Authors｜ Jacob Zhao & Jiawei @IOSG

On February 3, 2026, Vitalik Buterin published a significant reflection on Ethereum's scaling roadmap on X. With the real-world challenges of evolving Layer 2 into a fully decentralized form being re-evaluated, and with the mainnet's throughput expected to increase significantly in the coming years, the original vision of "using L2 as the core carrier for Ethereum's scaling" is no longer valid. Ethereum's strategic focus is returning to the mainnet itself—strengthening its position as the world's most trusted settlement layer through institutionalized scaling and inherent protocol security mechanisms. Scaling is no longer the sole objective; security, neutrality, and predictability have once again become core assets of Ethereum.

Key changes:

Ethereum is entering an “L1-first paradigm”: With the mainnet scaling directly and fees continuing to decrease, the original assumption that L2 would assume a core role at scale no longer holds.
L2 is no longer a "brand sharding" but a trust spectrum: L2's decentralization progress is much slower than expected, making it difficult to uniformly inherit Ethereum's security. Its role is being redefined as a network spectrum with different trust levels.
Ethereum's core value has shifted from "traffic" to "settlement sovereignty": ETH's value is no longer limited to Gas or Blob revenue, but lies in its institutional premium as the world's most secure EVM settlement layer and its native monetary asset.
The extension strategy is shifting towards protocol endogenization: On the basis of continuous direct extension of L1, the exploration of native verification and security mechanisms at the protocol layer may reshape the security boundary and value capture structure of L1–L2.
The valuation framework is undergoing a structural shift: the weight of security and institutional credibility has increased significantly, while the weight of transaction fees and platform effects has decreased. ETH pricing is shifting from a cash flow model to an asset premium model.

This article will analyze the paradigm shift and valuation reconstruction of the Ethereum pricing model in a hierarchical manner based on facts (the technological and institutional changes that have occurred), mechanisms (the impact on value capture and pricing logic), and deductions (the implications for allocation and risk-return).

Returning to the Origin: Ethereum's Values

Understanding Ethereum's long-term value hinges not on short-term price fluctuations, but on its consistent design philosophy and value orientation.

Trustworthiness and neutrality: Ethereum's core goal is not efficiency or profit maximization, but to become a trustworthy and neutral infrastructure—with publicly available and predictable rules that do not favor any participant, are not controlled by a single entity, and allow anyone to participate without permission. The security of ETH and its on-chain assets ultimately depends on the protocol itself, not the credibility of any institution.

Ecosystem First, Revenue Second: Ethereum's multiple key upgrades demonstrate a consistent decision-making logic—actively sacrificing short-term protocol revenue in exchange for lower usage costs, a larger ecosystem, and stronger system resilience. Its goal is not to "collect tolls," but to become an irreplaceable neutral settlement and trust foundation in the digital economy.

Decentralization as a means: the mainnet focuses on the highest level of security and finality, while Layer 2 networks occupy different levels of the connectivity spectrum from the mainnet: some inherit the mainnet's security and pursue efficiency, while others position themselves as value propositions based on differentiated functions. This enables the system to simultaneously serve global settlement and high-performance applications, rather than being an L2 "branded sharding."

Ethereum's long-term technological roadmap prioritizes a slow and deterministic evolution, ensuring system security and trustworthiness. From its transition to PoS to subsequent optimizations in scaling and confirmation mechanisms, its roadmap pursues sustainable, verifiable, and irreversible correctness.

Security Settlement Layer: This refers to the Ethereum mainnet providing irreversible finality services for Layer 2 and on-chain assets through decentralized validator nodes and consensus mechanisms.

This positioning of a secure settlement layer marks the establishment of "settlement sovereignty," signifies Ethereum's shift from a "confederation" to a "federal system," represents a "constitutional moment" in the establishment of the Ethereum digital nation, and is a significant upgrade to Ethereum's architecture and core.

After the American Revolutionary War, under the terms of the Confederation, the 13 states functioned like a loose alliance. Each state printed its own currency, levied tariffs on each other, and each state free-rided: enjoying common defense while refusing to pay its dues; enjoying the confederation's brand while acting independently. This structural problem led to a decline in national credit and an inability to unify foreign trade, severely hindering the economy.

1787 was a "constitutional moment" for the United States, with the new Constitution granting the federal government three key powers: the power to directly tax, the power to regulate interstate trade, and the power to establish a unified currency. However, what truly revitalized the federal government was Hamilton's economic plan of 1790: the federal government assumed the debts of the states, restored national credit by redeeming assets at face value, and established a national bank as the financial center. A unified market unleashed economies of scale, national credit attracted more capital, and infrastructure construction gained financing capabilities. The United States transformed from 13 mutually defensive states into the world's largest economy.

