Any successful blockchain must create a flywheel effect as follows:
Economic progress (such as TVL, price, revenue, transaction volume, etc.) must bring attention and visibility to the chain, thereby:
Enabling new applications to receive funding, new developers to learn the relevant technologies, and new users to leverage what we have built to improve their lives. This will inevitably lead to:
Innovation, as well as improvements in infrastructure and applications to enhance efficiency and explore new use cases and architectures. Collaboration is especially crucial during the innovation phase, but this stage is also often where teams become fragmented due to natural incentive mechanisms. Innovation drives economic progress, and the cycle begins anew.
Ethereum's Next Move: Scaling, Upgrading, and Embracing the Convergence Era
The problem Ethereum faces is simple—we have broken every part of this flywheel.
Note: This article explores Ethereum's advanced technical roadmap and does not focus on the social roadmap. Both must be combined to present a complete picture.
First, Acknowledge the Problem
New applications, developers, and users are all on Layer 2 (L2)! Innovation is happening on L2! Economic progress is also shifting towards L2.
If these L2s could provide feedback to the flywheel, it would not be a problem for Ethereum, but this is often not the case.
Where Did the Flywheel Break?
Starting around 2020, Ethereum believed that scaling through rollups was the only way to expand and severely overestimated the contribution of L2 to Ethereum's overall flywheel.
Rollups were seen as the scaling solution. Compared to sharding, rollups appeared simpler, avoided diluting the security of Ethereum's Layer 1 (L1), and could even bring better composability.
However, rollups are not just a scaling architecture; they are also an incentive architecture. A simplified logical chain might be as follows:
We need to scale Ethereum.
Some form of sharding is necessary to scale a blockchain with the characteristics we need.
Sharding is too complex and has other issues in protocol execution.
Therefore, rollups are the only way to scale Ethereum.
In my view, the second point here is the first major mistake. It is empirically obvious that we were wrong (at least to some extent). For example, both Solana and Monad have demonstrated reasonable scaling roadmaps that do not involve any form of sharding. Meanwhile, many of Ethereum's core developers have proven that we can push the performance of L1 further than it is now.
Ethereum's Next Move: Scaling, Upgrading, and Embracing the Convergence Era
While I do not believe that one chain can meet all needs, I think we have pushed towards this endgame before pursuing L1 scaling opportunities.
The fourth point in this reasoning is also insufficient. We failed to properly assess the potential drawbacks of a rollup-centric roadmap on the L1 network effect flywheel.
The Ideal Flywheel
I believe we can rebuild the network effect flywheel as follows:
Ethereum's Next Move: Scaling, Upgrading, and Embracing the Convergence Era
L2 should not siphon off network effects from the flywheel but should accelerate the flow between each network effect.
Specifically, this means:
Providing almost unlimited flexible scaling as an overflow
Driving customization, specialization, and bold experiments
Attracting users and developers
Increasing the total revenue of the Ethereum ecosystem and the revenue of Ethereum L1 itself
Maintaining high composability with Ethereum
This interaction produces the desired effect for both Ethereum and L2—when the tide rises, all boats rise.
Ethereum's Next Move: Scaling, Upgrading, and Embracing the Convergence Era
My presentation slides at "Sequencing Day" in November 2024
A Solid Foundation
To effectively restart the flywheel, we need a strong L1. An L1 worth composing with. An ETH worth holding in your vault. A hub of innovation.
How to achieve this? The answer is simple. Aggressively scale L1.
Ethereum's Next Move: Scaling, Upgrading, and Embracing the Convergence Era
We start with innovation at the L1 level.
There are three reasons:
Scaling L1 increases network effects under the ideal flywheel
Scaling L1 raises the competitive barrier for any L2
Scaling L1 is beneficial for L2! (Especially the kind I will discuss in the next section)
Most people reading this article probably understand what scaling L1 means in practice, but the core is to increase TPS and Gas per second while reducing slot time. We must make Ethereum L1 the strongest settlement network, yes, but also an execution network.
Combined, this is the solid foundation that L2 needs.
Bring Back Rollups
As L1 scales and establishes its own network effects, there is no time to waste in optimizing L2 to contribute to the ideal flywheel.
Several things need to be balanced here:
Ethereum has given rollups the impression that they will be prioritized within Ethereum.
Rollups have already successfully grown their own network effects.
Any shift back to L1 scaling must be careful not to completely alienate major L2s (although some L2s have no reason to exist in the first place and should absolutely be phased out).
I propose a simple rollup design:
Rollup uses Ethereum for data availability (DA).
Rollup uses Ethereum for execution. This means it is a native rollup.
Rollup uses Ethereum for sequencing. This means it is a rollup-based design.
Rollup uses ETH as its native gas token.
This type of rollup is called an "Ultrasound Rollup" and a "Base+Native Rollup." I have written about them in detail!
"Ultrasound Rollups" cannot be implemented on the current Ethereum. To enable their native part, Ethereum needs to hard fork to introduce a new opcode, specifically the execution engine opcode. The sequencing-based design also currently has some practical issues, all of which are closely related to scaling L1.
Assuming we can achieve this, what would we get?
Ultrasound Rollups contribute to Ethereum's network effect flywheel by maintaining composability and enabling customization. Their combined scaling capabilities are theoretically very powerful; any single ultrasound rollup could drive execution like MegaETH or RISE. Ultrasound Rollups are not a step backward but a necessary step forward.
The synergy between Ultrasound Rollups and Ethereum is so strong that I see them as an extension of Ethereum's network effect. Solana's philosophy on network scaling is correct, but Ultrasound Rollups are not just about increasing Ethereum's capabilities; they are Ethereum's network.
Ethereum's Next Move: Scaling, Upgrading, and Embracing the Convergence Era
Existing rollups have the potential to transition to Ultrasound Rollups. In fact, some teams have already committed to further exploring this option. New rollups and application chains (Appchains) should prioritize this direction.
Through this approach, a unified Ethereum ecosystem can achieve "Universal Synchronous Composability," bringing crazy scaling capabilities and infinite expressiveness.
In this ecosystem, user and developer activities occur on L1 or specialized rollups. Important and contentious states may still remain on L1. Developers can build cross-chain applications without focusing on the underlying differences between chains. Users experience chain abstraction within the economic zone of Ethereum's scaling.
This is the era of Ethereum's convergence.
From "Multiple Choices" to "The Obvious Choice"
Ethereum is building top-tier data availability (DA), sequencing-based rollups are outputting our continuously improving sequencing technology, and native rollups will provide excellent execution capabilities.
Ethereum's Next Move: Scaling, Upgrading, and Embracing the Convergence Era
Ethereum L1 will integrate core rollup services into a unified Ultrasound Rollup. Although the market remains permissionless and chains can stay modular, Ethereum itself provides such important and complete services that any competitor becomes irrelevant.
In this model, value accumulation (in the form of fees) becomes simple and clear: providing the most valuable services, accessing the largest synchronous economic zone, the strongest economic security, the most censorship-resistant sequencing, the most reliable settlement layer, and the safest data availability.
The narrative naturally forms: "Ethereum is the best" –> Ethereum truly is the best.
Scale L1.
Bring back rollups.
Integrate everything.
And launch as soon as possible.
