Ethereum 2025: A journey from an identity crisis to a new business model

Is Ethereum Still Having a Future? The Question Every Investor Asked in 2025

For most of 2025, Ethereum’s position in the capital markets was highly ambiguous. Located in the “dead zone of the middle,” ETH could not compete with Bitcoin as “digital gold,” nor did it match Solana in terms of technological performance. At the same time, protocol revenues in the first three quarters plummeted—by 75% year-over-year, to just $39.2 million. This situation raised a fundamental question: to which category does Ethereum truly belong? Does it have a sustainable business model? Is this the beginning of the end, or a moment of transformation?

A Lesson from History: When Utopian Ideals Meet Reality

Before understanding Ethereum’s challenges in 2025, it’s worth going back to the 1950s. In Singapore, known for its strict laws, People’s Action Party leader Lee Kuan Yew faced a crisis: over 300 gangs operated in the area, with membership exceeding 50,000—about 6% of the population at the time. Society was on the brink of chaos.

The government introduced drastic measures. However, when overcrowded prisons became unmanageable, a bold proposal emerged: prisons without walls, handcuffs, or armed guards. Pulau Senang was to become an “experiment in trust”—a place where rehabilitation through work and community would replace violence and isolation. Prison warden Daniel Dutton believed in the goodness of human nature. For a time, the experiment yielded results—recidivism was only 5%. The world marveled at this “miracle.”

But on July 12, 1963, idealism was burned in the fire. Prisoners, armed with machetes and shovels, rebelled. They burned down their self-built houses and dining halls. Dutton, who believed in the possibility of redemption, fell victim to the uprising. History has taught us: even the noblest ideals can be shattered by human nature.

Ethereum’s Similar Path: from Dencun to Fusaki

In March 2024, Ethereum began its “Pulau Senang experiment”—the Dencun upgrade with the implementation of EIP-4844. Leading developers, like Dutton before, decided to tear down the economic wall between L1 and L2. They introduced a “rollup-centric” vision—when Layer 2 receives almost free Blob data space, the ecosystem will thrive, and the main network will reap the benefits of this growth.

History, however, tends to repeat itself. Instead of gratitude, L2s conducted at most a “silent transfer of value” to L1—L2 protocols collected high fees from users but paid Ethereum just a few cents for data storage. Base generated tens of thousands of dollars in daily revenue but transferred amounts to L1 that could be counted on fingers.

Ethereum’s revenues turned out to be a disaster. The EIP-1559 burn mechanism, instead of causing deflation, delivered inflation—the annual supply growth rate increased to +0.22%. The narrative of “deflationary assets” fell apart.

A Turning Point: the Fusaki Update in December 2025

Fortunately, the Ethereum developer community did not remain passive in the face of this challenge. On December 3, 2025, the long-awaited Fusaki update arrived—not as an escape, but as a structural solution.

EIP-7918: L2 must pay tribute to L1

A key proposal is linking the minimum Blob price to the execution layer Gas price of L1—specifically 1/15.258 of the base L1 fee. This means L2s can no longer use Ethereum’s security for pennies. When the main network is busy (new emissions, DeFi transactions, NFT minting), the Gas price rises, and with it, the “rent” for L2.

The effect was immediate: the base Blob fee increased 15 million times—from 1 wei to a range of 0.01-0.5 Gwei. Although transaction costs for L2 users remained low (about $0.01), for the Ethereum protocol, this meant a rise in revenues by orders of magnitude.

PeerDAS (EIP-7594): capacity increase

To prevent stagnation of L2 growth, Fusaki also introduces PeerDAS—a technology enabling nodes to verify data availability through random sampling of fragments instead of downloading entire blocks. This reduces bandwidth requirements by about 85%.

The target Blob count per block will increase gradually from 6 to 14 and beyond. Ethereum has built a “growing quantity and price” model—raising the minimum price while increasing volume.

New Business Model: B2B Tax on Security Services

This is what Ethereum looks like after Fusaki:

Upstream (Layer 2 networks): Base, Optimism, Arbitrum—“distributors” serving end-users and high-frequency, low-value transactions.

Main product (L1): Ethereum sells two key resources:

• Execution space for complex L2 settlements and DeFi transactions
• Data space (Blob) for storing transaction history

L2s must pay fees corresponding to the economic value of these resources. Most is burned, some goes to validators.

Growth spiral: L2 growth → increased Blob demand → higher ETH burn → deflation → stronger security → attraction of high-value assets.

Analyst Yi predicts that ETH burn rate in 2026 could increase eightfold.

How to Value Ethereum?

Ethereum combines features of commodities, capital assets, and currencies—a single model does not fully capture the picture:

DCF Model (perspective of tech stocks): 21Shares in its Q1 2025 report, based on transaction fee revenues and burn mechanisms, valued ETH at $3,998 under conservative assumptions, and $7,249 under more optimistic scenarios.

Currency premium (commodity perspective): ETH is a key DeFi collateral (TVL over $10 billion), a foundation for stablecoin issuance and loans. With the ETF block ($2.76 billion by Q3 2025) and corporate accumulation, its liquidity becomes increasingly constrained.

“Trust software” (Trustware): Ethereum does not sell raw computing power but decentralized, immutable finality. In the era of RWA tokenization, its ability to capture value depends on the size of protected assets. If it secures assets worth $10 trillion and charges an annual security tax of 0.01%, its market cap must match the security budget—growing with the scale of the economy it supports.

Market Segmentation: Ethereum vs. Solana

Data from 2025 shows a natural division of labor in the public chain market:

Solana—like Visa or Nasdaq—aims for maximum TPS and low latency, ideal for high-frequency trading, payments, and consumer apps (DePIN).

Ethereum—like SWIFT or FedWire—settles “settlement packets” from L2 containing thousands of transactions. High-value, low-frequency assets prefer Ethereum for higher security and decentralization.

Ethereum’s Dominance in the RWA Sector

In the RWA space, considered the future trillion-dollar market, Ethereum shows enormous dominance. The BlackRock BUIDL fund and Franklin Templeton’s on-chain funds are positioned on Ethereum. For assets worth hundreds of millions or billions of dollars, security takes precedence over speed. Ethereum’s ten-year track record without failures is its deepest competitive moat.

Regulatory Vindication: Does the World Finally Understand Ethereum?

In November 2025, SEC Chairman Paul Atkins announced the “Project Crypto” plan—ending “Regulation by Enforcement” and moving toward clear classification frameworks. In July of that year, the US House of Representatives passed the “Digital Asset Market Clarity Act” (CLARITY Act), which explicitly places ETH and BTC under CFTC jurisdiction as “mass digital commodities.”

The CLARITY Act defines mass digital commodities as “any fungible digital asset that can be solely owned and transferred between persons without intermediaries, in a cryptographically secured public distributed ledger.” The law allows banks to register as digital commodity brokers. ETH on bank balance sheets will no longer be considered high-risk assets but commodities—similar to gold or foreign currencies.

A key distinction: native staking at the Ethereum protocol level is considered “work”—validators provide security and are compensated for services, not passive income. Only centralized staking custodial services constitute investment instruments.

Summary: Ethereum Emerges from Crisis

In 2025, Ethereum underwent a transformation: from lost aspirations as both “gold” and “tech giant” to a decentralized settlement system with a clear economy.

Surprisingly, regulation rather than technology ultimately clarified its position. Fusaki fixed the business model. RWA created a new growth space.

Will Ethereum finally end up on the sidelines? All signs point to yes this time.