Authors: Konstantin Lomashuk, Artem Kotelskiy
Translation by Dingdong, Odaily Planet Daily
Editor’s note: Recently, publicly listed companies in the U.S. have started to 'reassess' Ethereum. SharpLink Gaming plans to raise up to $1 billion by selling stock to purchase ETH as a strategic reserve; BTCS has also purchased approximately 3,450 ETH for about $8.42 million. These trends may signal a clear message: ETH is transitioning from 'on-chain fuel' to 'enterprise-level strategic asset.'
From a developer community's experimental platform to the infrastructure of DeFi and long-term allocations in corporate finance, Ethereum's role is undergoing profound changes. In this wave of value reassessment, how should we understand the technical logic and economic model behind ETH?
Odaily Planet Daily has translated and refined a deep article co-authored by Ethereum early investor and Lido co-founder Konstantin Lomashuk and Cyber•Fund research director and Princeton mathematics PhD Artem Kotelskiy (Ethereum Roadmap: Becoming the Root Chain of the 'World Computer'). This article systematically sorts out Ethereum's development trajectory, protocol evolution, scaling paths, and its positioning in the Rollup era, attempting to answer a key question: Why is ETH worth being 'held long-term'?
Note: Due to the length of the original text, the translator has made some reductions and optimizations without affecting the original meaning for improved readability.
DeFi: Ethereum's first finding of product-market fit (PMF)
Since its inception, Ethereum has been committed to creating a globally shared, trustless computing platform. After ten years of development, it has evolved from an early technological experiment to the core foundation of decentralized finance (DeFi), the block space market, and the on-chain application ecosystem.
But to understand how ETH arrived at today's point, we must start with a key turning point—the product-market fit (PMF) of DeFi. This occurred during the bear market from 2018 to 2020, with the emergence of protocols like ERC 20, Uniswap, DAI, Aave, and Compound, where Ethereum gradually evolved into a self-custodial, composable, permissionless financial system base. The explosion of DeFi was a natural fit between technological innovation and market demand.
The 'DeFi Summer' of 2020 marked the peak of this phenomenon, with a rapid increase in locked assets and on-chain transaction volume surpassing centralized trading platforms for the first time, revealing the network value of ETH. However, the subsequent high transaction fees also exposed Ethereum's scalability bottleneck and laid the groundwork for future technological route transitions.
The turning point of ETH's value: from EIP-1559 to The Merge
If DeFi showcased Ethereum's practical value, then the upgrades of EIP-1559 and The Merge conferred long-term value logic to ETH.
In 2021, EIP-1559 was launched, fundamentally changing Ethereum's fee mechanism. The original 'priority bidding' model was replaced by the base fee, and the portion of fees paid by all users is no longer owned by miners but is directly destroyed. This means that the more active the network, the more ETH is destroyed, reducing inflation pressure and strengthening ETH's value support.
The indigo section indicates that ETH is beginning to achieve 'value return' through the destruction mechanism.
In September 2022, Ethereum completed a historic upgrade: the consensus mechanism switched from proof of work (PoW) to proof of stake (PoS), marking the official landing of 'The Merge.' This transformative change was technically extremely challenging but also crucial—it reduced Ethereum's energy consumption by 8,000 times and lowered the annual issuance rate required for network security from 4% to less than 1%.
After this, the 'net inflation rate' of ETH turned negative for a considerable period.
Green represents the weekly issuance of new ETH, orange is the weekly destruction of ETH, and blue represents the net difference between the two.
Long-term belief in the Rollup era: Cooperation or parasitism?
Scalability is the core challenge of Ethereum. Faced with the trilemma of decentralization, security, and scalability, Ethereum ultimately chose the Rollup solution. Rollup executes transactions off-chain and only writes state changes and data to the main chain, ensuring the security of the main chain while significantly enhancing transaction throughput.
This also enables Ethereum to transition from a purely 'execution platform' to a 'security layer + data availability layer,' forming a 'Rollup-centric' expansion route.
