Compiled by: Yuliya, PANews

Recently, PANews held an online topic interview on Twitter Space themed "Year-End Special Space: Outlook on Ethereum and Altcoin Market". This session invited Chainfeed founder Pan Zhixiong, Nothing Research partner Todd, Gate Group Chief Business Officer Kevin Lee, and independent researcher NingNing to jointly explore the future potential of Ethereum and altcoin markets.

Guest Introductions

Pan Zhixiong:

I am currently working on a technical newsletter, focusing on Ethereum and the entire ecosystem. Recently, I have been concentrating on two directions: one is researching the progress of programmable cryptography and privacy protocols; the other is exploring some capabilities of OpenAI while paying attention to topics related to AI agents.

Todd:

I am currently doing two main things: one is operating a research-driven fund; the other is running a non-custodial Ethereum mining pool called Ebunker, which currently accounts for over 1% of the total Ethereum hash rate. Our research on Ethereum has been ongoing, and Ethereum has performed relatively well in recent days.

Kevin Lee:

I previously worked in banking. Currently, I am preparing for the upcoming Consensus conference in Hong Kong and also planning a large music event. This will be an important industry event in Hong Kong.

NingNing:

I am now an independent researcher. I have previously been a long-time investor and have participated in the development and operation of exchanges and various vertical products. I am glad to be part of today's discussion.

Controversies Surrounding Ethereum

PANews: Why does Ethereum, despite being so active, still face many doubts?

Pan Zhixiong:

Doubts about Ethereum have existed every year, which is normal and should exist. The main reason is that it has not met the expected growth compared to Bitcoin or Solana. Solana (SOL) has indeed performed impressively this year, rising from around $10 at the beginning of the year to nearly $200, while Ethereum's growth has been relatively small. People often form conclusions first and then look for reasons, such as the Ethereum Foundation selling tokens or the foundation being bloated.

Regarding the issue of the foundation selling tokens, we need to view it more objectively. It is indeed an objective fact, but the interpretation can have two sides: negatively, it may indicate a lack of confidence in the project, but positively, it is to pay engineers' salaries and invest in future research. Compared to other projects, Ethereum's transparency is actually higher, and everyone can see every move of the foundation.

I think the problem in the community now is that many people rely too much on KOL opinions and lack independent thinking. For example, regarding the foundation selling tokens, if other public chains do this, it might be interpreted as "the project team is raising funds for ecological development," but when it comes to Ethereum, it becomes negative news. Therefore, I believe it is important to have independent judgment rather than blindly following others' opinions.

Todd:

I completely agree with Pan's viewpoint. From our experience operating the mining pool and communicating with various token holders, Ethereum needs a strong "monetization" scenario in every bull market cycle.

Looking back at history reveals this pattern:

• In the 2017 bull market, it was the ICO craze, where participating in any quality project required ETH, creating huge demand;
• In the 2021 bull market, it was DeFi mining (whether L1/L2), and ETH became essential once again;
• The current situation in 2024: buying Meme coins on Pump.Fun has created demand for Solana.

Although Ethereum has a staking mechanism, it is more suited for large holders. For example, if a large holder invests tens of thousands of ETH while a retail investor only has 0.1 ETH, the significance of participation is minimal. I calculated that even at the current yield rate of about 6%/7%, it lacks sufficient appeal for ordinary investors. This explains why Ethereum's performance in this round of market is below expectations; it has not found a new effective "monetization" scenario.

Kevin:

This year's performance of Ethereum can be divided into two phases:

• The first half of the year actually performed quite well, with trading volume maintaining a high level and market expectations being relatively optimistic.
• However, in the second half of the year, the situation changed significantly. Even with ETF approvals in the US and Hong Kong, the application scenarios remain insufficiently active. The Meme coin trend is in Solana, GameFi is on Telegram, and the DeFi projects that were hot in 2021 have now cooled down, while the NFT market is far less vibrant than before.