The structural dilemmas facing the Ethereum ecosystem today are exactly the same.

Each L2 blockchain acts like a "sovereign state," with its own user base, liquidity pools, and governance tokens. Liquidity is fragmented, cross-L2 interactions are highly frictional, and while L2s enjoy Ethereum's security layer and brand, they cannot contribute value back to L1s. Locking liquidity on their own chain is rational in the short term, but if all L2s do this, the core competitive advantage of the entire Ethereum ecosystem will be lost.

Ethereum's current roadmap is essentially about its constitution and the establishment of a central economic system, which is to say, establishing "settlement sovereignty":

Native Rollup Precompile is like a federal constitution. L2 can freely build differentiated functionalities outside the EVM, while the EVM part can obtain Ethereum-level security verification through native precompile. Not integrating is also an option, but the cost is losing trustless interoperability with the Ethereum ecosystem.
Synchronous composability equals a unified market. Through mechanisms such as native Rollup pre-compilation, trustless interoperability and synchronous composability between L2 and L1 systems are becoming possible, directly eliminating "interstate trade barriers" and freeing liquidity from being trapped in its own isolated islands.
L1 value capture reconstruction = federal taxation. When all key cross-L2 interactions return to L1 settlement, ETH once again becomes the settlement hub and trust anchor of the entire ecosystem. Whoever controls the settlement layer captures value.

Ethereum is transforming the fragmented L2 ecosystem into an irreplaceable "digital nation" through a unified settlement and verification system—a historical inevitability. While the transformation may be slow, history tells us that once completed, the resulting network effects will far exceed the linear growth of the fragmented era. The United States used a unified economic system to transform 13 small states into the world's largest economy. Ethereum will also transform the loosely structured L2 ecosystem into the most secure settlement layer, and even a global financial platform.

Ethereum Core Upgrade Roadmap and Valuation Impact (2025-2026)

Valuation Misconceptions: Why Ethereum Shouldn't Be Considered a "Technology Company"

Applying traditional corporate valuation models (P/E, DCF, EV/EBITDA) to Ethereum is essentially a classification error. Ethereum is not a company aiming to maximize profits, but rather an open digital economic infrastructure. While corporations pursue maximum shareholder value, Ethereum prioritizes maximizing ecosystem scale, security, and censorship resistance. To achieve this, Ethereum has repeatedly and proactively reduced protocol revenue (e.g., through EIP-4844, by introducing Blob DA, structurally lowering L2 data publishing costs and reducing L1 revenue from rollup data)—which from a corporate perspective appears like "revenue self-destruction," but from an infrastructure perspective, it sacrifices short-term fees for long-term neutrality premiums and network effects.

A more reasonable framework for understanding Ethereum is to view it as a globally neutral settlement and consensus layer: providing security, finality, and trusted coordination for the digital economy. ETH's value lies in multiple structural needs—the rigid demand for final settlement, the scale of on-chain finance and stablecoins, the impact of staking and burning mechanisms on supply, and the long-term, sticky funding brought about by institutional adoption such as ETFs, corporate treasuries, and RWA.

Paradigm Restructuring: Finding Pricing Anchors Beyond Cash Flow

In late 2025, the Hashed team launched ethval.com, providing a comprehensive set of reproducible quantitative models for Ethereum. However, traditional static models struggled to capture the dramatic shifts in the Ethereum narrative in 2026. Therefore, we reused their systematic, transparent, and reproducible underlying model (covering returns, currency, network effects, and supply structure) and reshaped its valuation framework and weighting logic:

Structural Restructuring: Map the model to four value quadrants: "security, currency, platform, and revenue," and price them by category and sum.
Weight rebalancing: The weights of security and settlement premium are significantly increased, while the marginal contribution of protocol revenue and L2 expansion is weakened.
Risk control overlay: Introducing a circuit breaker mechanism that combines macroeconomic and on-chain risk perception to make the valuation framework adaptable across cycles.
Eliminate "circular reasoning": Models with current price inputs (such as Staking Scarcity and Liquidity Premium) will no longer be used as fair value anchors, but will only be retained as indicators for position and risk preference adjustment.

Note: The model below is not intended for precise location prediction, but rather to characterize the relative pricing direction of different value sources across different cycles.

