## How Does Ethereum Break Out of the Technical Trap? Fusaka's Upgraded Business Model Reimagined

2025 is a year full of contradictions for Ethereum. Despite its large developer community, continuous technical upgrades, and increasingly sophisticated infrastructure, the performance in the secondary market has been disappointing. Ethereum finds itself in an "awkward middle ground": as an asset storage tool, it lacks Bitcoin’s simple consensus and risk hedging properties; as a high-performance execution layer, it faces fierce competition from efficient layer-2 solutions like Solana and Hyperliquid. These chains seem better aligned with market pricing logic in terms of throughput and fee structures.

Ironically, the 2024 Dencun upgrade was supposed to bring new narrative glory but instead exposed a fatal economic dilemma: the prosperity of Layer 2 networks is eating into Layer 1’s revenue. As a large volume of transactions migrate to Layer 2, Ethereum mainnet’s fee income plummets. By August 2025, despite ETH reaching new highs, network protocol revenue had plunged 75% year-over-year to just $39.2 million—signaling a collapse in traditional business models.

## When Ideals Meet Reality: The Metaphor of Pulau Senang

This dilemma can be explained by a piece of buried history. In 1960, Singapore prison reformer Devan Nair proposed a seemingly crazy experiment: establishing a "Utopian Prison" on Pulau Senang, replacing high walls and chains with trust and dignity. Warden Daniel Dutton believed in human goodness, removing armed guards, barbed wire, and shackles, allowing prisoners to participate in island construction. Initial results were remarkable—recidivism was only 5%, and it was hailed by the UN as a "miracle of human transformation."

But ideals eventually unraveled in reality. When prisoners grew dissatisfied with work assignments and release times, resentment spread. In July 1963, long-standing discontent erupted into a riot—trusted prisoners attacked guards with pickaxes and knives, burning down facilities they had built themselves. Dutton himself was killed. That "Utopia" was ultimately reduced to ashes in the flames.

Ethereum is playing out a similar story. The March 2024 Dencun upgrade is like establishing this "Utopian Island." Core developers, like Dutton, hold a grand vision of "centered on Rollups," providing almost free, cheap blob data space to Layer 2. They believe that Layer 2 prosperity will eventually feed back into the mainnet, creating a win-win ecosystem.

But reality betrayed this ideal. Layer 2 networks did not show gratitude—they launched "economic plunder"—charging users high transaction fees while paying only minimal blob fees to Ethereum mainnet. Layer 2 solutions like Base sometimes generate over a million dollars in daily revenue, but pay only a few dollars in blob fees to Ethereum. The result: **Layer 2 is eating the meat, while Layer 1 is drinking the broth**.

## Business Model Bleeding and Repair: EIP-7918's "Price Floor" Mechanism

Until December 3, 2025, the highly anticipated Fusaka upgrade finally arrived. Its core was not technological innovation but economic salvation—through the proposal EIP-7918, it completely rewrote the blob pricing logic.

**The key reform was the introduction of a "price floor" mechanism**. Previously, the base fee for blobs followed market supply and demand. Due to oversupply, the price once dropped to 1 wei (0.000000001 Gwei), nearly zero. After the Dencun upgrade, Ethereum mainnet’s blob supply became excessive, allowing Layer 2 to purchase data space at extremely low costs.

EIP-7918 changed all that. The new rule stipulates that the blob base fee cannot fall indefinitely but is linked to Layer 1’s gas price—specifically, it is set at 1/15.258 of the Layer 1 base fee. This means: **as long as the mainnet remains active (with token sales, DeFi transactions, or NFT minting), rising gas prices will automatically push up the minimum blob purchase price**. After activation, blob base fees skyrocketed by 15 million times (from 1 wei to 0.01–0.5 Gwei).

Although individual transaction costs for Layer 2 users remain very low (around $0.01), this represents an exponential increase in overall Ethereum revenue. The prosperity of Layer 2 directly translates into a demand premium for Layer 1 services.

**Meanwhile, Fusaka also expanded supply via PeerDAS (EIP-7594)**. This technology allows nodes to verify data availability through random sampling without downloading full blob data, reducing bandwidth pressure by 85%. This enables Ethereum to significantly increase blob capacity—target blob count per block rising from 6 to 14 or more.

By **reducing node operation costs (PeerDAS) + establishing a minimum blob price (EIP-7918)**, Ethereum has successfully built a "volume-price upward spiral" business model.

## Reimagined Business Logic: From Subsidizer to Tax Collector

Post-Fusaka, Ethereum’s business model can be summarized as **"Basic Layer Security Tax"**:

- **Upstream clients**: Base, Optimism, Arbitrum, etc., act as "distributors," attracting end-users and handling high-frequency, low-value transactions.

- **Core products**: Ethereum mainnet sells two types of infrastructure—high-value execution space (for Layer 2 proofs, complex DeFi transactions) and large-capacity data space (blobs for Layer 2 transaction history storage).