NingNing:

The price performance of Ethereum this year has indeed surprised the market. Recently, there were news reports about a whale going long on the Bitcoin and Ethereum exchange rate, forced to stop loss, losing tens of millions of dollars. Ethereum faces some issues with the Cancun upgrade; although there are no technical problems, the economic model's consideration of ecological impact is insufficient, especially the blob pricing curve setting on the DA layer is too high, affecting Ethereum's ability to capture L2 value. (At that time, influenced by market optimism)

The rise of Meme and AI agents has led a large number of users to Solana. Although on the surface, Ethereum's TVL has reached over $100 billion, far exceeding Solana's $10 billion, in reality, a large portion of Ethereum's funds are "dead money" (various staked/wrapped), and there are issues with duplicate calculations. Now, launching tokens or projects on Ethereum and raising funds on DEX has become difficult, leading many projects to turn to Solana or Base. This indicates that Ethereum is facing the strongest challenge from Solana, just as it faced Polygon and Avalanche in the previous cycle.

Current Status of L2 Development

PANews: In the Ethereum L2 field, the ZK narrative was once a hot topic, but after several large ZK projects were launched and token airdrops occurred, negative news followed. So, has the ZK track for Ethereum failed? Is the L2 landscape already determined? Is it possible for ZK L2 to surpass OP L2 by 2025?

Pan Zhixiong:

From the perspective of the Ethereum Foundation, they have invested a lot in ZK research. Although ZK zero-knowledge proof technology has not yet been implemented, the roadmap remains focused. In the short term, the entire community is unlikely to see significant differences:

• In terms of scalability, OP can also meet the demand, while the burden of generating ZK proofs is even greater.
• ZK is more suitable for privacy technology, but recent privacy technologies have faced policy restrictions.
• Users find it difficult to directly perceive the advantages of ZK in privacy.

Ethereum is currently advancing ZK applications in two main directions:

• Privacy and Scalability Exploration Group (such as the 0xPARC project): Implementing specific scenario applications, such as personal tickets, email content reading, etc.
• Development Tools: Providing open-source tools for developers to read specific content while protecting user privacy.

Todd:

I have a possibly radical viewpoint. First, it must be acknowledged that the strongest applications in the industry right now are Binance and Coinbase. From the Layer 2 rankings, Arbitrum is first, Base is second, and OP is third. Base's second place is largely due to Coinbase's support for listing.

OP's persuasion of Coinbase for this decision has given it a significant advantage in competing against ZK. Considering that most users participate in Layer 2 for speculative purposes, projects on Base may have more opportunities to be listed on Coinbase in the future, which also increases user participation willingness.

Another key point is the convenience of deposits and withdrawals. In the past, ZK's one-day withdrawal completion was an advantage, while OP required seven days. But now, mainstream exchanges like Binance support quick deposits and withdrawals for OP, which can be completed in about 20-30 minutes, effectively leveling the timeliness advantage of ZK.

In terms of technical maturity, in the rating system launched by L2Beat (the higher the better, stage zero means the sequencer is still controlled by a security committee, stage one is managed by whitelisted sequencer providers, and stage two is fully decentralized), only OP and Arbitrum have reached stage one, while most ZK projects are still at stage zero. This is also why mainstream exchanges are more inclined to support OP technology.

Kevin:

The biggest problem right now is the lack of necessary application scenarios. Looking back at 2021, the booming NFT market led to high gas fees, and at that time, Layer 2 solutions, whether OP or ZK, began to emerge. But in this cycle, we have not seen a similar application explosion.

Moreover, many other L1 public chains have already solved the scalability issue, and users do not have an urgent need to use L2. The reality is that when users find that other public chains can meet their needs, why would they specifically choose to use Ethereum and additionally use L2 solutions on Ethereum?

However, I still have confidence in Ethereum. If new applications emerge in the future, whether it be NFTs or other applications, leading Ethereum to face scalability issues again, these L2 solutions can truly demonstrate their value.

