Ethereum's 10th Anniversary: Four Major Challenges of the Second Decade

Ethereum has undergone tremendous changes over the past decade. From its initial "experimental project", it has developed into a platform managing over $44 billion in Layer 2 locked value, becoming one of the infrastructures for global cryptocurrency ETFs. During these ten years, Ethereum has experienced significant events such as the DAO fork and the Merge upgrade, with each crisis becoming an opportunity for technological advancement.

However, as it enters its second decade, Ethereum faces more severe challenges. The four major issues of account abstraction, Layer 2 ecosystem, MEV problems, and global regulation hang over it like the sword of Damocles. With institutional funds pouring in through ETFs and ordinary users expecting a better interactive experience, Ethereum needs to find a new balance between technological ideals and real-world demands.

Account Abstraction: A Balance of Convenience and Security

In May 2025, a report of a user encountering a wallet theft sparked widespread attention. While using a certain wallet's "one-click upgrade account abstraction" feature, the user inadvertently authorized a malicious contract, resulting in the transfer of ETH worth 120,000 yuan. According to security company statistics, within just two weeks after the Pectra upgrade, over 100,000 wallets were stolen due to the EIP-7702 authorization vulnerability, with total losses reaching as high as $150 million.

The implementation of EIP-7702 allows ordinary user wallets to temporarily possess smart contract functionalities, supporting new features such as batch transactions and Gas fee payment. This theoretically addresses the long-standing user experience issues on Ethereum, simplifying complex operations into single-step processes. However, behind this convenience lies significant security risks.

Security experts point out that EIP-7702 breaks the fundamental assumption that "EOA cannot execute contract code," leading many old contracts that rely on tx.origin == msg.sender to face reentrancy attack risks. More seriously, hackers exploit users' curiosity about new features to lure them into authorizing malicious contracts. Data shows that novice users who are first exposed to account abstraction account for as much as 73% of the victims.

To address these challenges, the Ethereum community is advancing the "Smart Account Security Standards." The new standards require wallets to display the open-source status of delegated contracts and introduce a 72-hour cooling-off period. However, the real challenge lies in finding a balance between flexibility and security. Institutional users need complex permission management mechanisms, while ordinary users prefer operations that are simple and intuitive. As Vitalik stated, account abstraction is not the end point but a continuous game between "user sovereignty" and "security barriers."

Layer2 Ecosystem: The Split Concerns Behind Prosperity

Despite the total locked value of Layer 2 exceeding $52 billion in 2025, with daily transaction volumes reaching 40 million, users still need to frequently switch between different Rollups, experiencing it as if they are traversing multiple parallel universes.

The current Layer 2 ecosystem shows a polarized trend. In the Optimistic Rollup camp, certain platforms have become the developers' first choice due to their EVM compatibility, capturing 72% of the market share. The ZK-Rollup camp, on the other hand, leverages zero-knowledge proof technology to compress transaction confirmation times to 2 seconds, with transaction fees 60% lower than Optimistic Rollups, and is quickly catching up.

However, this prosperity hides many problems behind it:

1. Liquidity fragmentation: There are huge differences in liquidity between different platforms, and users need to recharge repeatedly.
2. Technical Fragmentation: Optimistic Rollup and ZK-Rollup each have their pros and cons, leaving developers in a dilemma over technical choices.
3. Centralized risk: Some platforms have key components controlled by a single entity, posing a single point of failure risk.

To address these issues, the industry has proposed solutions such as "superchains" and "ZK alliances", attempting to achieve cross-chain interoperability and proof recognition. However, the implementation of these solutions has not been smooth. As one analyst stated, whether the final form of Layer 2 can become "a seamless network" will directly affect whether Ethereum can support a user scale of 1 billion.

MEV: The Dilemma of Fairness and Efficiency

The MEV (Maximal Extractable Value) problem has become increasingly severe after Ethereum's transition to PoS. In the first quarter of 2025, the total MEV extraction from Ethereum reached $520 million, with DEX arbitrage and liquidation accounting for 73%. Ordinary users' transaction costs actually include a "hidden tax" of 15%-20% paid for this.

What is even more concerning is the trend of MEV centralization. Approximately 65% of block building rights are controlled by a few leading builders, which could result in Ethereum becoming a "high-frequency trading playground."

To address this challenge, the Ethereum community is advancing multiple solutions, including encrypted memory pools and MEV-Burn. The Proposer-Builder Separation (PBS) model is also considered to reduce the risk of single-point control. However, balancing fairness and efficiency among these solutions remains a challenge.

As a core developer stated, "MEV is not a bug, but an inevitable result of blockchain transparency. Our goal is not to eliminate MEV, but to ensure that the profits are more fairly distributed across the entire network."

Regulation and Financialization: The Game Between Compliance and Decentralization

With a massive influx of institutional funds, Ethereum is facing unprecedented regulatory pressure. In July 2025, the approved Ethereum ETF attracted $2.2 billion in net inflows, with the proportion of ETH held by institutions jumping from 5% to 18%. Meanwhile, regulatory policies around the world are also tightening.

The United States, the European Union, and Asia have adopted different strategies in cryptocurrency regulation, and these regulatory differences have given rise to a series of "regulatory arbitrage" activities. Certain DeFi protocols deploy different versions in different regions to comply with local regulatory requirements. This "fragmented compliance" not only increases the costs for developers but also undermines the vision of Ethereum as a global unified infrastructure.

The influx of institutional funds has increased liquidity, but it has also tightened the connection between Ethereum and traditional financial markets. The correlation between ETH prices and U.S. stocks has significantly risen, and the sensitivity to macroeconomic factors has also greatly increased. This change has led to a fundamental shift in Ethereum's "value capture mechanism."

At this critical moment, Ethereum needs to find a balance between "compliance innovation" and "decentralized principles." Certain regions may become ideal testing grounds that can connect with traditional financial systems while attracting global crypto enterprises.

Conclusion

The challenges faced by Ethereum in its second decade essentially continue the "decentralization, security, scalability" trilemma. Finding a balance among these seemingly contradictory goals will determine whether Ethereum can truly become a global infrastructure capable of supporting one billion users.

As Vitalik said, "We don't need a perfect blockchain, we just need a 'constantly evolving blockchain'." Perhaps the ultimate value of Ethereum lies not in solving all problems, but in proving that decentralized networks can continue to move forward amidst the tug-of-war between ideals and reality.

The curtain has already been raised on the second decade, and the answers will gradually emerge through every line of code, every upgrade, and the actual experiences of each user.