Analysis of ETH Value: From Technical Asset to Corporate Strategic Reserve Transformation

Ethereum is undergoing a significant shift in its role positioning. Recently, U.S. publicly traded companies like SharpLink Gaming and BTCS have started to incorporate ETH into their strategic reserves, sending a clear signal: ETH is transforming from merely "on-chain fuel" to "enterprise-grade strategic asset".

Behind this shift lies the profound evolution of Ethereum from a developer experimentation platform to DeFi infrastructure to corporate financial allocation options. Let's explore the technical logic and economic model behind ETH and understand why it's worth holding for the long term.

DeFi: The First Product-Market Fit for Ethereum

Since its inception, Ethereum has aimed to become a globally shared trustless computing platform. After ten years of development, it has transformed from an early technological experiment into the cornerstone of DeFi, the blockchain space market, and the on-chain application ecosystem.

To understand the development process of ETH, we must start from the market convergence point of DeFi products. During the bear market from 2018 to 2020, with the emergence of ERC-20 standards, decentralized exchange protocols, stablecoins, and lending platforms, Ethereum gradually became the bottom layer of the self-custodial, composable, and permissionless financial system. This natural fit between technological innovation and market demand reached its climax in the "DeFi summer" of 2020, when on-chain trading volume surpassed centralized exchanges for the first time, and the value of ETH's network began to emerge.

However, the high transaction fees that followed have also exposed Ethereum's bottleneck in scalability, laying the groundwork for future technological transformations.

The Value Turn of ETH: From EIP-1559 to the Merge Upgrade

If DeFi has showcased the practical value of Ethereum, then EIP-1559 and the merge upgrade have endowed ETH with a long-term value logic.

In 2021, EIP-1559 revolutionized Ethereum's fee mechanism. The original "Preferred Bidding" model is replaced by the base fee, which is no longer owned by the validator and is burned directly. This means that the more active the network, the more ETH is burned, the less inflationary pressure there is, and the stronger the value support of ETH.

In September 2022, Ethereum completed a historic upgrade: it switched from Proof of Work (PoW) to Proof of Stake (PoS), officially completing the "Merge". This transformation 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%. Since then, the net inflation rate of ETH has turned negative for a long time, providing strong support for its value.

Rollup Era: Cooperation or Parasitism?

Scaling is a core challenge for Ethereum. Faced with the trilemma of decentralization, security, and scalability, Ethereum chose the Rollup solution. This technology puts transaction execution off-chain, and only writes state changes and data to the main chain, which not only ensures security, but also improves transaction throughput.

This transforms Ethereum from a simple "execution platform" to a "security layer + data availability layer", forming a "Rollup-centric" scaling route. This is not only a technological change, but also a change in the logic of ETH's value flow. In the past, users paid fees directly to the main chain, but now most transactions are completed through Rollup, and the demand for direct transactions on the main chain is reduced.

There is an opinion that Rollup is a "parasite" of Ethereum, especially after the Cancun upgrade, and its direct expenses on the main chain have been greatly reduced. However, a more reasonable view is that Rollup, as a "business extension" of Ethereum, relies on the security and data services of the main chain to bring more users and transactions to the ecosystem. Although the demand for transactions on the main chain has declined, the expansion and upgrading of the main chain is still actively promoted, with the goal of increasing the processing capacity by 100 or even 1,000 times in the next few years to provide stronger support for L2.

Challenges Facing Ethereum: A Deep Analysis of Stagnant Growth

Since 2022, the overall cryptocurrency industry has maintained growth, but ETH has clearly lagged behind Bitcoin and other emerging public chains. The price of ETH is highly correlated with network fees, and in recent years, the growth of fees has been sluggish, leading to significant revenue pressure. There are three main reasons:

( 1. The value of Rollup is insufficient in its feedback.

Although Rollups make money through user fees, they currently have limited value returns to the mainnet. However, it is too early to question the feedback - the Ethereum community "intentionally" adopts the strategy of providing free data availability space to Rollups in order to attract more Rollup access, and this kind of "concession" is necessary for the early construction of the ecosystem.

) 2. Strategic focus shift

Since the launch of the Rollup strategy on Ethereum, the focus on strategy and user growth has almost entirely shifted towards the Rollup ecosystem, while the expansion and maintenance of the mainnet have been relatively neglected. Looking back now, this "all in" strategy may have overlooked the potential of L1 itself, but at the time, the Rollup strategy was a pragmatic choice to address congestion issues, making it difficult to perfectly allocate resources between L1 and DA.

( 3. Demand has not yet exceeded supply

The most critical and overlooked problem is that the demand for data availability space in rollups has not substantially exceeded the supply of Ethereum. The rollup sequencer is very efficient when packaging and uploading transactions, and the compression ratio is extremely high, resulting in much less blob space consumed than the theoretical value. Even as demand rises, blob gas prices have not risen significantly, suggesting that supply still far exceeds actual demand.

