Ethereum 2025: From Identity to Sustainable Business Model

Understanding the Dilemma: Ethereum’s “Over-Arching” Position

The year 2025 has become a period of profound revelation for Ethereum—a contradictory era where technological success has not translated into market performance. Despite support from many key figures, numerous L2 solutions emerging, and revolutionary upgrades implemented, Ethereum remains caught in a “midst of stagnation”: it does not match Bitcoin as a pure store of value, nor does it compete with Solana and Hyperliquid in throughput and fee collection. The Dencun upgrade in 2024, instead of providing a boost, has become a long-term challenge to its narrative.

This question reflects a deeper issue: Where is Ethereum’s true value? What should its classification be in the digital economy? Is there a sustainable business model that can provide long-term benefits?

The Historical Parallel: Two Utopian Experiments of the Past

To understand Ethereum’s current crisis, we need to look at a remarkable historical parallel from Singapore in the 1950s.

During times of gang violence and social disorder in Singapore, Workers’ Party leader Devan Nair proposed a revolutionary prison model—the Pulau Senang experiment. The concept was simple: instead of walls, prisons, and punishment, communities and dignified labor should reform criminals. Warden Daniel Dutton believed that humans are inherently good and only need opportunity and respect.

The early years seemed successful—the recidivism rate dropped to 5%, and the United Nations called it a “miracle of human transformation.” But gradually, resentment grew. Prisoners complained about various issues related to work equity and credit. In July 1963, a mutiny occurred, Dutton was killed, and the “paradise” turned into fire.

Ethereum is repeating this cycle. In March 2024, the Dencun upgrade removed the “economic wall”—the Gas fees—between L1 and L2, with developers believing it would bring prosperity. But like the Pulau Senang experiment, the results fell far short of expectations.

Chapter 1: The Identity Crisis and Natural Resources

The “Not Gold, Not Tech Stock” Dilemma

In 2025, the capital markets became strict in classifying crypto assets. Investors expected only two types: commodities “store of value” like Bitcoin, or high-growth “tech stocks” earning from user activity like Solana. Ethereum tried to be both—“Ultra Sound Money” and “World Computer”—but the market has no patience for a dual narrative.

As a Commodity of Natural Resources:
Bitcoin clearly exhibits commodity characteristics—fixed supply and scarcity at the atomic level. Ethereum, however, is more complex: variable supply due to staking mechanisms, ongoing network upgrades that alter economic parameters—all making it difficult to categorize as “digital gold” for conservative institutions.

As a Technology Platform:
From a business perspective, the key metric is revenue. But by August 2025, even as Ethereum approached an all-time high in price, network protocol revenue had fallen 75% year-on-year, only reaching $39.2 million. For an industry accustomed to P/E valuation and discounted cash flow analysis, this is a significant warning—an earning business should not be shutting down.

The Sandwich Pressure: From Above and Below

The structural challenge becomes clearer: Ethereum is at the center of a competitive landscape, surrounded on all sides.

From Above (Bitcoin):
Ongoing inflows into Bitcoin ETFs and the narrative of “sovereign reserves” strengthen Bitcoin’s dominance. Even with approval of Ethereum ETFs, capital inflow remains much smaller compared to Bitcoin. Institutional investors still trust Bitcoin’s simpler and more secure value proposition.

From Below (Solana and Others):
Solana captured nearly all ecosystem growth in 2025—payments, DePIN, AI agents, meme coins. Its stablecoin velocity and ecosystem revenue outpace Ethereum mainnet. Hyperliquid, in turn, has become a leader in perpetual derivatives, capturing fees more effectively than most Ethereum applications.

Chapter 2: The Regulatory Renaissance and Legal Rebuilding

Project Crypto and the New Regulatory Philosophy

In November 2025, US SEC Chairman Paul Atkins announced “Project Crypto”—a revolutionary reset of regulatory approach. Instead of “Regulation by Enforcement,” the new framework is based on economic reality and clear classification.

The key insight: A token issued as a security initially does not mean it remains a security forever. If the network is sufficiently decentralized and no centralized entity profits from holder returns, it is no longer subject to the Howey Test.

