Recent moves by publicly traded companies indicate a significant shift in how Ethereum is perceived. Corporations are now strategically allocating substantial capital to acquire ETH, signaling its evolution from mere "on-chain fuel" to a cornerstone "enterprise-level strategic asset." This transition reflects a deeper change in Ethereum's role within the global digital economy.
From its origins as an experimental platform for developers to its current status as the backbone of decentralized finance (DeFi) and a growing presence in corporate treasuries, Ethereum continues to redefine its utility and value proposition. How can we make sense of ETH’s underlying technological and economic models amid this reassessment?
How DeFi Marked Ethereum’s First Product-Market Fit
Ethereum was created to become a globally shared, trustless computing platform. A decade into its development, it has matured from an ambitious experiment into the core infrastructure supporting DeFi, block space markets, and a thriving ecosystem of on-chain applications.
A pivotal moment in this journey was Ethereum’s achievement of product-market fit (PMF) through DeFi. During the bear market of 2018–2020, key innovations like the ERC-20 standard and protocols such as Uniswap, DAI, Aave, and Compound emerged. These components gradually shaped Ethereum into a self-custodial, composable, and permissionless foundation for a new financial system.
The "DeFi Summer" of 2020 marked the climax of this phase. Total value locked (TVL) surged, on-chain transaction volumes briefly surpassed those of centralized exchanges, and the inherent value of the Ethereum network became unmistakable. However, skyrocketing transaction fees also revealed critical scalability challenges, setting the stage for the next phase of technical upgrades.
The Value Pivot: How EIP-1559 and The Merge Transformed ETH
If DeFi demonstrated Ethereum’s practical utility, then the upgrades known as EIP-1559 and The Merge established a long-term value thesis for ETH.
Introduced in 2021, EIP-1559 overhauled Ethereum’s fee mechanism. The previous "first-price auction" model was replaced with a base fee that is paid by users and permanently burned (destroyed). This means that the more active the network, the more ETH is burned, reducing inflationary pressure and strengthening ETH’s value.
In September 2022, Ethereum underwent an even more profound transformation: The Merge. This upgrade transitioned the network’s consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS). The technical achievement was monumental—it reduced Ethereum’s energy consumption by over 99.9% and cut the annual issuance rate of new ETH needed for security from approximately 4% to under 1%.
As a result, ETH’s net inflation rate frequently turned negative, meaning more ETH was being destroyed than issued—a deflationary dynamic that enhances scarcity.
The Rollup Era: Cooperation or Parasitism?
Scaling has always been Ethereum’s core challenge. Faced with the blockchain trilemma—balancing decentralization, security, and scalability—Ethereum’s community settled on Rollups as the chosen path forward.
Rollups execute transactions off-chain and submit compressed data and proof back to the mainnet. This preserves Ethereum’s security while dramatically improving transaction throughput. In this new paradigm, Ethereum evolves from a pure execution layer into a security and data availability layer, adopting a "Rollup-centric" roadmap.
However, Rollups don’t just represent a technical shift—they also change how value accrues to ETH. While users now conduct most of their transactions on Layer 2s, the demand for block space on the mainnet has evolved, not disappeared. Rollups resell block space and generate revenue, but since the Dencun upgrade, their direct fee payments to the mainnet have decreased, sparking discussions about "parasitism."
In reality, Rollups act more as business extensions of Ethereum. They rely on the mainnet for security and data services, bringing more users and transactions into the ecosystem. Although mainnet transaction demand may seem reduced, ongoing upgrades aim to increase its capacity by orders of magnitude, further bolstering the L2 ecosystem.
Current Metrics: Analyzing ETH’s Challenges
Since the collapse of FTX in 2022, the broader crypto market has recovered, but ETH’s performance has lagged behind assets like Bitcoin (BTC) and Solana (SOL). ETH’s price is closely correlated with network transaction fees, which have grown more slowly compared to previous cycles.
Three primary factors help explain this dynamic:
Factor A: Do Rollups Extract Value Without Returning It?
While Rollups generate significant user fees, critics argue they don’t sufficiently feed value back to the Ethereum mainnet. Currently, the overall impact is limited—Rollup revenues are still measured in the millions of dollars weekly. Their lower fee structure is made possible by higher gas limits and efficient transaction processing.
It’s also too early to conclude that Rollups aren’t contributing. Ethereum has intentionally provided low-cost data availability (DA) to encourage Rollup adoption—a strategic decision that has successfully accelerated ecosystem growth.
Factor B: Has Mainnet Development Been Neglected?
With the shift toward a Rollup-centric roadmap, some argue that mainnet development and scalability have been deprioritized. There is some truth to this—resources have倾斜 toward L2 solutions.
