ETH 2025: From Regulatory Chaos to the Fusaka Salvation Model

The Identity Crisis That Paralyzed Ethereum

2025 was the year Ethereum faced an existential question: who are you really? It wasn’t a technical crisis but an identity one.

Despite upgrades, influencers, and community campaigns, the market categorized ETH into an uncomfortable niche: neither pure gold like Bitcoin nor a high-speed engine like Solana. On the store of value side, it lacked the purity and simplicity of BTC. On the technical performance side, it was outperformed by Solana in throughput, DePIN, and high-frequency trading, while Hyperliquid dominated fee capture. Meanwhile, the 2024 Dencun upgrade proved a double-edged sword: it lowered gas fees for L2s but drained Ethereum’s coffers.

Q3 2025 data don’t lie: despite ETH nearing all-time highs, protocol revenues plummeted 75% year-over-year to just $39.2 million. For institutional investors evaluating via P/E ratio, it was a sign of a collapsing business model. Ethereum seemed trapped in a “gray zone,” lacking a coherent narrative.

The Historical Analogy: Pulau Senang and the Failed Utopian Dream

This scenario strangely echoes Singapore’s prison experiment in the 1960s. In 1960, prison director Daniel Dutton conceived a “prison without walls” on Pulau Senang, believing that freedom and trust could redeem criminals. There were no fences, barbed wire, or armed guards—only dignified work and community. Initially, it seemed a miracle: recidivism was only 5%, attracting UN attention.

But human nature isn’t fooled by technology. When greed and dissatisfaction grew, July 1963 arrived. The inmates, armed with the same tools—shovels, machetes, parang—revolted. They burned down the structures they had built, killed Dutton who believed in their redemption, and turned utopia into nightmare.

Ethereum repeated the same mistake in March 2024 with Dencun (EIP-4844): it tore down the “economic wall” between L1 and L2, offering data space almost for free, hoping Layer 2 would restore value to the mainnet. Instead, L2s launched a “silent economic predation”: earning tens of thousands of dollars daily in fees while paying Ethereum only a few dollars.

The Post-Dencun Paradox: Uncontrolled Volatility

Dencun introduced Blob transactions (EIP-4844) with a simple demand-supply-based pricing mechanism. Since Blob space initially far exceeded demand, the Base Fee collapsed to 1 wei—virtually zero.

The result? Base and Arbitrum paid Ethereum a negligible “rent” while charging users significant fees. At the same time, transactions that previously went on L1 moved to L2, reducing ETH burn via EIP-1559. In Q3 2025, Ethereum’s inflation rose back to +0.22% annualized, losing the “deflationary asset” narrative that had supported the bull case for years.

It was the situation of “L2 eating the meat, L1 eating the wind”—the community called it the “parasite effect.”

The Regulatory Turning Point That Changed Everything

While Ethereum was in chaos, the US took a crucial step. In November 2025, SEC Chairman Paul Atkins announced “Project Crypto”—the regulatory reset plan ending years of “Regulation by Enforcement.”

The key innovation: the SEC introduced the “Token Taxonomy,” recognizing that digital asset properties are fluid. A token isn’t a security forever. With over 1.1 million validators and the most distributed node network in the world, Ethereum was officially recognized as a non-security.

In July 2025, Congress passed the “Digital Asset Market Clarity Act” (CLARITY Act), assigning ETH to CFTC jurisdiction and defining it as a “digital commodity.” This meant banks could register as “digital commodity brokers,” offering custody and trading of ETH to clients. In bank balance sheets, ETH was no longer a high-risk undefined asset but a commodity like gold or foreign currencies.

The staking issue was elegantly resolved: ETH layer remains a commodity, while native staking is considered a “validation service,” not an investment contract. Institutional investors began viewing ETH as a “Productive Commodity”—an “internet bond” with anti-inflationary properties.

Fusaka: The Business Model Repair

On December 3, 2025, Ethereum finally launched the Fusaka upgrade— the true turning point.

