Ethereum in 2025: From Identity Crisis to Economic Revival

Introduction: When Narrative Fails, the Business Model Wins

Entering 2025 with Ethereum means confronting a fundamental question that the market is increasingly asking: what is the true purpose of this blockchain? Throughout the year, despite support from prestigious influencers, significant technical upgrades, and substantial investments, Ethereum’s performance has not convinced traditional asset managers. The project has found itself trapped in a gray area: it lacks the simple narrative of Bitcoin as a global store of value, nor the operational speed of Solana for high-throughput applications. At the same time, chains like Hyperliquid have demonstrated models capturing higher fees in the derivatives segment. This ambiguity has raised crucial questions: Does Ethereum truly represent a sustainable asset? What category should it occupy in institutional portfolios? Does it have a clear and replicable economic model? And most importantly, can the December Fusaka upgrade turn this uncertainty into solidity?

Chapter 1: The Classification Dilemma in 2025

The Pressure of Forked Positioning

Throughout most of 2025, the crypto community tried to fit Ethereum into two mutually exclusive categories. On one side, the “Ultra Sound Money” thesis aligns it with Bitcoin as a safe haven; on the other, the “World Computer” narrative presents it as a high-growth technological platform. However, the 2025 market context dismantled both constructions.

As a “digital commodity,” Ethereum suffers from a lack of clarity: its dynamic supply (alternating inflation and deflation through staking) makes it difficult to compare to Bitcoin’s fixed supply model. Conservative institutions have struggled to understand an asset that produces both passive income and resource consumption simultaneously.

As a “technological platform,” the numbers are even more brutal. From January to September 2025, protocol revenues experienced a dramatic contraction. In August, although ETH’s price approached all-time highs, network fees totaled only $39.2 million per month—a 75% drop compared to the same period in 2024. For investors evaluating via P/E multiples or discounted cash flow models (DCF), this represented the collapse of any economic growth thesis.

The Competitive Pressure: Trapped Between Two Fronts

In the broader blockchain landscape, Ethereum faced an unprecedented squeeze. Bitcoin, thanks to institutionalization via ETFs and the narrative of sovereign strategic reserves, monopolized the macroeconomic value preservation segment. Although Ethereum also received approval for spot ETFs, capital flows remained significantly lower, indicating a still widespread perception of its ambiguous nature.

On the opposite side, Solana consolidated dominance in high-value and fast segments:

• Payments and DePIN: growth of blockchain-based IoT applications favored Solana’s monolithic architecture
• Meme tokens and retail trading: the speculative community preferred Solana’s liquidity
• Decentralized derivatives: Hyperliquid, as a specialized exchange, captured professional trader volume with higher fee structures

In some months of 2025, the volume settled in stablecoins on Solana actually surpassed that of Ethereum, fueling the narrative that Ethereum’s “moat” was eroding in real time.

Chapter 2: The Regulatory Framework as Foundation

Project Crypto: The SEC’s Change of Philosophy

November 12, 2025, marks a watershed date. Paul Atkins, SEC Chairman, officially announced the “Project Crypto” plan, signaling the definitive abandonment of the “Regulation by Enforcement” strategy that characterized the previous decade. The new philosophy is based on a rigorous economic classification of digital assets.

The most relevant element for Ethereum was the explicit recognition that a token’s nature can evolve. The SEC’s “Token Taxonomy” theory states that an asset initially sold as an investment contract does not remain forever bound by that classification. When a network reaches sufficient decentralization—such that holders no longer depend on centralized management efforts to generate yields—the asset exits the Howey Test perimeter.

With over 1.1 million active validators and the most geographically distributed node network among all Layer 1 blockchains, Ethereum was explicitly recognized as a non-security. For the first time in its history, Ethereum had a coherent legal classification.

The Digital Asset Market Clarity Act: The Digital Commodity

In July 2025, the House of Representatives passed the “Digital Asset Market Clarity Act” (CLARITY Act), providing a structured legal definition of the digital commodity:

Jurisdiction: assets derived from decentralized blockchain protocols—explicitly mentioning Bitcoin and Ethereum—fall under the jurisdiction of the Commodity Futures Trading Commission (CFTC), not the SEC.

Operational Definition: a digital commodity is “any fungible asset that can be owned and transferred exclusively between persons without intermediaries, recorded on a publicly distributed and cryptographically secure ledger.”

Banking Implications: the law authorizes banks to register as “digital commodity brokers,” offering custody and trading of Ethereum to institutional clients. In bank balance sheets, ETH would cease to be classified as a high-risk, undefined asset, and become a commodity similar to gold, agricultural commodities, or foreign currencies—carrying enormous implications for capital adequacy ratios.

Resolving the Staking Paradox

A remaining technical-legal obstacle until 2025 was the compatibility between Ethereum’s staking mechanism and its status as a commodity. Traditional commodities (oil, wheat, metals) do not generate passive income; in fact, they incur storage costs. How could Ethereum, which produces staking yields, remain a commodity and not a financial security?