However, this strategy was a pragmatic response to mainnet congestion. At the time, scaling solutions like zkEVM were still in development. Even with today’s advances, achieving full scalability will likely require some form of sharding. The Rollup-first approach was a reasonable choice given the circumstances.
Factor C: DA Demand Has Not Yet Exceeded Supply
This is the most critical yet overlooked issue: the demand for data availability space from Rollups has not yet exceeded Ethereum’s supply.
Rollups are highly efficient at compressing and submitting data. Until recently, the supply of blob space (introduced in the Dencun upgrade) was more than sufficient to meet demand. Even after the Pectra upgrade increased blob capacity, demand has yet to consistently outpace supply.
Once Rollup demand for blob space genuinely exceeds supply, blob fees will enter a market-driven phase, fundamentally altering Ethereum’s fee structure and revenue potential.
How Should We Value ETH? The Business Logic of Ethereum
Is ETH a productive asset or a currency? We believe ETH is primarily a productive asset, and only secondarily a currency.
Ethereum’ strongest moats are technical: a battle-tested foundation of trust and stability, neutrality and censorship resistance enabled by decentralization, a leading DeFi ecosystem, a high-quality research and development community, and robust liveness guarantees. It is, in many ways, the unstoppable "world computer."
It is precisely because ETH functions as a productive asset—dependent on technological adoption—that its monetary properties can solidify over time. While framing ETH as money might help it endure technological shifts, the sounder path is to ensure Ethereum succeeds as a platform. sustainable economic model will naturally give rise to stronger monetary characteristics.
In short, ETH’s price can be broken down into three components: the discounted value of future fees, a monetary premium (as a store of value, medium of exchange, or unit of account), and a speculative premium (including cultural and meme value). Although the latter two often dominate short-term price action, strengthening all three requires maximizing base-layer network revenue. This is the foundation of ETH’s value.
The Long-Term Rollup Strategy: Why It’s the Right Choice
Ethereum’s commitment to a "Rollup-centric" roadmap is no accident. It is the only architecture that can effectively balance security, scalability, and neutrality.
From a technical standpoint, Ethereum is the most secure and decentralized smart contract platform. Through validating bridges and a robust data availability layer, it can "wholesale" security to Rollups, allowing them to launch their own chains without rebuilding trust from scratch.
From a market perspective, users care less about which chain they are on and more about where they can transact cheaply and securely. In the long run, the rational choice for many projects will be to become a Rollup—purchasing security, DA, and consensus from Ethereum. This creates a powerful convergence effect: Rollups will naturally cluster around Ethereum’s "neutral ledger," rather than fragmenting across isolated networks.
Ethereum vs. Solana
Some argue that Solana has begun to outperform Ethereum in block space revenue based on 2024 metrics. However, Solana’s hardware-dependent scaling model carries risks, and the network has experienced periodic congestion. If blockchain is to reach its full potential—moving global financial infrastructure on-chain—even Solana may eventually need to adopt sharding or similar scaling techniques.
Crucially, a significant portion of Solana’s recent on-chain activity has been driven by Memecoin trading, which can be volatile and speculative. Ethereum, by contrast, is home to more established, high-value use cases like DeFi, which represent real financial behavior migrating on-chain.
The most important difference, however, lies in decentralization. Solana’s validator set is relatively concentrated, while Ethereum boasts the most diverse and globally distributed staker network—a powerful moat in itself.
Challenges Within the Rollup Strategy
If the Rollup roadmap is so promising, why has ETH’s price performance been muted?
Technically, the biggest drawback is the lack of native interoperability between Rollups, leading to a fragmented user and developer experience.
From a business perspective, the key issue is that Ethereum has not yet clearly communicated its Rollup strategy:
- Short-term adoption: How will Ethereum drive Rollup growth?
- Long-term moat: Why won’t Rollups migrate to other data availability platforms?
A Business Strategy for Rollups: Growth, Differentiation, and Moats
1. Prioritize Expansion with Affordable Data Availability
Ethereum operates in a highly competitive and fast-moving market. The winner in such markets is often the network that achieves scale first and benefits from powerful network effects. The correct strategy, therefore, is to offer a superior product (DA) at an extremely low cost to maximize adoption.
Ethereum must keep data availability prices low to minimize barriers for Rollups. The post-Dencun upgrade provision of 3 blobs per block created a supply that exceeded demand, effectively suppressing prices—an unintentional but beneficial outcome.
2. Solve Rollup Interoperability
Fragmentation is the biggest user experience hurdle in the Rollup era. Solving interoperability will create a unified experience, narrowing the gap with integrated chains like Solana, and is key to building a liquidity moat.
