Under Strong Public Pressure, Vitalik Calls for L2 Support: Come Back and Support ETH

By: blockbeats|2025/01/24 06:30:03

Original Title: Scaling Ethereum L1 and L2s in 2025 and beyond

Original Author: Vitalik Buterin

Original Translation: Fu Ruhe, Odaily Planet Daily

Recently, Ethereum's performance in this round of the cycle has triggered widespread dissatisfaction, with community members expressing disappointment with the Ethereum Foundation's (EF) inaction. Even some leading projects in the Ethereum ecosystem have begun to question the Ethereum Foundation, seemingly with a sense of "forcing the palace."

The founders of several well-known projects have successively voiced their concerns about the future direction of Ethereum:

· The founders of Synthetix and Infinex believe that the EF should require L2 (Layer 2 networks) to use their revenue to buy back ETH, thereby increasing ETH demand and boosting its value.

· The founder of Curve believes that the EF should immediately abandon the L2 strategy.

· The founder of Aave has released the "12 Measures to Save the EF," calling on the foundation to quickly take action to address the current predicament.

· A more intense voice comes from the founder of Wintermute, who believes that Ethereum faces the possibility of a "death spiral."

Facing strong questioning from cornerstone projects in the ecosystem, Ethereum founder Vitalik Buterin finally spoke out today, announcing a "toll" on the L2 network. You can find more details in "The Seven Sins of Ethereum, Who Can Play the 'Salvation Symphony' for It?" and "Leading Projects Jointly 'Force the Palace,' Unmoved by the Ethereum Foundation."

This transformation is likely to become a key milestone in Ethereum's future development, showing us how Ethereum adapts to new opportunities and challenges. Below is Vitalik's original text, curated by Odaily Star Daily.

Ethereum's goal has not changed since day one: to build a global, censorship-resistant, permissionless blockchain platform. It is a freely open platform for decentralized applications, embodying principles similar to GNU + Linux, Mozilla, Tor, Wikipedia, and many other great free and open-source software projects (now known as the rebirth and cypherpunk spirit).

Over the past decade, Ethereum has also developed a feature that I greatly appreciate: in addition to cryptographic and economic innovation, Ethereum is also an innovation in social technology. The Ethereum ecosystem as a whole demonstrates a more open and decentralized way of collaboration. Political philosopher Ahmed Gatnash described his experience at Devcon as follows:

“...this allowed me to catch a glimpse of what an alternative world might look like—a world with almost no barriers, divorced from traditional systems. Here, social hierarchies are upended, and the most esteemed members of society are the geeks who are focused on independently solving problems they deeply care about, rather than those playing the game to climb the ladder of traditional institutions and accumulate power. Here, almost all power is soft power. I found this to be beautiful and very inspiring—it makes you feel that in such a world, anything is possible, and such a world is actually within reach.”

Technical projects and social projects are inherently intertwined. If at time T you have a decentralized technical system, but it is backed by a centralized social process, then you cannot ensure that your technical system will still be decentralized at time T+1. Similarly, social processes are also upheld by technology in various ways: technology attracts users, the ecosystem brought by technology provides incentives for developers to stay, technology grounds the community, focusing on building rather than just socializing, and so on.

Under Strong Public Pressure, Vitalik Calls for L2 Support: Come Back and Support ETH

After a decade of effort, under the combined governance of technology and social attributes, Ethereum has demonstrated another important quality: Ethereum is able to provide practical services to people at scale. Millions of people use ETH or stablecoins as a savings method, and more people use these assets for payments: I am one of them. Ethereum has efficient, practical privacy tools that I use to pay for VPN services to protect my internet data. It also has ENS, a robust decentralized alternative for DNS and wider public key infrastructure. Additionally, Ethereum hosts easy-to-use decentralized Twitter alternatives and DeFi tools that offer millions of people higher-yield, lower-risk assets compared to traditional finance.

Five years ago, I was reluctant to discuss the latter's use cases, primarily because the infrastructure and code were not yet mature. At that time, we had just experienced those large-scale and painful smart contract hacks in 2016-2017, and if there was a 5% annual probability of losing 100% of returns, then a 7% annualized return would be meaningless compared to a 5% annualized return. Additionally, transaction fees were too high to enable the widespread application of these tools. Today, these tools have proven their resilience over time, the quality of audit tools has also improved, and we are becoming increasingly confident in their security. We now know what things cannot be done. L2 scaling solutions are at work, and transaction fees have remained extraordinarily low for almost a year.

