The Next Decade of Ethereum: Technological Innovations and Unfinished Business

Yesterday, Ethereum turned ten years old. When the Genesis Block went live in 2015, it was still just an "experimental project," and now it manages over $44 billion in Layer 2 Lock-up Position value and is one of the infrastructures supporting global Crypto Assets ETFs. Ethereum's first decade has written the most magnificent evolutionary history in Blockchain, from DAO forks to merge upgrades, from high Gas fees to Rollup promotions; every crisis has become a stepping stone for technological leaps.

However, at the beginning of the second decade, Ethereum's "coming of age" is not easy. After the implementation of account abstraction, security vulnerabilities emerged, and the Layer 2 ecosystem faced a "war of factions." MEV erodes fairness, and global regulation is a "double-edged sword." These four core challenges hang over Ethereum like the sword of Damocles. Institutional funds are pouring in through ETFs, while ordinary users are hoping for a better interactive experience. Ethereum must find a new balance between technical ideals and real-world compromises.

Account Abstraction: The "Life and Death Game" of Convenience and Security

In May 2025, a user shared their experience on social media: after clicking authorization, their wallet balance was emptied within 15 minutes, and the other party didn't even obtain their private key. While using a certain wallet's "one-click upgrade account abstraction" feature, the user inadvertently authorized a malicious contract, and ETH worth 120,000 yuan was automatically transferred. This situation is not an isolated case; the blockchain security company SlowMist reported that within just two weeks of the Pectra upgrade, over 100,000 wallets were stolen due to the EIP-7702 authorization vulnerability, with total losses reaching 150 million dollars.

The Duality of EIP-7702

The Pectra upgrade, launched on May 7, 2025, achieves a significant breakthrough in "account abstraction" through EIP-7702. Ordinary user wallets (EOA) are allowed to temporarily possess smart contract capabilities to support batch transactions, Gas fee payment, social recovery, and other "Web3 native experiences." Theoretically, the "user experience ailment" that Ethereum has not resolved for ten years can be addressed. Previously, completing a DeFi exchange required two authorizations and one transaction, but this can now be consolidated into a single step. Additionally, developers will be able to cover Gas fees for users, making it possible to "play Web3 with zero ETH."

Behind the convenience, the trust model has been completely reconstructed. The CertiK security team pointed out that EIP-7702 breaks the underlying assumption that "EOA cannot execute contract code," making old contracts that rely on tx.origin==msg.sender face reentrancy attack risks. More seriously, hackers exploit users' curiosity about "account abstraction" by luring them to authorize malicious contracts with phishing links. For instance, the top-ranked EIP-7702 delegated contract (0x930fcc37d6042c79211ee18a02857cb1fd7f0d0b) was found to automatically redirect funds, with novice users who are first exposed to account abstraction accounting for 73% of the victims.

Future Key Directions

The Ethereum Foundation is promoting the "Smart Account Security Standards", requiring wallets to display the open-source status of delegated contracts and to include a 72-hour cooling-off period. However, the real challenge is balancing "flexibility" and "security". Institutional users need complex permission management such as multi-signature plus time locks, while ordinary users want it to be as simple to use as Alipay. Vitalik mentioned at the Hong Kong Web3 Carnival that account abstraction is not the end point, but a continuous game between "user sovereignty" and "security safeguards".

Layer2 Ecology: The "Fragmentation Crisis" Behind the Prosperity

Transferring 0.01 USDC on Arbitrum is sufficient, while the mainnet requires 5 US dollars. Developer Zhang Ming from Beijing complained that it took him 30 minutes to transfer assets across chains when buying NFTs on zkSync. This illustrates the current state of Layer 2: by 2025, the total Lock-up Position value of Ethereum Layer 2 could exceed 52 billion US dollars, with a daily transaction volume reaching 40 million, yet users still have to switch back and forth between different Rollups as if they are in multiple parallel universes.

Optimistic Hegemony & ZK Counterattack

The current Layer 2 ecosystem is polarized, with Arbitrum (TVL reaching 17.8 billion USD) and Optimism (TVL reaching 8.9 billion USD) in Optimistic Rollup becoming the developers' top choices due to EVM compatibility, accounting for 72% of the market share. On the ZK-Rollup side, zkSync (TVL 3.8 billion USD) and Starknet (TVL 2.2 billion USD) are rapidly catching up, and the zero-knowledge proof technology compresses transaction confirmation time to 2 seconds, with transaction fees 60% lower than Optimistic Rollup.

But beneath the prosperity lies hidden concerns:

• Liquidity Fragmentation: Uniswap's liquidity on Arbitrum is 8 times that of zkSync, and users can only recharge repeatedly during transactions.
• Technical Fragmentation: Optimistic Rollup relies on "fraud proof," which means that withdrawals require a 7-day period, while the proof generation cost of ZK-Rollup remains a barrier for ordinary developers.
• Centralized Risk: The sequencer of Arbitrum is controlled by OffchainLabs, and it experienced a 3-hour transaction interruption due to a server failure.

"Super Chain" Dreams and Reality Obstacles

The "Superchain" plan proposed by Optimism aims to connect all Optimistic Rollups through a shared security layer, but progress has been slow. By July 2025, only Base and Zora have completed cross-chain interoperability, while zkSync and Starknet have jointly launched the "ZK Alliance" to achieve proof recognition. However, the compatibility of different ZK algorithms remains a challenge. Blockchain analyst Wang Feng has said that the ultimate form of Layer 2—whether it will be "a seamless network" or "multiple fragmented small territories"—will determine whether Ethereum can support 1 billion users.

