Why Hoskinson Believes Ethereum Will Fail
According to Hoskinson, the core issue lies in the misaligned incentives between Ethereum’s main chain (L1) and its rapidly growing constellation of layer 2 solutions. “To make Ethereum better, they’ve had to embrace layer twos,” he said. “The layer twos are not strong allies… they’re partners of necessity.”
He stressed that many rollup teams “don’t particularly care if they’re attached to Solana or they become a layer one,” meaning they can easily migrate or go multi-chain if better economics or user growth exist elsewhere. New applications and liquidity are already forming outside of the Ethereum ecosystem, weakening its traditional network effects.
“So if they’re gobbling up the transaction volume and gobbling up the users and they’re gobbling up the token appreciation, if there’s a more attractive target, they could simply migrate or go multi-chain,” Hoskinson explained, citing LayerZero and Espresso as examples of this trend.
External Forces Threatening Ethereum
Hoskinson identified two major external forces that he believes will accelerate Ethereum’s decline. First is the rise of Bitcoin-based decentralized finance (DeFi), which he described as a “sleeping giant” capable of attracting “hundreds of billions” in total value locked once primitives such as stablecoins, decentralized exchanges, and lending protocols are developed with strong security.
“When Bitcoin wakes up… its TVL will be… larger than the market cap of Ethereum,” he predicted, adding that sovereign wealth funds and large asset managers would likely prefer to build around Bitcoin exposure rather than Ethereum.
The second external factor, he said, is the entry of big technology platforms and traditional financial institutions, which will bring their own infrastructure. “Microsoft… Google… Amazon… have no incentive to go boost Ethereum or deploy on Ethereum,” Hoskinson said, pointing out that these entities would likely create systems adjacent to public chains without relying economically on Ethereum’s base layer.
Technological Shifts Away From Ethereum’s Model
Hoskinson also highlighted how technological progress could further erode Ethereum’s relevance. With the rise of zero-knowledge proofs and proof-carrying code, he argued, more computation will be executed off-chain—in secure enclaves, on devices, or through multi-party computation systems. The blockchain would only verify succinct proofs instead of hosting heavy computation.
“Why… spend billions of dollars a year maintaining this very weak computer that’s shared and replicated,” Hoskinson asked, “when you can turn it into a distributed problem that runs everywhere?”
Drawing a parallel with Microsoft’s pivot from Windows dominance to its Azure cloud business after missing the mobile revolution, Hoskinson suggested that Ethereum may also need to “pivot to a new McGuffin” in order to remain relevant in the long run.
Conclusion
Hoskinson’s sharp critique underscores the growing debate around Ethereum’s future as competitors like Cardano and the emerging Bitcoin DeFi ecosystem gain momentum. While Ethereum continues to innovate, its reliance on external scaling solutions and the rise of powerful new players could fundamentally challenge its long-term dominance.