However, Rollup is not just a technological revolution; it has also changed the logic of ETH's value flow. In the past, users directly paid transaction fees to the main chain, but now most transactions are completed through Rollup, reducing direct transaction demand on the main chain. Rollup earns revenue by reselling block space, but since the Cancun upgrade, its direct fee expenditure to the main chain has significantly decreased, sparking discussions about 'parasitism.' In fact, Rollup acts more as a 'business expansion' of Ethereum, relying on the security and data services of the main chain, bringing in more users and transactions.
Although the demand for transactions on the main chain has decreased, the expansion and upgrade of the main chain are still actively progressing, aiming to increase processing capacity by a hundredfold or even a thousandfold in the coming years, providing stronger security and data support for L2. Rollup and the main chain together form a complementary ecosystem, both specializing and collaborating, laying the foundation for Ethereum's future sustainable development.
Current indicators of Ethereum: Crisis and deep factor analysis
Since the FTX collapse in 2022, the overall crypto industry has continued to grow, but ETH has clearly lagged behind Bitcoin (BTC) and Solana (SOL). The price of ETH is highly correlated with Ethereum network transaction fees, and since 2022, fee growth has been sluggish, especially compared to the performance of Solana in the 2018-2022 cycle and this cycle, revealing significant income pressure. The main reasons are threefold:
Factor A: Rollup 'Parasitism'
Although Rollup profits from user fees, it has not yet returned sufficient value to the Ethereum mainnet.
From the data, this factor exists but currently has little impact on overall revenue. The total weekly revenue of Rollup is only in the millions of dollars, with low fees partly because Rollup's sorters can support gas limits far exceeding those of the mainnet, thus they do not need to charge high fees to users like L1 networks.
Moreover, it is still too early to question why rollup has not fed back to the mainnet. In fact, the Ethereum community has 'unexpectedly' adopted the strategy of providing free data availability (DA) space to rollups to attract as many aggregation layers as possible; this 'benefit' is the correct ecological construction method in the early stages.
Factor B: The strategic focus of L1 shifts to DA, marginalizing the mainnet's construction
Since the start of the Rollup strategy, its focus on strategy and user growth has almost entirely tilted towards Rollup, while the expansion and maintenance of the main network have been relatively overlooked.
This bias is indeed true to some extent. When Ethereum chose to bet on Rollup to solve the high mainnet fee problem, this 'all-in' strategy overlooked the potential of L1 itself. Looking back now, as the issue of Rollup fragmentation gradually surfaces and we have found feasible L1 scaling paths (such as access lists and the development of zkEVM), it appears that the strategic underallocation of L1 may have been excessive.
However, it must be acknowledged that this judgment is based on a retrospective perspective. The Rollup route was originally a pragmatic approach to address the congestion issues of the mainnet at that time, while solutions like zkEVM were still far from realization. Therefore, it was difficult at that time to reasonably allocate resources between L1 and DA.
Moreover, even if we now have a clear path to increase L1 gas limits by 100 times, achieving performance above 10,000 TPS and supporting a comprehensive public chain computing platform will still inevitably require some form of horizontal sharding. In this context, choosing the Rollup-first strategy at that time was still a reasonable decision.
Factor C: The demand for Rollup DA has not yet surpassed the supply of the mainnet's DA.
This is the most critical and overlooked deep issue: the demand for data availability space (DA) from Rollup has not yet materially exceeded Ethereum's supply.
The sorters of Rollup are very efficient in packaging and uploading transactions to the mainnet, achieving a very high compression rate, resulting in them consuming far less blob space than theoretical values. Moreover, some user activities in this cycle (such as Meme coin trading) have also been diverted to Tron and Solana.
Before the Pectra upgrade (May 7, 2025), with 3 blobs per block calculated, Ethereum's DA supply was about 210 TPS. Until November 2024, this supply exceeded market demand. Even after demand rises, blob gas prices indicate that prices have not significantly increased, suggesting that demand has not yet surpassed supply. Recently, Pectra doubled the blob target to 6 per block, further increasing DA supply, far exceeding actual demand.