MEV: The Fairness Dilemma of the "Dark Forest" in Blockchain

On March 24, 2025, Uniswap user Michael wanted to exchange $220,000 worth of USDC, but he fell victim to a typical "sandwich attack." The MEV bot first bought USDT to drive up the price, and immediately after Michael's transaction, the bot sold off, resulting in Michael receiving only 5,272 USDT and losing $215,000. On-chain data indicates that the validator bobTheBuilder received a $200,000 "tip" for packaging this transaction, while the attacker only profited $8,000, leaving ordinary users as the biggest victims.

MEV Industrialization and Network Fairness

After Ethereum transitioned to PoS, MEV (Maximum Extractable Value) transformed from "miner privilege" into a specialized industry, with arbitrage scripts written by seekers and builders responsible for packaging transactions, while optimal blocks are selected by validators. In the first quarter of 2025, the total MEV extraction amount for Ethereum reached $520 million, with DEX arbitrage and liquidation accounting for 73%. Ordinary users pay an "implicit tax" of 15%-20% in their transaction costs for this.

The situation is more severe with "MEV centralization": 65% of the block construction rights are controlled by the leading builder Flashbots. Validators often choose high MEV blocks for higher returns, making it difficult for smaller builders to survive. MIT professor Muriel Médard has issued a warning that if block ordering rights are monopolized by a few institutions, Ethereum may very well become "Wall Street's high-frequency trading playground."

Breaking the Deadlock: From Technical Defense to Mechanism Design

The Ethereum community is advancing multiple solutions:

• Encrypted Memory Pool: Hides transactions outside the public memory pool to prevent MEV bots from monitoring them in advance.
• MEV-Burn: Destroying part of the MEV earnings to reduce the rent-seeking motivation of validators.

In the Proposer-Builder Separation (PBS) model, only validators propose blocks while builders compete for ordering rights, thus reducing the risk of single-point manipulation. However, it is still necessary to balance "fairness" and "efficiency" in these schemes. Ethereum core developer Dankrad Feist has stated, "MEV is not a vulnerability; it is an inevitable result of blockchain transparency—our goal is not to eliminate MEV but to distribute the profits more fairly across the network."

Regulation and Financialization: The "Soul Searching Questions" After Institutional Involvement

In July 2025, the Ethereum ETF approved by the US SEC had a net inflow of $2.2 billion, and the institutional holding ratio of ETH surged from 5% to 18%. Meanwhile, the EU's "Smart Contract Transparency Act" requires Rollup to publicly trade algorithms, and Hong Kong requires all crypto service providers to implement KYC. Ethereum is facing the ultimate conflict between "compliance" and "decentralization."

Global Regulatory "Crossroads"

• United States: The "CLARITY Act" will usher in a wave of DeFi compliance, defining ETH as a "commodity" to allow banks to custody it, while DeFi platforms must also register as "exchanges".
• European Union: The MiCA regulation requires stablecoin issuers to hold 100% fiat reserves and transactions of privacy coins must undergo additional approval.
• China: Currently, although the mainland region remains under high pressure, the transaction scale of digital renminbi cross-border settlement is expected to exceed 3.5 trillion yuan by 2025. Hong Kong, as a "testing ground", has already opened up the free circulation and trading of digital assets, and the stablecoin legislation has made the market in Hong Kong show vibrant vitality.

The regulatory differences have given rise to a series of "regulatory arbitrage": for example, a leading DeFi protocol deploys a KYC module in the EU while Singapore retains an anonymous pool, and compliant trading pairs are the only ones accessible to US users. This kind of "fragmented compliance" not only increases costs for developers but also undermines the vision of Ethereum as a "global unified infrastructure."

Financialization is a double-edged sword

The influx of institutional funds has improved liquidity, but the correlation between Ethereum price fluctuations and US stocks has risen from 0.3 to 0.6; in June 2025, when the Federal Reserve raised interest rates by 0.5%, ETH experienced a single-day drop of 8% while Bitcoin only dropped by 5%. This was unimaginable five years ago and has far-reaching implications. The "value capture mechanism" has changed; previously, ETH prices were driven by on-chain Gas fees and ecosystem growth, but now ETF fund flows and macro interest rates have become the dominant factors.

Xiao Feng, Chairman of Wanxiang Blockchain, pointed out that Ethereum's second decade must find a direction between "innovating within a compliance framework" and "sticking to the original intention of decentralization"; Hong Kong may be the best testing ground, as it can connect with China's digital currency and attract global crypto enterprises.

Finding Balance in the "Impossible Triangle"

In the first decade of Ethereum, upgrades like "the Merge", "Shapella", and "Dencun" answered the question of "Can it survive?", while in the second decade, it must answer "How to become a true global infrastructure?" The four major challenges of security games in account abstraction, ecosystem integration of Layer 2, fair distribution of MEV, and compliance adaptation to regulation are essentially a continuation of the impossible triangle of "decentralization, security, scalability"; only this time, the trust of one billion users is used as a wager.

In his speech on the tenth anniversary of Ethereum, Vitalik said, "We do not need a perfect blockchain, we only need a 'constantly evolving blockchain'." Perhaps the ultimate value of Ethereum is not to solve all problems but to prove that decentralized networks can still move forward amidst the tug-of-war between technological ideals and real-world compromises.

The curtain of the second decade has been raised, and the answers will be written in every line of code, every upgrade, and every user's wallet!