The narrative around Ethereum (ETH) is undergoing a profound transformation. Once viewed primarily as “gas” for transactions, ETH is increasingly being recognized as a strategic asset by public companies and institutions. Recent moves by firms like SharpLink Gaming—planning up to $1 billion in ETH purchases—and BTCS, which acquired over 3,450 ETH, signal a shift in perception: ETH is evolving from utility token to long-term digital treasury reserve.
This reevaluation stems from deeper technological maturity, economic innovation, and strategic positioning. To understand why ETH may be worth holding for the long term, we must examine its technical evolution, economic model, and role in the emerging Rollup-centric ecosystem.
DeFi: Ethereum’s First Product-Market Fit
Ethereum was founded with an ambitious vision: to create a global, trustless computing platform. Over the past decade, it has matured into the foundational layer for decentralized finance (DeFi), on-chain applications, and digital economies.
A pivotal moment came between 2018 and 2020—during a prolonged bear market—when key protocols like ERC-20, Uniswap, DAI, Aave, and Compound emerged. These innovations laid the groundwork for a self-custodial, composable, permissionless financial system built on Ethereum.
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The 2020 "DeFi Summer" marked peak momentum. Total value locked (TVL) surged, and on-chain trading volume briefly surpassed centralized exchanges. For the first time, Ethereum demonstrated real utility and network value. However, this success also exposed a critical limitation: scalability. Soaring transaction fees highlighted the urgent need for architectural evolution.
The Turning Point: EIP-1559 and The Merge
While DeFi proved Ethereum’s practical use cases, two major upgrades fundamentally altered ETH’s economic model: EIP-1559 and The Merge.
EIP-1559: Introducing Value Accrual
Launched in 2021, EIP-1559 replaced the auction-based fee system with a base fee automatically burned after each transaction. This mechanism means that the more active the network, the more ETH is removed from circulation, reducing inflationary pressure.
This innovation transformed ETH from a purely consumable resource into a deflationary asset under certain conditions—creating a direct link between usage and scarcity.
The Merge: Transition to Proof-of-Stake
In September 2022, Ethereum completed “The Merge,” shifting from energy-intensive proof-of-work (PoW) to efficient proof-of-stake (PoS). The impact was monumental:
- Energy consumption dropped by ~8,000x
- Annual issuance fell from ~4% to under 1%
- Combined with EIP-1559 burns, ETH entered periods of net-negative issuance
When more ETH is burned than issued, the total supply contracts—strengthening its case as a sound monetary asset and long-term store of value.
Rollups: The Future of Scalability and Value Flow
To solve blockchain’s trilemma—decentralization, security, and scalability—Ethereum adopted Rollups as its core scaling solution. Rollups execute transactions off-chain while posting compressed data back to Ethereum (Layer 1), ensuring security without sacrificing throughput.
This shift redefines Ethereum’s role: no longer just an execution layer, it now functions as a security and data availability (DA) layer—the foundation upon which Layer 2s are built.
However, this transition sparked debate: if most transactions occur on Rollups, does Ethereum lose revenue? Some critics argue Rollups are “parasitic,” benefiting from Ethereum’s security without adequately compensating it.
But this overlooks a crucial point: Rollups depend entirely on Ethereum’s trust-minimized infrastructure. They pay for data availability and finality—services only a highly decentralized, battle-tested chain can provide reliably.
Why Ethereum Still Leads: Addressing Key Challenges
Despite strong fundamentals, ETH has underperformed BTC and even Solana since the 2022 FTX collapse. Three interrelated factors explain this:
1. Rollup “Parasitism” Is Overstated
While Rollups currently retain most user fees, their reliance on Ethereum’s DA layer creates indirect value accrual. Moreover, low blob usage prices today reflect abundant supply—not lack of demand.
With Pectra upgrading blob capacity from 3 to 6 per block (May 2025), supply remains high. But when demand eventually exceeds supply, blob fees will rise organically, turning DA into a major revenue stream.
2. L1 Innovation Was Deprioritized
Post-Rollup adoption, focus shifted heavily toward Layer 2s, leaving Layer 1 upgrades behind. While pragmatic at the time—given zkEVM immaturity—it may have underestimated L1’s potential.
