Ethereum’s Modular Technique: Quick-Time period Ache, Lengthy-Time period Acquire, Says Analysis

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

“Within the quick time period, modularization doubtless hurts ETH value due to decrease charges and diminished token burn, however this isn’t the entire story,” mentioned Hack VC managing associate Alex Pack.

Ethereum’s Future is Bullish

Since 2020, Ethereum has shifted to a modular structure, outsourcing elements 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 value within the quick time period as a result of diminished charges on the principle community, resulting in much less token burn by way of EIP-1559. Decrease charges imply diminished shortage of ETH, which places downward strain on its value, the analysis famous.

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

— Alexander Pack (@alpackaP) November 12, 2024

Till just lately, ETH had underperformed this yr, with Bitcoin and rival community Solana seeing higher beneficial properties. Moreover, the proliferation of recent L2 tokens within the Ethereum ecosystem might have additionally diluted investor curiosity in ETH, the researchers mentioned.

Nonetheless, 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 This adaptability may assist Ethereum keep away from changing into out of date, in contrast to previous tech giants like AOL or Yahoo.

The researchers concluded that in the long run, Ethereum might emerge as a stronger participant as a result 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 business the place success is pushed by community results, Ethereum’s modular technique might 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 Value Cools

ETH costs have been on fireplace this week, surging greater than 30% and including greater than Solana’s total 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% day by day dip; nonetheless, it stays up 31% for the reason that identical time final week.

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