We need to continue to enhance Ethereum's technological and social properties as well as its usability. If we only have the former without the latter, we will degenerate into an increasingly ineffective "decentralized" community, only protesting against mainstream institutions' "unethical and wrongful behavior" without truly providing better alternative solutions. If we only have the latter without the former, we will be no different from Wall Street's "greed is good" mindset, and many people joined the Ethereum community to break free from this mindset.

The duality of this coexistence of technology and practicality has many far-reaching implications. In this article, I want to focus on a specific aspect that is crucial for Ethereum users in the short and medium term: Ethereum's scaling strategy.

The Rise of Layer 2

Today, the path we are taking to scale Ethereum is through Layer 2 protocols. The Layer 2 in 2025 has made a significant leap compared to the early experiments of 2019: they have achieved crucial decentralization milestones, are safeguarding billions of dollars in assets, and have increased Ethereum's transaction capacity by 17 times while reducing fees by the same magnitude.

All of this is happening right at the wave of a successful application trend: various DeFi platforms, social networks, prediction markets, and novel projects like Worldchain (which now has 10 million users). Additionally, the once-stalled "enterprise blockchain" movement of the 2010s, deemed a dead end due to private chain failures, has found a new lease on life with the rise of Layer 2, with Soneium being a prominent example.

These successes also demonstrate the social advantage of Ethereum's decentralized and modular scaling approach: the Ethereum Foundation does not need to personally onboard all users but has dozens of independent entities driving the initiative. These entities have also made critical contributions to the technology, and without them, Ethereum could not have achieved what it has today. It is for this reason that we are finally approaching "escape velocity."

Challenge: Scaling and Heterogeneity Handling

The current Layer 2 faces two main challenges:

· Scaling: The current "Blob Space" barely manages to support the existing Layer 2 and its use cases but is far from sufficient to meet future demands.

· Heterogeneity Issue: Ethereum's initial scaling vision was to create a blockchain consisting of multiple shards, with each shard being a replica of the EVM handled by a small set of nodes. In theory, Layer 2 is the realization of this vision. However, in practice, a key difference exists: each shard (or group of shards) is created by different participants, considered as separate chains in the infrastructure, and typically follows different standards. This situation brings about challenges for developers and users in terms of composability and user experience.

The first issue is a straightforward technical challenge with a simple solution but significant implementation difficulty: provide Ethereum with more "Blob Space." Additionally, Ethereum L1 can alleviate the pressure in the short term through moderate scaling and improvements in proof of stake, statelessness, light verification, storage, EVM, and cryptographic technologies.

The second issue is a coordination problem that has garnered widespread public attention. The Ethereum ecosystem is no stranger to cross-team collaboration to accomplish complex technical tasks—after all, we achieved The Merge. However, the coordination challenge here is more daunting due to a larger number of participants, diverse goals, and a later start to the process. Nevertheless, our ecosystem has overcome many difficult challenges in the past and can do so again this time.

A potential shortcut for scaling is to forgo Layer 2 and achieve a much higher gas limit directly through Layer 1 (whether through multiple shards or a single shard). However, this approach would excessively sacrifice the advantages of Ethereum's current social structure, which have proven highly effective in integrating various forms of research, development, and ecosystem-building cultures. Therefore, we should stick to the existing path, continue primarily scaling through Layer 2, while ensuring Layer 2 truly delivers on its promise.

This implies the following:

· Layer 1 needs to accelerate expanding Blob capacity.

· Layer 1 also needs to moderately scale the EVM and increase the Gas limit to handle activities that Layer 1 will still carry even in a Layer 2-centric environment (such as zero-knowledge proofs, large-scale DeFi, deposits and withdrawals, specific large-scale exit scenarios, key storage wallets, asset issuance, etc.).

· Layer 2 needs to continue to enhance security. Layer 2 should provide the same security guarantees as sharding (including censorship resistance, light client verifiability, absence of embedded trusted parties, etc.).

· Layer 2 and wallets need accelerated improvement and standardized interoperability. This includes chain-specific addresses, message passing and cross-chain bridge standards, efficient cross-chain payments, on-chain configurations, etc. Using Ethereum should feel like using a single ecosystem, not 34 different blockchains.

· Layer 2 deposit/withdrawal times need to be significantly reduced.

· Heterogeneity in Layer 2 is beneficial as long as basic interoperability requirements are met. Some Layer 2s will be based on Rollups with minimal governance, running exact replicas of the Layer 1 EVM; some Layer 2s will try different virtual machines; and some Layer 2s will act more like servers, leveraging Ethereum to provide additional security for users. We need various types of Layer 2 solutions across this spectrum.

· We need to explicitly consider the economics of ETH. Even in a world where Layer 2 dominates, we must ensure that ETH continues to accrue value and provide solutions for various value accrual patterns.