EIP-7918: The “Floor Price” of Blobs

The most significant proposal was EIP-7918, which radically changed Blob pricing. Instead of an unlimited downward price, the protocol set a minimum floor price linked to the execution layer gas price of L1 ( precisely 1/15,258 of the L1 Base Fee). This meant that as long as the mainnet was busy, the “minimum price” for Blob space increased automatically.

The result was instant and dramatic: the Blob Base Fee increased by 15 million times, from 1 wei to 0.01-0.5 Gwei. For L2 users, transaction costs remained low (around $0.01), but for the Ethereum protocol, revenues exploded.

PeerDAS: Expanding Supply

To prevent the higher price from stifling L2 development, Fusaka simultaneously introduced PeerDAS (EIP-7594). This mechanism allows nodes to sample only a small random part of Blobs instead of downloading the entire dataset, reducing bandwidth and storage pressure by about 85%.

This enabled Ethereum to drastically increase Blob supply—the target blocks per second gradually rose from 6 to 14 or more. With the minimum price rising and the available quantity increasing, Ethereum built a “price and volume increase” model.

The New Model: “Seigniorage of Digital Security”

Post-Fusaka, Ethereum operates as a B2B fiscal system based on security services:

• Upstream: Layer 2 (Base, Optimism, Arbitrum) act as “distributors,” capturing high-frequency, low-value transactions
• Core: Ethereum L1 sells two commodities: high-value execution space (for L2 settlement) and high-capacity data space (Blob)
• Virtuous cycle: More L2s prosper → higher Blob demand → even with low unit price, volume is high → more ETH burn → ETH deflationary → increased network security

According to analyst Yi, after Fusaka, ETH burn rate in 2026 could increase by 8 times.

Valuation: How to Price “Trustware”

With a clarified business model, the question becomes: how to value this hybrid asset?

DCF Approach: 21Shares estimated ETH’s fair value between $3,998 (conservative scenario) and $7,249 (optimistic scenario) based on cash flows and burn mechanisms. EIP-7918 provides solid support for linearly projecting minimum L1 income.

Monetary Premium: ETH is the main collateral in DeFi (TVL over $100 billion), the trust anchor for DAI and other stablecoins, and the unit of account in the NFT market. With ETFs locking ETH and corporate reserves (Bitmine holds 3.66 million ETH), liquidity tightens, granting a premium similar to gold.

“Trustware”: Consensys introduced the concept that Ethereum doesn’t just sell computing power but “decentralized and immutable finality.” With RWA onboarding, Ethereum will shift from “processing transactions” to “protecting assets.” If it safeguards $10 trillion of global assets by applying a 0.01% annual “security tax,” Ethereum’s market cap must be proportional to the economic value it supports.

The Competitive Landscape: Market Segmentation

By 2025, the division became structural:

Solana is Visa/Nasdaq: extreme TPS, low latency, ideal for trading, payments, and DePIN.

Ethereum is SWIFT/FedWire: it doesn’t process every purchase but focuses on “settlement packets” containing thousands of transactions. High-value, low-frequency assets (tokenization of government bonds, cross-border settlement) prefer Ethereum for greater security.

In the RWA domain—the future trillion-dollar market—Ethereum remains dominant. BlackRock BUIDL and Franklin Templeton have chosen Ethereum for reference projects. The institutional logic is simple: for assets from hundreds of millions to billions, security comes before speed. Ethereum’s ten years of uninterrupted uptime is its deepest moat.

The Conclusion: A Leap of Faith

Did Ethereum lose its way? In 2025, it made a risky leap toward the “seigniorage of the digital economy base” model, abandoning Pulau Senang’s utopian dream. Like that wall-less prison burned in the flames of revolt, Ethereum had to accept that technology alone can’t solve human economic dynamics.

But unlike Pulau Senang, Ethereum survived. It redesigned the rules, gained regulatory recognition, and rebuilt its business model on firmer foundations. It’s not a story of utopian redemption but pragmatic adaptation. Whether Fusaka lands on a haystack or on solid rock, only time will tell.