On February 3, 2026, Vitalik published a significant reflection on the Ethereum scaling roadmap on X. As the practical difficulties of Layer 2 evolving into a fully decentralized form are being re-evaluated, and with the mainnet's own throughput expected to increase significantly in the coming years, the original assumption of relying solely on L2 for throughput scaling is being corrected. A new "Settlement-Service" collaborative paradigm is forming between L1 and L2: L1 focuses on providing the highest level of security, censorship resistance, and settlement sovereignty, while L2 evolves into "differentiated service providers" (such as privacy, AI, high-frequency trading). Ethereum's strategic focus is returning to the mainnet itself, reinforcing its positioning as the world's most trusted settlement layer. Scaling is no longer the sole objective; security, neutrality, and predictability are once again becoming Ethereum's core assets.

Core Changes:

• Ethereum is entering an "L1-First Paradigm": With direct mainnet scaling and continuously decreasing fees, the original assumption relying on L2 to shoulder the core role of scaling no longer holds.

• L2 is no longer "Branded Sharding," but a Trust Spectrum: The progress of L2 decentralization is much slower than expected, making it difficult to uniformly inherit Ethereum's security. Their role is being redefined as a spectrum of networks with different trust levels.

• Ethereum's core value is shifting from "Traffic" to "Settlement Sovereignty": The value of ETH 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 native monetary asset.

• Scaling strategy is adjusting towards protocol internalization: Based on continuous direct L1 scaling, the exploration of protocol-layer native verification and security mechanisms may reshape the security boundary and value capture structure between L1 and L2.

• Valuation framework acts a structural migration: The weight of security and institutional credibility has risen significantly, while the weight of fees and platform effects has decreased. ETH's pricing is shifting from a cash flow model to an asset premium model.

This article will analyze the paradigm shift in Ethereum's pricing model and valuation reconstruction according to a layered approach: Facts (technological and institutional changes that have occurred), Mechanisms (impact on value capture and pricing logic), and Deductions (implications for allocation and risk-return).

To understand the long-term value of Ethereum, the key lies not in short-term price fluctuations, but in its consistent design philosophy and value orientation.

• Credible Neutrality: Ethereum's core goal is not the maximization of efficiency or profit, but to become a set of credibly neutral infrastructure—with open rules, predictability, no favoritism towards any participant, no control by a single entity, and where anyone can participate without permission. The security of ETH and its on-chain assets ultimately depends on the protocol itself, not on any institutional credit.

• Ecosystem First, Not Revenue First: Multiple key upgrades of Ethereum reflect a consistent decision-making logic—actively foregoing short-term protocol revenue in exchange for lower usage costs, larger ecosystem scale, and stronger system resilience. Its goal is not to "collect tolls," but to become the 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 are located on a connection spectrum with varying degrees to the mainnet: some inherit mainnet security and pursue efficiency, while others position themselves with differentiated functions. This enables the system to serve both global settlement and high-performance applications simultaneously, rather than L2s being "Branded Shards."

• Long-Termist Technical Route: Ethereum adheres to a slow but certain evolutionary path, prioritizing system security and credibility. From the PoS transition to subsequent scaling and confirmation mechanism optimizations, its roadmap pursues sustainable, verifiable, and irreversible correctness.

Security Settlement Layer: 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 as a Security Settlement Layer marks the establishment of "Settlement Sovereignty." It is a transition for Ethereum from a "Confederation" to a "Federation," representing the "Constitutional Moment" of the establishment of the Ethereum digital nation, and a significant upgrade to Ethereum's architecture and core.

After the American Revolutionary War, under the Articles of Confederation, the 13 states were like a loose alliance. Each state printed its own currency and levied tariffs on others. Every state was free-riding: enjoying common defense but refusing to pay; enjoying the alliance's brand but acting independently. This structural problem led to reduced national credit and an inability to unify foreign trade, severely hindering the economy.

1787 was America's "Constitutional Moment." The new Constitution granted the federal government three key powers: the power to tax directly, the power to regulate interstate commerce, and the power to unify currency. But what truly brought the federal government "to life" was Hamilton's economic plan of 1790: the federal assumption of state debts, repayment at face value to rebuild national credit, and the establishment of a National Bank as a financial hub. A unified market released economies of scale, national credit attracted more capital, and infrastructure construction gained financing capability. The US moved from 13 mutually guarded small states to become the world's largest economy.

Today's structural dilemma in the Ethereum ecosystem is exactly the same.

Each L2 is like a "Sovereign State," with its own user base, liquidity pool, and governance token. Liquidity is fragmented, cross-L2 interaction friction is high, and L2s enjoy Ethereum's security layer and brand without being able to return value to L1. Locking liquidity on their own chain is short-term rational for each L2, but if all L2s do this, the core competitive advantage of the entire Ethereum ecosystem is lost.

The roadmap Ethereum is currently advancing is essentially its constitution-making and the establishment of a central economic system, that is, the establishment of "Settlement Sovereignty":

• Native Rollup Precompile = Federal Constitution. L2s can freely build differentiated functions outside the EVM, while the EVM part can obtain Ethereum-level security verification through native precompiles. Not connecting is an option, but the cost is losing trustless interoperability with the Ethereum ecosystem.

