Is 2025 ETH dead?

Written by: danny

The year 2025 is undoubtedly filled with contradictions and controversies for Ethereum. Despite the involvement of big influencers, various DATs, numerous technical upgrades, and hacker promotions, the performance in the secondary market has been disappointing: Ethereum finds itself in an “awkward” middle ground: in terms of asset attributes, it seems to lack the pure commodity attributes and safe-haven consensus of Bitcoin as “digital gold”; in terms of technical performance and fee capture, it faces fierce competition from high-performance chains like Solana and Hyperliquid, which seem more in line with investor preferences and valuation models regarding throughput and fee capture. Furthermore, the Dencun upgrade in 2024 did not restore Ethereum's former glory, but rather became a nightmare that consumed narratives.

This perception of being “neither here nor there” has sparked the soul-searching question: Does Ethereum still have a future? What category does it belong to? Does it possess a clear and sustainable business model?

After the Fusaka upgrade, can Ethereum redeem itself?

Introduction: Two “Walled” Utopian Experiments 60 Years Apart

I believe many people would never expect that Singapore, known for its strict laws, actually had its own 'utopian' dream in its early years? In fact, Lee Kuan Yew once fantasized about using 'love' to reform prisoners, but reality gave him a harsh slap in the face.

The 1950s in Singapore was a time when secret societies (gangs) were rampant. According to statistics, there were over 300 active secret society groups at the time, involving more than 50,000 people (accounting for 6% of the resident population at that time), essentially penetrating various sectors of Singapore. This not only brought many issues to social order but also affected economic development. Then-Prime Minister Lee Kuan Yew of the People's Action Party decided to take drastic measures and enacted the “Temporary Provisions for Criminal Law” (also known as Bill 55), which essentially granted the police the authority to detain suspected individuals who were deemed to pose a threat to social security for extended periods without trial.

The effect of this plan on the adjustment of social order can be described as immediate, but for prison management, it is a nightmare. Due to the sudden increase in numerous suspects/inmates within a short period, Changi Prison was practically overcrowded, almost reaching the brink of collapse.

Just as the human rights advocates were in a heated debate with the law enforcement authorities, the then leader of the Workers' Party, Devan Nair, proposed a “utopian prison model,” which is a hybrid model of prison + community + farm, without handcuffs, shackles, high walls, or heavy guards. The aim is to allow prisoners to reform and reintegrate into society through collective labor and community trust. Nair believed that high walls and oppression would only provoke the worst in human nature, and that trust and freedom are essential for reshaping one's character.

This seemingly crazy experimental proposal was surprisingly passed in 1960 after intense debates, and the location was set on Pulau Senang, a small island less than 1 square kilometer located to the south of Singapore Island, surrounded by turbulent waters to prevent prisoners from escaping. At that time, the warden of Pulau Senang, Daniel Dutton, firmly believed in the inherent goodness of human nature and thought that as long as trust and dignified labor were provided, criminals could redeem themselves in a “wall-less prison.” Therefore, there were no walls on the island, no barbed wire, and even the guards were not equipped with guns.

At that time, Happy Island could be described as desolate, but with the hard work of the first and second batches of inmates, Happy Island began to take shape. In addition to a dining hall, dormitories, and warehouses, it also had running water and electricity. To outsiders, it looked more like a large community than a prison. Everyone on Happy Island was required to work and participate in the construction, including the prison guards (Dutton himself lived and ate with the inmates). The working hours were from 8 AM to 5 PM, and after 5 PM, it was free time, with weekends off. Just as Nair hypothesized, the recidivism rate of inmates serving in such a community environment was only 5% after “release.” This “good story” even attracted coverage from Western media and visits from a United Nations inspection team, being hailed as a “miracle in the history of human rehabilitation.”

Just when Dutton thought everything was looking up, little did he know that “greed” and “resentment” were quietly brewing in the community of Happy Island. Some prisoners complained that the work was too hard? Some complained about why it wasn't them who got released early? Some complained about the unequal distribution of labor, always doing the hardest jobs but receiving fewer credits? This sentiment gradually spread among the prisoners. The trigger was a weekend work incident at the docks in July 1963, when several carpenters refused to work because it was the weekend. In a fit of anger, Dutton sent the striking prisoners back to Changi Prison. This incident pushed the feelings of discontent to a peak.

