The year 2025 was undoubtedly one of contradiction and controversy for Ethereum. Despite endorsements by key opinion leaders, various DATs, numerous technical upgrades, and hacker propaganda, its performance in the secondary market was disappointing. Ethereum found itself stuck in an "awkward" middle ground: as an asset, it seemed to lack the pure commodity attributes and safe-haven consensus of Bitcoin as "digital gold"; in terms of technical performance and fee capture, it faced fierce competition from high-performance chains like Solana and Hyperliquid, which appeared more favored by investors and better fit their valuation models due to superior throughput and fee capture. Furthermore, the Dencun upgrade in 2024 did not restore Ethereum's former glory but instead became a nightmare that devoured its narratives.
This perception of being "neither here nor there" sparked a soul-searching question: Does Ethereum still have a future? What category does it belong to? Does it possess a clear and sustainable business model?
Can Ethereum redeem itself after the Fusaka upgrade?
Introduction: Two "Wall-less" Utopian Experiments 60 Years Apart
I believe many people wouldn't imagine that Singapore, known for its strict laws and harsh punishments, also had its own "utopian" dream in its early days? In fact, Lee Kuan Yew once fantasized about using "love" to rehabilitate prisoners, but reality gave him a hard slap in the face.
Singapore in the 1950s was an era dominated by secret societies (gangs). Statistics show that there were over 300 active secret society groups at the time, involving more than 50,000 people (accounting for 6% of the resident population then), infiltrating almost every industry in Singapore. This not only caused numerous social order issues but also affected economic development. Lee Kuan Yew, the leader of the People's Action Party, then Singapore's "chief administrator," decided to take drastic measures and enacted the Criminal Law (Temporary Provisions) Act (also known as Act 55), which shocked the judicial community—this act essentially gave the police the power to detain suspects deemed a threat to public security for extended periods without trial.
The effect of this act on social order was immediate, but it was a nightmare for prison management. The sudden influx of numerous suspects/prisoners overwhelmed Changi Prison, pushing it to the brink of collapse.
While human rights activists and public security authorities were locked in debate, Devan Nair, then leader of the Workers' Party, proposed a "utopian prison model," a hybrid of prison, community, and farm, without handcuffs, shackles, high walls, or heavy guarding, aimed at allowing prisoners to reform and integrate into society through collective labor and community trust. Nair believed that high walls and oppression only provoke the evil in human nature, while trust and freedom could rebuild character.
After intense debate, this seemingly crazy experimental proposal was surprisingly approved in 1960, to be implemented on Pulau Senang, a small island of less than 1 square kilometer located south of Singapore's main island, surrounded by swift currents to prevent escapes. The prison warden of Pulau Senang at the time, Daniel Dutton, firmly believed in the inherent goodness of people. He thought that given trust and dignified labor, even criminals could achieve self-redemption in this "wall-less prison." Thus, the island had no walls, no barbed wire, and even the guards were unarmed.
Pulau Senang was desolate then, but through the hard work of the first and second batches of prisoners, it gradually took shape. It eventually had canteens, dormitories, warehouses, running water, and electricity. To outsiders, it looked more like a large community than a prison. Everyone on Pulau Senang had to work and participate in construction, including the guards (Dutton himself ate and lived with the prisoners). The work schedule was from 8 AM to 5 PM, with free time after 5 PM and even double rest days. As Nair had hypothesized, the recidivism rate of prisoners who served their sentences in this community environment was only 5%. This "success story" attracted reports from Western media and even visits from United Nations inspection teams, hailed as a "miracle in the history of human rehabilitation."
Just as Dutton thought everything was improving, he was unaware that "greed" and "resentment" were quietly festering within the Pulau Senang community. Some prisoners complained the work was too hard? Others grumbled about why they weren't released early? Some complained about unfair division of labor, always doing the hardest work but receiving fewer work credits? These sentiments gradually spread among the prisoners. The trigger was a weekend rush job at the码头 (mǎtóu - dock/wharf) in July 1963. Several carpenters refused to work because it was the weekend. In a rage, Dutton sent the striking prisoners back to Changi Prison. This incident pushed the discontent to its peak.