Next, we will delve into each topic in detail.

Scaling: Blob, Blob, or Blob

In EIP-4844, each slot has 3 Blobs, with a data bandwidth of 384 kB per slot. A simple calculation suggests this is equivalent to 32 kB per second, with each on-chain transaction taking up approximately 150 bytes, allowing us to support around 210 transactions/second (TPS). According to L2beat's data, this estimate is almost spot on.

The upcoming Pectra release scheduled for March will double the number of Blobs per slot to 6.

The current focus of Fusaka is primarily on PeerDAS, with plans to prioritize the implementation of PeerDAS and EOF only. PeerDAS may increase the Blob count by another 2-3 times.

The next goal is to continue increasing the Blob count. When reaching 2D sampling, the Blob count can be increased to 128 per time slot, with the potential for further increases in the future. Combined with improvements in data compression, the on-chain TPS can reach 100,000.

The above is a restatement of the established roadmap before 2025. The key question is: How do we accelerate this process? My answer is as follows:

· Clearly lower the priority of non-Blob functionalities.

· Emphasize more clearly that Blob is the target and list related peer-to-peer development as a priority for talent recruitment.

· Allow validators to directly adjust the Blob target, similar to Gas limits. This will enable the Blob target to increase more rapidly with technological improvements without waiting for a hard fork.

· Consider more aggressive approaches to increase the Blob count faster by introducing more trust assumptions for low-resource validators, but we need to approach this cautiously.

Enhancing Security: Proof Systems and On-Chain Rollup

Currently, there are three Stage 1 Rollups (Optimism, Arbitrum, Ink) and three Stage 2 Rollups (DeGate, zk.money, Fuel). However, most activities still occur on Stage 0 Rollup (i.e., multi-signature schemes). This situation needs to change. One significant reason for the slow pace of change is that building a reliable proof system and establishing enough confidence to fully rely on its security (abandoning the "training wheels") is very challenging.

To achieve this goal, there are two paths:

· Stage 2 + Multi-Proof System + Formal Verification: Achieve redundancy through multiple proof systems and enhance security confidence through formal verification (e.g., "Verifiable ZK-EVM project").

· On-Chain Rollup: Integrate the verification of the EVM state transition function into the protocol itself, for example, through precompiled contracts.

At the current stage, both of these paths need to proceed concurrently. The roadmap for "Stage 2 + Multi-Proof System + Formal Verification" is relatively clear. Accelerated development can be achieved through strengthened collaboration within the software stack, reducing duplication of work and improving interoperability as a byproduct.

For Native Rollup, this is still in the early stages and particularly requires more thought on how to maximize the flexibility of precompiled contracts. An ideal goal is to support not just a complete clone of the EVM but also to support an EVM with arbitrary changes, allowing a modified EVM Rollup to still utilize the precompiled contracts of the Native Rollup, only modifying part of it through "introducing custom verifiers." This may involve adaptations of precompiled contracts, opcodes, state trees, and other components.

Interoperability and Standardization

The goal is to make the experience of transferring and applying assets between different L2s as smooth as interacting between different "shards" on the same blockchain. Currently, there is a relatively clear roadmap in this regard:

· Chain-specific addresses: Addresses should include both on-chain account information and an identifier for the chain itself. For example, ERC-3770 is an early attempt, and there are now more complex designs, even migrating the L2 registry to Ethereum L1.

· Standardizing Cross-Layer Bridges and Message Passing: There should be a standardized way to verify proofs and pass messages between L2s, and these standards should not rely on trust-based mechanisms like multi-signature bridges. An ecosystem relying on trust-based assumptions is unacceptable. If this trust assumption did not exist in the 2016 sharding design, it is also unacceptable today.

· Accelerating Deposit and Withdrawal Times: The time for "local" messages should be reduced from weeks to minutes (with the ultimate goal being one block time). This requires faster ZK-EVM provers and support for proof aggregation technology.

· Reading L1 Data from L2: For example, L1SLOAD and REMOTESTATICCALL, these features will significantly simplify cross-L2 interoperability and help enable functionalities like key management wallets.

· Shared ordering and other long-term work: One valuable aspect of Rollup-based designs is their ability to more efficiently implement shared ordering and similar functionalities.

While meeting these standards, L2s can differ in terms of security, performance, and design models according to their needs. For example, exploring different virtual machines, ordering models, and trade-offs between scale and security are valid. However, the security level of each L2 must be clear to users and developers.

