2025: Ethereum’s Operational Growth Amidst Price Struggles

As we look back at 2025, the Ethereum blockchain stands out for achieving its strongest operational performance ever. This period witnessed record transaction volumes, cementing Ethereum’s dominance as the leading platform in the decentralized finance (DeFi) space. Nevertheless, this operational success has not been mirrored by the price of Ether (ETH), which has struggled, showcasing a disconnect between utility and asset value.

Operational Milestones and Market Dynamics

Despite processing significant transaction volumes, Ether is trading down nearly 10% year-to-date, hovering under the $3,000 mark. This underperformance becomes even more pronounced when analyzed against Bitcoin, with the ETH/BTC ratio decreasing by 6% since the year’s start. Such trends signal a fundamental shift in the underlying economics of Ethereum, particularly given its role as the most popular commercial blockchain globally.

A Shift in Revenue Sources

One pivotal factor affecting Ethereum’s financial model this year was a dramatic decline in the revenue generated from “rent” paid by Layer-2 networks. Traditionally, these networks bundle transactions to save costs before settling on the Ethereum mainnet, creating a revenue stream for Ethereum. In 2024, Layer-2 networks amassed approximately $277 million in revenue, with around $113 million, roughly 41%, flowing to the Ethereum mainnet for processing and securing transactions.

However, 2025 saw this revenue model flip dramatically. Total revenues for Layer-2 networks fell by 53%, declining to about $129.17 million, primarily due to a strategy to reduce user fees. This led to Layer-2 providers transmitting a mere $10 million to Ethereum, a stark contrast to the previous year, indicating a loss of over $100 million in guaranteed revenue.

The Impact of the Dencun Upgrade

The "Dencun" upgrade initiated last year aimed to lower transaction fees significantly, ultimately diminishing Ethereum’s revenue intake from Layer-2 networks. The upgrade’s success allowed Ethereum to manage higher traffic volumes efficiently, avoiding congestion and preventing fee spikes. However, this shift also resulted in a noted reduction in the demand for the Ether token itself.

Historically, high network activity linked to elevated fees often resulted in a portion of those fees being burned, a process that curbed supply and supported Ether’s price. With fees hitting record lows in 2025, the deflationary pressure on Ether’s supply has drastically weakened, resulting in an inflation rate increase of 0.204% since the Ethereum merge event.

Dependent Revenues: Coinbase’s Layer-2 Dominance

The evolving financial landscape within Ethereum’s ecosystem now favors certain players over others. Among Layer-2 networks, Coinbase’s Base emerged as the dominant force, achieving over $75 million in revenue—nearly 60% of the entire Layer-2 sector’s revenue for the year.

This stark contrast in performance highlights a shift from the previous year, where the revenue landscape was more evenly distributed. Arbitrum, a former giant in the space, witnessed its earnings dip significantly, collecting only around $25 million. Other notable players like Polygon and Consensys-backed Linea brought in comparatively modest revenues of $5 million and $3.94 million, respectively.

The concentration of revenue around a single player like Coinbase suggests that integration with existing exchange products and streamlined user experiences have become pivotal in the competition for scaling solutions.

Growing Market Share Despite Price Decline

Interestingly, despite Ether’s price struggles, institutional adoption of the Ethereum network gained momentum in 2025. Ethereum’s market share in the DeFi landscape grew to approximately 64%, a significant rebound from a low of 45% in 2022. Some analysts posit that when considering assets held on Layer-2 networks such as Base and Arbitrum, Ethereum’s market share could rise above 70%.

This data reinforces a growing trend among large investors—prioritizing security and legal clarity inherent to the Ethereum ecosystem rather than seeking volatile alternatives. As Ethereum fortifies its role as a settlement layer for blockchain transactions, transaction volumes have surged steadily into year-end without the typical speculative blow-off tops historically associated with market peaks.

Diverging Utility and Asset Valuation

Despite the operational successes, Ethereum faces a dilemma regarding its valuation heading into 2026. The disconnect between Ethereum’s exceptional transaction figures and the decline in ETH’s price reflects anxiety surrounding its utility in this evolving, low-fee environment. As the mainnet effectively subsidizes Layer-2 networks, the previously direct correlation between transaction volume and Ether’s price appears disrupted.

Market observers note a critical point: even as the ecosystem flourishes, the financial benefits are being accrued primarily at the level of applications and scaling layers, not directly to the Ethereum network. Supporters of Ethereum argue that this is merely a transitional phase, believing that the network’s long-term positioning as a valuable asset will ultimately yield positive outcomes for the Ether token.

As Ethereum continues to navigate this complex landscape, eyes remain fixed on whether the ecosystem’s robustness will translate into tangible value for ETH investors looking to capitalize on the blockchain’s long-term potential.