On July 12, 1963, black smoke rose from the originally tranquil Pulau Senang. After receiving their tools (shovels, machetes, hoes) as usual in the morning, the prisoners launched indiscriminate attacks on the guarding officers. Armed with hoes and parangs (machetes), the prisoners rioted, killing Dutton, who had believed they could reform, and burning down the houses, canteens, and other buildings they had built with their own hands. Along with these, they burned their hopes of reintegrating into society and the Singapore government's belief in the inherent goodness of people.
This island, called "Senang" (meaning "comfort" or "ease"), was originally a world-renowned sociological experiment. Here, hundreds of the fiercest secret society members transferred from Changi Prison were given unprecedented freedom—yet on this day, idealism turned to ashes in the flames.
In March 2024, Ethereum launched its own "Pulau Senang experiment"—the Dencun upgrade (EIP-4844).
Core developers, like Dutton back then, dismantled the expensive "economic wall" (Gas fees) between L1 and L2. They harbored the grand vision of a "Rollup-centric" future, believing that providing L2 (Layer 2) with almost free Blob data space would lead L2s to feed back the mainnet through a prosperous ecosystem, building a mutually beneficial utopia.
But history often rhymes. Just as the prisoners of Pulau Senang chose riot over gratitude, the L2s of 2025 chose to wage a silent "economic plunder" against L1 instead of feeding back.
Chapter 1 The Origin of "Awkwardness": Identity Crisis in 2025
1.1 The Dilemma of Being Neither Gold Nor Tech Stock
For most of 2025, Ethereum's positioning in the capital market was particularly ambiguous. Investors were accustomed to categorizing crypto assets into two extremes: one end being "digital commodities" for value storage (like BTC), and the other being "tech stocks" with high growth potential, monetizing through user traffic (like Solana). Ethereum once attempted to occupy both ends—being both "Ultra Sound Money" and the "World Computer."
However, the market environment in 2025 mercilessly stripped away the红利 (hónglì - dividend/benefit) of this dual narrative.
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The Awkwardness as a Commodity: Although ETH plays a central role as collateral in DeFi, its dynamic supply changes (switching between inflation and deflation) and the existence of the Staking mechanism make it difficult to simply define it as "digital gold" like BTC. BTC's fixed supply and energy anchor give it rock-solid commodity attributes, while Ethereum's complexity makes it appear模糊 (móhú - blurry/indistinct) in the eyes of conservative institutions.
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The Awkwardness as a Tech Stock: If viewed as a technology platform, its core metric—revenue—experienced a disastrous decline in the first three quarters of 2025. Data from August showed that although the ETH price once approached its historical high, the network's protocol revenue plummeted by 75% year-on-year to just $39.2 million. For traditional investors accustomed to valuation based on P/E ratios or discounted cash flow models, this was a signal of a collapsing business model.
1.2 The "Sandwich" Effect in the Competitive Landscape
In the competitive dimension, Ethereum also suffered from pressure from both sides.
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Pressure from Above: Continued inflows into BTC ETFs and the narrative of sovereign national strategic reserves further solidified BTC's position as a macro asset. In contrast, although the Ethereum ETF was approved, the scale of fund inflows never matched that of BTC, reflecting mainstream capital's lagging recognition of its "digital oil" positioning.
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Impact from Below: Solana,凭借 (píngjiè - by means of) its monolithic architecture delivering极致 (jízhì - ultimate) performance and low cost, almost monopolized growth in payments, DePIN, AI Agent, meme, and high-frequency consumer applications in 2025. Data showed that the velocity of stablecoin flow and ecosystem revenue on the Solana chain甚至 (shènzhì - even) surpassed that of the Ethereum mainnet in some months. Meanwhile, Hyperliquid also attracted numerous whale users and traders with its position as the leading Perp DEX; the fee capture capability of HLP left ETH in the dust.
This state of "neither ascending to heaven nor touching the ground" was the breeding ground for the "awkwardness" narrative. The market couldn't help but白眼 (báiyǎn - roll eyes/despise): If value storage is inferior to BTC, high-performance applications are inferior to Solana, and fee capture ability is inferior to Hyperliquid, where exactly is Ethereum's moat?
