Hotcoin Research | Ethereum’s Decade of Ups and Downs: A Financial Reengineering Experiment from White Paper to Global Settlement Layer

I. Introduction

In 2013, a 19-year-old programmer named Vitalik Buterin proposed a bold new vision for blockchain technology. In his white paper titled “Ethereum,” he outlined a decentralized platform that would surpass Bitcoin’s capabilities, introducing the concept of a “world computer.” To bring this vision to life, Buterin and his team raised approximately $18 million through an initial coin offering (ICO), leading to the official launch of the Ethereum network in 2015.

This marked the beginning of a new era for Web3, enabling the rise of smart contracts and decentralized applications (DApps). Over the past decade, Ethereum has weathered market cycles, navigated internal and external challenges, and powered waves of innovation across finance and technology. Despite periods of intense hype and harsh corrections, Ethereum has consistently evolved, emerging stronger with each cycle. Today, it stands not just as a concept, but as a foundational layer of the global blockchain ecosystem.

This report reviews Ethereum’s major development milestones and technical evolution, explores its pivotal role in driving innovations like DeFi, NFTs, and DAOs, and analyzes key topics such as Layer 2 scaling, competitive dynamics, and future risks. Through this lens, we trace Ethereum’s transformation from a white paper vision to a decentralized global financial infrastructure — and look ahead to the possibilities of its next decade.

II. A Decade of Ethereum’s Development: Key Milestones

Ethereum’s ten-year journey represents the most pivotal storyline in blockchain history. From its early days as a “hacker’s playground,” Ethereum has evolved into a robust infrastructure supporting hundreds of billions in value. Each milestone not only propelled Ethereum’s growth but also mirrored the broader evolution and maturing of the crypto industry.

• 2013–2015 Beginnings: Vitalik released the white paper in 2013, followed by a public crowdsale in 2014. The Ethereum genesis block was mined on July 30, 2015, officially launching the mainnet and ushering in the smart contract era.
• 2016 Idealism and Crisis: Smart contracts began to gain traction, but a major security incident with “The DAO” led to a contentious hard fork, resulting in the creation of Ethereum Classic (ETC).
• 2017 Boom and Challenges: The ICO boom turned Ethereum into the go-to platform for token launches. The ERC-721 standard was introduced, enabling early NFT applications like CryptoKitties.
• 2018–2019 Crypto Winter: The ICO bubble burst, and ETH’s price plummeted from $1,448 to $84. Ethereum focused on technical upgrades (e.g., Byzantium and Constantinople hard forks) to lay the groundwork for the future.
• 2020 Rise of DeFi: Decentralized finance exploded, with “liquidity mining” fueling the DeFi summer. Protocols like Uniswap and Compound surged, while network congestion and high gas fees exposed scalability bottlenecks.
• 2021 Peak Moment: The London upgrade implemented EIP-1559, introducing a fee-burning mechanism. Layer 2 solutions like Arbitrum and Optimism launched. NFTs went mainstream with projects like BAYC. ETH hit an all-time high near $4,878.
• 2022 Transition and Turmoil: “The Merge” transitioned Ethereum from proof-of-work (PoW) to proof-of-stake (PoS), reducing energy consumption by 99%. But broader market turmoil (e.g., Terra collapse, FTX implosion) caused ETH to briefly drop below $1,000.
• 2023 Recovery and Upgrades: The Shanghai/Shapella upgrade enabled ETH staking withdrawals, completing the PoS transition. Rollup ecosystems like Arbitrum matured, and ZK rollup solutions such as zkSync and StarkNet went live.
• 2024 Scaling and Institutional Adoption: The Cancun/Dencun upgrade (featuring EIP-4844) slashed Layer 2 transaction fees by ~90% and improved data availability. The U.S. approved an ETH spot ETF, drawing significant institutional inflows.
• 2025 Moving Forward: The Pectra upgrade introduced account abstraction, enabling more flexible smart contract wallets. Ethereum’s market cap neared $500 billion, solidifying its role as a global decentralized financial infrastructure.