Security Settlement Layer: Core Value Anchor (45%, hedging period increased)

We consider the security settlement layer to be the core source of Ethereum's value, assigning it a baseline weight of 45%; this weight is further increased during periods of rising macroeconomic uncertainty or declining risk appetite. This judgment stems from Vitalik's latest definition of "truly scaling Ethereum": the essence of scaling is not increasing TPS, but creating a block space fully backed by Ethereum itself. Any high-performance execution environment that relies on external trust assumptions does not constitute an extension to Ethereum itself.

Within this framework, ETH's value primarily stems from the credit premium of a global sovereign-free settlement layer, rather than protocol revenue. This premium is supported by structural factors such as the scale and decentralization of validators, a long-standing security record, institutional adoption, clarity of compliance pathways, and the protocol's inherent Rollup verification mechanism.

In terms of specific pricing, we mainly adopt two complementary methods: Validator Economics (yield equilibrium mapping) and Staking DCF (perpetual staking discounting) to jointly depict the institutional premium of ETH as a "global secure settlement layer".

Validator Economics (Equilibrium Pricing): Derives the theoretical fair price based on the ratio of the annualized staking cash flow per ETH to the target true yield.
Fair Price = (Annual Staking Cash Flow per ETH) / Target Real Yield
This expression is used to characterize the equilibrium relationship between returns and prices, serving as a directional relative valuation tool rather than an independent pricing model.
Staking DCF (Perpetual Staking Discount): Treats ETH as a long-term asset that sustainably generates real staking rewards and perpetually discounts its cash flows.
M_staking = Total Real Staking Cash Flow / (Discount Rate − Longterm Growth Rate)
ETH Price (staking) = M_staking / Circulating Supply

In essence, this value layer is not benchmarked against the revenue-generating capacity of platform companies, but rather against settlement credit similar to a global clearing network.

Monetary attributes: settlement and collateral (35%, dominated by the period of utility expansion)

We consider its monetary attributes to be Ethereum's second core source of value, assigning it a baseline weight of 35%, making it the primary utility anchor during neutral markets or on-chain economic expansion phases. This judgment is not based on the narrative that "ETH is equivalent to the US dollar," but rather on its structural role as the native settlement fuel and ultimate collateral asset of the on-chain financial system. The security of stablecoin circulation, DeFi liquidation, and RWA settlement all rely on the settlement layer supported by ETH.

In terms of pricing, we adopt an extended form of the quantity theory of money (MV = PQ), but we model the use cases of ETH in a hierarchical manner to address the order-of-magnitude differences in circulation velocity under different scenarios, creating a hierarchical monetary demand model:

High-frequency settlement layer (Gas payments, stablecoin transfers)

M_transaction = Annual Transaction Settlement Volume / V_high
V_high ≈ 15-25 (refer to historical on-chain data)

Mid-frequency financial layer (DeFi interaction, lending and clearing)

M_defi = Annual DeFi Settlement Volume / V_medium
V_medium ≈ 3-8 (based on the capital turnover rate of mainstream DeFi protocols)

Low-frequency collateral layer (pledging, re-pledging, long-term lock-up)

M_collateral = Total ETH Collateral Value × (1 + Liquidity Premium)
Liquidity Premium = 10-30% (Reflects compensation for the sacrifice of liquidity)

Platform/Network Effects: Growth Options (10%, Bull Market Amplifier)

Platform and network effects are considered growth options in Ethereum's valuation, assigned only a 10% weight to explain the non-linear premium brought about by ecosystem expansion during bull markets. We employ a trust-corrected Metcalfe model to avoid equally weighting L2 assets of different security levels in the valuation:

Metcalfe model: M_network = a × (Active Users)^b + m × Σ (L2 TVL_i × TrustScore_i)
Platform/network effect valuation: ETH Price(network) = M_network / Circulating Supply

Income Assets: Cash Flow Floor (10%, a safety net in a bear market)

We view protocol revenue as the cash flow floor in Ethereum's valuation system, rather than a growth engine, and assign it a 10% weight. This layer primarily functions during bear markets or periods of extreme risk to characterize the lower limit of valuation.

Gas and Blob fees provide the network with the lowest operating costs and influence the supply structure through EIP-1559. For valuation, we use a price-to-sales ratio and fee-to-revenue model, taking a conservative value as a bottom reference only. As the mainnet continues to expand, the importance of protocol revenue decreases relatively; its core role is reflected in providing a safety margin during downturns.