Therefore, factor C is actually the fundamental variable influencing factors A and B. Once the demand for blob space from Rollup truly exceeds supply, blob fees will enter a market discovery phase, and the overall fee structure of the Ethereum network will undergo a qualitative change.
How to assess the value of ETH? The business logic of Ethereum
Is ETH ultimately a productive asset or a currency? We firmly believe that ETH should primarily be a productive asset and secondly a currency.
The reason is that Ethereum's strongest moat comes from its technical advantages: a trust foundation and stability tested over years, neutrality and censorship resistance brought by decentralization, a leading DeFi ecosystem, a high-quality research and developer community, and a strong network vitality guarantee mechanism. Ethereum is truly an unstoppable 'global computer.'
Secondly, as a productive asset reliant on technology adoption, ETH's monetary value can be solidified and strengthened. While ETH is more likely to cross technology iteration cycles as currency, the most prudent path is to first establish Ethereum as a technological platform, ensuring its economic model is sustainable, after which the monetary attributes will naturally emerge. Conversely, relying solely on 'speculating ETH as currency' cannot build a solid foundation.
In short, the price of ETH is composed of three parts: the discounted value of future transaction fees, the monetary premium (as a store of value, medium of exchange, or even unit of account), and the speculative premium (including cultural and meme value). Although the latter two have a significant impact, to strengthen all three, the key is to maximize foundational network revenue, which is the basis of ETH's value.
Ethereum's long-term Rollup strategy: Why is it correct? The truth behind the competition with Solana
The reason Ethereum steadfastly chooses the 'Rollup-centric' expansion route is very clear: it is the only architectural design that can balance security, scalability, and neutrality.
From a technical supply perspective, Ethereum is currently the safest and most decentralized smart contract platform. Through validating bridges and data availability layers (DA), Ethereum can 'wholesale' the security of the main chain to Rollup, helping them build their own chains without needing to reconstruct an entire trust system.
From the perspective of market demand, users ultimately do not care which chain they are using—they only care about 'where transactions are cheapest and safest.' In the long run, the most rational choice is to become a Rollup, buying security, DA, and consensus, directly connecting to Ethereum. This will naturally create a market convergence phenomenon: Rollups will build their services around Ethereum's 'neutral ledger' like enterprises, rather than dispersing to other isolated chains.
Ethereum vs Solana
According to fee income in 2024, some believe Solana has begun to surpass Ethereum in the block space market. However, Solana's strategy focused on hardware expansion carries high risks, with the network experiencing periodic overload issues. If blockchains are to realize their full potential, that is, to migrate financial infrastructure on a large scale to the chain, Solana will ultimately also need to shift to sharding expansion, while Ethereum is already far ahead in security, Rollup infrastructure, and ecosystem adoption.
More critically, most on-chain activities on Solana stem from the Memecoin craze. Data shows that such transactions once accounted for over 50% of its DEX trading volume. However, Memecoins are a short-term, zero-sum phenomenon—once the hype fades, their 'high-income' myth is hard to sustain.
In contrast, Ethereum focuses on high-retention scenarios such as DeFi, where these protocols are driven not by frenzied speculation but by the on-chain migration of real financial behaviors.
The most significant and important difference: Solana's validation nodes are centralized, while Ethereum has the most diverse staking network globally. This decentralization itself is the strongest moat.
Problems with the Rollup strategy
If the Rollup route is correct, Ethereum's long-term future is bright; why then has ETH's price performed poorly?
On a technical level, the biggest flaw of Rollup is the lack of default interoperability, leading to state fragmentation that severely impacts user and developer experience.
On the business level, the key issue is that Ethereum has not clearly communicated Rollup's business strategy:
Short-term adoption strategy: How to drive rapid Rollup growth?
Long-term moat: Why will Rollup not turn to other data availability platforms?
Rollup's business strategy: Expansion, Differentiation, and Moat
1. Ethereum should prioritize expansion, continually providing ample and low-cost data availability (DA)
The technological network market in which Ethereum resides is fiercely competitive and rapidly changing, and the eventual winners will enjoy powerful network effects. In this environment, the correct strategy is to provide high-quality products and quickly expand the user base at extremely low or even nearly free prices, which is also the growth path of most successful tech networks.
