PlanB, a prominent Bitcoin analyst famous for the Stock-to-Flow (S2F) model, has recently expressed concerns about Ethereum due to the significant drop in ETH's price and dominance since the start of the year. This criticism questions Ethereum, the second-largest cryptocurrency by market cap, focusing on its fundamental mechanisms, particularly its shift from Proof of Work (PoW) to Proof of Stake (PoS).
The reason behind PlanB's labeling of Ethereum as "Centralized" and "Pre-Mined" stems from an older post by Vitalik Buterin from 2022. Buterin had criticized the Stock-to-Flow model for giving a false sense of certainty about Bitcoin's price. Taking advantage of this, PlanB derided Ethereum, highlighting its centralized structure, pre-mined supply, use of PoS over PoW, and the ability to alter its supply schedule.
PlanB's critique is shared by others. Despite Ethereum's move to PoS through "The Merge" significantly reducing its energy consumption, some experts feel this transition has undermined the network's long-term value. Meltem Demirors from Crucible Capital went as far as calling it a trillion-dollar mistake, suggesting that it diluted the core network and hindered GPU hardware innovation.
Apart from challenging PoS, PlanB also touched on the controversy surrounding Ethereum's pre-mine. The tokenomics of ETH show that developers pre-mined more than 72 million ETH in the early stages, constituting approximately 60% of the circulating supply. This disproportionate control by a select few could be alarming, especially given PoS where large holders wield more validation power.
Despite the criticisms, Ethereum continues to expand its role in real-world applications. For instance, analyst Danny Marques highlighted Ethereum's importance by mentioning that the network processed a vast number of stablecoin transactions in 2024, surpassing Visa. Additionally, Wise noted that Ethereum hosts 56% of real-world asset value, including stablecoins.
In response to ongoing critiques, Ethereum has been enhancing its performance and scalability. Co-founder Vitalik Buterin recently proposed replacing the Ethereum Virtual Machine (EVM) with RISC-V to improve smart contract performance and scalability while ensuring compatibility with existing contracts.