To accelerate progress, cross-industry organizations within the ecosystem can take on a larger share of the work, such as the Ethereum Foundation, client development teams, and mainstream application development teams. This will reduce coordination costs, making the adoption of standards an easier decision as the development workload for each L2 and wallet will decrease. However, as an extension of the Ethereum ecosystem, L2s and wallets also need to enhance the development work at the "last mile" to ensure these features truly reach the hands of users.

Ethereum Economics

We should adopt a multi-faceted strategy to cover all major potential sources of value for ETH as a triple-point asset. Key components of this strategy may include:

· Achieving widespread consensus, solidifying ETH as a primary asset of the larger (L1 + L2) Ethereum economy, supporting applications relying on ETH as the primary collateral, and more.

· Encouraging L2 support for ETH and allocating a portion of fees. This could be achieved through burning a portion of fees, permanently staking fees and donating proceeds to public goods within the Ethereum ecosystem, or through various other means.

· Supporting Rollup-based designs, partly as a pathway for L1 to capture value from MEV, but not mandating that all Rollups follow this design, as it may not be suitable for all applications, and it cannot be assumed that this alone will solve all issues.

· Increasing the Blob count, considering setting a minimum Blob price, and using Blob as another potential revenue stream. For example, suppose the average fee for Blob over the past 30 days remains constant (driven by demand) while the Blob count increases to 128. In that case, Ethereum would burn 713,000 ETH per year. However, the demand curve may not always be favorable, so this alone cannot solve the problem.

Conclusion: The Road Ahead

Ethereum has matured in terms of its technical stack and social ecosystem, leading us toward a freer and more open future where billions will benefit from crypto assets and decentralized applications. However, there is still much work to be done, and now is the time to redouble our efforts.

· If you are an L2 developer, engage in tooling to securely scale Blob, develop code to expand the EVM's execution, and implement features and standards that enable L2 interoperability.

· If you are a wallet developer, similarly contribute to and implement standards that keep the ecosystem secure while ensuring a seamless user experience that upholds the same security and decentralization ethos as Ethereum L1.

· If you are an ETH holder or community member, actively engage in these discussions; there are many areas that require deep thought and collaboration. The future of Ethereum relies on the active participation of each and every one of us.

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On May 13, S&P Dow Jones Indices announced that Coinbase would officially replace Discover Financial Services in the S&P 500 on May 19. While other companies like Block and MicroStrategy, closely tied to Bitcoin, were already part of the S&P 500, Coinbase became the first cryptocurrency exchange whose primary business is in the index. This also signifies that cryptocurrency is gradually moving from the fringes to the mainstream in the U.S.

On the day of the announcement, Coinbase's stock price surged by 23%, surpassing the $250 mark. However, just 3 days later, Coinbase was hit by two consecutive events: a hack where employees were bribed to steal customer data and a demand for a $20 million ransom, and an investigation by the U.S. Securities and Exchange Commission (SEC) into the authenticity of its claim of having over 100 million "verified users" in its securities filings and marketing materials. These two events acted as mini-bombs, and at the time of writing, Coinbase's stock had already dropped by over 7.3%.

Coincidentally, Discover Financial Services, being replaced by Coinbase, can also be considered the "Coinbase" of the previous payment era. Discover is a U.S.-based digital banking and payment services company headquartered in Illinois, founded in 1960. Its payment network, Discover Network, is the fourth largest payment network apart from Visa, Mastercard, and American Express.

In April, after the approval of the acquisition of Discover by the sixth-largest U.S. bank, Capital One, this well-established digital banking company of over 60 years smoothly handed over its S&P 500 "seat" to this emerging cryptocurrency "bank." This unexpected coincidence also portrayed the handover between the new and old eras in Coinbase's entry into the S&P 500, resembling a relay race scene. However, this relay baton also brought Coinbase's accumulated "external troubles and internal strife" to a tipping point.

Side Effects of ETFs

Over the past decade, cryptocurrency exchanges have been the most stable "profit machines." They play a role in providing liquidity to the entire industry and rely on trading fees to sustain their operations. However, with the comprehensive rollout of ETF products in the U.S. market, this profit model is facing unprecedented challenges. As the leader in the "American stack," with over 80% of its business coming from the U.S., Coinbase is most affected by this.

Starting from the approval of Bitcoin and Ethereum spot ETFs, traditional financial capital has significantly onboarded users and funds that originally belonged to exchanges in a more cost-effective, compliant, and transparent manner. The transaction fee revenue of cryptocurrency exchanges has started to decline, and this trend may further intensify in the coming months.

According to Coinbase's 2024 Q4 financial report, the platform's total trading revenue was $417 million, a 45% year-on-year decrease. The contribution of BTC and ETH's trading revenue dropped from 65% in the same period last year to less than 50%.