The 2025 regulatory framework resolved this tension through a categorical distinction:

• Asset Level: the ETH token itself remains a commodity—it’s the network’s gas and security collateral, with intrinsic utility value
• Protocol Level: native staking managed by the protocol is “work” or “validation service.” Validators provide computational resources and locked-up capital for network security; their reward is compensation for this service, not an investment yield
• Service Level: only when a centralized entity (exchange, staking platform) offers custodial staking service with a promised specific return, that “product” constitutes an investment contract subject to securities regulation

This tripartition allowed Ethereum to maintain the economic characteristic of a “productive asset” while enjoying regulatory exemption as a commodity. Wall Street has begun describing ETH as a “Productive Commodity”—a resource with anti-inflationary properties and bond-like yields, creating a completely new valuation category.

Chapter 3: The Collapse and Reconstruction of the Economic Model

The Dencun Paradox: Technical Success, Economic Disaster

When the Dencun upgrade was implemented in March 2024, Ethereum’s core dev team introduced EIP-4844, the “Blob” transaction, with the declared goal of reducing Layer 2 costs by providing data space at negligible price. Technically, execution was flawless: Layer 2 fees plummeted from several dollars to a few cents, accelerating the proliferation of secondary ecosystems like Base, Arbitrum, and Optimism.

Economically, however, Dencun was a silent disaster. The initial Blob pricing mechanism operated on a purely mercantile logic: supply and demand. Since the allocated Blob space vastly exceeded initial demand from L2s, the Base Fee remained practically at zero (1 wei, equivalent to 0.000000001 Gwei).

The subsequent dynamics were pathological:

• Base or Arbitrum could charge users “normal” fees (based on their local network congestion)
• They paid Ethereum L1 a tiny fraction of those revenues as “rent” for Blob space
• Data showed Base generating tens of thousands of dollars in daily fees, while paying Ethereum only a few dollars

As most L1 transaction traffic migrated to L2s, and L2s did not burn ETH significantly via Blob (paying too little), Ethereum’s EIP-1559 burning mechanism lost effectiveness. By Q3 2025, Ethereum’s annualized inflation rate had risen back to +0.22%—ETH was again inflationary, losing the “deflationary asset” narrative central in 2023-2024.

The community described this situation with a viral metaphor: L2s behaved like “blob fish,” abyssal creatures feeding on Ethereum L1’s luminescence without providing nourishment. Ethereum was generating security and decentralization to support ecosystems that did not contribute to its value capture.

Fusaka: The B2B Rent-Seeking Mechanism

Faced with the sustainability crisis, Ethereum’s development team decided on a structural reset. The Fusaka upgrade, implemented on December 3, 2025, represents the most ambitious attempt since the Merge to reconfigure the Ethereum-L2 value chain.

EIP-7918: The Guaranteed Minimum Price

The most significant proposal, EIP-7918, radically transformed Blob pricing logic. The innovation is elegant in its simplicity: the Base Fee of Blob can never fall below a threshold linked to the L1 execution layer’s gas price. Specifically, the minimum price is set at 1/15,258 of the L1 Base Fee.

This means that as long as the Ethereum mainnet remains congested (DeFi transactions, NFT minting, RWA settlement), the L1 gas price increases, and automatically raises the “floor price” to buy Blob space. L2s will no longer access Ethereum’s security almost for free; they will have to pay a “rent” proportional to the value they receive.

The immediate effect was a jump in Blob Base Fee from 1 wei to 0.01-0.5 Gwei—a 15 million times increase. For end users of L2s, the impact was marginal (transaction cost remained around $0.01), but for the Ethereum protocol, the significance was enormous. In terms of burn rate and fee capture, the system shifted from “zero” to “potentially a thousand times higher.”

PeerDAS (EIP-7594): The Double Elasticity of Supply

To prevent the price increase from choking off L2 ecosystem development, Fusaka simultaneously introduced PeerDAS (Peer Data Availability Sampling). This protocol innovation allows nodes to sample small random portions of a Blob to verify cryptographic integrity without downloading the entire content. The reduction in bandwidth and storage pressure was dramatic: about -85% compared to the previous model.

This technical innovation provided the economic space to significantly expand total Blob supply per block: the target gradually increased from 6 to 14-16 Blobs per block.

Post-Fusaka Ethereum’s business model thus becomes a classic “price and volume increase” strategy:

• Minimum price (floor) for Blob → stabilizing revenue base
• Increasing total quantity → supply elasticity
• Burning received ETH → structural deflation

Industry analysts, like the well-known Yi, estimated that ETH’s total burn rate in 2026 could increase by 8 times compared to 2025, marking the first year of true structural deflation following Fusaka.