On July 12, 1963, black smoke rose from the originally peaceful Sentosa Island. After receiving their work tools (shovels, machetes, hoes) in the morning as usual, the prisoners launched an indiscriminate attack on the guarding prison officers. Armed with hoes and parangs, the inmates revolted, killing Dutton, who firmly believed they would reform. They burned down the houses and dining halls they had built with their own hands, along with their hopes of reintegrating into society and the Singapore government's obsession with the inherent goodness of humanity.

This island, known as “Anle”, was originally a globally renowned sociological experiment site. Here, hundreds of the most ruthless gang members transferred from Changi Prison were given unprecedented freedom—however, on this day, idealism turned to ashes in the fire.

In March 2024, Ethereum also launched its own “Paradise Island Experiment” - the Dencun upgrade (EIP-4844).

Core developers have dismantled the expensive “economic walls” (Gas fees) between L1 and L2, much like Dutton did in the past. They hold a grand vision centered around “Rollups,” believing that as long as L2 (Layer 2) is provided with nearly free Blob data space, L2 will reciprocate the mainnet through a prosperous ecosystem, constructing a mutually beneficial utopia.

But history always follows the same rhyme. Just like the prisoners of Alcatraz chose rebellion instead of gratitude, the L2 of 2025 also chose not to give back, but instead launched a silent “economic plunder” against L1.

Chapter One: The Origin of “Awkwardness”: Identity Loss in 2025

1.1 The dilemma of being neither gold nor tech stocks

For much of 2025, Ethereum's positioning in the capital markets appears particularly ambiguous. Investors tend to categorize crypto assets into two extremes: on one end as a “digital commodity” (like BTC) that serves as a store of value, and on the other end as a “tech stock” (like Solana) with high growth potential that monetizes through user traffic. Ethereum once attempted to occupy both ends – being both “Ultra Sound Money” and a “world computer.”

However, the market environment in 2025 ruthlessly stripped away the dividends of this dual narrative.

The awkwardness of being a commodity: Although ETH plays a core collateral role in DeFi, the dynamic changes in its supply (the repeated switch between inflation and deflation) and the existence of the Staking mechanism make it difficult to be simply defined as “digital gold” like BTC. The fixed total supply and energy anchoring of BTC make its commodity properties rock solid, while the complexity of Ethereum makes it appear vague in the eyes of conservative institutions.

The awkwardness of being a tech stock: If considered as a technology platform, its core indicator—revenue—saw a disastrous decline in the first three quarters of 2025. Data from August showed that despite ETH prices briefly approaching historical highs, network protocol revenue plummeted by 75% year-on-year, totaling only $39.2 million. For traditional investors accustomed to valuing companies through price-to-earnings ratios or discounted cash flow models, this is a signal of a business model collapse.

1.2 The “sandwich layer” effect in the competitive landscape

In terms of competition, Ethereum has also been subjected to a two-way squeeze.

Upward Pressure: The continuous inflow of BTC ETF and the narrative of sovereign nations' strategic reserves further solidify BTC's position as a macro asset. In contrast, although Ethereum ETF has been approved, the scale of capital inflow has never been on par with BTC, reflecting the mainstream capital's lag in recognizing its positioning as “digital oil.”

Downward Impact: Solana, with its unparalleled performance and low costs brought by its monolithic architecture, almost monopolized the growth of payments, DePIN, AI Agent, meme, and high-frequency consumer applications in 2025. Data shows that the circulation speed of stablecoins on the Solana chain and ecosystem revenue in certain months even surpassed that of the Ethereum mainnet. At the same time, Hyperliquid has also attracted numerous whale users and traders due to its leading position in the Perp dex, and the fee capture ability of HLP has even left ETH in its dust.

This state of being “neither here nor there” is precisely the breeding ground for the “awkward” rhetoric. The market can't help but roll its eyes: if the store of value is not as good as BTC, high-performance applications are not as good as Solana, and the fee capture ability is not as good as Hyperliquid, then where exactly is Ethereum's moat?

