A new study commissioned by the Ethereum Foundation found that psychological perceptions of blockchain networks are just as important as other factors such as market prices and technical foundations.
The report, released under the name “Project Mirror,” was conducted by We3.co researchers Valeria Salazar and Jill Gunter. He interviewed more than 60 individuals between March and June this year, including EF, regulators, investors, traders, analysts and builders.
Research shows that the period between them was the long-standing “worst crisis” for Ethereum, as its gloomy price action saw it trade between $1,600 and $2,500, and was seen as the lowest in three years in April. Researchers described the downward trend of markets as a psychological breakpoint for many in the community, when other networks were increasing their highest prices and activity ever.
Project Mirror: After creating a smart contract, Ethereum lost its control
In a chart showing how community members viewed Ethereum while under pressure, the survey said the stagnation and uncertainty of price and uncertainty about the foundation’s leadership poses questioning the long-term competitiveness of the ecosystem.
When Ethereum was launched as the first smart contract platform, the ERC-20 standard allowed developers to create thousands of tokens for their Layer-1 chains. At the time, builders had limited options, so they had to deploy to Ethereum or at all.
All the major advances in cryptography found in decentralized exchanges, and even NFTs, were first constructed into ether. However, research shows that a surge in recruitment caused network congestion and increased transaction fees. Simple transfers have become more expensive, but complex distributed finance transactions cost hundreds of dollars.
The blockchain developers then decided to build a Layer 2 (L2) scaling solution, such as voluntary and optimism, that offers much cheaper and faster transactions embedded within Ethereum security.
Competing blockchains studied Ethereum’s limitations, and Solana focused on transaction speeds, while Avalanche highlighted the customizability that Ethereum is lagging behind.
Five perceived tension points in Ethereum
The study identified five issues that shaped people’s perceptions of Ethereum, finding that the most appropriate issue is public communication. Most of the community members interviewed said that Ethereum has become a “platform that has many meanings and no unified mental model.”
The developers were pleased with Ethereum’s technical talent and the strength of their virtual machines (EVMs), but admitted they were dissatisfied with the uncertainty surrounding the foundation’s leadership role. Some members identify Ethereum with the foundation itself or with the broader community of developers.
Without a clear definition, participants said that Ethereum felt like an abstract idea, not a product.
“We’re just a little bit between stories now. I don’t have a sense of what direction it will take,” a venture capital investor focused on Web3 told researchers.
ETH Prices have an impact on blockchain success
As mentioned in this study, the second issue mentioned is the market performance of ETH, characterized by a flat trading range, leading to many interpreting the ecosystem as stagnant. Even with continued technological advances, the lack of price growth was considered an evolutionary failure.
The surge in token prices on other networks amplified this perception. The study noted that the new ecosystem attracted capital, attention and developers through strong market performance. Ethereum lacks an explanation for why its price is not moving, so it seems reliable.
“Ethereum prices are important,” one decentralized finance app builder told researchers. “At the end of the day, if Ethereum currency is not running, it’s not a financially attractive place.”
The leader of a decentralized autonomous organization speculated that Ethereum “eats a really clean meal, but everyone eating junk is getting more buffs.”
Project Mirror also identified that the Ethereum base layer does not have a clear message about the layer that Layer 1 represents. Researchers said it was important for the ecosystem, but it was very “unmotivated.”
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