The cryptocurrency market has seen shifting dynamics, with Solana's resurgence and Ethereum's (ETH) recent performance falling short of some expectations. The ETH/BTC ratio has hit new lows, and the Ethereum Foundation's wallet activity, including asset sales and its approximately $100 million annual budget, has drawn significant attention—even prompting Vitalik Buterin to disclose his salary. Amidst this, the Ethereum Foundation's research team hosted their 12th Ask-Me-Anything (AMA) session on Reddit, addressing pressing questions from the community.
Held on September 5th, the AMA covered topics ranging from ETH's price potential and the Foundation's financial sustainability to technical developments like EIP-4844 (blobs), ZK-proofs, and Rollups. This article compiles key insights from that session, focusing on the core themes discussed. Note that researchers expressed personal views, and for full context, referring to the original thread is recommended.
Reasons for ETH's Potential Price Appreciation
What Are the Main Drivers for ETH's Growth in 2024?
Dankrad Feist emphasized Ethereum's role as a neutral financial platform for issuing and trading assets and creating permissionless financial products like derivatives. He believes value capture could occur through fee mechanisms, especially if L1 scaling advances sufficiently, making ETH a hub for high-value activity. Alternative methods, such as data availability fees or using ETH as collateral, were also mentioned, though the latter carries higher risk.
Anders Elowsson pointed to sustainable economic activity facilitated by Ethereum as the key to ETH's appreciation. When the ecosystem enables long-term utility, ETH becomes the go-to trustless asset and medium of exchange, with transaction fees burned, effectively distributing value to all holders.
Justin Drake succinctly stated, "ETH is money," underscoring its monetary premium potential as a global programmable currency.
Does the Ethereum Foundation Care About ETH's Price Growth?
Dankrad Feist clarified that the Foundation as an entity has no official stance, but researchers have personal opinions. He advocates focusing on building a valuable ecosystem, with value capture following naturally.
Anders Elowsson noted that while the EF may not prioritize price, individual researchers recognize its importance for economic security (as staked ETH secures the network), as a reliable currency within the ecosystem, and for investments held in ETH, including the Foundation's treasury.
Justin Drake personally views ETH's price growth as critical for Ethereum's success. He argues that without becoming the default "internet programmable money," Ethereum cannot serve as the settlement layer for the "internet of value." This monetary premium is essential for supporting trillion-dollar decentralized stablecoins, providing robust economic security, and attracting major economic players.
Could Ethereum Succeed Without ETH Price Growth?
Dankrad Feist compared it to a startup: even without profit, creating customer value signifies success. A diverse rollup ecosystem offering useful applications would be achievements, though ETH appreciation would amplify that success. He dismissed concerns about rollups becoming parasitic, describing the relationship as symbiotic—Ethereum provides cheap data availability, while rollups make L1 a hub for high-value transactions.
Anders Elowsson sees a direct link between sustainable economic activity and ETH's long-term price growth. He'd be surprised if Ethereum succeeded without ETH appreciation, viewing any disconnect as a market inefficiency and potential buying opportunity.
Justin Drake highlighted total fees (not per-transaction cost) and ETH's use as collateral in DeFi as key metrics. With a target of 10 million transactions per second at sub-cent fees, daily revenue could reach billions, fueling value accumulation.
Ethereum Foundation's Financial Sustainability
How Long Will the Ethereum Foundation's Funds Last?
Justin Drake shared insights based on limited knowledge:
- A new financial report is expected soon.
- Annual spending is around $100 million.
- The main ETH wallet holds roughly $650 million worth of ETH.
- Fiat reserves cover several years of expenses, recently replenished after a pause due to regulatory reasons.
- Rough estimates suggest about a decade of runway, though this fluctuates with ETH's price.
Ensuring Network Neutrality Amid Government Pressure
s0isp0ke from the Robust Incentives Group (RIG) discussed efforts to enhance censorship resistance through Inclusion Lists (ILs). These allow decentralized validators to强制 include transactions in blocks, reducing reliance on a few entities that might censors certain interactions. The recent FOCIL proposal relies on multiple proposers creating lists that must be included for blocks to be considered valid.
Layer 1 Development and Scaling
Plans for L1 Scaling Post-Rollup-Centric Roadmap
Dankrad Feist believes L1 execution scaling should proceed alongside rollup development. Data availability can scale nearly infinitely, constrained only by node participation. Execution scaling faces limits like state access, but zkEVMs and parallelization could increase capacity by 10-1000x, with rollups handling the rest.