From pioneering smart contracts to embracing proof-of-stake, Ethereum has repeatedly redefined itself at critical junctures. The lessons and experience gained throughout this journey have enhanced the network’s resilience and continue to shape the direction of future innovation.

III. Technical Evolution: From “World Computer” to Sharding and Rollups

At launch, Ethereum introduced a groundbreaking vision: a “world computer” powered by a Turing-complete smart contract platform. This innovation expanded blockchain’s utility beyond simple asset transfers, enabling programmable and decentralized computation. Since its mainnet debut in 2015, Ethereum has hosted tens of millions of smart contracts, giving rise to a thriving ecosystem of decentralized applications (DApps).

However, Ethereum’s early reliance on a Proof-of-Work (PoW) consensus mechanism — while crucial for security and decentralization — came with significant performance limitations. The 2017–2018 ICO boom, along with viral applications like CryptoKitties, exposed serious scalability issues. Network congestion and surging gas fees became common, with transaction throughput limited to around 12 TPS (transactions per second) and gas fees occasionally exceeding $50.

These bottlenecks prompted the Ethereum community to pursue the ambitious Ethereum 2.0 roadmap — a long-term upgrade path aimed at dramatically improving scalability and energy efficiency without compromising decentralization.

1. From PoW to PoS: A Consensus Shift

After years of development, Ethereum completed its most transformative upgrade with The Merge in 2022. A Proof-of-Stake (PoS) beacon chain had been running in parallel since 2020, while the network repeatedly postponed the “difficulty bomb” to prepare for a smooth transition. On September 15, 2022, Ethereum successfully merged to PoS without any downtime — reducing energy consumption by an estimated 99.95%.

The Merge also introduced native staking, allowing ETH holders to earn approximately 4% APY by staking their tokens and contributing to network security. As of July 31, 2025, more than 36.11 million ETH — about 29.17% of the total supply — has been staked by over one million validators.

Beyond sustainability, the PoS transition drastically cut ETH issuance by around 90%. Combined with EIP-1559’s burn mechanism, this shift has made ETH deflationary during periods of high network activity, reinforcing Ethereum’s value proposition as a scarce digital asset.

Source：https://dune.com/hildobby/eth2-staking

2. Key Proposals and Protocol Upgrades

Several Ethereum Improvement Proposals (EIPs) have played a pivotal role in shaping the network’s economic model and performance.

The most impactful was EIP-1559, introduced in the London upgrade (2021). This proposal implemented a fee-burning mechanism that removes a portion of every transaction fee from circulation. Since its launch, over 4 million ETH has been burned — effectively reducing ETH supply growth and introducing deflationary pressure during periods of high demand.

Another major upgrade, EIP-4844, was deployed in March 2024. It introduced “blob” transactions — low-cost data containers specifically designed for Layer 2 rollups. This innovation cut Layer 2 gas costs by more than 50%, making Ethereum-based applications significantly more scalable and cost-efficient.

Together, these proposals have enhanced the Ethereum user experience and laid the technical foundation for broader adoption across the Web3 ecosystem.

3. Toward Sharding and a Modular Architecture

To overcome its fundamental scalability limitations, Ethereum has long planned a sharding architecture. Sharding divides the blockchain’s state and transaction processing across multiple parallel shard chains, all coordinated by a unified consensus layer. This design could eventually scale Ethereum’s throughput to hundreds of thousands of transactions per second, while bringing transaction fees close to zero. Full sharding is expected to be rolled out between 2025 and 2026.

While full sharding remains under development, its core principles are already being realized through Layer 2 Rollups — scaling solutions that execute transactions off-chain while posting data back to Ethereum for verification. Both Optimistic Rollups and Zero-Knowledge (ZK) Rollups have gained significant traction, supporting fast-growing ecosystems like Optimism, Arbitrum, zkSync, and StarkNet.