This decline is not a result of a decrease in market enthusiasm. In fact, since the approval of the Bitcoin ETF in January 2024, the inflow of BTC into the U.S. market has continued to reach new highs, with asset management giants like BlackRock and Fidelity rapidly expanding their management scale. Data shows that BlackRock's iShares Bitcoin ETF (IBIT) alone has surpassed $17 billion in assets under management. As of mid-May 2025, the cumulative net inflow of 11 major institutional Bitcoin spot ETFs on the market has exceeded $41.5 billion, with a total net asset value of $1214.69 billion, accounting for approximately 5.91% of the total Bitcoin market capitalization.

Chart showing the trend of net outflows for Grayscale among the 11 institutions

Institutional investors and some retail investors are shifting towards ETF products, partly due to compliance and tax considerations. On one hand, ETFs have much lower trading costs compared to cryptocurrency exchanges. While Coinbase's spot trading fee rate varies annually in a tiered manner but averages around 1.49%, for example, the management fee for IBIT ETF is only 0.25%, and the majority of ETF institution fees fluctuate around 0.15% to 0.25%.

In other words, the more rational users are, the more likely they are to move from exchanges to ETF products, especially for investors aiming for long-term holdings.

According to multiple sources, several institutions, including VanEck and Grayscale, have submitted applications to the SEC for a Solana (SOL) ETF, with some institutions also planning to submit an XRP ETF proposal. Once approved, this may trigger a new round of fund migration. According to a report submitted by Coinbase to the SEC, as of April, the platform's trading revenue from XRP and Solana accounted for 18% and 10%, nearly one-third of the platform's fee revenue.

However, the Bitcoin and Ethereum ETFs passed in 2024 also reduced the fees for these two tokens on Coinbase from 30% and 15% to 26% and 10%, respectively. If the SOL and XRP ETFs are approved, it will further undermine the core fee revenue of exchanges like Coinbase.

The expansion of ETF products is gradually weakening the financial intermediary status of cryptocurrency exchanges. From their original roles as matchmakers and clearers to now gradually becoming mere "on-ramps and off-ramps" for funds, exchanges are seeing their marginal value squeezed by ETFs.

Robinhood Takes a Stand, Traditional Brokerages Join the Fray

On May 12, 2025, SEC Chairman Paul S. Atkins gave a keynote speech at the Tokenization and Cryptocurrency Working Group roundtable. The theme of his speech revolved around "It is a new day at the SEC," where he indicated that the SEC would not approach enforcement and regulation the same way as before but would instead pave the way for cryptocurrency assets in the U.S. market.

With signs of cryptocurrency compliance such as the SEC's "NEW DAY" declaration, an increasing number of traditional brokerages are attempting to enter the cryptocurrency industry. One of the most representative cases is the well-known U.S. brokerage Robinhood, which began expanding its crypto business in 2018. By the time of its IPO in 2021, Robinhood's crypto business revenue accounted for over 50% of the company, with a significant boost from the Dogecoin "moonshot" promoted by Musk.

In Q1 2025 earnings report, Robinhood showcased strong growth, especially in revenue from cryptocurrency and options trading. Fueled by Trump's Memecoin, cryptocurrency-related revenue reached $250 million, nearly doubling year-over-year. Consequently, Robinhood Gold subscription users reached 3.5 million, a 90% increase from the previous year, with the rapid growth of Robinhood Gold providing the company with a stable source of income.

Meanwhile, RobinHood is actively pursuing acquisitions in the cryptocurrency space. In 2024, it announced a $2 billion acquisition of the long-standing European cryptocurrency exchange Bitstamp. Additionally, Canada's largest cryptocurrency CEX, WonderFi, which recently went public on the Toronto Stock Exchange, also announced its integration with RobinHood Crypto. After obtaining virtual asset licenses in the UK, Canada, Singapore, and other markets, RobinHood has taken a proactive approach in the compliant cryptocurrency trading market.

Furthermore, an increasing number of brokerage firms are exploring the same path. Futu Securities, Tiger Brokers, and others are also dipping their toes into cryptocurrency trading, with some having applied for or obtained the VA license from the Hong Kong SFC. Although their user bases are currently small, traditional brokerages have a natural advantage in user trust, regulatory licenses, and low fee structures. This could pose a threat to native cryptocurrency platforms in the future.

User Data Breach: Is Coinbase Still Secure?

