The 12th Ethereum Foundation AMA, hosted on Twitter Spaces on September 5, 2024, brought together key figures including Vitalik Buterin, Justin Drake, and Dankrad Feist to discuss pressing concerns about Ethereum’s performance, scalability, and long-term value proposition. With ETH’s price under pressure and growing skepticism around its ecosystem momentum, this session offered rare insights into the foundation’s strategic thinking. Below is a refined, SEO-optimized summary of the key takeaways—free from promotional content and political overtones—with enhanced readability, keyword integration, and actionable context.
Ethereum’s Scalability: Beyond Layer 2 Dependence
A central theme of the AMA was whether Ethereum is overly reliant on Layer 2 (L2) solutions for scalability. The answer? No—Ethereum is actively pursuing Layer 1 (L1) improvements in parallel with L2 growth.
Justin Drake and Vitalik Buterin emphasized that Ethereum is not passively outsourcing its future to L2s. Instead, L1 is evolving through several technical upgrades:
- Precompiled contracts for faster virtual machine execution
- Zero-knowledge (ZK) proofs to accelerate validation and reduce overhead
- Verkle trees to minimize node storage requirements and improve decentralization
Dankrad Feist clarified that L1 and L2 development are complementary, not competitive. While L2s handle transaction volume, Ethereum’s core mission remains strengthening data availability (DA), security, and decentralization at the base layer.
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Why Is ETH Underperforming? The Value Proposition Debate
One of the most pressing questions addressed was: Why has ETH underperformed despite Ethereum’s technological lead?
Justin Drake responded definitively: “ETH is money.” He argued that ETH’s appreciation is not just desirable—it’s essential for Ethereum’s long-term success. He outlined three pillars supporting ETH’s intrinsic value:
- Economic bandwidth – The ability to securely settle trillions in decentralized stablecoin transactions.
- Economic security – Staking ETH secures the network; higher ETH value means stronger resistance to attacks.
- Economic vitality – High-value economic activity and institutional attention are drawn to platforms with appreciating native assets.
This framing positions ETH not just as a speculative token, but as the foundational asset of a decentralized financial system.
Do Layer 2s Drain Value From Ethereum?
A common critique is that L2s siphon fees and MEV (Maximal Extractable Value) from Ethereum, weakening its revenue model. Dankrad Feist pushed back strongly on this narrative.
He argued that L2s do not “parasitize” Ethereum—instead, they extend its utility. High-value transactions, such as large DeFi swaps or institutional settlements, will continue to occur on L1. Meanwhile, L2s provide affordable scaling by leveraging Ethereum’s secure data availability.
Justin added a crucial perspective: focus should shift from per-transaction revenue to total ecosystem throughput. Even if individual fees are low, massive scale can generate significant income.
For example: Achieving 10 million transactions per second—even at minimal fees—could yield over $1 billion in daily revenue across the network.
The real bottleneck today isn’t fee levels—it’s insufficient application-layer demand. Without compelling dApps driving user activity, transaction volume stagnates.
The Core Challenge: Application-Layer Innovation
Despite technical progress, many observers—including the original author—expressed disappointment over the lack of breakthrough innovations at the application layer.
The AMA did not present bold new initiatives to revive dApp creativity or user engagement. Questions about stagnant DeFi growth, NFT fatigue, and limited real-world asset (RWA) adoption were left largely unaddressed.
Vitalik touched on Ethereum’s unique strengths—its decentralized culture, credible neutrality, and community-driven ethos—but offered few concrete strategies to reignite innovation.
This gap between infrastructure readiness and application adoption remains one of Ethereum’s greatest risks in 2025.
Ensuring Credible Neutrality and Decentralization
Credible neutrality—the idea that no single entity controls the network—is considered foundational to Ethereum’s legitimacy.
The team acknowledged concerns about increasing centralization, particularly due to large entities (corporations, governments) running validators. To counter this:
- The consensus layer is being updated to allow decentralized validators to enforce fair transaction inclusion.
- Ongoing efforts aim to reduce reliance on centralized infrastructure like staking pools and cloud providers.
These changes reinforce Ethereum’s commitment to remaining permissionless and resistant to external control.
Ethereum Foundation Finances: Motivated to Succeed
Another revealing insight: the Ethereum Foundation spends around $100 million annually** and holds approximately **$650 million in reserves, mostly in ETH.
This creates a direct incentive for the Foundation to support ETH’s price appreciation—not for profit, but for operational sustainability. If ETH depreciates significantly, their purchasing power diminishes, threatening long-term research and development.
With over 300 team members, questions remain about organizational efficiency. How many are developers? How many focus on theoretical research versus shipping production-ready code? While not addressed in the AMA, these structural concerns matter for public trust.
Why Ethereum Still Leads: Four Key Advantages
Vitalik outlined four reasons why Ethereum maintains its leadership despite competition:
- Superior data availability (DA) – Enables robust L2 ecosystems like Optimism and Arbitrum.
- Stronger decentralization under PoS – Contrary to popular belief, Vitalik argues Proof-of-Stake enhances security and distribution vs. energy-intensive PoW.
- Established developer community – Largest ecosystem of builders, tools, and documentation.
- Shared values and culture – A global movement aligned around openness, censorship resistance, and innovation.
While some may find these points abstract, they reflect Ethereum’s intangible strengths—its network effect and ideological cohesion.
Frequently Asked Questions (FAQ)
Q: Is ETH a good investment if most transactions happen on Layer 2?
A: Yes—because L2s depend on Ethereum for security and data availability. As L2 usage grows, so does demand for ETH-backed settlement and staking.
Q: Can Ethereum generate high revenue with low transaction fees?
A: Absolutely. High throughput (e.g., millions of TPS) can generate massive total fees even at low per-transaction costs. The key is scaling demand through killer applications.
Q: Does the Ethereum Foundation control the network?
A: No. The Foundation funds research and coordination but does not govern protocol changes. Upgrades require broad consensus among developers, validators, and users.
Q: Is Proof-of-Stake less secure than Proof-of-Work?
A: According to Vitalik Buterin, PoS is more secure due to faster finality, lower attack profitability, and better decentralization incentives.
Q: What’s being done about high gas fees during peak times?
A: Short-term relief comes from EIP-1559 and blob transactions. Long-term solutions include sharding and improved DA layers to drastically reduce congestion.
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Final Thoughts: A Call for Application Renaissance
While the technical roadmap remains solid, the Ethereum ecosystem faces a crisis of perception—and innovation. The infrastructure is ready. The scalability path is clear. But without compelling applications that attract mainstream users, ETH’s price will continue to lag.
The message from the AMA is clear: Ethereum isn’t waiting for salvation—it’s building the foundation for it. Now, it’s up to builders, entrepreneurs, and creators to deliver the next wave of utility.
Core Keywords: Ethereum, ETH price, Layer 2 scaling, data availability, economic security, blockchain innovation, credible neutrality, application-layer demand
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