Ethereum is dead. Ethereum will be fine. The social media takes are flying on the state of the world’s second most valuable blockchain. Conceived in 2013, Ethereum has experienced a series of dramatic ups and downs, including an existential hack in 2016 and a remarkable technological upgrade in 2022. But this year has brought unprecedented scrutiny of the current and future direction of the project.
A big part of this is due to the price of Ethereum, which is badly lagging Bitcoin. The world’s most valuable cryptocurrency has notched a series of all-time highs and a flurry of interest from Wall Street investors. Meanwhile, as of Tuesday, Ethereum was trading around $2,500, about 50% lower than its all-time high, according to data from crypto exchange Binance.
Ether’s lackluster price movement has prompted some to proclaim Ethereum’s end. “Ethereum died,” wrote Max Keiser, a prominent Bitcoin booster, on X. “It just hasn’t been buried yet.”
This is an overstatement. But questions remain on whether Ethereum’s price slump reflects a temporary stumble, or whether the blockchain — long hailed by boosters as the computer of the future — will never grow into its promise.
“Bitcoin has died many times… Ethereum has died several times,” Joseph Lubin, CEO of the blockchain technology firm Consensys and cofounder of Ethereum, told Fortune. “When there are challenges, we learn from them.”
Those challenges have been present since 2013, when a wiry 19-year-old from Canada named Vitalik Buterin had an idea for a new type of computer. Fearing that Big Tech firms had an unhealthy monopoly over cloud computing that could stifle developers, Buterin looked to blockchains instead. He and others came up with Ethereum — a decentralized blockchain-based computing platform where programmers’ code was immune to the whims of corporate behemoths.
Developers soon flocked to Ethereum, but the increase in activity brought a rise in “gas fees.” Every time users send one another assets on Ethereum, they need to pay with cryptocurrency — in the same way Amazon requires users to pay dollars to use its cloud computing network. The only difference is that Ethereum’s gas fees are distributed to the decentralized cohort of computers supporting the blockchain, instead of one corporate entity. In 2021, sending a few dollars of cryptocurrency to other users on Ethereum resulted in charges of sometimes hundreds of dollars, and developers looked for a solution.
That solution is what Ethereum’s critics say has sapped the network of some of its financial value. Instead of immediately working to speed up Ethereum’s core network, developers fostered a system of layer 2 blockchains, or L2s, built on top of Ethereum. These L2s — including Arbitrum, Optmism, and Polygon — package user data into one bundle and post that onto Ethereum, rather than ask the blockchain to process each transaction individually.