NingNing:

Currently, OP Stack also provides ZK rollup solutions, but the adoption rate is low. Although ZK has technical advantages, it has not translated into market advantages. This is a challenge for the ZK camp, but it is not without hope; the key lies in finding a breakthrough.

Altcoin ETFs

PANews: How do you view the change in Ethereum's position as the leader of altcoins? Additionally, projects like Litecoin, Solana, and Ripple are also applying for ETFs. If Trump comes to power, these coins' ETFs may be approved; will they replicate Ethereum ETF's lackluster market performance?

Pan Zhixiong:

Overall, Ethereum's leading position remains solid. This is mainly reflected in two aspects: first, in terms of market capitalization, Ethereum is still the second-largest cryptocurrency after Bitcoin; second, in terms of application ecology, Ethereum has the richest and most representative DeFi and NFT application ecosystems. As for the ETF approval process for other projects, I believe this is a process that requires the market and regulators to adapt together, gradually. Different projects may face different challenges and opportunities.

Todd:

Regarding the topic of ETFs, I would like to analyze it from several key dimensions:

• First, small-cap cryptocurrencies face practical challenges in launching ETFs. Taking Litecoin as an example, its current market capitalization is about $7.7 billion. Even assuming that 10% of the coins flow into the ETF market (about $770 million), the annual income calculated at a 0.2% management fee would only be over $1.4 million. This income scale may not even cover the basic operating expenses of large financial institutions like BlackRock and Fidelity, let alone the costs of high-salary positions such as legal staff.
• Secondly, there is the issue of staking yields. Current ETF products do not support staking functionality, which is a clear shortcoming for projects like Solana that offer around 7% risk-free staking yields. Investors weighing their options will find that choosing an ETF not only fails to provide staking yields but also incurs management fees, and this difference will inevitably affect the flow of funds.

Kevin:

As someone who has worked in traditional banking for over ten years, I believe that current cryptocurrency ETF products are still quite primitive. In traditional financial markets, ETFs typically do not track a single asset but develop into more diverse product forms such as index ETFs and sector ETFs. In the future, the cryptocurrency market will inevitably see more diversified ETF products, such as Layer 1 sector ETFs and DeFi sector ETFs. In this evolution, Ethereum, as the largest smart contract platform, will continue to play a core role.

NingNing:

I have noticed an interesting phenomenon: there is a significant gap between market expectations and reality. Previously, the market generally believed that the approval of ETFs would bring a large influx of funds, driving up the entire Ethereum ecosystem and related altcoins. However, the actual situation is that in the US stock market, cryptocurrency ETFs may only be seen as a type of mid-cap tech stock.

From the market performance since November, funds have not flowed as expected in the path of "Bitcoin ETF → Ethereum ETF → Altcoin ETF"; instead, projects like XRP and Stellar (XLM), which have been deeply rooted in the US market for a long time, have performed more prominently. This gap between market perception and reality is worth deep consideration for investors.

Increase in Fund Inflows for Ethereum ETF

PANews: After the approval of the Ethereum ETF, its fund inflows have consistently lagged behind those of the Bitcoin ETF. However, recently, we have seen a gradual increase in fund inflows for the Ethereum ETF. I would like to ask everyone, what are the reasons behind this? Is it possible for the fund inflows of the Ethereum ETF to exceed those of the Bitcoin ETF in the future?

Todd:

Let’s look at this issue from the perspective of investor psychology. Many people, when they first enter the cryptocurrency market, often think, "Bitcoin is too expensive; I want to buy something cheaper," and then choose Ethereum or other coins. This is a common mindset.

