Short-Term Pain, Long-Term Gain, Says Research

On Nov. 12, Web3 enterprise capital agency Hack VC launched analysis and evaluation on Ethereum’s modular technique.

“Within the brief time period, modularization possible hurts ETH worth due to decrease charges and decreased token burn, however this isn’t the entire story,” stated Hack VC managing companion Alex Pack.

Ethereum’s Future is Bullish

Since 2020, Ethereum has shifted to a modular structure, outsourcing components of its infrastructure like execution and information availability to layer-2 networks. The notion was aimed to decentralize and improve the scalability of the community, nonetheless, there have been short-term drawbacks.

The technique has negatively impacted the ETH worth within the brief time period on account of decreased charges on the primary community, resulting in much less token burn through EIP-1559. Decrease charges imply decreased shortage of ETH, which places downward strain on its worth, the research famous.

1/ ETH is underperforming BTC and SOL massive time this cycle. The explanation? Many suppose that it’s Ethereum’s option to go modular. Was this a strategic misstep? We pulled a bunch of knowledge and have some solutions. pic.twitter.com/eAgqpLX5a2

— Alexander Pack (@alpackaP) November 12, 2024

Till not too long ago, ETH had underperformed this 12 months, with Bitcoin and rival community Solana seeing higher positive factors. Moreover, the proliferation of latest L2 tokens within the Ethereum ecosystem might have additionally diluted investor curiosity in ETH, the researchers stated.

However, Ethereum’s modular strategy goals to future-proof the community in opposition to technological shifts, such because the rise of zk-rollups and shared safety fashions like EigenLayer. This adaptability might assist Ethereum keep away from changing into out of date, not like previous tech giants like AOL or Yahoo.

The researchers concluded that in the long run, Ethereum might emerge as a stronger participant on account of its “funding in fostering a broader ecosystem” as it’s laying the inspiration to “adapt, scale, and thrive” within the subsequent wave of blockchain innovation.

“In an trade the place success is pushed by community results, Ethereum’s modular technique could possibly be the important thing to sustaining dominance amongst sensible contract platforms.”

“Possibly modularity has positioned ETH for sustainable development and continued dominance,” concluded Pack.

ETH Worth Cools

ETH costs have been on fire this week, surging greater than 30% and including greater than Solana’s complete market cap in simply 5 days. The asset topped out at $3,424 on Nov. 12 earlier than reiterating with the broader crypto market, which is cooling after its week-long rally.

On the time of writing, ETH was buying and selling at $3,148 following a 5.5% each day dip; nonetheless, it stays up 31% because the similar time final week.

In the meantime, spot Ethereum ETF complete flows have lastly flipped to internet constructive following a bumper influx day on Nov. 12, with BlackRock’s ETHA fund seeing its second-largest influx of $131.4 million.