Has Ethereum reached its limit? Buterin rejects high fees on the network

  • CEO of Three Arrow Capital, Su Zhu, has explained why Ethereum has become an “unforkable network” but also criticized its “opaque” governance.
  • Meanwhile, Ethereum inventor Vitalik Buterin stated that he continues to support the vision of Ethereum as “the internet of money”.

The CEO of Three Arrow Capital, Su Zhu, has pointed out an opportunity that could become an obstacle to the development of Ethereum. In recent months, Ethereum has become one of the driving forces behind the rally of the crypto market, according to several analysts. Ethereum’s DeFi sector continues to break through its all-time highs in total value, approaching $7 billion at the time of publication. However, he cautioned that there is a danger.

Zhu provided his explanations on the POV Crypto Podcast. There he acknowledged that the current bull market did not happen because of the investors who are chasing after Bitcoin‘s “digital gold” narrative. On the contrary, Zhu stated that the bull run is based on the number of investors who are looking to Ethereum’s DeFi for “the profits they can’t make with the banks”.

However, the growth of the DeFi sector could be costly for the future of the Ethereum. According to Zhu, Ethereum has become “unforkable” because of how much the ecosystem and the DeFi sector depend on the current state of the network:

I do think that Ethereum is unforkable now because of the way that things depend on it to run. It’s not going to be able to do a do-over like it did in 2016. So I think that, because of that, there’s very high stakes stuff now happening on Ethereum that may or may not be ready to handle as a platform.

Within the Ethereum community, some users have expressed their concerns about the possibility that Ethereum becomes a “DeFi network” only. Increased transaction fees and network congestion show that Ethereum could be at the limit of its capabilities. In that sense, Zhu commented that Ethereum has already reached its limit.

The CEO of Three Arrow Capital added that in addition to the problem of high fees, Ethereum could have other vulnerabilities, for example in its governance model. Zhu said Ethereum’s governance model is “opaque” and therefore fails to make quick decisions when needed. Furthermore, he asserted that Ethereum has failed as a “world computer”:

There are many concerns that the application layer is running beyond what Ethereum can handle (…) For me these are its two biggest problems. Its governance layer is very “opaque” (…) nobody knows how to reject something in Ethereum correctly, nobody knows how to do something quickly in Ethereum (…) I think it has failed as the world computer, I think that has died.

The CEO of Three Arrow Capital also added that investors, at least those located in Asia, are attracted to Ethereum because of its utility. In that sense, Ethereum’s network could lose its current momentum if it becomes a platform unable to implement change, to update itself, and to maintain its position as a leader among potential competitors. In line with that, Zhu said there is still time for an Ethereum competitor to emerge.

Buterin continues to bet on Ethereum as the Internet of money

On the other hand, Ethereum inventor Vitalik Buterin has revealed in a debate that he continues to support the vision of Ethereum as “the internet of money”. In response to an article by journalist Nic Carter, Buterin also revealed that he opposes the current state of the Ethereum network which has high fees. Therefore, Buterin stressed the work that the developers of the Ethereum Core are doing to deploy rollups and Ethereum 2.0

Both will be a solution that will give more scalability to Ethereum’s network. However, Buterin also acknowledged that Ethereum is currently in a “fee crisis”, but denied agreeing with this situation. In that sense, Buterin said that the community and developers have not abandoned “the dream” of Ethereum becoming a platform that can also support non-financial applications, but admitted the following:

The present situation is simply a matter of trying to deal with suddenly very high demand before the technology to properly handle it is available. It’s not a reflection of a state of affairs that Ethereum people *like*.