Chapter 2 Regulatory Clarification: Legal Re-framing as a Digital Commodity
2.1 "Project Crypto" and the Shift in Regulatory Philosophy
On November 12, 2025, U.S. SEC Chairman Paul Atkins, in a speech at the Federal Reserve Bank of Philadelphia, officially unveiled the "Project Crypto" regulatory reset plan. The core goal of this plan was to end the years-long "Regulation by Enforcement" and move towards establishing a clear classification framework based on economic reality.
In this speech, Chairman Atkins explicitly refuted the view that "once a security, always a security" (directly contradicting his predecessor). He introduced the "Token Taxonomy," pointing out that the属性 (shǔxìng - attributes/properties) of a digital asset are fluid and can change. A token might be sold as part of an Investment Contract during its initial offering stage, but this does not mean the asset itself is forever burdened with the shackles of being a security. (Note: This logic is very important for Ethereum.)
The SEC believed 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 obtain profits, the asset falls outside the jurisdiction of the Howey Test.
Ethereum, with over 1.1 million validators and the most widely distributed node network globally, therefore proved: ETH does not belong to 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 Clarity Act (CLARITY Act). This act legally accomplished the "correction" of Ethereum's identity.
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Jurisdictional Demarcation: The act clearly designated assets "originating from a decentralized blockchain protocol"—specifically naming BTC and ETH in the text—as under the jurisdiction of the Commodity Futures Trading Commission (CFTC).
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Definition of Digital Commodity: The act defined a digital commodity as "any fungible digital asset that can be exclusively possessed and transferred from person to person without necessary reliance on an intermediary, and is recorded on a cryptographically secure public distributed ledger."
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Role of Banks: The act allows banks to register as "digital commodity brokers" to provide custody and trading services for ETH for their clients. This means that on bank balance sheets, ETH will no longer be regarded as a high-risk unclassified asset but rather as a commodity asset similar to gold or foreign exchange.
2.3 Compatibility of Staking Rewards with Commodity Attributes
According to traditional securities law: Can an asset that generates interest still be called a "commodity"? Traditional commodities like crude oil or wheat not only do not generate yield by merely holding them but often incur storage costs. Ethereum's staking mechanism makes it more akin to equity or bonds.
The 2025 regulatory framework resolved this cognitive矛盾 (máodùn - contradiction):
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Asset Layer: The ETH token itself is a commodity. It is the network's Gas and security deposit, possessing utility value and exchange value.
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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, not passive investment income.
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Service Layer: Only when centralized institutions (like exchanges) provide custodial staking services and promise specific returns does this "service" constitute an investment contract.
This dichotomy allowed ETH to retain its "yield-bearing" characteristic while enjoying the regulatory exemption of a "commodity." Institutional investors began to view ETH as a "Productive Commodity"—possessing both the anti-inflation attributes of a commodity and a yield similar to bonds. Fidelity pointed out in its report that this unique combination of attributes makes ETH an indispensable "internet bond" in investment portfolios.
Chapter 3 The Collapse and Rebuilding of the Business Model: From Dencun to Fusaka
Having addressed the identity issue, the next尖锐 (jiānruì - sharp/pointed) economic question arose: 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 was a failure of a technical scaling solution, a fantasy of tech geeks attempting to reshape the commercial environment and human nature with technology. The helpless community pinned its hopes on the Fusaka upgrade in December to change the current predicament, but could it still?
3.1 The "Revenue Paradox" Post-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, it was a huge success—L2 Gas fees dropped from several dollars to a few cents,极大地促进 (jídà de cùjìn - greatly promoting) the prosperity of the L2 ecosystem. However, from an economic model perspective, it was a "disaster."
The pricing mechanism of the Blob market was initially based solely on supply and demand. Since the reserved Blob space supply far exceeded the early demand from L2s, the Blob Base Fee remained at an extremely low level of 1 wei (i.e., 0.000000001 Gwei) for a long time.
This led to a situation where L2 networks (like Base, Arbitrum) charged users substantial gas fees but paid微乎其微 (wēi hū qí wēi - negligible/miniscule) "rent" to Ethereum L1. Data showed that Base could generate hundreds of thousands of dollars in revenue on some single days but paid only a few dollars to Ethereum.