Based on this observation, I believe there are three key factors that will influence the future development of the Ethereum ETF:

• Price Threshold Effect: When Bitcoin reaches new highs, such as $150,000 or $200,000, investors will naturally look for relatively lower-priced alternatives. Since small-cap coins find it difficult to obtain ETF approval (because management fee income may not cover costs), Ethereum will become the most natural choice.
• Staking Yield Issue: A significant disadvantage of the current Ethereum ETF is that it does not support staking. If investors buy Ethereum directly on-chain and engage in native staking, they can earn about 3.26% risk-free yield. Purchasing the ETF would mean missing out on this yield. This indeed affects some investors' decisions, but if ETFs can support staking in the future, their attractiveness will greatly increase.
• Mixed ETF Opportunities: In the future, the market is likely to see mixed ETF products that combine Bitcoin and Ethereum, such as an 80% Bitcoin + 20% Ethereum configuration. Such "package" products will attract investors looking to diversify their investments, bringing new fund inflows to Ethereum.

Although short-term fund inflows for the Ethereum ETF may still be limited, based on these three reasons, I am optimistic about its long-term development, but it will require some time for the market.

Kevin:

From the perspective of trading strategies, I mainly see two possible fund flows:

• Long-Short Strategy: There are indeed traders attempting to go long on Ethereum while shorting Bitcoin as an arbitrage strategy. However, from October of this year to now, since Bitcoin has outperformed Ethereum, the effectiveness of this strategy has not been ideal. Currently, the attractiveness of this strategy has significantly decreased.
• Capital Rotation Effect: One characteristic of ETFs is that they provide a more convenient channel for capital conversion. For example, when investors sell a Bitcoin ETF, they receive cash and can freely choose to invest in the stock market, Tesla, or other assets. This convenience is a double-edged sword: the advantage is that it allows for easier conversion between different assets; the disadvantage is that funds may not necessarily remain within the cryptocurrency market for internal circulation.

So my judgment is that while fund inflows for the Ethereum ETF will continue to increase next year, the likelihood of exceeding those of the Bitcoin ETF is low.

When Will the Next Altcoin Season Arrive?

PANews: The Ethereum ecosystem seems to still be focused on infrastructure. Should it shift towards the application layer? Additionally, many investors are concerned about when the next altcoin season will arrive.

Pan Zhixiong:

This question is very interesting. Although Ethereum has developed for over a decade and Solana's performance is quite good, there is still significant room for improvement from an infrastructure perspective. Here are a few specific examples:

• Parallel processing has not been widely implemented.
• The construction of privacy layers is still incomplete.
• There are issues with front-end data storage for decentralized applications.
• The reliability and continuous accessibility of data.
• The gap in user experience compared to Web2.

At the current level of infrastructure, achieving a truly decentralized Web2-level user experience is still quite difficult. Only when the capabilities of each layer are enhanced can we approach the experience level of Web2.

Speaking of the application layer, the next generation of applications will inevitably develop alongside the improvement of infrastructure. For example, looking at the evolution of Uniswap: from V1 to V4, each upgrade has adapted to new infrastructure capabilities, considering performance optimization, multi-Layer2 deployment, cross-application calls, and automation features.

I believe the altcoin season will definitely come, usually accompanied by:

• Innovative gameplay mechanisms.
• New liquidity models.
• New monetization methods.
• Broader user participation.

Todd:

The key to this question lies in how we define "altcoin." This definition has undergone significant evolution over the past few bull markets:

• 2013: Modifying Bitcoin's code and changing the name counted as an altcoin.
• 2017: New public chain projects, even if they haven't launched yet.
• 2021: DeFi projects and NFT projects were all considered altcoins.
• 2024: New forms are emerging, including AI agent projects, blue-chip meme coins, and PPB (Protocol-owned Bots).

In fact, if we follow the new definition, the altcoin season has already quietly begun. It's like the sands of time washing away the old; each bull market will see new altcoin projects replace the old ones, capturing attention and funds. Investors need to accept this evolution rather than cling to past perceptions.