In April 2025, security researchers discovered that some Coinbase user data was leaked on the dark web. While the platform initially responded by attributing it to a "technical misinformation," it still raised concerns among users regarding its security and privacy protection. Just two days before Dow Jones Indexes announced Coinbase's addition to the S&P 500 Index, on May 11, 2025, Coinbase received an email from an unknown threat actor claiming to have obtained customer account information and internal documents, demanding a $20 million ransom to keep the data private. Subsequent investigations confirmed the data breach.

Cybercriminals obtained the data by bribing overseas customer service agents and support staff, mainly in "non-U.S. regions such as India." These agents abused their access to Coinbase's internal customer support system and stole customer data. As early as February this year, blockchain detective ZachXBT revealed on X platform that between December 2024 and January 2025, Coinbase users lost over $65 million to social engineering scams, with the actual amount potentially higher.

Among the victims was a well-known figure, 67-year-old Ed Suman, an established artist in the art world for nearly two decades, having been involved in the creation of artworks such as Jeff Koons' "Balloon Dog" sculpture. Earlier this year, he fell victim to an impersonation scam involving fake Coinbase customer support, resulting in a loss of over $2 million in cryptocurrency. ZachXBT critiqued Coinbase for its inadequate handling of such scams, noting that other major exchanges have not faced similar issues and recommending Coinbase to enhance its security measures.

Amidst a series of ongoing social engineering incidents, although there has not been any impact on user assets at the technical level so far, it has raised concerns among many retail and institutional investors. Especially institutions holding massive assets on Coinbase. Just considering the U.S. BTC ETF institutions, as of mid-May 2025, they collectively hold nearly 840,000 BTC, and 75% of these are custodied by Coinbase. If we price BTC at $100,000, this amount reaches a staggering $63 billion, which is equivalent to the nominal GDP of two Iceland in the year 2024.

Visualization: ChatGPT, Source: Farside

In addition, Coinbase Custody also serves over 300 institutional clients, including hedge funds, family offices, pension funds, and endowments. As of the Q1 2025 financial report, Coinbase's total assets under management (including institutional and retail clients) reached $404 billion. The specific amount of institutional custodied assets was not explicitly disclosed in the latest report, but it should still be over 50% based on the Q4 2024 report.

Visualization: ChatGPT

Once this security barrier is breached, not only could the rate of user attrition far exceed expectations, but more importantly, institutional trust in it would undermine the foundation of its business. Therefore, after a hacking event, Coinbase's stock price plummeted significantly.

CEXs are All in Self-Rescue Mode

Facing a decline in spot trading fee revenue, Coinbase is also accelerating its transformation, attempting to find growth opportunities in derivatives and emerging assets. Coinbase acquired a stake in the options platform Deribit at the end of 2024 and announced the official launch of perpetual contract products in 2025. This acquisition fills in Coinbase's gap in options trading and its relatively small global market share.

Deribit has a strong presence in non-U.S. markets, especially in Asia and Europe. The acquisition has enabled Coinbase to gain a dominant position in bitcoin and ethereum options trading on Deribit, accounting for approximately 80% of the global options trading volume, with daily trading volume remaining above $2 billion.

Meanwhile, 80-90% of Deribit's customer base consists of institutional investors, with their professionalism and liquidity in the Bitcoin and Ethereum options market highly favored by institutions. Coinbase's compliance advantage, coupled with its already robust institutional ecosystem, makes it even more suitable. By using institutions as an entry point, it can face the squeeze from giants like Binance and OKX in the derivatives market.

Facing a similar dilemma is Kraken, which is attempting to replicate Binance Futures' model in non-U.S. markets. Since the derivatives market relies more on professional users, fee rates are relatively higher and stickiness is stronger, making it a significant source of revenue for exchanges. In the first half of 2025, Kraken completed the acquisition of TradeStation Crypto and a futures exchange, aiming to build a complete derivatives trading ecosystem to hedge the risk of declining spot transaction fee income.

With the surge of Memecoin in 2024, Binance, OKX, and various CEX platforms began massively listing small-market-cap, highly volatile tokens to activate active trading users. Due to the wealth effect and trading activity of Memecoins, Coinbase was also forced to join the battle, successively listing popular tokens from the Solana ecosystem such as BOOK OF MEME and Dogwifhat. Although these coins are controversial, they are frequently traded, with fee rates several times higher than mainstream coins, serving as a "blood-boosting" method for spot trading.

However, due to its status as a publicly traded company, this practice is a riskier endeavor for Coinbase. Even in the current crypto-friendly environment, the SEC is still investigating whether tokens like SOL, ADA, and SAND constitute securities.