Yet hindsight bias applies: Rollup-first was the right call given constraints. Future improvements like sharding or zkEVM integration could revitalize L1 capabilities without compromising decentralization.
3. DA Demand Hasn’t Outpaced Supply
This is the root cause. Current Rollup data compression is so efficient that actual blob consumption lags far behind theoretical needs. Until demand consistently exceeds supply, fee pressure won’t materialize.
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Once usage scales—especially with AI agents, social apps, and high-frequency trading—the dynamics will shift dramatically.
Is ETH a Productive Asset or a Currency?
We argue ETH should be seen first as a productive asset, second as a currency.
Its value stems from technological superiority: battle-tested security, robust developer ecosystem, leading DeFi protocols, and strong network effects. These create a durable foundation for economic activity.
As adoption grows, so does ETH’s monetary premium—as a store of value, medium of exchange, and unit of account. But these attributes emerge from utility, not speculation alone.
ETH’s price reflects three components:
- Discounted future fee income
- Monetary premium
- Speculative/cultural value
To strengthen all three, maximizing base network income is essential—and that starts with enabling high-value use cases at scale.
Ethereum vs. Solana: A Tale of Sustainability
Some point to Solana’s higher fee revenue in 2024 as evidence of superiority. But much of Solana’s activity comes from memecoins—short-lived speculative trends.
Ethereum powers high-intent financial applications like lending, derivatives, and asset management—activities with lasting economic value.
Moreover:
- Solana suffers from network outages due to hardware bottlenecks
- Its validator set is less decentralized
- It lacks native support for secure cross-chain interoperability
In contrast, Ethereum offers unmatched decentralization and resilience—its greatest moat.
Building a Sustainable Rollup Economy
To unlock long-term value, Ethereum must refine its business strategy around Rollups:
Strategy 1: Expand Access with Low-Cost DA
To win the platform war, Ethereum must keep DA affordable—just as successful tech networks did historically (e.g., AWS early pricing). Cheap DA lowers entry barriers and accelerates ecosystem growth.
Strategy 2: Solve Interoperability
Fragmentation across Rollups harms UX and composability. Initiatives like ERC-7683 (fast bridging) and hybrid bridges (OP+ZK+TEE) aim to unify experiences and preserve liquidity within the Ethereum sphere.
Strategy 3: Strengthen Trust & Liquidity Moats
Two powerful network effects anchor Rollup loyalty:
- Trust: Security derived from Ethereum’s PoS consensus
- Liquidity: Access to deep institutional capital on L1
As interoperability improves, these advantages extend seamlessly across Rollups—making migration elsewhere less attractive.
The Path to Value Recapture
When Ethereum supports millions of TPS via advanced DA solutions (e.g., 2D PeerDAS), and Rollups become structurally dependent on its infrastructure, fee income will surge.
Imagine:
- Rollups processing 10K–30K TPS in payments, trading, AI coordination
- A minimal blob fee of $0.003 per transaction
- Annual ETH burn reaching $1–10+ billion
Such revenue would flow directly to ETH holders through deflationary mechanics—without compromising usability.
Pricing must evolve dynamically—guided by community governance—to balance growth and sustainability.
FAQ
Q: Can Ethereum ever compete with Solana on speed?
A: Not directly—and it doesn’t need to. Ethereum focuses on being the secure settlement layer; Rollups handle speed. Together, they offer both performance and safety.
Q: Why don’t Rollups pay more to Ethereum today?
A: Because DA supply exceeds demand. Once usage scales past capacity (expected post-Pectra), market-driven blob fees will naturally increase revenue.
Q: Is ETH a good long-term investment?
A: If you believe in the future of decentralized systems, digital ownership, and global financial infrastructure moving on-chain, then ETH’s foundational role makes it a compelling asset.
Q: How does staking affect ETH’s value?
A: Staking secures the network with ~1% annual issuance. Combined with EIP-1559 burns, it often results in net deflation—increasing scarcity over time.
Q: Will sharding make Ethereum faster?
A: Sharding enhances data availability for Rollups—not direct L1 execution speed. It enables cheaper DA, fueling broader ecosystem growth.
Q: Can other chains replace Ethereum as the DA layer?
A: Unlikely. No other platform matches Ethereum’s decentralization, security track record, developer mindshare, and institutional trust.