Kevin:

I completely agree with Todd's viewpoint. The current cryptocurrency market has become more segmented and mature, and we should analyze it by different sectors, just like we do in traditional financial markets:

• AI-related projects.
• NFT sector.
• Exchange tokens.
• Public chain ecosystems.
• DeFi projects.

Using the unified term "altcoin" to describe these projects is no longer appropriate. Each subfield has its unique development trajectory and valuation logic.

NingNing:

I would like to analyze from two core dimensions:

1. Cycle Misalignment:

• The current monetary cycle has been delayed by about a year compared to expectations.
• This directly affects the funding cycle of the entire financial market.
• We need to add this time difference to traditional analyses.

1. Necessary Conditions for Altcoin Season:

• Maturity of Technological Innovation: AI agents may have significant breakthroughs within a year, and it is expected that many applications will be reconstructed in an AI manner by 2025, bringing new user demands and use cases.
• Funding Environment: Currently, US Treasury yields are close to 4.6%, nearing the historical high of 5%. In such a high-yield environment, it is difficult to expect hot money to flood into the cryptocurrency market; we need to wait for a substantial shift in monetary policy.

Overall, I expect that the true comprehensive altcoin season will not arrive until the end of 2025 or the spring of 2026. This timing considers both the maturity cycle of technological innovation and the changes in the macro funding environment.

Ethereum Upgrades

PANews: In the first quarter of 2025, two upgrades will be launched for the execution layer and consensus layer. What changes will these upgrades bring to Ethereum? Additionally, when will the subsequent Fusaka upgrade be implemented, and what are its specific contents? Besides that, what other key points and new narrative directions should we pay attention to in Ethereum in 2025?

Pan Zhixiong:

Okay, I will mainly talk about the Prague upgrade and the Fusaka upgrade. The Prague upgrade is expected to go live in the first quarter of next year, with three important improvements:

• First is EIP-7251, which allows a single validator to hold up to 2048 Ethereum instead of having to spread them across multiple nodes. This can reduce network redundancy and improve efficiency while introducing a partial withdrawal mechanism.
• Second is EIP-7702, which is a new form of account abstraction. It allows existing EOA wallets to mount new contract logic, lowering the barrier for users to use smart contract wallets.
• Third is EIP-7691, which targets the blob ecosystem. It increases block data capacity and optimizes the pricing mechanism, which may lower Layer 2 gas fees, although this could impact Ethereum's deflationary nature.
• As for the Fusaka upgrade, it is expected to be implemented in 2026 and mainly includes two important contents: EOF (Ethereum Object Format) and PDAS (Data Availability Sampling). EOF is a significant upgrade to the Ethereum Virtual Machine, while PDAS is a key step in implementing DA technology, preparing for future sharding scalability.

Todd:

I want to discuss the Prague upgrade from several aspects. First is the timeline issue. Although it was originally planned for the end of 2024, based on current progress, it may be delayed until February or March of 2025. We have just completed the fifth version of testing, and according to Ethereum's consistent rigorous approach, it will need to go through at least the 10th or 12th version of testing, followed by validation on private and public testnets, so conservatively, it may not be until March of next year.

As a blockchain purist, I particularly appreciate the philosophy behind this upgrade. Let me explain why:

First, the core value of blockchain lies in decentralization, which means there need to be enough nodes. Each node acts as a backup of the ledger; if there are tens of thousands or even hundreds of thousands of backups globally, the network becomes truly unbreakable. This is the essential meaning of blockchain.

However, some public chains in the market, in pursuit of so-called "performance," have taken another path:

• They choose to limit the number of nodes.
• They set extremely high hardware requirements for nodes.
• They require the use of expensive servers.
• They demand significant bandwidth and high-performance CPUs.

This approach results in only large cloud service providers like AWS, Huawei Cloud, and Alibaba Cloud being able to meet the requirements. On the surface, this indeed brings better performance, but the issues are:

• Over-reliance on these centralized cloud service providers.
• If these data centers encounter problems, the entire blockchain network may be affected.
• This situation has occurred multiple times in the past year, with some chains experiencing downtime or outages.