Chapter 2 Regulatory Tone: Legal Reconstruction of Digital Commodities

2.1 The Shift in Regulatory Philosophy of “Project Crypto”

On November 12, 2025, Paul Atkins, Chairman of the U.S. SEC, officially unveiled a regulatory reset plan called “Project Crypto” during a speech at the Federal Reserve Bank of Philadelphia. The core objective of this plan is to end years of “Regulation by Enforcement” and shift towards establishing a clear classification framework based on economic realities.

In this speech, Chairman Atkins clearly refuted the viewpoint that “once a security, always a security” (which is a slap in the face of his predecessor). He introduced the “Token Taxonomy” and pointed out that the attributes of digital assets are fluid and can change. A token may be sold as part of an Investment Contract during its initial issuance phase, but that does not mean that the asset itself is forever burdened with the shackles of a security. (Note: This logic is very important for Ethereum.)

The SEC believes that when the degree of decentralization of a network reaches a certain threshold, such that holders no longer rely on the “Essential Managerial Effort” of a centralized entity to derive profits, the asset is no longer subject to the jurisdiction of the Howey Test.

Ethereum has over 1.1 million validators and the most widely distributed node network globally, thus demonstrating that ETH does not fall under the category of securities.

2.2 Digital Asset Market Clearity Act (CLARITY Act)

In July 2025, the U.S. House of Representatives passed the “Digital Asset Market Clarification Act” (CLARITY Act). This bill legally rectified the identity of Ethereum.

Jurisdiction Delimitation: The bill clearly assigns assets “originating from decentralized blockchain protocols”—specifically referring to BTC and ETH in the text—to the jurisdiction of the Commodity Futures Trading Commission (CFTC).

Definition of digital commodities: The bill defines digital commodities as “any fungible digital asset that can be exclusively owned and transferred between individuals without reliance on intermediaries, and recorded on a cryptographically secure public distributed ledger.”

The role of banks: The bill allows banks to register as “digital commodity brokers”, providing customers with custody and trading services for ETH. This means that ETH on the bank's balance sheet will no longer be viewed as a high-risk, indefinite asset, but rather as a commodity asset similar to gold and foreign exchange.

2.3 Compatibility of Staking Rewards with Product Attributes

According to traditional securities law: Can an asset that generates interest still be called a “commodity”? Traditional commodities like crude oil or wheat do not generate income by simply being held, and often require payment of storage costs. Ethereum's staking mechanism makes it more like equity or bonds.

The regulatory framework of 2025 addresses this cognitive dissonance:

Asset Layer: The ETH token itself is a commodity. It serves as the Gas and security deposit for the network, possessing both utility value and exchange value.

Protocol Layer: Native protocol-level staking is regarded as a form of “labor” or “service provision.” Validators maintain network security by providing computational resources and capital lock-up, and the rewards they receive are compensation for this service, rather than passive investment returns.

Service Layer: This “service” only constitutes an investment contract when a centralized entity (such as an exchange) provides custodial staking services and commits to specific returns.

This dichotomy allows ETH to retain its “yield-bearing” characteristic while enjoying regulatory exemptions as a “commodity.” Institutional investors are beginning to view ETH as a “Productive Commodity”—possessing both the anti-inflation properties of a commodity and the yield characteristics similar to bonds. Fidelity noted in its report that this unique combination of attributes makes ETH an indispensable “internet bond” in investment portfolios.

Chapter 3 The Collapse and Reconstruction of Business Models: From Dencun to Fusaka

The identity issue has been resolved, and now comes the more acute economic question: Does ETH make money? Where does its cash flow come from? Where does it go?

With all due respect, the revenue cliff in the first three quarters of 2025 is a failed technical scaling plan, a fantasy of tech enthusiasts attempting to reshape the business environment and human nature through technology. The helpless community can only hope that the Fusaka upgrade in December can change the current predicament, but can it still?

3.1 The “Income Paradox” after the Dencun Upgrade

The Dencun upgrade in March 2024 introduced EIP-4844 (Blob transactions), aimed at reducing L2 transaction costs by providing inexpensive data storage space. Technically, this is a huge success — L2 gas fees dropped from several dollars to just a few cents, greatly promoting the prosperity of the L2 ecosystem. However, from an economic model perspective, this is a “disaster.”

