The Next Decade of Ethereum: Technological Innovation and Unfinished Business

Yesterday, Ethereum celebrated its tenth anniversary. When the Genesis Block launched in 2015, it was merely an "experimental project." Now, it manages over $44 billion in Layer 2 locked value and serves as one of the infrastructure platforms for global cryptocurrency ETFs. Ethereum's first decade has been one of the most dramatic evolutionary journeys in blockchain history, from the DAO fork to merged upgrades, from high gas fees to the widespread adoption of Rollups, with each crisis serving as a stepping stone for technological advancement. However, at the start of its second decade, Ethereum's coming-of-age ceremony is far from easy. Security vulnerabilities have emerged since the implementation of account abstraction, and the Layer 2 ecosystem is plagued by "separatist wars." MEV erodes fairness, and global regulation is a double-edged sword. These four core challenges hang like a sword of Damocles over Ethereum's head. With institutional funds pouring in through ETFs and ordinary users hoping for a better user experience, Ethereum must find a new balance between technological ideals and practical compromises.

Account Abstraction: A Life-or-Death Struggle Between Convenience and Security

In May 2025, a user shared their experience on social media: after clicking "authorize," their wallet balance was emptied within 15 minutes, without the recipient even having access to their private key. While using a wallet's "one-click account abstraction upgrade" feature, the user accidentally authorized a malicious contract, automatically transferring 120,000 yuan worth of ETH. This isn't an isolated case. According to blockchain security firm SlowMist, just two weeks after the Pectra upgrade, over 100,000 wallets were compromised due to the EIP-7702 authorization vulnerability, resulting in a total loss of $150 million.

The Two Sides of EIP-7702

The Pectra upgrade, launched on May 7, 2025, leverages EIP-7702 to achieve a major breakthrough in "account abstraction." Regular user wallets (EOAs) are temporarily enabled with smart contract functionality to support "native Web3 experiences" like batch transactions, gas fee payments, and social recovery. This theoretically addresses Ethereum's decade-long user experience issues. Previously, completing a DeFi exchange required two authorizations and one transaction, but now these steps can be combined into a single operation. Developers can also prepay gas fees for users, making "playing Web3 with zero ETH" a reality.

Behind this convenience lies a fundamental restructuring of the trust model. The CertiK security team pointed out that EIP-7702 breaks the underlying assumption that "EOA cannot execute contract code." This exposes legacy contracts that rely on tx.origin == msg.sender to the risk of reentrancy attacks. More seriously, hackers exploit users' novelty of "account abstraction" by using phishing links to trick them into authorizing malicious contracts. For example, the top-ranked EIP-7702 delegation contract (0x930fcc37d6042c79211ee18a02857cb1fd7f0d0b) was found to automatically redirect funds. New users encountering account abstraction for the first time accounted for 73% of the victims.

Future Directions

The Ethereum Foundation is promoting the "Smart Account Security Standard." Wallets are required to display the open-source status of delegated contracts and implement a 72-hour cooling-off period. However, the real challenge lies in balancing flexibility and security. Institutional users require complex permission management, such as multi-signatures and time locks, while ordinary users want a user experience as simple as Alipay. Vitalik stated at the Hong Kong Web3 Carnival that account abstraction is not the end goal, but rather an ongoing struggle between user sovereignty and security guardrails.

Layer 2 Ecosystem: The "Crisis of Separatism" Behind Prosperity

On Arbitrum, transferring USDC for $0.01 is enough, while on the mainnet, it costs $5. Beijing developer Zhang Ming complained that it took 30 minutes to transfer NFTs across blockchains when he bought them on zkSync. This reveals the current state of Layer 2: By 2025, the total locked value of Ethereum's Layer 2 will exceed $52 billion, with daily transaction volume reaching 40 million. Yet, users still have to switch between different Rollups, as if they were in multiple parallel universes.

Optimistic Hegemony & ZK Counterattack

The current Layer 2 ecosystem is polarized. Optimistic Rollup platforms Arbitrum (TVL $17.8 billion) and Optimism (TVL $8.9 billion) have become developers' top choices due to their EVM compatibility, resulting in a 72% market share. ZK-Rollup platforms zkSync (TVL $3.8 billion) and Starknet (TVL $2.2 billion) are rapidly catching up, and their zero-knowledge proof technology has reduced transaction confirmation times to 2 seconds, while fees are 60% lower than Optimistic Rollup.

But beneath this prosperity lie hidden concerns:

• Liquidity fragmentation: Uniswap's Arbitrum liquidity is 8 times that of zkSync, and users are limited to repeated deposits when trading.
• Technical Fragmentation: OptimisticRollup relies on fraud proofs, which means withdrawals require a seven-day period. The cost of generating proofs for ZK-Rollup remains a barrier for ordinary developers.
• Centralization Risk: Arbitrum's sequencer is controlled by Offchain Labs, and it experienced a three-hour trading outage due to a server failure.

The "Superchain" Dream and Realistic Obstacles

Optimism's proposed "Superchain" plan aims to connect all Optimistic Rollups through a shared security layer, but progress has been slow. By July 2025, only Base and Zora had achieved cross-chain interoperability. While zkSync and Starknet jointly launched the "ZK Alliance" to achieve mutual recognition of proofs, compatibility between different ZK algorithms remains a challenge. Blockchain analyst Wang Feng has stated that whether Layer 2 ultimately becomes "a seamless network" or "multiple fragmented territories" will determine whether Ethereum can support 1 billion users.

