What happened to Ethereum in 2024?
It has been an extraordinary year for Ethereum. It experienced highs and lows, as well as uncertainties and challenges. The approval of the US spot Bitcoin ETF created a peak of excitement, but it also faced competition from Solana and various criticisms of being “anti-Ethereum.”
In addition to personnel changes, with researchers joining Eigenlayer as advisors and then leaving Eigenlayer for the better development of Ethereum, there were also discussions on Beam Chain and the issue of liquidity fragmentation raised at Devcon. All these events highlight the uniqueness of this year.
Price fluctuations:
Looking at the price chart of Ethereum, it is evident that it has undergone significant ups and downs. From starting the year at over $2,000 to reaching over $4,000 in March, then dropping back to the $2,000 range and surging again to over $4,000, it has been a dramatic and uncertain journey.
On January 11, 2024, the US Securities and Exchange Commission (SEC) approved the listing of 11 spot Bitcoin ETFs, which boosted Ethereum’s price due to the expectation of Ethereum ETF approval. Within a little over a month, the price nearly doubled.
On July 23, the US spot Ethereum ETF went live, and the trading volume surpassed $200 million within just 45 minutes. However, as the price had already factored in the expectation of an Ethereum ETF during the first half of the year, the spot Ethereum ETF did not bring significant price gains.
Due to the lack of sustainable innovation to support high prices, Ethereum’s price started to decline in August. From July 30th, the price experienced a continuous decrease for seven days, from a high of $3,366 to a low of $2,111. After that, it entered a long consolidation phase.
It wasn’t until the presidential election victory of Donald Trump that Ethereum saw another surge, pushing its price from the $2,000 range to a high of $4,170.
The continuous seven-day price decline and seven-day price surge, as well as the significant volatility, reflect the high volatility of the cryptocurrency market and the influence of market participants’ emotions, expectations, and external events. This is indeed the nature of crypto.
Behind the price fluctuations are a series of undeniable logical relationships. For example, the significant price increase driven by the expectation of Ethereum ETF approval after the approval of the Bitcoin ETF at the beginning of the year, the waterfall-like decline caused by the lack of real innovation and sustainable market demand, and the crazy price surge due to the optimism towards cryptocurrencies after the Trump administration took office.
Looking back at Ethereum’s price trends, it is evident that its ups and downs are not solely driven by external macro factors. Technological advancements have played a significant role. From the launch of Ethereum 2.0 to the implementation of Layer2 scalability solutions, as well as continuous optimization and updates to the Ethereum network, each technological breakthrough has become a market focus. However, these advances often get overshadowed by short-term market sentiments.
Beam Chain, Dencun upgrade, Pectra upgrade, and other EIPs:
Beam Chain:
Beam Chain was proposed by Ethereum researcher Justin Drake at Devcon in Thailand. It is a proposal to redesign the Ethereum consensus layer, an upgrade to the Beacon Chain. Its main goals are related to MEV (Miner Extractable Value), lowering staking thresholds, achieving fast finality, and enabling ZK (Zero-Knowledge) integration in the consensus layer. This proposal, riding on the wave of SNARK technology breakthroughs, is essentially an upgrade to the outdated Beacon Chain design from five years ago.
Dencun upgrade:
The Dencun upgrade went live on March 13, 2024, combining two core improvements: the Deneb consensus layer and the Cancun execution layer updates.
The highlight of the upgrade is EIP-4844 Proto-danksharding, which allows Rollup to send transaction and proof data in the form of a Blob to Layer1. Using Blob for off-chain data storage and access significantly reduces the cost of Rollup compared to the original calldata. However, this also resulted in a significant decrease in Ethereum’s revenue.
EIP-4844 is a controversial EIP. In the short term, it did cause a significant drop in Ethereum’s revenue and became one of the main criticisms of Ethereum. However, some people refer to this EIP as “a small step towards sharding and a big step towards Ethereum’s scalability.” Its long-term impact is yet to be determined.
The Dencun upgrade also includes other EIPs aimed at improving Ethereum’s efficiency, such as EIP-7516, EIP-6780, EIP-5656, EIP-1153, etc. For more details on the EIPs included in the Dencun upgrade, please refer to the table.
Pectra upgrade:
The Pectra upgrade combines two independent upgrades: the Prague execution layer upgrade and the Electra consensus layer upgrade.
The Pectra upgrade is a pre-transition upgrade before the Fusaka upgrade, which is specifically designed to implement Verkle transition. Ethereum developers believe that substantial changes should not be combined with Verkle, so the Pectra upgrade includes a series of other changes before implementing Verkle. The Verkle transition involves migrating Ethereum’s entire state data from Merkle Patricia tree structure to Verkle structure.
