The crypto world has witnessed a striking divergence in performance between major blockchains. Over the past year, SOL/ETH has surged by 300%, while ETH/BTC has declined by 50% over the past two years. This raises a critical question: Why is Ethereum, once considered the undisputed leader in smart contract platforms, struggling to keep pace?
In a candid discussion featuring Kyle Samani, Managing Partner and Co-Founder of Multicoin Capital, alongside Bankless co-founders Ryan Sean Adams and David Hoffman, a comprehensive analysis emerges—one that challenges conventional narratives around Ethereum’s dominance. While Multicoin is a known supporter of Solana, this conversation isn’t about tribalism. It’s a strategic, market-driven critique of Ethereum’s current trajectory, its structural limitations, and the evolving expectations of users and investors.
The Weight of Market Gravity
Large assets face inherent growth challenges—a phenomenon often referred to as market gravity. Ethereum, with a market cap hovering around $300 billion, ranks as the 34th largest asset globally, just behind Bitcoin at #10.
Kyle Samani argues that size brings scrutiny. As Ethereum grows, the bar for innovation and execution rises. Markets expect consistent breakthroughs, not incremental upgrades. When those expectations aren’t met, price stagnation or decline follows.
“When you’re a $300B asset, the world watches. And when progress feels slow, sentiment shifts—fast.”
Bitcoin, despite its own scalability issues, benefits from a clear value proposition: digital gold. Its role as a store of value insulates it from some of the performance pressures faced by platforms like Ethereum, which must deliver both security and utility.
Uncertainty in Value Capture
One of Ethereum’s most pressing challenges is value capture—or the lack thereof.
Unlike traditional equities that generate cash flow, or even commodities with industrial use cases, Ethereum’s economic model relies heavily on speculation and network usage. But with Layer 2 solutions fragmenting activity and fees, the question arises: Where does value actually accrue?
Samani points out that without a clear mechanism to capture value from Layer 2 activity—where most user transactions now occur—Ethereum risks becoming a security layer without economic dominance. This uncertainty has weighed on investor confidence.
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ETH vs. BTC: Functionality Over Store of Value
Ryan Sean Adams frames Bitcoin as the “special snowflake” of crypto—a digital gold with a fixed supply of 21 million. Its simplicity and scarcity are its strengths.
Samani agrees, noting that while he personally doesn’t view Bitcoin as special, market perception treats it as such. This social consensus gives Bitcoin resilience despite poor user experience or slow transaction speeds.
Ethereum, on the other hand, is judged differently. It’s expected to be functional, fast, and developer-friendly—more like a tech stock than a commodity. When it fails on UX or scalability, users don’t just complain—they leave.
Asset Class Reimagined
- Capital Assets (e.g., stocks): Generate cash flow
- Commodities (e.g., gold): Used in production or as stores of value
- Crypto Platforms: Should behave like capital assets—but many don’t
Samani argues that productive assets—like Amazon or Walmart—have historically outperformed passive stores of value during inflationary periods. If Ethereum can’t generate real yield or capture fees effectively, it risks being sidelined.
The Layer 2 Interoperability Crisis
David Hoffman highlights a growing pain point: Layer 2 interoperability.
While Ethereum’s roadmap includes rollups and shared sequencing, the reality is fragmented. Users face:
- High bridging fees
- Long confirmation times
- Poor cross-chain UX
This friction drives capital toward smoother alternatives like Solana, where transactions settle quickly and cheaply.
Samani is skeptical of Ethereum’s ability to unify its L2 ecosystem. “Nine years in, and we still don’t have seamless interoperability,” he notes. “If different rollups can’t agree on standards, how can users trust the system?”
“User experience isn’t a nice-to-have—it’s the deciding factor in capital allocation.”
Even if Ethereum solves scalability technically, poor UX erodes trust and accelerates migration to competing chains.
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Can Ethereum Capture Value From Its Own Ecosystem?
Here’s a paradox: Layer 2s are parasitic on Layer 1.