Once the demand for blob space by 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.

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The Essential Value of ETH: Productive Asset or Currency?

Is ETH a productive asset or a currency? A more reasonable positioning is: ETH is primarily a productive asset, and secondly a currency.

Ethereum's strongest moat comes from its technological advantages: a long-validated trust foundation, neutrality and censorship resistance brought by decentralization, a leading DeFi ecosystem, a high-quality developer community, and strong network activity. Ethereum is gradually becoming a truly unstoppable "global computer."

As a productive asset that relies on technological adoption, the monetary value of ETH can be firmly strengthened. While monetary attributes are easier to span the technology iteration cycle, the most robust path is to build Ethereum as a technology platform to ensure a sustainable economic model, and then monetary characteristics emerge naturally. Relying solely on "speculating on ETH as a currency" will not build a solid foundation.

In a nutshell, the ETH price consists of three parts: the discounted value of future fees, the monetary premium ### the store of value, the medium of exchange, the unit of account ### and the speculative premium ( cultural and memetic value ). To strengthen all three, the key is to maximize the network's underlying revenue, which is the foundation of ETH's value.

Ethereum vs Solana: A Battle of Technical Routes

Ethereum chooses the "Rollup-centric" scaling route because it is the only architectural design that can balance security, scalability, and neutrality.

From a technical perspective, Ethereum is currently the most secure and decentralized smart contract platform. By using verification bridges and data availability layers, Ethereum can "wholesale" the security of the main chain to Rollups, helping them build their own chains without the need to rebuild trust systems.

From the perspective of market demand, users ultimately care about transaction costs and security, rather than the underlying public chain. In the long run, it is the most rational choice to become a Rollup and directly connect with Ethereum. This will lead to market convergence: Rollups will build services around Ethereum, a "neutral ledger", just like enterprises.

Some analysts believe that Solana is beginning to surpass Ethereum in fee income. However, Solana's strategy of focusing on hardware expansion is risky, and the network is periodically overloaded. For blockchains to reach their full potential, Solana will eventually need to move to sharding as well.

What's more, most of Solana's on-chain activity comes from the Memecoin boom, which at one point accounted for more than 50% of its DEX trading volume. However, Memecoin is a short-term, zero-sum game phenomenon, and it is difficult to maintain "high income" after the heat has passed. In contrast, Ethereum focuses on high-stickiness scenarios such as DeFi, which represents the on-chain migration of real financial behavior.

The key difference is: Solana's validation nodes are relatively centralized, while Ethereum has the most diverse network of stakers globally, and this decentralization itself is the strongest moat.

Optimization Directions for Rollup Strategies

If the Rollup route is correct, why is the ETH price performing poorly?

From a technical perspective, the biggest flaw of Rollup is the lack of default interoperability, which leads to state fragmentation and affects the user and developer experience.

At the business level, the key issue is that Ethereum has not yet clearly communicated the Rollup business strategy: how to drive the rapid growth of Rollup? Why won't Rollup move to other data availability platforms?

( Ethereum's business strategy recommendations

1. Priority expansion, providing ample low-cost data availability In the competition of technical networks, the correct strategy is to rapidly expand the user base at a low price. Ethereum should keep the price of data availability low and lower the access threshold for Rollups.

2. Solve Interoperability Issues Interoperability is the biggest shortcoming of Ethereum in the Rollup era. Fragmentation severely affects user experience, and the community is actively promoting solutions such as ERC-7683 for second-level asset cross-chain exchange.

3. Build a differentiated moat Ethereum needs to differentiate its data availability services while building a moat. The key moat comes from the three network effects of trust, liquidity, and composability. The current value is focused on trust and liquidity, both of which will naturally scale across the ecosystem when interoperability is addressed.

The Future Path of Value Reflow

When Ethereum scales data availability to millions of TPS and the Rollup ecosystem is firmly bound to Ethereum, Ethereum will receive significant fee income.

At the main chain level, the widespread adoption of DeFi and enterprise applications will become a major source of revenue, while the popularization of Rollups will further amplify this effect. At the same time, Rollups will also incur costs for interoperability and settlement services.

In terms of data availability, the key to a sustainable economy is to set a reasonable minimum blob price. For example, in the next few years, assuming that the Rollup processes about 10,000 TPS and generates billions of dollars in annual revenue, if it is set to burn 0.3 cents per DA transaction, it can generate about $1 billion in annual revenue for ETH holders.

As Rollups cover more high-frequency trading markets, such as social, trading, and AI agent coordination, TPS can reach 30,000 levels, and DA fee revenue will exceed $10 billion, while transaction costs remain below one cent.

At the current stage, one should not rush to extract trading value, but rather support and promote high-value activities in the block and blob space. This will not only generate and enhance network effects but also help Ethereum capture the expanding block space market, solidifying its economic foundation. The path for value return is therefore very clear, and the value logic of ETH as a long-term holding asset is also more robust.

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