Is 2025 ETH dead?

Author: danny; Source: X, @agintender

The year 2025 is undoubtedly filled with contradictions and controversies for Ethereum. Despite the influence of big names promoting it, various DATs, and technological upgrades, along with 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 properties and safe-haven consensus that Bitcoin possesses 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 to align better with investors' preferences and valuation models in terms of throughput and fee capture. Furthermore, the Dencun upgrade in 2024 did not restore Ethereum's former glory; instead, it became a nightmare of narrative consumption.

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

After the Fusaka upgrade, can Ethereum redeem itself?

Introduction: Two “Wall-less” Utopian Experiments 60 Years Apart

I believe many people would not think that Singapore, known for its strict laws and penalties, 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 an era dominated by secret societies (gangs). According to statistics, there were over 300 active secret society groups at that time, involving more than 50,000 people (accounting for 6% of the resident population), essentially permeating all sectors of Singapore. This not only brought many social order issues but also affected economic development at the time. The then-leader of the People's Action Party, Lee Kuan Yew, decided to take drastic measures and enacted the shocking “Criminal Law (Temporary Provisions) Act” (also known as Bill No. 55) — this scheme essentially granted the police the authority to detain suspects for an extended period without trial if they believed these individuals posed a potential threat to social security.

The effect of this plan on the adjustment of social order is immediate, but it is a nightmare for prison management. Due to the sudden increase in the number of suspects/inmates in a short period of time, Changi Prison was overcrowded and almost on the verge of collapse.

Just as the human rights activists were in heated debate with the Public Order Authority, at that time, the 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, community trust, and other models. Nair believed that high walls and oppression would only provoke the worst in human nature, and that trust and freedom are what can reshape one's character.

This seemingly crazy experimental proposal surprisingly passed in 1960 after intense debate, with the location set on Pulau Senang, a small island less than 1 square kilometer located south of Singapore's main 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 achieve self-redemption in a “prison without walls.” Therefore, there were no walls on the island, no barbed wire, and even the guards were not armed.

At that time, Happy Island could be described as desolate, but with the hard work of the first and second batches of prisoners, Happy Island began to take shape. In addition to a cafeteria, dormitories, and warehouses, it also had running water and electricity. To outsiders, it looked like a large community rather than a prison. Everyone on Happy Island was required to work and participate in construction, including the prison guards (Dutton himself lived and ate with the prisoners). The daily schedule was from 8 AM to 5 PM, and after 5 PM there was free time, along with weekends off. Just as Nair's hypothesis suggested, the recidivism rate of prisoners serving in this community environment was only 5% after their “release.” This “success story” even attracted coverage from Western media and a visit from a United Nations inspection team, being hailed as a “miracle in the history of human rehabilitation.”

Just when Dutton thought everything was improving, he was unaware that “greed” and “discontent” were quietly causing trouble in the community of Long Island. Some prisoners complained that the work was too hard? Some complained about why it wasn't themselves getting released early? Some complained about the unequal division of labor, always doing the hardest work but receiving fewer credits? This sentiment gradually spread among the prisoners. The catalyst 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 dissatisfaction to its peak.

On July 12, 1963, dark smoke rose from the originally tranquil Sentosa Island. After receiving their production tools (shovels, machetes, hoes) as usual in the morning, the prisoners launched a indiscriminate attack on the guards. Armed with hoes and parangs, the prisoners rioted, killing Dutton, who firmly believed they would reform. They burned down the houses and dining hall they had built with their own hands, and along with them, they also burned the hopes of returning to society and the Singapore government's obsession with the inherent goodness of humanity.

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

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

Core developers, like Dutton back in the day, have dismantled the expensive “economic wall” (Gas fees) between L1 and L2. They hold a grand vision centered around “Rollups,” believing that by providing L2 (Layer 2) with nearly free Blob data space, L2 will thrive and in turn benefit the mainnet, creating a mutually beneficial utopia.