They rely on Ethereum for security but capture most of the fees and user activity. With software marginal costs near zero, blockchain scarcity becomes harder to enforce. And with MEV (Maximal Extractable Value) increasingly captured at the L2 level, Ethereum’s base layer risks becoming economically irrelevant.
Samani warns that this dynamic weakens Ethereum’s long-term value proposition. If developers and users operate primarily on L2s, why hold ETH?
The Human Factor: Communication & Collaboration
One overlooked issue is communication gaps within the Ethereum ecosystem.
Samani reveals that top app developers—like Aave’s Mark Zeller—have never spoken to core Ethereum Foundation members. This lack of dialogue between protocol creators and application builders leads to misaligned incentives and inefficient development.
He calls for Vitalik Buterin to return as a “benevolent dictator”—someone who can cut through bureaucracy and enforce interoperability standards across L2s.
Decentralization: Ideal vs. Reality
Decentralization remains a core Ethereum value—but Samani questions its practical limits.
While decentralized validators enhance censorship resistance, real-world finance still depends on centralized bridges, stablecoins, and custodians. These Cefi elements are essential for connecting crypto to traditional markets.
Solana’s builders, he notes, prioritize functionality over purity. They focus on creating sustainable businesses rather than ideological purity tests.
“Is 99.999% decentralization worth sacrificing speed, cost, and usability?”
In times of crisis—like the FTX collapse—Solana’s network remained secure despite reduced validator counts. This suggests that economic security may matter more than validator count alone.
Solana’s Competitive Edge
Solana’s rise isn’t just technical—it’s cultural.
Its builders are commercially oriented, focused on solving real user problems quickly. They prioritize:
- Low latency
- High throughput
- Developer ease-of-use
While Ethereum emphasizes anti-censorship and decentralization, Solana asks: How do we build the world’s largest permissionless financial market?
This difference in values shapes everything—from product design to investor sentiment.
Ethereum’s Strengths: Don’t Count It Out
Despite the critique, Samani acknowledges Ethereum’s advantages:
1. Regulatory Clarity
Ethereum enjoys favorable regulatory standing in many jurisdictions—a major edge over newer chains.
2. Human Capital
It attracts some of the brightest minds in crypto. Innovation thrives where talent聚集 (gathers).
3. Ecosystem Influence
Ethereum sets standards that others follow—from token contracts (ERC-20) to governance models.
These factors give Ethereum staying power—even as competitors gain ground.
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Frequently Asked Questions (FAQ)
Q1: Why is ETH underperforming compared to SOL?
A: ETH faces challenges in scalability, user experience, and value capture from Layer 2s. SOL offers faster transactions and a more cohesive ecosystem, attracting both users and capital.
Q2: Can Ethereum fix its interoperability issues?
A: Technically possible—but requires coordination across independent L2 teams. Without strong leadership or enforced standards, progress may remain slow.
Q3: Is decentralization overvalued in blockchain design?
A: While important for security and censorship resistance, excessive focus on decentralization can hinder usability and speed—key factors for mass adoption.
Q4: Does Ethereum still have a future?
A: Yes. Its regulatory position, developer talent, and ecosystem maturity provide long-term resilience—but it must evolve to stay competitive.
Q5: Why do users prefer Solana over Ethereum?
A: Lower fees, faster transactions, and better cross-chain UX make Solana more appealing for everyday use and trading.
Q6: Will Ethereum ever become digital money?
A: Unlikely in its current form. High volatility and complex UX prevent ETH from functioning as everyday currency—stablecoins fill that role instead.
Final Thoughts: Evolution or Obsolescence?
Ethereum stands at a crossroads. It pioneered smart contracts and DeFi—but innovation doesn’t stop. As user expectations evolve, so must platforms.
The rise of Solana isn’t just about technology; it’s about focus, execution, and user-centric design. Ethereum must bridge the gap between idealism and practicality—or risk becoming a legacy protocol in a fast-moving industry.
The next cycle will reward ecosystems that deliver real utility, seamless UX, and clear value capture—not just philosophical purity.