MEV: The Fairness Dilemma of Blockchain's "Dark Forest"

On March 24, 2025, Uniswap user Michael attempted to redeem $220,000 in USDC but was subsequently subjected to a classic "sandwich attack." A MEV bot first bought USDT to drive up the price, then immediately sold it after Michael's transaction. This resulted in Michael receiving only 5,272 USDT, a loss of $215,000. On-chain data shows that validator bobTheBuilder received a $200,000 "tip" for packaging this transaction, leaving the attacker with a profit of only $8,000. Ordinary users were the biggest losers.

MEV Industrialization and Network Fairness

After Ethereum transitioned to PoS, MEV (Maximum Extractable Value) shifted from a "miner's privilege" to a specialized industry. Arbitrage scripts are written by searchers, and builders are responsible for packaging transactions. The optimal block is selected by validators. In the first quarter of 2025, Ethereum's total MEV extraction reached $520 million, of which DEX arbitrage and liquidation accounted for 73%. This "hidden tax" on average users accounts for 15%-20% of their transaction costs.

Even more serious is "MEV centralization": 65% of block construction rights are controlled by Flashbots, the top builders. Validators, seeking higher returns, often select high-MEV blocks, making it difficult for small and medium-sized builders to survive. MIT professor Muriel Medard warned that if block sequencing rights are monopolized by a few institutions, Ethereum could become "Wall Street's playground for high-frequency trading."

Breakthrough: From Technical Defense to Mechanism Design

The Ethereum community is promoting multiple solutions:

• Encrypted Mempool: Hides transactions from the public mempool to prevent MEV bots from pre-monitoring.
• MEV-Burn: Destroys a portion of MEV revenue to reduce validators' rent-seeking incentives.

Under the Proposer-Builder Separation (PBS) model, only validators propose blocks, and builders compete for ordering rights, thereby reducing the risk of single-point manipulation. However, these proposals still need to balance fairness and efficiency. Ethereum core developer Dankrad Feist said, "MEV is not a vulnerability, but an inevitable consequence of blockchain transparency. Our goal is not to eliminate MEV, but to distribute the benefits more equitably across the network."

Regulation and Financialization: The "Soul-Searching" After Institutional Entry

In July 2025, the US SEC-approved Ethereum ETF saw $2.2 billion in net inflows, and institutional holdings of ETH surged from 5% to 18%. Meanwhile, the EU's Smart Contract Transparency Act mandates that Rollups disclose their trading algorithms, and Hong Kong requires all crypto service providers to perform KYC. Ethereum faces the ultimate conflict between compliance and decentralization.

The "Fork in the Road" of Global Regulation

• US: The CLARITY Act will usher in a wave of DeFi compliance, defining ETH as a "commodity," allowing bank custody, and requiring DeFi platforms to register as "exchanges."
• EU: MiCA regulations require stablecoin issuers to hold 100% fiat currency reserves, and privacy coin transactions are subject to additional approval.
• China: While regulations remain high in mainland China, cross-border settlement of the digital RMB is expected to exceed 3.5 trillion yuan by 2025. Hong Kong, as a "testing ground," has already opened up the free flow and trading of digital assets, and the stablecoin law has further revitalized the Hong Kong market.

Regulatory differences have led to a series of "regulatory arbitrage": for example, a leading DeFi protocol deployed a KYC module in the EU, while Singapore retained an anonymity pool. Compliant trading pairs are only accessible to US users. This fragmented compliance not only increases developer costs but also undermines Ethereum's vision of a "global unified infrastructure." The Double-Edged Sword of Financialization The influx of institutional capital has created liquidity, but the correlation between Ethereum's price fluctuations and US stocks has risen from 0.3 to 0.6. When the Federal Reserve raised interest rates by 0.5% in June 2025, ETH saw a single-day drop of 8%, while Bitcoin's was only 5%. This would have been unimaginable five years ago, and it has even more far-reaching implications. The "value capture mechanism" has changed. Previously, ETH's price was driven by on-chain gas fees and ecosystem growth, but now ETF flows and macro interest rates are the dominant factors. Wanxiang Blockchain Chairman Xiao Feng noted that Ethereum's second decade must find a balance between "innovation within a compliant framework" and "staying true to its original decentralization mission." Hong Kong may be the best testing ground, as it can both connect with mainland China's digital RMB and attract global crypto companies.

Finding a Balance in the "Impossible Triangle"

In Ethereum's first decade, upgrades like "Merge," "Shapella," and "Dencun" answered the question of "whether it can survive." In its second decade, it must answer the question of "how to become a truly global infrastructure." The four major challenges of account abstraction security, Layer 2 ecosystem integration, fair distribution of MEV, and regulatory compliance are essentially a continuation of the "Impossible Triangle" of "decentralization, security, and scalability." This time, the trust of one billion users is at stake.

In Ethereum's 10th anniversary speech, Vitalik said, "We don't need a perfect blockchain, we just need an 'evolving blockchain.'" Perhaps Ethereum's ultimate value lies not in solving all problems but in proving that decentralized networks can continue to move forward amidst the tug-of-war between technological ideals and practical realities.

The curtain has opened on the second decade, and the answer will be written in every line of code, every upgrade, and every user's wallet!