- **Pricing mechanism**: Through EIP-7918, Layer 2 is forced to pay "rental fees" aligned with market prices when using these resources. Most rental fees are burned (via EIP-1559), increasing value for all ETH holders; a small portion goes to validator rewards.

- **Positive feedback loop**: More prosperity in Layer 2 → greater demand for blobs → even at low unit prices, total volume and base prices increase → more ETH burned → ETH becomes scarcer → network security improves → more high-value assets choose Ethereum as the final settlement layer.

According to analyst Yi’s estimate, after the upgrade, Ethereum’s ETH burn rate could increase eightfold by 2026. This completely reverses the pessimistic outlook of "ETH supply inflation."

## Regulatory Framework Shift: From "Perpetual Securities" to "Dynamic Commodities"

Alongside the economic model overhaul, the legal framework is also evolving. On November 12, 2025, SEC Chair Paul Atkins announced the "Project Crypto" plan at the Federal Reserve Bank of Philadelphia, marking a fundamental shift in regulatory philosophy.

Atkins explicitly rejected his predecessor’s view that "once a security, always a security." His "Token Taxonomy" emphasizes that digital assets are dynamic and mutable. When a network’s decentralization reaches a critical threshold—such that token holders no longer rely on any centralized entity for returns (not satisfying the Howey test’s "Essential Managerial Effort" condition)—the asset is no longer classified as a security.

**Ethereum, with over 1.1 million validators and the most globally distributed node network, is explicitly recognized as a non-security asset**—a historic turning point.

Subsequently, the CLARITY Act further reinforced this stance, legally classifying "digital assets originating from decentralized blockchain protocols" (explicitly mentioning BTC and ETH) as commodities under CFTC regulation. The bill even permits banks to register as "digital commodity brokers," holding and trading ETH on their balance sheets—treating it like gold or foreign exchange.

To address potential conflicts between staking yields and commodity status, the new framework cleverly employs **layered definitions**: ETH tokens are both commodities and gas tools; protocol-level staking is "labor service" provided by validators (similar to mining), with rewards as service fees rather than investment returns; only when exchanges or intermediaries promise specific yields does it constitute an investment contract. This allows ETH to enjoy both "commodity" regulatory exemptions and the appeal of "interest-earning assets."

Institutional investors are increasingly viewing ETH as a "Productive Commodity"—combining inflation resistance with bond-like yields. Fidelity calls it an "Internet Bond," a necessary component of modern portfolios.

## Rebuilding the Valuation Framework

The once singular valuation challenge now finds multi-dimensional answers under the new business model:

**DCF valuation perspective**: Ethereum now has clear cash flows—transaction fee income, validator rewards, ETH destruction mechanisms. A Q1/2025 analysis by 21Shares shows that, based solely on current fees and destruction dynamics, with a conservative discount rate of 15.96%, ETH’s fair value is about $3,998; with an optimistic assumption (11.02% discount rate), it reaches $7,249. EIP-7918 enhances the predictability of future income.

**Currency premium perspective**: ETH’s role as collateral in DeFi (TVL over $10 billion), cross-layer fee valuation, ETF holdings (reaching $2.76 billion by Q3/2025), and corporate treasuries (e.g., Bitmine holding 3.66 million ETH) continuously tighten liquidity supply. This supply constraint creates a gold-like currency premium.

**"Trust Piece" valuation framework**: Consensys introduces a new concept—Ethereum is not just renting out compute (like AWS) but selling "immutable certainty." As RWA (real-world asset tokenization) scales, Ethereum will shift from a "transaction processor" to an "asset custodian." If Ethereum protects $10 trillion in global assets and charges just 0.01% annually as a "security tax," its protocol market cap must be large enough to resist 51% attacks. This "security budget" logic ties Ethereum’s valuation directly to the economic value it safeguards—a completely new pricing dimension.

## The Final Market Form of Layer Specialization

2025 data confirms an ecosystem division: Solana becomes the "Visa+"—focused on extreme TPS, low latency, suitable for high-frequency trading, payments, and DePIN applications. Ethereum evolves into the "SWIFT/FedWire"—handling high-value, low-frequency "batch settlements," with each batch packing thousands of transactions via Layer 2.

This is not a design flaw but an inevitable result of market maturity. High-value assets (government bond tokenization, cross-border large payments) prefer Ethereum for its trusted security record; daily consumer transactions flow to Solana.

In RWA, this is especially evident. BlackRock’s BUIDL fund, Franklin Templeton’s on-chain funds, and other institutional RWA products almost all choose Ethereum. For managing hundreds of millions or billions of dollars, "security > speed" is obvious—one attack could be catastrophic, but a one-second delay in transactions is just an experience issue.

## Final Question

So, is Ethereum confused? No. By 2025, it has completed a transformation from an "idealist utopia" to a "pragmatic economic infrastructure." It no longer relies on stories of "cutting-edge technology" or "flashy applications," but has built solid cash flows, predictable revenue models, clear regulatory identities, and layered market positioning.

The question is: can this leap of confidence land steadily on future prosperity? Or will it become another Pulau Senang?