As L1 execution layer transactions massively migrated to L2, and L2s did not burn enough ETH through Blobs, the EIP-1559 burn mechanism became ineffective. In Q3 2025, Ethereum's annualized supply growth rate rebounded to +0.22%, losing the "deflationary asset" narrative.
This situation of "L2s eating the meat, L1 drinking the西北风 (xīběifēng - northwest wind, meaning nothing)" was vividly described by the community as the "parasite" effect, directly leading to deep suspicion about the sustainability of Ethereum's business model.
3.2 Strategic Turning Point: The Fusaka Upgrade (December 3, 2025)
Fortunately, facing doubts about ETH's business model, Ethereum's "aloof" developer community did not "persist in idealism" and sit idly by. On December 3, 2025, the long-awaited Fusaka upgrade finally arrived.
The core of this upgrade was to "fix" the value capture chain between L1 and L2,说白了 (shuō báile - plainly speaking), L2s must pay tribute to L1.
3.2.1 Core Fix: EIP-7918 (Blob Base Fee Binding with Execution Cost)
The most commercially significant proposal in the Fusaka upgrade was EIP-7918. This proposal彻底改变 (chèdǐ gǎibiàn - completely changed) the pricing logic of Blobs.
EIP-7918 introduced a "price floor" mechanism—a price increase. It stipulated that the Blob Base Fee would no longer be allowed to fall unlimitedly to 1 wei. Instead, the minimum price of a Blob would be pegged to the L1 execution layer Gas price (specifically, 1/15.258 of the L1 Base Fee).
This meant that as long as the Ethereum mainnet remained busy (e.g., with token launches, DeFi trades, or NFT mints), the L1 Gas Price would rise, automatically raising the "floor price" for L2s to purchase Blob space. L2s could no longer use Ethereum's security at a nearly free price.
After the upgrade activated, the Blob Base Fee instantly surged 15 million times (jumping from 1 wei to the 0.01-0.5 Gwei range). Although the cost per transaction remained low for L2 users (around $0.01 USD), for the Ethereum protocol, this meant thousands-fold revenue growth. The prosperity of L2 became a direct driver of L1 income.
3.2.2 Supply-Side Expansion: PeerDAS (EIP-7594)
To prevent price increases from stifling L2 development, Fusaka simultaneously introduced PeerDAS (Peer Data Availability Sampling).
PeerDAS allows nodes to verify data availability by randomly sampling a small portion of data fragments without needing to download the complete data block (Blob). This significantly reduces the bandwidth and storage pressure on nodes (by about 85%).
This technological breakthrough allowed Ethereum to大幅增加 (dàfú zēngjiā - greatly increase) the supply of Blobs. After the upgrade, the target number of Blobs per block will be increased in phases from 6 to 14 or more.
By raising the unit price floor through EIP-7918 and simultaneously increasing the total sales volume through PeerDAS, Ethereum successfully constructed a "volume and price rising together" sales model.
3.3 The Closed Loop of the New Business Model
This is the post-Fusaka activated Ethereum business model, which can be broadly 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 product (Block space): Ethereum L1 sells two core commodities:
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High-value execution space: Used for L2 settlement proofs, complex DeFi atomic transactions.
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High-capacity data space (Blob): Used for L2s to store transaction history data.
Through EIP-7918, L2s must pay "rent" commensurate with their economic value for these two resources. This rent (ETH) is mostly burned, translating into value appreciation for all ETH holders; a small portion is paid to validators, forming staking rewards.
Positive feedback loop:
More prosperous L2s -> Greater L2 demand for Blobs -> Even with low unit price, large volume with a floor -> Increased ETH burn rate -> ETH becomes more deflationary/scarce -> Enhanced network security -> Attracts more high-value assets.
Is the market buy-in there? Yes. According to estimates by renowned analyst Yi, post-Fusaka upgrade, Ethereum's ETH burn rate in 2026 is expected to increase by 8 times?!
Chapter 4 Valuation Framework: How to Price "Trustware"?
Having clarified the business model, the next question: How to value this new type of asset? Since Ethereum兼具 (jiānjù - combines) commodity, capital asset, and monetary attributes, a single valuation model seems inadequate to express "ETH's greatness." The elites on Wall Street offered their views:
4.1 Discounted Cash Flow (DCF) Model: Tech Stock Perspective
Although defined as a commodity, ETH has clear cash flows, allowing it to be valued using traditional DCF models.
