of expectations. This has led many to question whether Ethereum's strategic choice was correct and whether its future direction needs adjustment. This article delves into the current situation, the Beam Chain proposal, the modular strategy, and the challenges and opportunities ahead.

2. Current State: Ethereum’s Market Performance

2.1 Price Performance Comparison

Ethereum has notably underperformed compared to Bitcoin and Solana during this cycle. According to TradingView, Ethereum's price has risen by 150% since the start of 2023, while Bitcoin increased by 422%, and Solana soared by 1,629%. Many believe Ethereum’s choice of a modular architecture is a key factor behind its weaker performance.

Source: https://www.tradingview.com/x/zfBGgFQv/ 

2.2 Short-term Impact of the Modular Architecture

The modular strategy has offloaded some core services like execution, settlement, and data availability to Layer 2 (L2) or independent projects. This has reduced Ethereum's core revenue source—network fees. While EIP-1559 supports prices by burning fees to shrink supply, the rise of L2 has diminished its effectiveness. In essence, while the modular approach boosts flexibility and scalability, it has had short-term negative effects on ETH prices.

2.3 Ecosystem Value

Ethereum and its modular infrastructure tokens created roughly $50 billion in market value in 2023, comparable to Solana. However, this value saw a decline in 2024, partly due to shaken confidence in the modular strategy. Investors have struggled to grasp the growth potential of a fragmented infrastructure ecosystem.

3. The Beam Chain Proposal: Opportunities and Challenges in Redesigning the Consensus Layer

3.1 Core Aspects of the Beam Chain Proposal

At Devcon, Ethereum Foundation researcher Justin Drake proposed the Beam Chain upgrade, referred to as "Ethereum 3.0." The proposal aims to significantly improve Ethereum’s performance and security through:

• Reducing block time from 12 seconds to 4 seconds.

• Lowering validator staking requirements from 32 ETH to 1 ETH to encourage more participation.

• Implementing SNARK technology for "chain SNARKification," enhancing efficiency and security.

• Using post-quantum encryption to ensure future safety against quantum computing threats.

3.2 Batch Upgrades and Risks

The Beam Chain proposes implementing multiple changes simultaneously to accelerate Ethereum's transition to a stable maintenance phase. While this reduces long-term uncertainty, it introduces systemic risks. Ethereum core developer Péter Szilágyi cautions that bundled upgrades could leave potential issues unaddressed, suggesting iterative updates as a safer approach.

4. Reflection on Ethereum’s Modular Strategy

4.1 Advantages of the Modular Strategy

Since 2020, Ethereum's modular architecture has offered:

• Flexibility: Quickly adapting to new technologies like SNARKs and zkEVM.

• Scalability: Expanding capacity through Layer 2, reducing costs for developers and users.

Source: https://ethereum.org/zh/layer-2/

4.2 Drawbacks of the Modular Strategy

The strategy has also brought economic and technical downsides:

• Reduced Fees: Layer 2 has diverted transaction fees from Ethereum’s mainnet.

• User Complexity: Operating across multiple Layer 2 networks can be cumbersome.

• Centralization Risks: Infrastructure token ownership concentration may harm decentralization.

5. Historical Review: From "The Merge" to Now

5.1 Recap of the 2022 Merge

The 2022 Merge marked Ethereum’s transition from Proof of Work (PoW) to Proof of Stake (PoS), drastically reducing energy consumption and laying the foundation for scalability enhancements like sharding.

5.2 Post-Merge Developments

• Energy Efficiency: Reduced energy use by 99.5%.

• Staking Growth: Validators replaced miners, enhancing decentralization.

• Scalability Foundations: Paved the way for upgrades like sharding and Beam Chain.

6. Future Plans and Challenges

6.1 Implementation Roadmap

• 2025: Specification phase.

• 2026: Development phase.

• 2027 and beyond: At least two years of testing before mainnet deployment.

6.2 Technical and Governance Challenges

Challenges include integrating complex technologies like SNARKs and post-quantum encryption, coordinating among stakeholders, and ensuring security during transitions.

6.3 Key Issues to Address

• Technical Complexity: High difficulty in real-time SNARKification.

• Governance Coordination: Broad community support and team collaboration.

• System Security: Preventing vulnerabilities during new technology adoption.

7. Criticism and Counterarguments

7.1 Advantages of Gradual Upgrades

Péter Szilágyi suggests that gradual upgrades align better with Ethereum’s evolutionary philosophy, reducing systemic risks.

7.2 Modular Ecosystem Centralization

The complexity of modular systems and concentrated ownership of infrastructure tokens pose risks to decentralization and user experience.

8. Competitor Analysis: Solana and Other Layer 1 Blockchains

8.1 Solana’s Monolithic Structure

Unlike Ethereum, Solana opts for a monolithic approach, achieving high throughput and low latency on Layer 1.

• High Throughput: Parallel processing and efficient consensus mechanisms.

• User-Friendliness: Simpler experience without cross-layer complexities.

8.2 Scalability and Flexibility Challenges

Solana’s monolithic design limits scalability and lacks Ethereum’s flexibility for rapid innovation.

9. Conclusion: The Future of Ethereum

9.1 Combining Modular and Beam Chain Strategies

The integration of Beam Chain and modular architecture marks a significant experiment for Ethereum. The success of Beam Chain will determine Ethereum’s ability to maintain its position as a leading smart contract platform.

9.2 Ecosystem Innovation and Vitality

Ethereum’s future depends on ecosystem activity, innovation, and community consensus. Continuous innovation and iteration will be essential for realizing its vision of becoming the “world computer” and staying ahead in the blockchain revolution.

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