Price-to-Sales Ratio (P/S Floor) Model: M_PS = Annual Protocol Revenue × P/S_multiple
Price-to-Sales Ratio (PS) Valuation: ETH Price (PS) = M_PS / Circulating Supply
Cost-benefit model: M_Yield = Annual Protocol Revenue / Target Fee Yield
Fee-based valuation price: ETH Price(Yield) = M_Yield / Circulating Supply
Cash flow floor pricing (taking the minimum of the two): P_Revenue_Floor = min(P_PS , P_Yield )

Dynamic calibration: macroscopic constraints and periodic adaptation

If the preceding text established Ethereum's "intrinsic value center," this chapter introduces an "external environment adaptation system" independent of fundamentals. Valuation cannot operate in a vacuum; it must be subject to three external constraints: the macro environment (cost of capital), market structure (relative strength), and on-chain sentiment (crowding). Based on this, we constructed a Regime Adaptation mechanism to dynamically adjust valuation weights in different cycles—releasing option premiums during periods of ease and retreating to the income floor during periods of risk aversion, thereby achieving a leap from a static model to a dynamic strategy. (Note: Due to space limitations, this article only presents the core logical framework of this mechanism.)

Conditional path of the structured second curve

The preceding analyses were all based on the technical, valuation, and cyclical logic within the crypto system. This chapter, however, discusses a different level of issue: how will ETH's pricing power, asset attributes, and risk structure change when it is no longer solely priced by crypto-native funds but is gradually integrated into the traditional financial system? The institutional second curve is not an extension of existing logic, but rather an exogenous redefinition of Ethereum:

The shift in asset attributes (Beta → Carry): Spot ETH ETFs address compliance and custody issues, but their essence remains price exposure; while the future advancement of Staking ETFs will, for the first time, introduce on-chain yields into the institutional system through a compliant vehicle. ETH will thus transform from a "non-interest-bearing, highly volatile asset" to an "allocation asset with predictable returns," expanding potential buyers from trading funds to pension funds, insurance companies, and long-term accounts sensitive to returns and duration.
The shift in usage (Holding → Using): If institutions no longer simply view ETH as a tradable asset, but instead begin using it as a settlement and collateral infrastructure. Whether it's JPMorgan's tokenized fund or the deployment of compliant stablecoins and RWA on Ethereum, it indicates that the demand for ETH is shifting from "holding demand" to "operational demand"—institutions are not only holding ETH, but also using it for settlement, liquidation, and risk management.
Changes in tail risk (Uncertainty → Pricing): As stablecoin regulatory frameworks (such as the GENIUS Act) are gradually established in the future, and as the Ethereum roadmap and governance transparency improve, the regulatory and technological uncertainties that institutions are most sensitive to are being systematically compressed, meaning that uncertainty is beginning to be priced in rather than avoided.

The so-called "institutionalized second curve" is a change in the nature of demand, providing a real source of demand for the valuation logic of "security settlement layer + monetary attributes", and driving ETH to transition from an emotionally driven speculative asset to a basic asset that simultaneously carries both allocation and functional needs.

Conclusion: Value Anchoring in the Darkest Hour

Over the past week, the industry has undergone a severe deleveraging process, with market sentiment plummeting to rock bottom. This is undoubtedly the "darkest hour" for the crypto world. Pessimism is spreading among industry professionals, and Ethereum, as the asset that best represents the spirit of crypto, is also at the center of a storm of controversy.

However, as rational observers, we need to see through the fog of panic: what Ethereum is currently experiencing is not a "collapse of value," but a profound "shift in pricing anchors." With the direct advancement of L1 scaling, the redefinition of L2 into different trust levels across the network spectrum, and the proactive prioritization of system security and neutrality over protocol revenue, ETH's pricing logic has structurally shifted to "security settlement layer + native currency attributes."

Given the high macroeconomic real interest rates, the lack of ample liquidity, and the fact that on-chain growth options are not yet allowed to be priced by the market, the price of ETH has naturally converged to a structural value range supported by settlement certainty, verifiable returns, and institutional consensus. This range is not a sentiment bottom, but rather a value center after stripping away the platform-type growth premium.

As long-term builders of the Ethereum ecosystem, we refuse to be mindless bulls on ETH. We hope to use a rigorous logical framework to carefully demonstrate our predictions: only when macro liquidity, risk appetite, and network effects simultaneously meet the triggering conditions of the market state will higher valuations be re-incorporated by the market.

Therefore, for long-term investors, the key question now is no longer anxiously asking "Can Ethereum still rise?", but rather to clearly recognize which layer of core value we are buying at the "floor price" in the current environment.

数据：以太坊早期参与者地址今日质押4032枚ETH，此前已休眠2.4年

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