The pricing mechanism of the Blob market was initially entirely based on supply and demand. Due to the reserved Blob space supply far exceeding the early demand of L2, the Base Fee of the Blob has remained at a very low level of 1 wei (i.e., 0.000000001 Gwei) for a long time.

This has led to L2 networks (such as Base, Arbitrum) charging users high gas fees, while the “rent” paid to Ethereum L1 is negligible. Data shows that Base can generate hundreds of thousands of dollars in revenue on certain days, but only pays a few dollars in fees to Ethereum.

Due to the large migration of transactions from L1 execution layer to L2, and L2 not destroying enough ETH through Blob, the destruction mechanism of EIP-1559 has become ineffective. In the third quarter of 2025, the annualized growth rate of Ethereum's supply rose to +0.22%, losing the narrative of a “deflationary asset.”

This situation of “L2 eating big meat while L1 drinks the northwest wind” is vividly referred to by the community as the “parasite” effect, which has directly led to deep skepticism from the outside world regarding the sustainability of Ethereum's business model.

3.2 Strategic Turning Point: Fusaka Upgrade (December 3, 2025)

Fortunately, in the face of doubts about the ETH business model, the “aloof” developer community of Ethereum did not “stick to ideals” and sit idly by. On December 3, 2025, the long-awaited Fusaka upgrade has finally arrived.

The core of this upgrade lies in “repairing” the value capture chain between L1 and L2. In simple terms, L2 needs to pay tribute to L1.

3.2.1 Core Fix: EIP-7918 (Binding Blob Base Fee to Execution Cost)

The most commercially significant proposal in the Fusaka upgrade is EIP-7918. This proposal fundamentally changes the pricing logic of Blobs.

EIP-7918 introduces a “floor price” mechanism - price increase. It stipulates that the base fee for a Blob can no longer fall indefinitely to 1 wei. Instead, the minimum price for a Blob will be linked to the Gas price of the L1 execution layer (specifically, 1/15.258 of the L1 Base Fee).

This means that as long as the Ethereum mainnet remains busy (for example, with new token launches, DeFi transactions, or NFT minting), the Gas Price for L1 will rise, which will automatically increase the “floor price” for L2 to purchase Blob space. L2 can no longer use Ethereum's security at nearly free prices.

After the upgrade activation, the base fee of Blob instantly skyrocketed by 15 million times (from 1 wei to the range of 0.01-0.5 Gwei). Although the cost of a single transaction remains low for L2 users (around 0.01 usd), this means a thousandfold increase in revenue for the Ethereum protocol. The prosperity of L2 is a direct driver of L1 revenue.

3.2.2 Supply Side Expansion: PeerDAS (EIP-7594)

In order to prevent price increases from stifling the development of L2, Fusaka has simultaneously introduced PeerDAS (Peer Data Availability Sampling).

PeerDAS allows nodes to verify data availability by randomly sampling a small portion of data shards instead of downloading the entire data block (Blob). This greatly reduces the bandwidth and storage pressure on nodes (approximately 85% reduction).

This technological breakthrough allows Ethereum to significantly increase the supply of Blobs. After the upgrade, the target number of Blobs per block will be gradually increased from 6 to 14 or even more.

By improving the minimum price limit through EIP-7918 and increasing the total sales volume through PeerDAS, Ethereum has successfully constructed a sales model of “simultaneous increase in quantity and price.”

3.3 Closed Loop of New Business Models

This is the post-Ethereum business model activated by Fusaka, which can be summarized as a “B2B tax model based on security services”: Upstream (L2 networks): Base, Optimism, Arbitrum, etc. act as “distributors”, responsible for capturing end users and handling high-frequency, low-value transactions.

Core Products (Blockchain Space): EthereumL1 sells two core products:

High-value execution space: Settlement proofs for L2, complex DeFi atomic transactions.

Large Capacity Data Space (Blob): Used for L2 storage of transaction historical data.

Through EIP-7918, L2 must pay “rent” that matches the economic value of these two resources. The majority of this rent (ETH) is destroyed, converting into value enhancement for all ETH holders; a small portion is paid to validators, forming staking rewards.

Positive feedback spiral:

The demand for Blob on L2 increases

Is there someone in the market to settle the bill? Yes, according to the famous analyst Teacher Yi's estimate, after the Fusaka upgrade, the ETH burn rate of Ethereum in 2026 is expected to increase by 8 times?!