Therefore, Ethereum must keep data availability (DA) prices low, minimizing the entry barrier for Rollup. After the Cancun upgrade, Ethereum offered a capacity of 3 blobs, with short-term supply exceeding demand, effectively suppressing prices. Although this strategy was not deliberate, it achieved good results.
2. Solve Rollup interoperability to improve user and developer experience
Interoperability is the biggest shortcoming of Ethereum in the Rollup era. Fragmentation severely impacts users and developers. Solving interoperability is key to unifying experiences and narrowing the gap with integrated chains, while also constructing a liquidity moat.
The community is actively promoting solutions such as ERC-7683 for second-level cross-chain exchanges of medium-scale assets and 2-of-3 OP+ZK+TEE hour-level large asset cross-chain bridges.
3. Differentiation strategies and moat building
Ethereum needs to achieve differentiation in DA services to attract marginal Rollup clients while building a moat to lock in ecosystem clients.
The key moats come from three major network effects: trust, liquidity, and composability. Currently, the cross-Rollup composability demand is still unclear, with the main value concentrated in trust and liquidity, both of which will naturally extend from Ethereum L1 to the Rollup ecosystem after solving interoperability.
In terms of trust, Rollup enjoys the highest security guarantees through Ethereum's DA, while independent chain security is weaker. The security of Rollup utilizing Ethereum's DA continually strengthens, and the moat is persistently solidified.
In terms of liquidity, the institutional-grade liquidity of Ethereum L1 is an important factor in Rollup's choice. After connecting to Ethereum's DA, Rollup can access ecosystem-wide institutional liquidity, significantly enhancing capital efficiency and forming a solid moat.
Thus, the market will drive Rollup to use Ethereum's DA for the highest security and liquidity. Ethereum should strengthen these two advantages and attract institutional clients through branding and trust.
Path for value return: From 'maximizing fees' to 'maximizing value carrying'
When Ethereum expands data availability (DA) to the level of millions of TPS (such as through solutions like 2D PeerDAS), and the Rollup ecosystem is voluntarily and firmly bound to Ethereum's DA, Ethereum will gain significant fee income.
At the main chain level, the widespread adoption of DeFi and enterprise applications will become the main driving force, while the popularity of Rollup will further amplify this effect. At the same time, Rollup will also pay fees for interoperability and settlement services, further contributing to revenue.
At the DA level, the key to achieving a sustainable economy lies in raising the minimum blob price. The specific approach is to monitor the overall income of Rollup and set a reasonable minimum price that allows Rollup to pass on a certain proportion of value to Ethereum.
For example, in the coming years, if Rollup occupies the CeDeFi payment market, processing about 10,000 TPS with annual revenues in the billions, while Ethereum's DA supply exceeds 10,000 TPS. At that point, although blob transaction fees will not fully enter market price discovery, setting a minimum fee of 0.3 cents per DA transaction would bring about $1 billion in annual revenue to ETH holders.
Further covering high-frequency trading markets, such as social, trading, and AI agent coordination, Rollup's TPS could reach the level of 30,000, generating DA fee revenue exceeding $10 billion, while transaction costs remain below one cent.
Such income is influenced by ETH prices and other factors, requiring dynamic adjustments to the minimum price, which is expected to be determined by community consensus, similar to today's gas limit mechanism. Further research is needed on the optimal pricing strategy for blobs, such as improving the link with the Ethereum L1 fee market. Additionally, as Ethereum transitions to zkEVM or RISC-V, new technologies like SNARK infrastructure will help enhance fee capture efficiency.
The key is that, at the current stage, we should not rush to extract value directly from transactions, but rather maximize support and promote high-value activities in Ethereum blocks and blob space. This not only generates and enhances network effects but also helps Ethereum capture the expanding block space market, solidifying its economic foundation. The path for value return is therefore very clear.
