The Ethereum blockchain had its strongest year of operation in history in 2025, processing record transaction volumes and securing a large portion of the DeFi market.
However, the crypto assets powering the network failed to reflect that growth, posting double-digit losses for the year.
According to crypto slate According to the data, ETH has fallen 10% since the beginning of the year and is trading below $3,000. Its performance against the main digital asset Bitcoin has also lagged, with the ETH/BTC ratio falling 6% since the beginning of the year.
This difference highlights a fundamental shift in the economics of the world's most widely used commercial blockchain.
While network utilities have soared, technology upgrades aimed at reducing costs for users have significantly reduced the revenue flowing to the core network, decoupling Ether's price from its on-rails activity.
$100 million loss
One of the most important factors in Ethereum's financial situation this year was the collapse of the “rent” paid by the Layer 2 network.
These networks bundle transactions to save costs before being settled on the main Ethereum blockchain, and previously served as a major source of fee income.
In 2024, Layer 2 networks generated $277 million in total revenue. Approximately $113 million (41%) of this amount was paid to Ethereum's mainnet to process data and secure the network.
In 2025, that revenue model will be reversed. Layer 2 network total revenue fell 53% to $129.17 million as end-user rates were lowered, according to Growthepie data.
However, the cost paid to the Ethereum mainnet has plummeted even further. Layer 2 Network paid approximately $10 million to Ethereum for security in 2025, representing less than 10% of its total revenue.
The remaining $119 million was retained by layer 2 operators as profits.
This effectively means that Ethereum has sacrificed more than $100 million in guarantee fee income this year to ensure its long-term survival.
This decrease is due to the “Dencun” upgrade carried out last year. This update successfully lowered transaction fees, effectively subsidizing the growth of the ecosystem by reducing the revenue that Ethereum collects from the “layer 2” network built on top of it.
This allows the network to handle larger amounts of traffic without clogging up the main blockchain or inflating fees.
While the technical implementation has succeeded in making Ethereum cheaper and faster, it has removed a major driver of demand for the ETH token.
Previously, high network utilization led to high prices, and some of it was “burned”, reducing supply and supporting prices.
With fees reaching an all-time low in 2025, deflationary pressures on token supply have significantly eased. As a result, Ethereum’s inflation rate has increased by 0.204% since the September 2022 merger event.
Coinbase network dominates profit share
The restructuring of Ethereum’s economic structure has created a consolidated market for scaling solutions, with one dominant player capturing the majority of the sector’s revenue.
Base, a layer 2 network developed by US public exchange Coinbase, generated more than $75 million in revenue in 2025. This figure represented almost 60% of the entire Layer 2 sector's revenue that year.
Base's financial performance far outperformed its decentralized rivals. Arbitrum has held a significant lead in the market so far, coming in at number two with approximately $25 million in revenue.
Lower values were seen with other competitors. Polygon Network generated $5 million in revenue, while ConsenSys-backed Linea brought in $3.94 million. Optimism, another early leader in the scaling category, earned about $3.83 million.
This concentration of revenue marks a departure from 2024, when the market was more evenly distributed. In the previous year, Arbitrum generated $42 million, Linea $36.6 million, and Scroll $35 million.
The rise of Base suggests that distribution channels and user experience have become determining factors in the scaling wars.
Coinbase has been able to centralize its retail activities on its own rails by integrating its network directly into its exchange products.
As a result, a significant portion of the value generated by the Ethereum ecosystem is now accumulated on the balance sheets of individual corporate entities rather than on the broader network participants.
Market share reaches multi-year high
Despite ETH’s price performance, institutional adoption of the Ethereum network continues to accelerate.
Available data shows that investors are not leaving the ecosystem in search of faster or cheaper blockchain alternatives, a trend that characterizes the 2022 bear market.
By way of background, Ethereum's dominance in the DeFi sector grew from 2024 to 2025. The blockchain network’s mainnet currently secures approximately 64% of the total value locked (TVL) of DeFi applications, up from a cycle low of approximately 45% in 2022.
Leon Weidman, Head of Research at Onchain Headquarters, claimed that the market share of the Ethereum ecosystem is over 70%, including assets held in layer 2 networks such as Base, Arbitrum, and Optimism.
This consolidation suggests a “flight to quality” among large capital allocators.
As the industry has matured, institutions have prioritized the security and legal clarity of Ethereum over the speculative benefits of newer, more unstable blockchains.
The network has effectively become the industry's payments layer, even though the specific mechanisms for capturing value from its activities remain under pressure.
At the same time, analysts note that the stability of the ecosystem stands in contrast to previous market cycles.
Trading volumes accelerated towards the end of the year without the 'top blowout' speculation typically seen during peak periods, suggesting that this growth is being driven by fundamental exploitation rather than short-term trading frenzy.
Investors weigh utility versus value
Nevertheless, the widening gap between Ethereum's operational success and market valuation presents a mixed outlook for investors heading into 2026.
The 10% year-to-date drop in ETH price reflects uncertainty about the token's role in this new low-fee environment.
The direct correlation between transaction volume growth and token price growth has broken down as the mainnet is effectively subsidizing the layer 2 network.
Market observers note that while the ecosystem is healthier than ever, the economic benefits are currently siled into the application and scaling layers.
But network proponents argue that this is a necessary transitional step. They claim that Ethereum has secured its place as the global standard for blockchain payments by lowering costs and increasing capacity.
They say this moat will ultimately increase the long-term value of the token, with BitMine Chairman Tom Lee believing the asset could exceed $5,000 next year.