Chapter 4: The Valuation Framework for “Trustware”

Traditional DCF: The Equity Tech Perspective

Once it was clarified that Ethereum generates predictable and quantifiable cash flows, it became possible to apply the traditional DCF (Discounted Cash Flow) methodology used for valuing tech companies. Although classified as a commodity, Ethereum possesses the structure of a business—revenues (fees), costs (validator rewards), and distribution mechanisms (burn via EIP-1559, staking rewards).

21Shares developed in Q1 2025 a multi-stage model based on projecting fee revenues and burn mechanisms. Even with conservative assumptions (discount rate of 15.96%), the fair value of ETH was calculated at $3,998 USD. With more bullish assumptions (discount rate of 11.02%), the fair value rose to $7,249 USD.

The post-Fusaka economic reset provides a solid structure for the “growth rate of future revenues” in the DCF model. Analysts no longer need to fear the zeroing of L1 revenues caused by L2s but can project a linearly guaranteed minimum cash flow based on the expected growth of Layer 2 adoption.

Monetary Premium: The Commodity Value Perspective

Beyond future cash flows, Ethereum benefits from an uncaptureable value in traditional valuation models: the monetary premium, derived from its role as a settlement medium and reference collateral.

• Dominant DeFi collateral: ETH remains the primary collateral in the decentralized ecosystem. From stablecoin protocols (DAI) to derivatives, ETH remains the trust anchor, with over $100 billion USD of Total Value Locked directly or indirectly linked to its value.

• Ecosystem denomination: the NFT market, L2 marketplaces, network fees of countless applications—all denominated in ETH. Replacing this standard would cause massive economic frictions.

• Liquidity restrictions: ETF-locked assets, corporate treasuries (Bitmine holds 3.66 million ETH), and validators holding indefinite positions constantly reduce Ethereum’s available liquidity. This structural supply-demand imbalance confers a scarcity premium similar to gold or sovereign bonds.

The “Trustware” Concept and Its Pricing

Consensys introduced in 2025 a revolutionary valuation category: Trustware. Unlike AWS, which sells generic computational power, Ethereum sells something more scarce economically: “decentralized and immutable finality.”

As RWA (Real World Assets) migrate on-chain, Ethereum L1 will transition from a “transaction processor” to a “guardian of global assets.” Value capture will depend less on TPS and throughput, and more on the amount of assets it protects.

If Ethereum protected $10 trillion of tokenized global assets, even applying a modest “annual security” of 0.01%, the network would need to capture $1 billion annually. To be immune to a 51% attack, Ethereum’s market cap should be proportionally scaled to the volatility and economic value it supports.

This “security budget” framework makes Ethereum’s market cap directly a function of the economic value it safeguards. There is no more convincing narrative than witnessing a hacker who, after compromising assets, instantly converts them into ETH to secure their custody.

Chapter 5: Competitive Segmentation and RWA Domination

The Natural Division: Ethereum vs. Solana as Complementary Models

2025 data reveal a crystallized structural segmentation of the public blockchain market. Solana has consolidated its role as a retail processing network—similar to Visa or Nasdaq. It optimizes for extreme TPS, ultra-low latency, and minimal unit costs, ideal for:

• High-frequency trading
• Consumer payments
• High-density DePIN applications

Ethereum has evolved into a wholesale settlement system—similar to SWIFT or FedWire. It does not aim to process every coffee transaction; instead, it focuses on “batch settlements” sent from L2s, bundles containing thousands of consolidated transactions:

• Tokenization of high-value financial instruments
• Cross-border settlement of significant amounts
• Finality and immutability for high-value assets

This division represents the natural evolution of a mature market. High-value, low-frequency investors prefer Ethereum for its superior security and decentralization trade-off. High-volume, low-value traffic converges on Solana.

The RWA Moat: Trillion-Dollar Future

In the RWA segment—considered the next trillion-dollar market—Ethereum maintains an almost uncontested dominance. Although Solana is accelerating, institutional reference projects remain focused on Ethereum:

• BlackRock’s BUIDL fund (milliards USD)
• Franklin Templeton’s on-chain products
• Sovereign tokenizations under discussion at central banks

Institutional logic is clear: when protecting assets worth hundreds of millions or billions of dollars, security takes precedence over speed. Ten years of uptime without interruption represent Ethereum’s deepest moat.

Conclusion: The Leap into the Void

In 2025, Ethereum made a bold and calculated move. It abandoned the “universal” narrative of “world computer” to adopt the role of “global value foundation.” It turned an identity crisis into a structural redefinition.

However, an open question remains: is the post-Fusaka economic reconstruction landing strip sufficiently stable? Or will the project, like the famous Pulau Senang prison experiment, discover that human incentives are stronger than any technical innovation?

The answer will come from the market in the next 12-18 months. What is certain is that Ethereum is no longer the ambiguous project of 2024. It has become the battleground where the next three narratives of global finance—protocol security, value preservation, and wholesale settlement—will find their winner.