Main Points:
- Ethereum faces critical “technical walls,” governance gaps, and fragmentation across Layer-2 networks.
- Layer‑1 network revenue has plunged by 99% since March 2024 post‑Dencun, underscoring overreliance on Layer‑2 solutions.
- David Hoffman’s proposals include raising the gas limit, integrating zkVM technology, and pivoting from protocol‑first to user‑centric design.
- The Ethereum Foundation’s leadership overhaul—appointing Hsiao‑Wei Wang and Tomasz Stańczak as co‑executive directors—aims to bring clearer vision and cohesion.
- The upcoming Pectra upgrade, set for May 7, 2025, promises to expand throughput, lower fees, and enhance Layer‑2 interoperability.
- On‑chain metrics reveal sustained address growth, whale accumulation surges, and improving market confidence.
The Walls Ethereum Confronts
In his April 18 Bankless article “Ethereum’s Strategic Pivot,” co‑founder David Hoffman highlights a series of interrelated challenges that have stalled Ethereum’s momentum. Chief among them is a set of “technical walls” arising from underinvestment in the base layer—while Layer‑2 rollups have flourished, the Layer‑1 roadmap has lagged, eroding Ethereum’s foundational strength. Hoffman also warns of a fragmented Layer‑2 landscape, where disparate rollups lack seamless interoperability, leading to user confusion and fractured liquidity. Moreover, the absence of decisive leadership within the Ethereum Foundation and wider ecosystem has created an “Ivory Tower” culture, diluting accountability and slowing decision‑making.
Compounding these technical barriers is a creeping sense that Ethereum’s core narrative has become overly academic, with a heavy emphasis on research rather than execution. As Hoffman puts it, the industry needs to “right the course” by aligning long‑term vision with near‑term engineering and product goals, something that has, until now, been in short supply.
A Revenue Freefall: The Post‑Dencun Reality
Perhaps the starkest illustration of Ethereum’s current predicament is the collapse of Layer‑1 network revenue. Data from Token Terminal show that fees on Ethereum’s mainnet peaked at $35.5 million on March 5, 2024, just before the Dencun upgrade, only to tumble to as low as $566,000 by late August—a 99% plunge. While Dencun successfully reduced transaction costs on Layer‑2, it inadvertently drove substantial activity off the mainnet and onto rollups, depriving Ethereum of its primary revenue source.
Market observers warn that this shift could undermine both network security (by reducing fee‑based incentives for validators) and the deflationary economics introduced by EIP‑1559. As daily Layer‑2 transaction volumes and active users have doubled since the upgrade, the Ethereum base layer risks being relegated to mere settlement infrastructure rather than a thriving execution environment.
Hoffman’s Rebuilding Strategy
To address these intertwined crises, Hoffman and his Bankless guests propose a multi‑pronged rebuilding strategy. Technically, they advocate an immediate increase in the gas limit from roughly 36 million to 100 million per block, with a longer‑term target of 300 million under the upcoming “Glamsterdam” fork. This would provide a tenfold boost to on‑chain throughput in the short term, accommodating more transactions and smarter contracts without sacrificing decentralization.
In parallel, integrating zero‑knowledge virtual machines (zkVMs) could skyrocket Layer‑1 capacity by up to 100×, leveraging succinct proofs to aggregate rollup state transitions on‑chain efficiently. This shift from pure research to production‑grade engineering is presented as essential for reclaiming Ethereum’s performance leadership. Equally critical is a cultural pivot from protocol‑first to product‑first thinking—prioritizing user experience (UX), developer ergonomics, and clear release cadences to outpace competitors in a fast‑moving market.
Reinforcing Leadership: A New Chapter at the Ethereum Foundation
Recognizing that technical fixes alone cannot steer a fragmented community, the Ethereum Foundation announced a leadership shake‑up in March 2025, appointing longtime researcher Hsiao‑Wei Wang and Nethermind founder Tomasz Stańczak as co‑executive directors effective March 17. This co‑leadership model aims to balance Wang’s deep research expertise—particularly on the beacon chain—with Stańczak’s proven track record scaling development teams and client implementations.
The move addresses criticism of an “Ivory Tower” culture by injecting fresh perspectives and clearer accountability into project planning and external communications. Wang and Stańczak are tasked with unifying diverse stakeholder voices, accelerating decision‑making, and ensuring that Ethereum’s technical roadmap aligns with ecosystem needs for security, performance, and interoperability.
Upcoming Milestone: The Pectra Upgrade
On May 7, 2025, Ethereum is slated to deploy the much‑anticipated Pectra upgrade—a synthesis of the “Prague” and “Electra” development phases. Pectra prioritizes scalability optimizations over radical protocol changes, introducing EIPs that raise the gas limit further, refine staking mechanics, and enable account abstraction to streamline user onboarding. Institutional depositories such as Coinbase and Fidelity have published guides advising infrastructure teams to prepare for minor client updates, validator software patches, and pre‑upgrade testing on Holesky testnet.
In addition to throughput improvements, Pectra seeks to reduce transaction fees, enhance Layer‑2 data availability, and strengthen consensus under high load. While not a panacea, it represents the clearest roadmap yet for reversing revenue declines and absorbing Layer‑2 growth, laying the groundwork for subsequent data‑centric upgrades like PeerDAS and Fusaka.
On‑Chain Indicators: Signs of Life
Despite the headwinds, on‑chain metrics hint at underlying resilience. According to PatentPC, over 27 million unique addresses now hold ETH as of early 2025—a sign of broadening adoption and user retention. Meanwhile, whale wallets—defined as holdings between 1,000 and 10,000 ETH—have climbed to 5,460 addresses, the highest count since August 2023, suggesting renewed confidence from large holders.
Moreover, data from IntoTheBlock shows that whale‑controlled supply has risen to 46% of total ETH, marking a near decade‑long high. This concentration could prove double‑edged: bullish if whales accumulate ahead of technical upgrades, but risk‑laden if large holders exit en masse during volatility.
Steering Toward Rebirth
Ethereum stands at a pivotal inflection point. The combination of technical debt, fragmented Layer‑2 ecosystems, and leadership inertia has inflicted steep revenue and market share losses. Yet, the comprehensive blueprint laid out by David Hoffman—encompassing aggressive Layer‑1 scaling, zkVM integration, UX‑driven culture change, and a reinforced leadership structure—charts a credible path toward revival.
The imminent Pectra upgrade serves as both a test and a promise: if Ethereum can successfully deploy its planned optimizations and reignite mainnet activity, it may reclaim its reputation as the world’s programmable blockchain. At the same time, on‑chain indicators of address growth and whale accumulation suggest that core believers remain engaged.
Ultimately, Ethereum’s renaissance will depend on the coordinated execution of its roadmap, the agility of its governance, and the willingness of its community to embrace a user‑centric, product‑first ethos. Should these elements coalesce, the “gargantuan ship” of Ethereum may once again set a confident course toward broader adoption, robust revenue models, and enduring decentralization.
