Ethereum's application positioning dilemma: from world computer to identity crisis.

Ethereum's "Application Positioning Dilemma": From World Computer to Identity Crisis. Starting from the grand vision of a "World Computer," Ethereum has experienced a series of failed application dreams and has yet to find a clear application positioning.

1. The Origin and Ebb of the "World Computer" Dream. At its inception, Vitalik Buterin positioned Ethereum as a "World Computer"—an open, global smart contract platform to host decentralized applications like internet protocols. However, this path faced successive real-world challenges. In the 2016 The DAO incident, hackers exploited a smart contract vulnerability to steal a large amount of ETH, triggering a hard fork into ETH and ETC, exposing the governance dilemma of the "code is law" ideal. During the 2020 DeFi Summer, soaring Gas fees and network congestion coincided with the rise of high-TPS, low-fee public chains like Solana and BNB Chain, putting severe scaling pressure on Ethereum. That same year, Vitalik published a roadmap centered on L2 Rollups, shifting the scaling focus from L1 to L2. However, the subsequent ebb of speculation left it essentially an empty shell. This decision was later proven to be a double-edged sword.

2. The "Value Capture Fracture" Brought by L2 Expansion. Ethereum's strategy of prioritizing L2 development over improving L1 throughput led to a structural problem: L2s diverted users and fee revenue, but value did not effectively flow back to ETH itself. As of May 2026, the total value locked (TVL) in Ethereum L2s was approximately $45 billion, but the top three—Arbitrum, Base, and ZKSync—accounted for over 70% of the share, with the remaining 50+ chains competing for the rest. Many generic Rollups lacked differentiated use cases and faced a "subsidy cliff" after ecosystem subsidies expired. Vitalik himself admitted that the original vision of L2s as "branded shards" "no longer holds," and L2s existing merely as "cheaper Ethereum" need to find new value propositions.

3. Competitive Landscape: Eroded by Faster and Cheaper Chains. The 2022-2025 cycle marked the first time Ethereum faced real competition from other general-purpose smart contract chains. These chains were not only faster and cheaper but also gained real user adoption, especially Solana. Network revenue, a proxy for user willingness to pay, continued to cede ground to chains like Solana, Tron, and Hyperliquid. ETH's performance lagged behind BTC for the first time in this cycle.

4. Internal Crisis: Core Team Turmoil and Roadmap Divisions. From February to May 2026, the Ethereum Foundation lost at least seven to nine top core developers within four months, covering key roles in protocol research, upgrade coordination, and fund management. Reasons for departure included power dilution and governance turmoil due to the Foundation's decentralization and delegation of authority, weak salary competitiveness, poaching by the AI industry and new public chains with high salaries, and the CROPS (Censorship-Resistant, Open, Private, Secure) roadmap being seen by some members as weakening growth and adoption. Long-time ETH bull and Bankless co-founder David Hoffman even revealed he had sold all his ETH, citing disappointment with the leadership's lack of interest in growth.

5. Vitalik's New Vision: "Sanctuary Technology" and Mass Adoption.

Facing the predicament, Vitalik proposed a strategic pivot in 2025-2026: shifting from pursuing mass adoption to building "sanctuary technology," prioritizing decentralization, privacy, and user sovereignty over imitating Apple or Google-style growth models. This pivot was seen by pragmatists as a refocusing on Ethereum's core competencies, while critics viewed it as a retreat after the bankruptcy of the "World Computer" dream, an admission of inability to compete with emerging chains at the application layer.

6. What Exactly is "A Series of Application Dream Bankruptcies"? "A series of application dreams" can be traced back to multiple high-hoped but unfulfilled application directions in Ethereum's history. From 2015 to 2017, the "World Computer" and DApp platform vision failed to break through due to high Gas fees and poor user experience. In 2020, the dream of DeFi transforming finance mainly served crypto-speculative users, with institutional barriers remaining high. In 2021, the NFT and metaverse hype faded, lacking sustained application scenarios. From 2022 to 2023, the vision of L2 scaling carrying everything encountered pseudo-applications, fragmentation, and value flow fracture. From 2024 to 2025, RWA tokenization and AI Agents were still in early stages, unverified and unscaled. Mo Jalil, Head of Institutional Privacy at the Ethereum Foundation, pointed out that the biggest current challenge is the cognitive and language gap; Ethereum is accustomed to expressing itself through technology and ideas, but institutions care more about risk, compliance, and other contexts. Patrick McCorry, a researcher at the Arbitrum Foundation, believes the main obstacle to institutional adoption lies not in the underlying technology but in the user experience itself; the complex tools designed by DeFi for crypto-native users are too high a barrier for traditional financial institutions.

Ethereum remains an industry benchmark at the technical level, dominating in TVL, stablecoin issuance, and RWA tokenization, but it has consistently failed to find a "killer application scenario" in its application dream positioning. From "World Computer" to DeFi, NFTs, L2s, and then AI Agents, the half-life of each application narrative cycle has shortened towards bankruptcy. In 2026, Ethereum simultaneously faces intensifying external competition, internal brain drain, ambiguous market positioning strategy, and heavy pressure from roadmap execution uncertainties. Its future is shrouded in mist.