The Ethereum blockchain achieved unprecedented operational milestones in 2025, marked by an extraordinary surge in transaction volumes and an overwhelming dominance in the decentralized finance (DeFi) sector. Despite this operational success, the associated crypto asset, Ether (ETH), did not experience a corresponding appreciation in value, suffering a notable decline of double-digit percentages throughout the year.
Data curated by CryptoSlate indicates that ETH is currently trading at a price below $3,000, reflecting a year-to-date depreciation of approximately 10%. Furthermore, its comparative performance against Bitcoin—the preeminent digital asset—has been lackluster, with the ETH/BTC trading pair evidencing a 6% reduction since the commencement of the fiscal year. This disparity underscores a significant transformation within the economic framework of the world’s most extensively utilized commercial blockchain.
The $100 Million Revenue Decline
A pivotal factor influencing Ethereum’s fiscal landscape in 2025 was the dramatic contraction in “rent” payments from Layer-2 networks. These supplementary networks aggregate transactions to minimize costs before finalizing them on the principal Ethereum blockchain and have historically constituted a substantial source of fee revenue for Ethereum.
In the preceding year (2024), Layer-2 networks collectively generated revenue amounting to $277 million. Of this total, approximately $113 million—equating to 41%—was remitted to the Ethereum mainnet for data processing and security services. In stark contrast, this revenue model experienced an inversion in 2025. According to data from Growthepie, total revenue for Layer-2 networks plummeted by 53%, descending to $129.17 million as user fees were significantly decreased.
However, the payments made to the Ethereum mainnet saw an even more precipitous decline; Layer-2 networks contributed roughly $10 million towards network security in 2025, representing less than 10% of their total revenue. This shift effectively translated into a loss exceeding $100 million in guaranteed fee revenue for Ethereum, which was sacrificed in pursuit of ensuring long-term viability.
This decline can be attributed to the “Dencun” upgrade implemented in the previous year, which adeptly reduced transaction fees while simultaneously subsidizing ecosystem growth at the expense of Ethereum’s revenue derived from Layer 2 networks. This advancement facilitated higher traffic volumes without congesting the main blockchain or inflating fees.
While successful in enhancing cost efficiency and speed, this technical modification has decoupled a critical demand driver for ETH tokens. Historically, elevated network usage resulted in proportionately high fees; a portion of these fees was subsequently “burned,” leading to decreased supply and consequently supporting token price appreciation. With transaction fees experiencing unprecedented lows in 2025, the deflationary pressure on ETH’s supply has markedly diminished. As a result, Ethereum’s inflation rate has escalated by approximately 0.204% since the merge event occurred in September 2022.
Coinbase Network Captures Dominant Profit Share
The reconfiguration of Ethereum’s economic model has engendered a consolidated landscape for scaling solutions within which one entity has emerged as a predominant player. Base—the Layer 2 network developed by Coinbase—garnered more than $75 million in revenue during 2025, representing nearly 60% of the total earnings within the Layer 2 sector.
This financial performance starkly eclipsed that of its decentralized counterparts; Arbitrum—once a market leader—achieved revenue approximating $25 million, positioning it as a distant second. Other market participants reported significantly lower revenues: Polygon generated $5 million; Consensys-backed Linea accrued $3.94 million; and Optimism realized approximately $3.83 million.
This concentration of revenue marks a pronounced deviation from the more equitable distribution observed in 2024 when Arbitrum generated $42 million while Linea and Scroll recorded revenues of $36.6 million and $35 million respectively. The ascendance of Base illustrates that distribution channels and user experience have emerged as pivotal determinants in competitive scaling dynamics.
By integrating directly into its exchange products, Coinbase has adeptly channeled retail activity onto its own infrastructure. As a consequence, a substantial portion of value generated within the Ethereum ecosystem is now accruing to Coinbase’s balance sheet rather than being distributed among broader network participants.
Market Share Reaches Multi-Year High
Despite Ether’s underwhelming price trajectory, institutional adoption of the Ethereum network continues to proliferate at an unprecedented pace. Empirical data suggests that investor confidence remains steadfast within the ecosystem rather than migrating towards alternative blockchains characterized by faster transaction speeds or lower costs—a trend prevalent during previous bear markets.
To contextualize this growth trajectory, Ethereum’s dominance within the DeFi sector has expanded throughout both 2024 and into early 2025. Currently, approximately 64% of total value locked (TVL) across DeFi applications is secured by Ethereum’s mainnet—a significant increase from a cyclical nadir of roughly 45% witnessed in 2022.
Leon Waidmann—the head of research at Onchain HQ—postulated that when accounting for assets on Layer 2 networks such as Base, Arbitrum, and Optimism, Ethereum’s market share may exceed an impressive threshold of 70%.
This consolidation indicates a pronounced “flight to quality” among institutional investors. As the cryptocurrency industry matures, there is an evident preference for Ethereum’s robust security features and regulatory clarity over potential speculative gains associated with newer and more volatile blockchain alternatives.
The network has effectively positioned itself as a foundational settlement layer for the industry; however, mechanisms for capturing value from this activity continue to face challenges.
Moreover, analysts have noted that the ecosystem’s stability signifies a departure from previous market cycles characterized by speculative peaks followed by abrupt declines. Current transaction volumes are rising toward year-end without exhibiting typical speculative “blow-off tops,” suggesting that growth is fundamentally driven rather than being propelled by transient trading frenzies.
Investors Assess Utility Against Value
Nevertheless, the growing schism between Ethereum’s operational success and its market valuation presents a multifaceted dilemma for investors as they navigate into fiscal year 2026.
The aforementioned year-to-date decline in ETH’s price underscores prevailing uncertainty concerning its function within this evolving low-fee paradigm. Given that the mainnet now effectively subsidizes Layer–2 networks’ operations, there exists a disjunction between increased transaction volumes and corresponding price appreciation for ETH tokens.
Market observers contend that while indicators suggest an increasingly robust ecosystem overall, financial benefits are currently concentrated within application-specific layers rather than being broadly distributed throughout the network itself. Supporters assert that this transitional phase is imperative; they argue that Ethereum has solidified its status as the global standard for blockchain settlement by lowering costs while simultaneously enhancing capacity.
This strategic positioning is expected to yield long-term value enhancements for ETH tokens; BitMine Chair Tom Lee posits that Ether could potentially exceed $5,000 within the forthcoming fiscal year.