As a result, Ethereum’s mainnet is gradually evolving into a settlement layer focused on finality and data availability, while Rollups handle high-speed execution. This shift is transforming Ethereum into a modular, multi-layered network architecture, poised for massive scale and broader Web3 adoption.

4. Performance and Scalability Leap

Driven by the Proof-of-Stake (PoS) transition and rapid Layer 2 (L2) expansion, Ethereum’s technical evolution has focused on increasing throughput and reducing costs — while maintaining decentralization.

As of now, Ethereum’s mainnet processes approximately 1.8 million transactions per day, supported by a globally distributed validator network. In parallel, Layer 2 networks collectively handle over 5 million daily transactions, significantly boosting overall capacity.

This layered architecture has enabled dramatic fee reductions. Whereas gas fees once spiked to tens of dollars per transaction, they now average just a few cents on the mainnet — and even lower on L2s. The result is a Web2-like user experience within a decentralized Web3 framework.

Each upgrade — whether in consensus, execution environments, or scaling infrastructure — has made Ethereum more powerful, efficient, and accessible, all while preserving its core values of openness and decentralization.

Source：https://dune.com/flagund/l2-stats-vs-ethereum

IV. Ethereum Ecosystem Applications

Ethereum’s evolving technical architecture has laid the groundwork for the explosive growth of its application ecosystem. Over the past decade, Ethereum has emerged as the leading platform for open finance and digital assets, fueling transformative waves in decentralized finance (DeFi), non-fungible tokens (NFTs), and decentralized autonomous organizations (DAOs).

Powered by Ethereum’s smart contract capabilities, developers have built a diverse suite of financial applications — including lending, trading, derivatives, payments, and clearing — giving rise to a new financial paradigm often described as “banking without banks.”

Meanwhile, NFTs have introduced the concept of unique digital ownership, unlocking new possibilities for art, collectibles, and in-game assets, and pushing blockchain into the mainstream creative economy.

With DAOs, communities are now experimenting with internet-native governance models, enabling decentralized groups to coordinate, allocate capital, and make decisions collectively, reshaping how organizations form and operate in the digital age.

1. DeFi Revolution: Ethereum’s New Financial System

The DeFi movement began to take shape in 2017, when MakerDAO launched DAI, an overcollateralized stablecoin that laid the foundation for on-chain lending. In 2018, Uniswap introduced the automated market maker (AMM) model, revolutionizing decentralized trading by enabling token swaps without intermediaries.

Between 2019 and 2020, protocols like Compound and Aave expanded the DeFi landscape by offering permissionless lending and borrowing. The true inflection point arrived during DeFi Summer 2020, when Compound launched its governance token, sparking a wave of liquidity mining incentives. Users rushed to deposit assets into DeFi protocols in exchange for token rewards, propelling Ethereum’s total value locked (TVL) from under $1 billion to tens of billions within a matter of months — alongside a surge in transaction volume and network fees.

By the end of 2021, DeFi reached a short-term peak, with TVL surpassing $100 billion. Although the market faced volatility in the years that followed, the sector regained momentum. As of mid-2025, global DeFi TVL has recovered to approximately $150 billion, with Ethereum maintaining its leadership position — hosting nearly 60% of that value (around $85 billion).

Source：https://defillama.com/chains

Notable DeFi Protocols on Ethereum:

• Uniswap DEX: Pioneer of the AMM model, enabling peer-to-peer trading via a constant product formula — at one point surpassing the volume of many centralized exchanges.
• Sky (formerly MakerDAO): Issuer of DAI, the leading decentralized stablecoin backed by overcollateralized crypto assets — crucial for on-chain lending and value stability.
• Aave Lending Protocol: Offers permissionless lending and borrowing with dynamic interest rates, flash loans, and more — expanding DeFi use cases.