This will allow nodes to generate smaller proofs about state data, making it easier to transmit to other nodes. It is a prerequisite for achieving a “stateless client.”
The Pectra upgrade is planned to be launched on the mainnet in early 2025. The most important aspect of this upgrade is EIP-7702, which extends smart account functionality to externally owned accounts (EOA).
EIP-7702 is an improvement of EIP-3074, proposed in May 2024. EIP-3074 was the community’s first attempt to explore extending smart account functionality to EOAs.
Unlike ERC-4337 (which introduced a smart contract called EntryPoint to make smart contracts behave like user accounts), EIP-3074 requires a hard fork to be implemented.
It introduces two opcodes, AUTH and AUTHCALL, to extend smart account functionality to EOAs.
EIP-7702 further improves EIP-3074. Instead of using opcodes to implement smart account mode for EOAs, EOA can now store an address called “delegation indicator” that points to a smart contract.
When a transaction is sent to an EOA, it can execute the code at the specified address as if it were its own code, similar to how a “delegate call” works in smart contracts.
EIP-7702 not only brings smart account functionality to EOAs but also addresses many concerns raised by EIP-3074. It provides full compatibility and a clear upgrade path with ERC-4337 and is planned to be included in the Pectra upgrade.
Since the focus of the Pectra upgrade will shift to the Verkle Tree, EIP-7702 may be the last EIP related to account abstraction upgrades, as there may not be a two-year window to include account abstraction-related upgrades after that.
So far, other code changes related to Pectra mainly focus on improving user and smart contract developer experiences. For a more detailed introduction to the Pectra upgrade, please refer to the referenced article.
Other EIPs:
Not all approved EIPs need to be implemented after a hard fork upgrade. Ethereum has also passed some significant process/standard-related EIPs this year, such as the cross-chain intent standard ERC-7683 and the account abstraction standard ERC-4337 (ERCs are subsets of EIPs). These changes rely on community acceptance and implementation.
Some EIPs that require implementation after a hard fork upgrade also need acceptance from users and DApps to achieve widespread adoption.
Interoperability: Cross-chain/Rollup standards
With Ethereum’s roadmap focusing on Rollup and the increasing number of Layer1 solutions, on-chain liquidity fragmentation and the composability advantage of Ethereum are gradually diminishing.
Interoperability needs to address two issues: how to achieve fast, low-cost, and secure cross-chain asset transfers and how to achieve synchronous composability.
Currently, there are already many protocols that can achieve the first issue. Protocols like Across have greatly improved cross-chain speed and reduced transaction fees.
Due to its intent-based architecture, the security of cross-chain transactions has been fully transferred to the solver. Currently, some proposals related to cross-chain/Rollup mainly focus on solving preliminary standardization issues.
Synchronous composability will be addressed by Based Rollup. The specific proposals related to cross-chain/Rollup are as follows:
ERC-7683:
ERC-7683 is an intent cross-chain standard proposed by Across and Uniswap. This standard allows all intent interaction orders to be shared on the solver network.
ERC-7683 combines ERC-3668 and ERC-3770 to provide a preliminary interoperability experience for Layer2.
ERC-7683 establishes a unified framework for cross-chain intent and can be accessed by all solvers. EIP-3370 adds identification labels to blockchain addresses, clearly indicating the specific blockchain network that the address belongs to, preventing users from sending funds to the wrong network. ERC-3668 CCIP Read completes off-chain verification, providing a secure mechanism to obtain off-chain data without additional trust assumptions, effectively supporting lightweight clients compatible with L2 blockchains without requiring additional configuration by wallets.
RIP-7755 (L2 Invocation Standard):
RIP-7755 is an L2 invocation standard that aims to achieve seamless cross-chain interoperability between different Ethereum Layer2 networks, especially Optimism and Arbitrum.
The proof of concept (POC) for RIP-7755 was launched by the Base research team on October 17, 2024, and it applies to blockchains that comply with the EIP-4788 standard. Currently, it has been validated for OP Stack Chain and Arbitrum.
In summary, the above is a retrospective of the major events Ethereum went through in 2024.
Of course, Ethereum’s journey in 2024 encompasses more than just these events. It also includes the competition with Solana, criticisms regarding its unclear positioning and centralization, major institutions holding Ethereum spot ETFs (such as the Michigan Retirement Fund disclosing holdings of over $10 million in Ethereum spot ETFs), large institutions launching tokenized products on Ethereum (such as UBS launching a tokenized money market fund called uMINT in Singapore, and Goldman Sachs tokenizing $20 million in commercial paper on Ethereum), and V God’s publication of six articles about Ethereum’s roadmap after facing a crisis, as well as Ethereum research Reddit’s AMA session, etc.
All of these events ultimately lead to an undecided question: where does the future lie for Ethereum?