In addition to the forced transformation strategies carried out by the aforementioned CEXs, they are also starting to lay out RWAs and the most talked-about stablecoin payment fields, such as the PYUSD launched through a collaboration between Coinbase and Paypal, Coinbase's support for the Euro stablecoin EURC by Circle that complies with EU MiCA regulatory requirements, or the USD1 launched through a collaboration between Binance and WIFL. In the increasingly crowded trading field, many CEXs have shifted their focus from just the trading market to the application field.

The golden age of transaction fees has quietly ended, and the second half of the crypto exchange platform game has silently begun.

Arthur Hayes: Why I'm Betting on ETH While the Market Is Obsessed with SOL

"I personally have also allocated 20% to gold, expecting the price of gold to potentially rise to $10,000-20,000 by the end of this market cycle."

Key Market Insights for May 16th, how much did you miss out on?

1. On-chain Flows: $111.3M inflow to Ethereum this week; $237.6M outflow from Berachain 2. Largest Price Swings: $ETHFI, $NEIRO 3. Top News: Data: Solana Network's revenue reached $7.9M on the 13th, surpassing the sum of all other L1 and L2 chains

CryptoPunks Changes Hands Twice, Did the Originator of NFTs Finally Find Its "Forever Home" This Time?

The original NFT pioneer CryptoPunks has once again officially changed ownership after being sold to the Bored Ape Yacht Club (BAYC) developer Yuga Labs.

May 16 Key Market Information Gap, A Must-Read! | Alpha Morning Report

1. Top News: Coinbase Faces Double Blow with 'SEC Investigation' and 'User Data Breach,' Stock Price Drops by 7.2% 2. Token Unlocking: $ARB, $AVAX, $PRIME, $ASTR, $1INCH

Key Market Intelligence on May 14th, how much did you miss out on?

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After Surging 40%, Has Ethereum Price Peaked Upon Exiting the Craze?

Whether you are an insider or an outsider, these days you must be familiar with the news about Ethereum. The reason is simple, causing Ethereum enthusiasts to sigh with emotion and almost throwing off-guard those who defend Ethereum, Ethereum, with a "3-day surge of 40%," climbed to the top of the Douyin Hot List.

Where Does the Rally Come From?

As we all know, Ethereum launched the Pectra upgrade on May 7th. This most significant network upgrade since early 2024 integrates the Prague execution layer hard fork and the Electra consensus layer upgrade, significantly improving Ethereum's performance through 11 improvement proposals. The account abstraction feature (EIP-7702) allows users to flexibly manage wallets through social media accounts or multi-signature schemes, reducing the user threshold, attracting more users and developers. The staking mechanism optimization increases the validator ETH cap from 32ETH to 2048ETH and introduces a flexible withdrawal method, making it easier for institutions and individuals to participate in network security, enhancing the market's confidence in Ethereum's long-term value.

At the same time, Pectra optimized the interaction efficiency of Layer 2 networks such as Arbitrum and Optimism, making transactions faster and cheaper, leading to a surge in on-chain activity. As a crucial step for Ethereum's transition from "2G" to "5G," the Pectra upgrade not only enhances network vitality but also "recharges confidence" in the market, directly driving the price increase.

Related Reading: "Ethereum Skyrockets 22% in One Day, E Enthusiasts Rejoice"

It's not just Ethereum itself, as Wall Street also brought important bullish news.

The world's largest asset management company, BlackRock, proposed to the SEC allowing Ethereum ETFs for staking. This proposal is expected to elevate Ethereum ETFs from a mere investment tool to a bond-like "interest-bearing asset," bringing investors both capital appreciation and passive income, igniting market optimism about Ethereum's future potential.

Specifically, BlackRock has proposed to amend its S-1 filing to allow investors to create and redeem ETF shares directly with Ethereum instead of the U.S. dollar (i.e., in-kind redemption). This move, combined with its $2.9 billion BUIDL Fund launched in March 2024, aims to deepen the integration of traditional finance with blockchain. The BUIDL Fund is a tokenized fund operating on the Ethereum network, investing in traditional assets such as U.S. Treasury bonds. This setup is highly attractive to institutional investors, as they can not only benefit from Ethereum's price appreciation but also earn stable cash flow through staking.

Robert Mitchnick, BlackRock's Head of Digital Assets, stated in a CNBC interview in March 2025 that the addition of staking functionality will significantly enhance the appeal of the Ethereum ETF. He admitted that when the Ethereum spot ETF was launched in July 2024 without staking functionality, the market demand was lackluster, and staking could be the key to reversing this trend.