These protocols replicate and reinvent traditional finance — swaps, loans, derivatives — on-chain, with 24/7 global accessibility and composability between applications, fostering “Lego-like” innovation. DeFi has indeed triggered a paradigm shift in financial infrastructure, with Ethereum serving as the foundational layer of this “Internet of Value.”

2. NFT Craze: A New Frontier for Digital Assets

In late 2017, CryptoKitties, a game on Ethereum, introduced the concept of blockchain-based digital collectibles. These uniquely owned virtual cats congested the Ethereum network due to high demand. NFTs, based on the ERC-721 standard, offer provable digital ownership of assets like art, collectibles, and game items.

After initial experimentation, NFTs boomed in 2021. Iconic projects like CryptoPunks and Bored Ape Yacht Club (BAYC) became cultural phenomena. Celebrities and institutions embraced them, driving prices to hundreds of ETH. In March 2021, artist Beeple’s NFT sold at Christie’s for $69.3 million, validating NFTs in the traditional art world. Ethereum hosted the majority of these transactions, pushing NFTs into mainstream consciousness, art, fashion, and entertainment.

Platforms like OpenSea became dominant NFT marketplaces. Sports leagues like the NBA launched collectible NFTs (e.g., Top Shot), and game studios began tokenizing in-game assets. However, during peak periods, Ethereum’s network often suffered from congestion, with gas fees skyrocketing, deterring casual users.

Since then, the NFT market has cooled and matured. Prices and volume declined in the 2022 bear market, but the space continues to evolve. NFTs are increasingly used in gaming, digital identity, membership systems, and brand engagement. Ethereum still sees over $10 million in daily NFT trading volume, and NFTs remain a core blockchain application.

Source：https://dune.com/hildobby/ethereum-nfts

3. DAO Governance: Rethinking Organizational Collaboration

Ethereum didn’t just spawn new asset classes — it also enabled a new way to organize people and resources via decentralized autonomous organizations (DAOs). DAOs use smart contracts and token-based voting to enable community-led governance without central leadership.

The first major DAO experiment launched in April 2016 — The DAO, a decentralized venture fund that raised over $150 million in ETH. However, due to a code vulnerability, hackers exploited it, stealing ~$60 million. This incident led to Ethereum’s most famous hard fork, with the main chain retaining the Ethereum name, while the original fork became Ethereum Classic (ETC).

Despite the failure of The DAO, the DAO concept persisted and grew. Today, DAOs govern protocols like MakerDAO and Uniswap, manage treasuries (e.g., LAO, PleasrDAO), and even coordinate community campaigns (e.g., ConstitutionDAO’s attempt to purchase a U.S. Constitution copy via Ethereum crowdfunding). Ethereum’s governance — through public EIPs (Ethereum Improvement Proposals) — is arguably a form of DAO.

Ethereum provides the infrastructure for DAO operations: multisig wallets, voting tokens, and smart contract-based execution, ensuring transparent, trustless coordination. Yet DAOs face challenges: low voter turnout, slow decision-making, and governance centralization (i.e., large token holders wielding outsized influence). Despite these issues, DAOs are redefining organizational boundaries and enabling digital-native governance models.

V. Ethereum’s Competitive Landscape and Challenges

As of now, over 4,000 decentralized applications run on Ethereum’s mainnet, spanning lending, trading, gaming, social, and more. Ethereum boasts the largest developer ecosystem among public blockchains, reinforcing its position as the Internet of Value’s base layer. However, it faces unprecedented competition and internal challenges.

1. Competitive Landscape: Ethereum in a Multi-Chain World

Over the past decade, many so-called “Ethereum killers” have risen and fallen.

• EOS (2017) raised a record-setting $4.2 billion ICO and promised superior performance. But it suffered from governance centralization and stagnation post-launch.
• Binance Smart Chain (BSC, 2020) attracted users with low fees but relies on only 21 validators, raising decentralization concerns.
• Solana (2021) wowed with thousands of TPS and sub-second finality, becoming a hub for NFTs and memecoins. But frequent network outages raised reliability issues.