The community is actively advancing solutions like ERC-7683 for near-instant cross-rollup swaps and more secure bridges for large asset transfers.
3. Differentiation and Moat Building
Ethereum must differentiate its DA offering to attract marginal Rollup clients while building moats to lock in existing ones.
Key moats stem from three network effects: trust, liquidity, and composability. While cross-rollup composability is still evolving, immense value is already concentrated in trust and liquidity. These will naturally extend from Ethereum L1 to the Rollup ecosystem once interoperability is solved.
In trust, Rollups using Ethereum DA benefit from the highest security standard—a moat that continues to strengthen.
In liquidity, Ethereum L1’s deep institutional liquidity is a major draw. Rollups tapping into this via Ethereum DA gain capital efficiency, forming a powerful liquidity moat.
The market will naturally incentivize Rollups to use Ethereum DA for superior security and liquidity. Ethereum should reinforce these advantages and leverage its brand to attract institutional clients.
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The Path to Value Accrual: From "Maximizing Fees" to "Maximizing Value"
Once Ethereum scales its data availability to millions of TPS (through technologies like 2D PeerDAS) and the Rollup ecosystem is voluntarily and firmly anchored to Ethereum DA, Ethereum will generate significant fee revenue.
On the mainnet, widespread DeFi and enterprise adoption will be primary drivers, amplified by Rollup activity. Rollups will also pay fees for interoperability and settlement services, further contributing.
At the DA layer, the key to a sustainable economic model is establishing a minimum blob price. This involves monitoring aggregate Rollup revenue and setting a floor price that ensures Rollups pass a portion of their value back to Ethereum.
For example, in a future where Rollups capture a segment of the CeDeFi payments market processing ~10,000 TPS and generating billions in annual revenue, and Ethereum DA supply exceeds 10,000 TPS, a minimum fee of $0.003 per DA transaction could generate approximately $1 billion in annual revenue for ETH holders.
Extending this to high-frequency use cases like social media, trading, and AI agent coordination could push Rollup TPS to 30,000+, generating over $10 billion in annual DA fees—all while keeping transaction costs under a penny.
This minimum price would need to be dynamically adjusted, likely governed by community consensus similar to today’s gas limit mechanism. Future research is needed on optimal blob pricing and its integration with Ethereum’s L1 fee market. Furthermore, as Ethereum evolves toward zkEVM or RISC-V architectures, new tech like SNARK infrastructure could improve the efficiency of fee capture.
The key insight is that the current focus should not be on extracting maximum value from every transaction, but on maximizing and supporting high-value activity across Ethereum’s block and blob space. This will generate and strengthen network effects, allowing Ethereum to capture a growing share of the block space market and solidify its economic foundation. The path to value accrual is clear.
Frequently Asked Questions
What gives ETH its value?
ETH derives its value from three primary sources: its utility as fuel for network transactions (gas fees), its role as a productive asset that captures value from network activity (e.g., through fee burning in EIP-1559), and its monetary premium as a decentralized store of value and medium of exchange.
How does EIP-1559 contribute to ETH's value?
EIP-1559 introduced a mechanism where a base fee for transactions is burned (destroyed). This creates a deflationary pressure on ETH supply when the network is busy, directly linking ETH's scarcity to its utility and demand, thereby enhancing its value proposition.
Are Rollups taking value away from the Ethereum mainnet?
This is a common concern, but the current relationship is more symbiotic than parasitic. Rollups rely on the mainnet for security and data availability. While they reduce direct fee pressure on L1, they drive overall ecosystem growth, bringing new users and use cases, which ultimately increases the demand for and value of Ethereum's core services.
What is Ethereum's main advantage over competitors like Solana?
Ethereum's primary advantages are its superior decentralization, robust security model proven over years of operation, and a massive, established ecosystem of developers and applications (especially in DeFi). While other chains may offer higher throughput, Ethereum's security and neutrality make it the preferred settlement layer for high-value applications.
How will Ethereum scale to handle more users?
Ethereum is scaling through a layered approach. The mainnet (Layer 1) is being optimized for security and data availability, while execution is moved off-chain to Layer 2 Rollups. This "Rollup-centric" roadmap, combined with future upgrades like data sharding (e.g., Danksharding), aims to massively increase capacity without compromising decentralization.
What is the long-term vision for ETH as an asset?
The long-term vision is for ETH to function as a foundational internet asset—a productive capital asset that generates value from the fees of a global digital economy and also serves as a credible, neutral reserve currency within the crypto ecosystem and beyond.