Meanwhile, the SEC's shifting stance on cryptocurrency regulation has also fueled this upward trend. During the tenure of the previous SEC chairman, the regulatory approach was tough, and staking was strictly viewed through the Howey test as a potential unregistered security. Therefore, when approving the Ethereum spot ETF in May 2024, staking functionality was explicitly prohibited.

However, with Trump back in the White House and Paul Atkins taking over the SEC, there has been a noticeable relaxation in crypto regulation. Apart from BlackRock, ETF issuers such as Invesco Galaxy, VanEck, WisdomTree, and 21Shares have also submitted applications for similar staking and in-kind redemption.

Related reading: "New Chairman Takes Office, SEC Transforms into 'Crypto Daddy' Within 48 Hours"

If staking ETFs are approved, the benefits are likely to go beyond price appreciation. The introduction of staking functionality could redefine the role of crypto assets, making them more similar to traditional financial products that provide returns and value appreciation, thereby driving Ethereum closer to mainstream finance.

Currently, the SEC still needs to address several decisions related to crypto ETFs, including whether to approve ETFs for Solana, XRP, Litecoin, and even Dogecoin. With the calls for an "altcoin season" growing louder, Ethereum's strong performance may just be the beginning of a larger crypto market frenzy.

In addition, the Trump family-related DeFi project WLFI is also bullish on this wave of rise, with frequent on-chain activities. According to on-chain data analyst @ai_9684xtpa's monitoring, a WLFI-related address is currently borrowing coins to go long on ETH, borrowing 4 million U from Aave to buy 1590 ETH at an average price of $2515 per ETH.

Has Ethereum's Price Peaked in This Wave?

For this epic surge of Ethereum after half a year of silence, the community has indeed gained more confidence and hope, which has also led to a revival of the entire altcoin market. However, amidst the joy, there are also voices of pessimism. Below is a summary conducted by BlockBeats based on community discussions.

The optimists point out that the current market structure is similar to the eve of the bull markets in 2016 and 2020, predicting a life-changing surge in the next 3-6 months, where some altcoins may even achieve astonishing single-day gains of up to 40%.

@liuwei16602825 stated that this surge signifies the return of the bull market as a sure thing. There is no need to worry about a pullback. The driving force behind the surge uses a high-cost isolated operation, fearing a drop more than any retail investor and will definitely do everything to support the price.

Related Reading: "Ethereum Leads the Surge Triggering the 'Altcoin Season' Speculation, How Do Traders View the Future Market?"

The bears mainly believe that this surge is different from the bull market of 2021, as the current market lacks the confidence of large-scale retail investors entering and holding positions for the long term, with funds rotating too quickly.

@market_beggar observed that a Bitfinex E/B whale has started to close positions and believes that if this whale maintains its high-speed position-closing operation for the next few days, it can be inferred that the whale no longer sees the upside potential of ETH, preparing to take profits and exit. The closing time will be a key focus going forward.

@FLS_OTC stated that there are still many uncertainties at the macro level, and the liquidity cannot support a major bull market. At this stage, it is a "last hurrah," not a complete reversal, and will continue to remain in a short position.

@off_thetarget believes that after ETH transitioned from POW to POS, it lost the "gold standard" of mining machine power cost support. The staking economic model led to a breakdown in value anchoring. Additionally, the L2 ecosystem (such as Starknet, zkSync, etc.) suffered from liquidity fragmentation, failing to establish an effective capital inflow mechanism, causing the collapse of the split disc pattern. Furthermore, the ETH community's excessive pursuit of technical narratives divorced from real-world needs resulted in a weak ecosystem growth. Therefore, he believes that ETH's intrinsic value system has crumbled, and the price is bound to plummet to the 800-1200 range, with a decisive short position at 1800.

@Airdrop_Guard, based on the core logic of the "High Probability Trading Strategy," where three sets of underlying logic different trading systems (such as volume depletion, price supply-demand, long/short position funding rate, etc.) simultaneously issue a short signal at the same point (2580), creating a high-probability trading opportunity. He emphasizes that these systems must be based on different algorithms and logics (rather than mere technical indicator overlays). The current ETH trend aligns with the short conditions in multiple independent dimensions of his trading system, hence the decision to short.

Overall, Bitcoin still maintains over 54% market dominance, and institutional funds' continued preference for it may limit the altcoin's upward potential. The market's future direction will depend on multiple factors, such as Bitcoin's price trend, global macroeconomic conditions, and whether funds can effectively rotate from Bitcoin to the altcoin sector.

Although Ethereum's recent leadership in the market has brought about optimistic sentiment, investors still need to remain rational as different sectors of altcoins are likely to show divergence in trends. Whether this round of Ethereum's rise will usher in a true altcoin frenzy may require more time and conducive conditions.

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