For Ethereum: With 1.1 million validators and the largest distributed node network in the world, the conclusion is clear—ETH is not a security, it is a commodity.

The CLARITY Act and Institutional Recognition

In July 2025, the US House of Representatives passed the Digital Asset Market Clarity Act (CLARITY Act). The legal implications are significant:

• Explicit Classification: Bitcoin and Ethereum are explicitly mentioned as decentralized commodities under the jurisdiction of the CFTC, not the SEC.
• Commodity Definition: A digital commodity is defined as “a fungible digital asset that can be traded directly person-to-person on a cryptographically secured distributed ledger.”
• Banking Integration: The law permits banks to register as “digital commodity brokers,” offering custody and trading services. This means ETH is no longer a high-risk undefined asset on banking balance sheets—it is a commodity asset like gold or foreign exchange.

This regulatory clarity unlocks significant institutional adoption. Pension funds and insurance companies have begun accumulating ETH not as a speculative asset but as a portfolio hedge.

The Compatibility of Staking and Commodity Status

Traditional securities law creates a paradox: if an asset bears interest, is it still a commodity? The 2025 regulatory framework resolves this elegantly:

1. Asset Layer: The ETH token itself is a commodity—gas and security collateral with intrinsic utility.
2. Protocol Layer: Native staking rewards are “labor compensation,” not passive investment returns.
3. Service Layer: If centralized institutions offer custodial staking with guaranteed returns, only then does it become an investment contract.

Under this framework, Ethereum attains “Productive Commodity” status—a combination of a commodity’s inflation hedge and a bond’s yield characteristics. Fidelity reports label it as an “internet bond” due to this unique value proposition.

Chapter 3: The Business Model Evolution: From Dencun to Fusaka

The Income Paradox After Dencun

The Dencun upgrade in March 2024, introducing EIP-4844 (Blob transactions), was a technical success but an economic disaster.

Blob pricing is based on supply and demand. Due to an oversupply relative to demand, the base fee increased only to 1 wei (0.000000001 Gwei). This means:

• L2 networks (Base, Arbitrum, Optimism) earn hundreds of thousands of dollars daily from users
• But Ethereum L1 receives only a few dollars due to minimal Blob pricing

Result: Many L1 execution transactions moved to L2, and the ETH burn mechanism no longer functions efficiently. By Q3 2025, Ethereum’s supply growth rate reached +0.22% annually—undermining the “deflationary asset” narrative supporting ETH price.

The community labels this as a “parasitic” effect—L2 profits while L1 suffers from revenue starvation. This creates an existential crisis for Ethereum’s business model sustainability.

The Strategic Turning Point: Fusaka Upgrade

Fortunately, Ethereum’s developer community was not blind to these issues. On December 3, 2025, the long-awaited Fusaka upgrade was activated. Its core purpose: to repair the value capture mechanism between L1 and L2.

EIP-7918: Floor Price Mechanism

The most revolutionary component is EIP-7918. It changes Blob pricing logic through a “floor price” mechanism—the minimum Blob price cannot fall below a set level. The floor is tied to the L1 execution layer Gas price (specifically, 1/15.258 of the L1 Base Fee).

Practical effect: Even if the Ethereum mainnet is busy, the minimum Blob price automatically rises. L2 networks can no longer avoid paying “rent” to Ethereum L1 for security.

Upon activation, the Blob base fee increased by 15 million times—from 1 wei to 0.01-0.5 Gwei. For L2 users, transaction costs remain low (~$0.01), but L1 revenue skyrocketed by thousands of times.

PeerDAS (EIP-7594): Supply-side Scaling

To prevent choking the L2 ecosystem with higher Blob prices, Fusaka simultaneously introduced PeerDAS. This innovation allows nodes to sample only random portions of data blocks to verify availability, rather than downloading entire blocks. Bandwidth and storage requirements decrease by ~85%.

As a result, Ethereum can increase Blob capacity from 6 to 14 or more blobs per block. Combined with the floor price mechanism, Ethereum successfully implements a “scaling both price and volume” strategy.