In contrast, the direction of the Prague upgrade is commendable. It has made two important improvements:

Significantly reducing the storage burden on nodes:

• Removed ancient historical state data.
• Retained only necessary recent transaction data.
• Reduced hard drive requirements from several TB to possibly just 100GB.
• Allowed ordinary home PCs to run nodes.

Optimizing the staking mechanism:

• Increased the staking limit for a single validator from 32 Ethereum to 2048 Ethereum.
• Solved the congestion issue in the node entry and exit queue.
• Previously, to stake 3200 Ethereum, it required creating 100 nodes.
• Now, only two nodes are sufficient.
• Greatly lowered the participation threshold, making it easier for ordinary users to participate.

What moves me the most is that even as Ethereum has developed to its current scale, it has not abandoned its original ideals. It has not chosen the "data center chain" route in pursuit of performance but has insisted on:

• Continuously lowering the participation threshold.
• Pursuing true decentralization.
• Allowing ordinary users to participate in the network using home computers.
• Expanding the number of nodes without compromising performance.

Although these updates are often delayed and attract some criticism, I completely understand. This is an extremely complex balance:

• Maintaining or improving performance.
• Allowing more nodes to join.
• Ensuring that home PCs can also run nodes.

This requires repeated argumentation and discussion to find the optimal solution. While these technical upgrades may not directly impact coin prices, the commitment to the ideal of making the blockchain ledger verifiable by more people is truly admirable.

NingNing:

Every time Ethereum's underlying protocol is upgraded, it brings structural changes to the application layer. For example, the Shanghai upgrade led to the prosperity of LST, and the Cancun upgrade promoted the development of L2. I believe that the Prague upgrade and the Fusaka upgrade may facilitate the development of DEX based on account abstraction, as the new version reduces the gas costs of creating account abstraction addresses.

Additionally, the optimization of the blob pricing mechanism may better reflect L2 demand, impacting Ethereum's token economics. As for PDAs, although the modular narrative has shifted, its specific impact on the industry still needs further observation.

2025 Predictions

PANews: What do you all think about the market changes in 2025? Will this round of bull-bear transition happen in 2025?

Pan Zhixiong:

From a macro and policy perspective, there are indeed many favorable factors that have not yet materialized, such as policy adjustments after Trump's return to power. Another important factor is Bitcoin breaking the $100,000 mark, which is a milestone psychological price point. Compared to the past, this time maintaining the historical high has been quite persistent, indicating that the market has undergone sufficient turnover. For traditional capital, this price point may represent a new starting point, with significant room for growth.

Todd:

First, I want to state that this is not financial advice. For 2025, I am most looking forward to three points:

• The loosening of staking for Ethereum ETFs, which will bring more incremental funds.
• The involvement of the Trump family in the Ethereum DeFi space may lead to new developments.
• The introduction of RWA (real-world assets) may become a new growth engine and narrative.

Kevin:

Although it's a light topic, we are all cautious when it comes to compliance issues. I agree with Professor Pan's viewpoint that the favorable factors related to Trump are still ongoing. However, I would like to suggest thinking from another angle: rather than predicting the peak, consider where the lowest point will be next year. Just like this time last year when I predicted it might be the last time we see Bitcoin at $30,000, it indeed turned out to be so. So will next year be the last time we see $60,000, $80,000, or $90,000? This relates to everyone's investment strategy and risk tolerance.

NingNing:

Predictions are mainly for entertainment purposes; even the most advanced AI models find it difficult to predict accurately. Personally, I believe that 2025 may not be much different from 2024, and there won't be a super bull market, but rather a continuation of seasonal trends. I suggest focusing on the spring and autumn markets. While there may not be a significant altcoin bull market, there will be alpha opportunities in sector rotation. I will pay attention to projects in new narrative directions such as chain abstraction, AI agents, consumer chains, and PayFi.

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