But history always follows the same rhyme. Just like the prisoners of Bliss Island chose rebellion over gratitude, the L2 of 2025 did not choose 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 Neither Gold Nor Tech Stocks

For most of 2025, Ethereum's positioning in the capital markets appeared particularly vague. Investors are accustomed to categorizing crypto assets into two extremes: on one end, “digital commodities” (like BTC) that serve as a store of value, and on the other end, “tech stocks” (like Solana) that have high growth potential and monetize based on user traffic. Ethereum has tried to occupy both ends at the same time - being both “Ultra Sound Money” and a “world computer.”

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

• The Awkwardness of Being a Commodity: Although ETH plays a core collateral role in DeFi, its dynamic supply changes (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 attributes rock-solid, while the complexity of Ethereum renders it somewhat ambiguous in the eyes of conservative institutions.
• The Embarrassment of a Tech Stock: If regarded as a technology platform, its core metric—revenue—saw a disastrous decline in the first three quarters of 2025. Data from August shows that despite ETH prices approaching historical highs, network protocol revenue plummeted by 75% year-on-year, totaling only $39.2 million. For traditional investors accustomed to valuing through price-to-earnings ratios or discounted cash flow models, this is simply a signal of a business model collapse.

1.2 The “sandwich layer” effect in the competitive landscape

In terms of competition, Ethereum is also facing a dual squeeze.

• Upward Pressure: The continuous inflow of BTC ETFs and the strategic reserve narrative of sovereign nations further solidify BTC's status as a macro asset. In contrast, while Ethereum ETFs have been approved, the scale of capital inflows has never been able to compare with BTC, reflecting mainstream capital's lag in recognizing its positioning as “digital oil.”
• Downward Impact: Solana, with its monolithic architecture providing extreme performance and low costs, 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 even surpassed that of the Ethereum mainnet in certain months. At the same time, Hyperliquid, with its leading position in Perp dex, has attracted numerous large whale users and traders, and the fee capture capability of HLP even leaves ETH in the dust.

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

Chapter Two Regulatory Orientation: Legal Restructuring of Digital Commodities

2.1 “Project Crypto” and the Shift in Regulatory Philosophy

On November 12, 2025, Paul Atkins, the chairman of the US SEC, officially unveiled the regulatory reset plan known as “Project Crypto” during a speech at the Federal Reserve Bank of Philadelphia. The core goal 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 explicitly refuted the view 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 the asset itself is forever burdened by the shackles of a security. (Note: This logic is very important for Ethereum.)

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

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

2.2 The Digital Asset Market Clarity Act (CLARITY Act)

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

• Jurisdictional Demarcation: The bill explicitly places assets “originating from decentralized blockchain protocols”—specifically referring to BTC and ETH in the text—under 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 the need for intermediaries, and recorded on a cryptographically secure public distributed ledger.”
• The Role of Banks: The bill allows banks to register as “digital commodity brokers” to provide custody and trading services for ETH to customers. This means that ETH on the bank's balance sheet will no longer be regarded as a high-risk intangible asset, but rather as a commodity asset similar to gold and foreign exchange.

2.3 Compatibility of Staking Returns and 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 returns merely by holding them; they often require storage costs. The staking mechanism of Ethereum makes it more akin to equity or bonds.

The regulatory framework of 2025 addresses this cognitive dissonance:

1. 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.
2. 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 earn are compensation for this service, rather than passive investment returns.
3. Service Layer: This “service” only constitutes an investment contract when a centralized institution (such as an exchange) provides custodial staking services and promises specific returns.

This dichotomy allows ETH to retain its “yield-bearing” characteristics 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 Three The Collapse and Rebuilding of Business Models: From Dencun to Fusaka

Having solved the identity issue, the next is a sharper economic question: Does ETH make money? Where does its cash flow come from? Where does it go?

With all due respect, the income cliff in the first three quarters of 2025 is a failed technical scaling solution, a fantasy of tech enthusiasts attempting to reshape the business environment and humanity through technology. Meanwhile, the helpless community hopes that the Fusaka upgrade in December can change the current predicament, but is that still possible?

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 cheap data storage space. Technically, this is a huge success — L2 gas fees dropped from several dollars to 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 Blob's Base Fee has long remained at an extremely low level of 1 wei (i.e., 0.000000001 Gwei).