The Closed-Loop Business Model

Post-Fusaka, Ethereum has become a clarified “B2B security service tax model”:

• Upstream (L2 Networks): They acquire end users, process millions of high-frequency, low-value transactions
• Core Product (L1): They sell two products:
  • High-value execution space (for L2 settlement proofs, complex DeFi transactions)
  • Large-capacity data space (for L2 transaction history storage)
• Revenue Model: L2 networks pay “rent” proportional to economic value. Most rent is burned (increasing scarcity), a small portion goes to validators as staking rewards

Positive feedback loop: More advanced L2 → greater demand for Blob → more ETH burned → ETH becomes scarcer → more secure network → more high-value assets attracted

Potential impact is significant: according to analysts, ETH burn rate could multiply by 8x in 2026 due to the Fusaka upgrade.

Chapter 4: The Valuation Renaissance: How to Price Trustware?

DCF Model: Tech Stock Valuation

Although classified as a commodity in regulation, Ethereum clearly generates cash flow, making Discounted Cash Flow applicable:

• 21Shares used transaction fees and burn mechanisms in a three-stage growth model
• With a conservative discount rate (15.96%), fair value is $3,998 per ETH
• In an optimistic scenario (11.02% discount), valuation reaches $7,249

EIP-7918 mechanism provides confidence that future income growth is sustainable, no longer dependent on L2 mercy.

Monetary Premium: The Commodity Perspective

Beyond cash flow, Ethereum has intrinsic value as a settlement currency and collateral:

• ETH is core collateral in DeFi ecosystems (TVL >$10 billion)
• Stablecoin minting (DAI), lending protocols, and derivatives trading are all anchored to ETH
• NFT markets and L2 Gas fees are denominated in ETH
• ETF lock-up ($2.76 billion in Q3 2025) and corporate treasury accumulation reduce liquid supply

This supply-demand tension provides a premium similar to gold.

Trustware Pricing: The New Paradigm

The Consensys report introduces the “Trustware” concept—the idea that Ethereum is not just a simple computing platform (gateway like AWS), but a “decentralized, immutable finality provider.”

In tokenizing real-world assets, Ethereum moves from a “transaction processor” to an “asset protector.” The value capture depends not only on TPS but also on the scale of assets protected.

If Ethereum can protect $10 trillions in global assets, and even with just 0.01% annual security tax, its market cap should be sufficient to prevent a 51% attack. This is the “security budget” logic supporting long-term upside.

Chapter 5: The Competitive Landscape and RWA Dominance

Ethereum vs. Solana: Structural Differentiation

Data from 2025 reveals clear market segmentation:

• Solana: Became like Visa or Nasdaq—optimized for highest TPS, lowest latency, perfect for high-frequency trading, payments, DePIN
• Ethereum: Became like SWIFT or FedWire—focused on settlement bundles from L2, less concerned with individual transaction speed

This division of labor is a natural evolution of a mature market. High-value, low-frequency assets (tokenized bonds, large settlements) still trust Ethereum more due to higher security and decentralization; low-value, high-frequency transactions go to Solana.

The RWA Battlefield: Ethereum’s Enduring Moat

In the emerging trillion-dollar real-world assets market, Ethereum remains dominant:

• Flagship projects (BlackRock BUIDL, Franklin Templeton on-chain fund) are all built on Ethereum
• Institutional logic is simple: for assets worth hundreds of millions or billions, security > speed
• Ethereum’s decade-long track record of zero downtime is its deepest moat

Reflection: From Pulau Senang to Ethereum

Ethereum’s journey in 2025 is not just technical or financial. It is philosophical—the question of whether decentralized systems can self-correct and evolve without losing their ideals. In Pulau Senang, utopia began with trust but ended in fire. Ethereum, through Fusaka, attempts to build a sustainable model balanced between security, sustainability, and growth.

A decade of track record does not lie—Ethereum continues to exist, evolve, and improve. 2025 is not Ethereum’s peak. It is only the beginning of the next chapter.