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In a Q1 2025 research report, 21Shares, based on Ethereum's transaction fee revenue and burn mechanism, used a three-stage growth model for projection. Even under conservative discount rate assumptions (15.96%), the calculated fair value of ETH reached $3,998; under more optimistic assumptions (discount rate 11.02%), the fair value was as high as $7,249.
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The EIP-7918 mechanism post-Fusaka upgrade provided solid support for the "future revenue growth rate" in the DCF model. Market analysis suggests there is no longer a need to worry about L2s吸血 (xīxuè - sucking blood/leeching) leading to zero revenue; instead, one can linearly derive L1's guaranteed revenue based on the expected growth scale of L2s.
4.2 Monetary Premium Model: Commodity Perspective
Beyond cash flow, Ethereum also enjoys a portion of value not captured by DCF—the monetary premium. This is the value derived from being a settlement currency and collateral.
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ETH is the core collateral of the DeFi ecosystem (TVL exceeding $100 billion). Whether minting stablecoins (like DAI), lending, or derivative trading, ETH is the fundamental trust anchor.
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NFT markets, L2 Gas fee payments are all denominated in ETH.
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With ETF lock-ups (reaching $27.6 billion by Q3 2025) and corporate treasury accumulation (e.g., Bitmine holding 3.66 million ETH), ETH's liquid supply is increasingly tight. This紧张 (jǐnzhāng - tight/strained) supply-demand relationship赋予 (fùyǔ - bestows upon) it a premium similar to gold.
4.3 "Trustware" Pricing
Consensys proposed the concept of "Trustware" in its 2025 report.
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Ethereum sells not simple computing power (that's what AWS does), but "decentralized, immutable finality."
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With RWA moving on-chain, Ethereum L1 will shift from "processing transactions" to "securing assets." Its value capture will no longer rely solely on TPS but on the scale of assets it protects.
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If Ethereum secures $10 trillion in global assets, even if it charges only a 0.01% security tax annually, its market capitalization must be sufficiently large to resist a 51% attack. This "security budget" logic means Ethereum's market cap is positively correlated with the economic scale it carries.
For promoting "Trustware," nothing is more convincing than hackers converting stolen funds into ETH after a theft, nothing at all.
Chapter 5 Competitive Landscape: Modular Moat and the RWA Battlefield
5.1 Ethereum vs. Solana: The Divide Between Wholesale and Retail
Data from 2025 clearly showed the structural differentiation in the public chain market:
Solana is akin to Visa or NASDAQ, pursuing极致 TPS and low latency, suitable for high-frequency trading, payments, and consumer-grade applications (DePIN). Ethereum has evolved into SWIFT or the Federal Reserve's settlement system (FedWire). It does not追求 (zhuīqiú - pursue)快速处理 (kuàisù chǔlǐ - quickly process) every coffee purchase transaction but focuses on processing "settlement packages" submitted by L2 networks, containing成千上万 (chéng qiān shàng wàn - thousands upon thousands) of transactions.
This division of labor is an inevitable evolution of a mature market. High-value, low-frequency assets (like tokenized treasury bonds, large cross-border settlements) still首选 (shǒuxuǎn - first choice) Ethereum due to its higher security and decentralization; while low-value, high-frequency transactions flow to Solana.
5.2 Dominance in RWA
In the realm of RWA, seen as a future trillion-dollar market, Ethereum demonstrated极强的统治力 (jí qiáng de tǒngzhì lì -极强的 (extremely strong) dominance). Although Solana is growing rapidly, in benchmark projects like BlackRock's BUIDL fund and Franklin Templeton's on-chain funds, Ethereum remains the preferred foundation.
The logic behind institutional choice is clear: for assets worth hundreds of millions or even billions of dollars, security priority far outweighs speed. Ethereum's decade-long,从未宕机 (cóngwèi dàngjī - never宕机 (downtime)) record constitutes its deepest moat.
Was Ethereum lost? In 2025, it completed a perilous leap towards a "base seigniorage" model for the digital economy, only we don't know if this leap of faith will land on the haystack?