Chapter 4 Valuation System: How to Price “Trust Items”?

After clarifying the business model, the next question is: how to value this new type of asset? Since Ethereum possesses attributes of commodity, capital asset, and currency, a single valuation model seems unable to express the greatness of “ETH”. In this regard, the elites on Wall Street have offered their opinions:

4.1 Discounted Cash Flow (DCF) Model: A Tech Stock Perspective

Although defined as a commodity, ETH has clear cash flows, allowing it to apply traditional DCF models.

In the Q1 2025 research report, 21 Shares used a three-stage growth model based on Ethereum's transaction fee revenue and burn mechanism for projection. Even under a conservative discount rate assumption (15.96%), the calculated fair value of ETH reached $3,998; while under a more optimistic assumption (discount rate of 11.02%), the fair value soared to $7,249.

The upgraded EIP-7918 mechanism of Fusaka provides solid support for the “future income growth rate” in the DCF model. Market analysis suggests that there is no longer a need to worry about income going to zero due to L2 siphoning, but rather, it is possible to linearly derive the base income of L1 based on the expected growth scale of L2.

4.2 Currency Premium Model: A Commodity Perspective

In addition to cash flow, Ethereum enjoys a portion of value that cannot be captured through DCF—currency premium. This is the value brought by being a settlement currency and collateral.

ETH is the core collateral of the DeFi ecosystem (with a TVL exceeding $100 billion). Whether it is for minting stablecoins (such as DAI), lending, or derivatives trading, ETH serves as the fundamental trust anchor.

The NFT market and Gas fees for L2 are priced in ETH.

With the locking of ETFs (reaching 27.6 billion dollars as of Q3 2025) and the accumulation of corporate treasuries (such as Bitmine holding 3.66 million ETH), the liquidity supply of ETH is becoming increasingly tight. This strained supply-demand relationship gives it a premium similar to gold.

4.3 “Trustware” Pricing

Consensys proposed the concept of “Trustware” in its 2025 report.

Ethereum does not sell simple computing power (which is what AWS does), but rather “decentralized, immutable finality.”

With the RWA on-chain, Ethereum L1 will shift from “processing transactions” to “protecting assets”. Its value capture will no longer rely solely on TPS, but rather on the scale of the assets it protects.

If Ethereum protects $10 trillion in assets globally, even if it only charges a 0.01% security tax per year, its market value must be large enough to withstand a 51% attack. This logic of a “security budget” correlates Ethereum's market value with the economic scale it supports.

Nothing is more convincing for the promotion of “trust pieces” than a hacker stealing funds and then converting the stolen money into ETH, without exception.

Chapter 5 Competitive Landscape: Modular Moat and the RWA Battlefield

5.1 Ethereum vs. Solana: The Divide Between Wholesale and Retail

The data from 2025 clearly shows the structural differentiation in the public chain market:

Solana is similar to Visa or Nasdaq, pursuing extreme TPS and low latency, suitable for high-frequency trading, payments, and consumer-grade applications (DePIN). Ethereum, on the other hand, has evolved into SWIFT or the Federal Reserve's settlement system (FedWire), as it does not aim to quickly process every single transaction for buying coffee, but rather focuses on processing “settlement packages” submitted by L2 networks that contain thousands of transactions.

This division of labor is an inevitable evolution of mature markets. High-value, low-frequency assets (such as tokenized government bonds and large-scale cross-border settlements) still prefer Ethereum due to its higher security and decentralization; while low-value, high-frequency transactions are shifting to Solana.

5.2 The Dominance of RWA

In the field of RWA, which is regarded as a future trillion-dollar market, Ethereum has demonstrated strong dominance. Despite the rapid growth of Solana, Ethereum remains the preferred foundation in benchmark projects such as BlackRock's BUIDL fund and Franklin Templeton's on-chain fund.

The selection logic of institutions is very clear; for assets worth hundreds of millions to even billions of dollars, the priority of security far outweighs speed. Ethereum, with a ten-year track record of validation and never having gone down, constitutes its deepest moat.

Has Ethereum lost its way? In 2025, it made a daring leap to the “base minting tax” model of the digital economy, but we don't know if this leap of faith will land in a haystack.