Ethereum has long been the cradle of innovation in the crypto ecosystem. From the 2017 ICO boom to DeFi Summer in 2020, and the NFT and Play-to-Earn waves of 2021–2022, nearly every major breakthrough originated on Ethereum’s Layer 1. Yet today, the narrative has shifted. Despite maintaining dominance in total value locked (TVL), Ethereum’s L1 appears increasingly stagnant—both in user activity and new application development. Meanwhile, networks like Solana, Base, and emerging chains such as Monad and MegaETH are capturing momentum in the primary market.
This article explores Ethereum’s current “stagnation” not from a bearish or FUD-driven stance, but through the lens of early-stage innovation and venture capital trends—where the next wave of crypto applications is being built, funded, and incubated.
The Shift in Primary Market Sentiment
Over the past two years, conversations with over 1,000 early-stage projects reveal a clear trend: the center of gravity for innovation is moving away from Ethereum L1.
In 2023, Ethereum still held strong appeal in the primary market, especially with the rise of EigenLayer and the broader restaking and liquid restaking token (LRT) narrative. Projects building infrastructure (Infra) on or for Ethereum were well-funded and highly anticipated.
But by 2024, investor appetite changed dramatically. The market grew skeptical of yet another generic rollup, ZK-proof layer, or modular blockchain component. The so-called “ghost chain” phenomenon—where chains launch with massive hype but little real usage—sparked widespread fatigue.
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At the same time, Vitalik Buterin’s public statements evolved. In his August 2024 piece “Ethereum’s Next Decade,” he suggested that “we already have or will soon have the tools to build optimal applications in every domain where Ethereum makes sense.” This subtle but significant shift signaled a maturation—or perhaps a plateau—in Ethereum’s infrastructure ambitions.
Three key events around mid-2024 marked a turning point:
- A high-profile AI infrastructure project raised nearly $10M in seed funding.
- Matr1x, an app with over 250 million downloads, launched with a modest FDV of just over $100M.
- Vitalik’s evolving stance on Ethereum’s future.
Together, these events signaled the peak of infrastructure hype and the beginning of a slow but steady resurgence in application-layer innovation.
Where Are New Applications Being Built?
The next major crypto breakthrough could come from any number of sectors: AI, payments (PayFi), prediction markets, DePIN, gaming, or RWA. But crucially, where these innovations are emerging tells us a lot about where value is being created—and captured.
Based on current primary market activity, here’s a snapshot of where new projects are clustering:
- Prediction & Betting Markets: TON, Solana, Monad
- AI Applications: Solana, Base, Monad
- DePIN: Solana, MegaETH, Monad
- DeFi Innovations: Arbitrum, Berachain, MegaETH, Monad
- PayFi (Payment + DeFi): TON, Solana, Monad, MegaETH
- Gaming: Sui, Ronin, Immutable X
- RWA (Real-World Assets): Ethereum, Solana
One pattern stands out: very few new application-layer projects are choosing to build directly on Ethereum L1. Even when they do, it's often limited to RWA-related use cases.
Instead, the action is happening elsewhere:
- Solana leads in AI and PayFi with fast execution and low fees.
- Base has become a hub for consumer-facing apps and AI-agent ecosystems.
- Monad and MegaETH—though still pre-mainnet—are attracting strong developer interest due to high throughput and Ethereum compatibility.
- Arbitrum remains a leader among L2s for DeFi innovation.
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Yet here lies the paradox: even if Arbitrum or Base launches a breakout app with millions of users, Ethereum L1 captures minimal direct value from it. Under the current architecture, L1 earns only gas fees from data availability and settlement—fees that remain low due to rollup batching.
Can Ethereum L1 Still Capture Value?
Ethereum’s role is increasingly seen as a settlement and data availability layer—a secure back-end for L2s. While this ensures security and decentralization, it raises a critical question: Can Ethereum remain culturally and economically dominant if most innovation and user activity happen elsewhere?
Historically, Ethereum’s price surges have been fueled by on-L1 application booms:
- 2017: ICOs on Ethereum
- 2020: DeFi protocols like Uniswap and Aave
- 2021: NFTs like CryptoPunks and Bored Apes
Today? The top applications on Ethereum L1 haven’t changed much since 2021. Most new users are on L2s. Gas prices remain low. And while TVL is high, it's largely inert—locked in legacy protocols.
Compare this to Solana, where:
- Pump.fun enables viral meme coin launches
- AI memecoins like $GOAT and $ACT are driving engagement
- Real usage spikes during retail-driven events
Solana may not surpass Ethereum in total value locked yet—but it’s winning the battle for developer mindshare and user attention.
The Most Promising Frontiers: AI & PayFi
Two sectors stand out as potential catalysts for mass adoption: AI + blockchain and PayFi.
AI on Blockchain
Solana and Base are leading here:
- Base recently executed the first AI-to-AI payment on-chain.
- It launched an open-source framework for creating autonomous AI agents with built-in wallets and optional Twitter integration—in under three minutes.
- On Solana, AI isn’t just utility—it’s culture. Projects like $GOAT aren’t mere memes; they represent a new paradigm of community-driven AI agents.
These aren’t speculative side projects—they’re early signs of a decentralized AI economy.
PayFi: The Return to Crypto’s Roots
PayFi—the fusion of payments and DeFi—is arguably the most inevitable use case for crypto. After all, Bitcoin was created as peer-to-peer electronic cash.
Today’s race is between:
- Established players: TON and Solana
- Emerging contenders: Monad and MegaETH
Even Bitcoin is re-entering the conversation via Lightning Network-based PayFi projects.
But again, Ethereum L1 is largely absent from this movement—despite its strong DeFi foundation.
FAQs: Addressing Key Questions
Q: Is Ethereum losing relevance?
A: Not yet. Ethereum remains the most secure, decentralized, and widely adopted smart contract platform. Its ecosystem depth—especially in DeFi and RWA—is unmatched. However, its influence over new innovation is waning.
Q: Can L2 success still benefit ETH?
A: Indirectly. Increased L2 activity boosts demand for settlement and DA services. But unless Ethereum evolves its fee capture model (e.g., through shared fees or sequencer revenue sharing), direct economic benefits will remain limited.
Q: Why aren’t more apps building on ETH L1?
A: High latency and cost. Ethereum L1 can’t support mass-market apps requiring fast, cheap transactions. Most developers opt for L2s or alternative L1s that offer better UX.
Q: Could Ethereum flip Solana in 2025?
A: It depends on innovation velocity. If Ethereum accelerates upgrades like proto-danksharding or introduces new value accrual mechanisms for L1, it could regain momentum. Otherwise, Solana’s lead in consumer apps may widen.
Q: What would it take for ETH to reach $10K?
A: A new on-L1 application boom—something comparable to DeFi Summer or NFTs. RWA alone may not be enough. The market needs proof that Ethereum L1 can still be a platform for cultural and technological breakthroughs.
The Path Forward
Ethereum doesn’t need to “beat” Solana or Monad to succeed—but it does need to reignite innovation on its own layer.
Potential paths include:
- Incentivizing experimental dApps on L1 via grants or fee subsidies
- Exploring novel consensus or scaling models that increase throughput without sacrificing decentralization
- Rethinking how value flows back to L1 from L2s
Ultimately, this isn’t just a technical challenge—it’s a philosophical one. Can Ethereum remain the heart of crypto culture if most excitement happens elsewhere?
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The answer will shape not only Ethereum’s future but the entire trajectory of web3.
Core Keywords:
Ethereum, Solana, Layer 1 innovation, value capture, AI blockchain applications, PayFi, primary market trends