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

Due to a large number of transactions migrating from the 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 rebounded to +0.22%, losing the narrative of being a “deflationary asset.”

This situation of “L2 eating large meat, L1 drinking northwest wind” is vividly referred to as the “parasite” effect by the community, directly leading to deep doubts about the sustainability of Ethereum's business model.

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

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

The core of this upgrade lies in the “repair” of the value capture chain between L1 and L2; in simple terms, L2 needs to 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 Blobs is no longer allowed to fall indefinitely to 1 wei. Instead, the minimum price for Blobs will be tied 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 trading, or NFT minting), the Gas Price on L1 will rise, thus automatically raising the “floor price” for purchasing Blob space on L2. L2 can no longer utilize Ethereum's security at nearly free prices.

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

3.2.2 Supply-side Expansion: PeerDAS (EIP-7594)

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

PeerDAS allows nodes to verify the availability of data by randomly sampling only a small portion of data fragments, without the need to download the complete data block (Blob). This greatly reduces the bandwidth and storage pressure on nodes (by approximately 85%).

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 through EIP-7918 and increasing the total sales volume through PeerDAS, Ethereum has successfully established a sales model where both quantity and price rise.

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, and other L2s act as “distributors,” responsible for capturing end users and processing high-frequency, low-value transactions.

Core products (block space): Ethereum L1 sells two core products:

• High-Value Execution Space: Used for L2 settlement proofs and 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 for these two resources. Most 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 greater the demand for Blobs

Is there anyone in the market to take the bill? Yes, according to the estimation by the famous analyst Teacher Yi, after the Fusaka upgrade, the ETH destruction rate of Ethereum is expected to increase by 8 times in 2026?!

Chapter Four 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 has the attributes of a commodity, capital asset, and currency, a single valuation model seems unable to express the “greatness of ETH.” In response, Wall Street elites have shared their views:

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

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

• In the Q1 2025 research report, 21Shares projected a three-stage growth model based on Ethereum's transaction fee revenue and destruction mechanism. 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 revenue growth rate” in the DCF model. Market analysis suggests that there is no longer a need to worry about L2 siphoning leading to revenues dropping to zero; instead, L1's guaranteed income can be linearly derived based on the expected growth scale of L2.

4.2 Currency Premium Model: A Commodity Perspective

In addition to cash flow, Ethereum also enjoys a value that cannot be captured by DCF - the currency premium. This is the value brought by being used as a settlement currency and collateral.

• ETH is the core collateral of the DeFi ecosystem (with a TVL of over $100 billion). Whether for minting stablecoins (like DAI), lending, or derivatives trading, ETH serves as the fundamental trust anchor.
• The NFT market and L2 gas fees are priced in ETH.
• With the locking of ETFs (reaching 27.6 billion USD by 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 tension in supply and demand gives it a premium similar to that of gold.

4.3 “Trustware” pricing

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

• Ethereum does not sell simple computing power (that's what AWS does), but rather “decentralized, immutable finality.”
• With the on-chain RWA, 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 global assets, even if it charges only a 0.01% security tax each year, its market value must be large enough to withstand a 51% attack. This logic of a “security budget” makes Ethereum's market value positively correlated with the economic scale it supports.

There is nothing more persuasive for the promotion of “trust items” than hackers stealing funds and then converting the stolen money into ETH, nothing at all.

Chapter Five 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 of 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-level applications (DePIN). Ethereum, on the other hand, has evolved into SWIFT or the Federal Reserve's settlement system (FedWire); it does not aim to quickly process each transaction for buying coffee but 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 degree of decentralization; while low-value, high-frequency transactions flow 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 logic behind the choice of institutions is very clear: for assets worth hundreds of millions or even billions of dollars, the priority of security far outweighs speed. Ethereum, with a ten-year track record of validation and never experiencing downtime, forms its deepest moat.

Has Ethereum lost its way? After completing a thrilling leap to the “base mint tax” model of the digital economy in 2025, the question remains whether this leap of faith will land on a haystack.