Justin Drake envisions using SNARKs to scale L1 EVM execution essentially without limits. Real-time SNARK verification would let validators confirm proofs cheaply, drastically raising gas limits without burdening nodes. Specialized nodes would handle heavy lifting, while users run light nodes. EVM-in-EVM precompiles could enable programmable "native rollups" for horizontal scaling.
Key Areas in ZK Research
George Kadianakis listed several L1-related ZK projects:
- STARKed hash trees for statelessness.
- Recursive SNARKs for signature aggregation.
- ZK anonymous credentials for network robustness.
- STARKs for post-quantum signatures.
- ZK for privacy in leader election.
- ZK for L1 execution (long-term goal).
The cryptography team has broad ZK interests, detailed on their website.
Antonio Sanso noted that the team recommends deeper understanding before integrating Verifiable Delay Functions (VDFs) into Ethereum, with ongoing research needed.
Justin Drake expressed excitement about L1 EVM SNARKing, citing progress from Succinct: proving L1 EVM blocks now costs ~$1 million yearly, with optimizations underway. A $20 million budget supports zkEVM formal verification led by Alex Hicks.
EIP-4844 and Blobs
Current Research Focus and Blob Impact
Davide Crapis mentioned work on blob pricing, driven by its growing importance as a resource with inelastic demand from L2s. New research with partners will be released soon.
Issues with Blob Fee Mechanism
Davide Crapis acknowledged room for improvement but noted that high blob fees would increase L2 costs, reducing demand and thus blob prices—a self-regulating mechanism. The Arbitrum Nitro whitepaper offers good insights into L2 fee structures.
Dankrad Feist added that rollups would pass costs to users, naturally reducing transaction volume during congestion.
Adjusting Blob Targets if Usage Is Low
Davide Crapis argued against lowering targets; low prices without congestion are normal. However, current low demand affects price discovery during congestion. Adjustments like slightly higher minimum fees or faster updates could help, as discussed in EIP-4844 analysis and EIP-7762.
Dankrad Feist views the data availability market as competitive, with alternatives like Celestia competing on price, not security. Even at 3 blobs per block, revenue isn't significant; scaling should prioritize expansion over fee extraction. He believes L1's role as a financial hub will drive better value capture.
Justin Drake expects demand to meet targets over time as rollups like Base and Scroll optimize blob usage.
Other Topics
Solutions for ETH Over-Issuance
Davide Crapis prefers simpler demand curve adjustments over PID controllers, targeting a staking ratio range rather than a fixed value, as discussed at CEE 2023.
Justin Drake advocates a smarter issuance curve tapering to zero at soft caps (e.g., 1/4 or 1/2 ETH staked), pending community coordination.
Progress on EIP-4444, Portal Network, and MEV
Barnabé Monnot recommended notes from a recent internal meeting for updates. MEV research includes specific proposals like ePBS and FOCIL, plus broader concepts like APS and Braid. An ePBS tracker is maintained.
VDF Research and Applications
Antonio Sanso pointed to Mary Maller's Devconnect talk and his IC3 winter retreat presentation.
Justin Drake outlined VDFs for unbiased leader election in L1 (a "nice-to-have") and lotteries. MinRoot VDF ASICs are progressing, needing integration with SNARK proofs for chain verification. He encouraged contact for lottery development.
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Frequently Asked Questions
Why has ETH's price underperformed recently?
Market dynamics, including Solana's growth and concerns over the Ethereum Foundation's asset sales, have impacted sentiment. However, long-term value is tied to ecosystem utility and adoption.
What is the Ethereum Foundation's role in ETH's price?
The Foundation focuses on development, not price. Researchers personally believe ETH appreciation supports security and ecosystem health, but it's not an official mandate.
How do blobs benefit Ethereum users?
EIP-4844 introduces blobs for cheaper data storage, reducing L2 transaction costs and improving scalability, which can enhance user experience and adoption.
Is Ethereum's shift to rollups reducing L1 importance?
No; rollups and L1 have a symbiotic relationship. L1 remains the secure settlement layer, while rollups scale transactions, making Ethereum more versatile.
What happens if the Ethereum Foundation runs out of funds?
With current reserves, this isn't imminent. The community and ecosystem would likely support ongoing development, ensuring continuity.
How can I stay updated on Ethereum research?
Follow Ethereum Research forums, GitHub repositories, and key researchers on social media for real-time insights into technical advancements.