Still, competition remains fierce. Solana’s memecoin-driven boom briefly saw its gas fees surpass Ethereum’s. New architectures like modular blockchains (e.g., Celestia for data availability, EigenLayer for ETH restaking) are challenging Ethereum’s dominance by redefining the base layer design. In a multi-chain, modular future, Ethereum must not only maintain its leadership but also collaborate with other chains to remain relevant.

2. Challenges and Ethereum’s Response

Ethereum’s journey is marked by triumphs — but persistent challenges remain:

• Scalability Bottlenecks: High gas fees and limited TPS hamper the user experience. While Layer 2 networks ease congestion, they also introduce fragmentation and liquidity silos.
• Balancing Performance and Decentralization: Ethereum prioritizes decentralization and security, which limits throughput. The blockchain trilemma persists.
• Smart Contract Security: Vulnerabilities have led to major exploits. Immutable code underscores the need for better audit tools and developer frameworks.
• Regulatory Uncertainty: As DeFi and NFTs gain mainstream attention, regulators are watching. Compliance pressures could deter large institutions or shift them toward permissioned chains.
• Governance and Centralization Risks: Ethereum’s open governance (via EIPs and client diversity) is democratic but slow and complex. Meanwhile, staking is becoming centralized, with Lido, Coinbase, Kraken, and Binance controlling over 50% of staked ETH, raising concerns about censorship and validator dominance.

Ethereum’s Strategies:

• Rollup-Centric Scaling: Focus on short-term L2 adoption (Arbitrum, Optimism) and long-term data sharding to reduce costs and boost performance.
• Preserving Decentralization: Promoting light clients and stateless execution to lower node requirements and keep Ethereum accessible.
• Improving Security & Developer Support: Bug bounty programs, better dev tooling, DevCon and hackathons to grow the ecosystem.
• Engaging Regulators: The Ethereum Foundation and others are actively dialoging with regulators to shape innovation-friendly policies.
• Decentralizing Staking: Encouraging diverse validators and supporting decentralized staking solutions (Rocket Pool, SSV, etc.).

VI. Ethereum Today and the Road Ahead

On July 30, 2025, Ethereum celebrates its 10th anniversary. As the world’s second-largest crypto asset and leading smart contract platform, Ethereum is now an essential component of global investment portfolios, bridging crypto-native economies with traditional finance.

• Market Cap and Institutional Inflows: Institutions are entering via ETH spot ETFs. Public companies like Bitmine and SharpLink are adding ETH to their treasuries.
• Regulatory Clarity: ETH is now increasingly recognized as a commodity. U.S. regulators are defining frameworks for on-chain stablecoins, making it safer for institutions to adopt Ethereum. Traditional firms like Visa and JPMorgan already use Ethereum for settlement and tokenization pilots.
• RWA (Real World Assets) Tokenization: Since 2024, RWA has become a hot trend. BlackRock and Franklin Templeton have issued tokenized funds on Ethereum. Over 70% of RWA issuance now occurs on Ethereum or its L2s. More bonds and equities may follow suit.
• Future Tech Roadmap: Ethereum’s focus is shifting from research to impact. Upcoming innovations include:
• Sharding for exponential scaling
• Account Abstraction to simplify wallet UX
• ZK-EVMs for privacy-preserving smart contracts

Conclusion

Looking back, Ethereum’s first decade has been a journey of resilience and reinvention. Whenever it faced setbacks, it emerged stronger through community-driven innovation. If the past 10 years reshaped digital finance, the next 10 may see Ethereum evolve into a public infrastructure layer across industries — finance, commerce, governance, and beyond.

From white paper to global network, Ethereum’s story is far from over. The next chapter promises even greater transformation — and we’re just getting started.

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