• Synchronous Composability = Unified Market. Through mechanisms like Native Rollup Precompiles, trustless interoperability and synchronous composability between L2s and between L2 and L1 are becoming possible. This directly eliminates "interstate trade barriers," and liquidity is no longer trapped in respective silos.

• L1 Value Capture Reconstruction = Federal Taxing Power. When all critical cross-L2 interactions return to L1 for settlement, ETH re-becomes the settlement hub and trust anchor for the entire ecosystem. Whoever controls the settlement layer captures the value.

Ethereum is using a unified settlement and verification system to turn a fragmented L2 ecosystem into an irreplaceable "Digital Nation." This is a historical inevitability. Of course, the transition process may be slow, but history tells us that once this transition is complete, the released network effects will far exceed the linear growth of the fragmentation era. The US used a unified economic system to turn 13 small states into the world's largest economy. Ethereum will also transform a loose L2 ecosystem into the largest Security Settlement Layer, and even a global financial carrier.

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

Applying traditional corporate valuation models (P/E, DCF, EV/EBITDA) to Ethereum is essentially a category error. Ethereum is not a company aiming for profit maximization, but an open digital economic infrastructure. Corporations pursue shareholder value maximization, while Ethereum pursues the maximization of ecosystem scale, security, and censorship resistance. To achieve this goal, Ethereum has repeatedly actively suppressed protocol revenue (e.g., via EIP-4844 introducing Blob DA to structurally lower L2 data publishing costs and suppress L1 revenue from rollup data)—which approximates "revenue self-destruction" from a corporate perspective, but from an infrastructure perspective, is sacrificing short-term fees for long-term neutrality premium and network effects.

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

The ethval.com launched by the Hashed team at the end of 2025 provided a detailed set of reproducible quantitative models for Ethereum, but traditional static models struggle to capture the dramatic pivot in Ethereum's narrative in 2026. Therefore, we reused their systematic, transparent, and reproducible underlying models (covering yield, money, network effects, and supply structure), but reshaped the valuation architecture and weighting logic:

1. Structural Restructuring: Mapping models to four value quadrants: "Security, Money, Platform, Revenue," aggregated for pricing.

2. Weight Rebalancing: Significantly increasing the weight of security and settlement premium, weakening the marginal contribution of protocol revenue and L2 expansion.

3. Risk Control Overlay: Introducing a circuit breaker mechanism sensing macro and on-chain risks, making the valuation framework adaptable across cycles.

4. Removing "Circular Reasoning": Models containing current price inputs (like Staking Scarcity, Liquidity Premium) are no longer used as fair value anchors, but retained only as indicators for position and risk appetite adjustment.

Note: The following models are not for precise point prediction, but to depict the relative pricing direction of different value sources in different cycles.

We view the security settlement layer as Ethereum's most core source of value and assign it a 45% benchmark weight; this weight is further increased during periods of rising macro 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 block space fully backed by Ethereum itself. Any high-performance execution environment relying on external trust assumptions does not constitute an extension of the Ethereum entity.

Under this framework, ETH's value is mainly reflected as the credit premium of a global sovereign-less settlement layer, rather than protocol revenue. This premium is jointly supported by structural factors such as validator scale and degree of decentralization, long-term security record, institutional adoption, clarity of compliance paths, and protocol-endogenous Rollup verification mechanisms.

In specific pricing, we mainly use two complementary methods: Validator Economics (Yield Equilibrium Mapping) and Staking DCF (Perpetual Staking Discount), to jointly depict the institutional premium of ETH as the "Global Secure Settlement Layer."

• Validator Economics (Yield Equilibrium Pricing): Based on the ratio of annualized staking cash flow per ETH to the target real yield, deriving a theoretical fair price. This expression is used to depict the equilibrium relationship between yield and price, serving as a directional relative valuation tool rather than an independent pricing model.

• Staking DCF (Perpetual Staking Discount): Viewing ETH as a long-term asset capable of generating sustainable real staking yields, discounting its cash flow in perpetuity. Essentially, this value layer does not benchmark against the revenue capability of platform companies, but is similar to the settlement credit of a global clearing network.

We view the monetary attribute as Ethereum's second core source of value and assign it a 35% benchmark weight, becoming the main utility anchor in neutral markets or during on-chain economic expansion. This judgment is not based on the narrative that "ETH equals USD," but 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.

For pricing, we use an extended form of the Quantity Theory of Money (MV = PQ), but model ETH's usage scenarios in layers to address the order-of-magnitude differences in circulation velocity across different scenarios:

1. High-Frequency Settlement Layer (Gas Payment, Stablecoin Transfers)

   • M_transaction = Annual Transaction Settlement Volume / V_high

   • V_high ≈ 15-25 (Referencing historical on-chain data)

2. Medium-Frequency Financial Layer (DeFi Interaction, Lending Liquidation)

   • M_defi = Annual DeFi Settlement Volume / V_medium

   • V_medium ≈ 3-8 (Based on mainstream DeFi protocol capital turnover rate)

3. Low-Frequency Collateral Layer (Staking, Restaking, Long-term Locking)

   • M_collateral = Total ETH Collateral Value × (1 + Liquidity Premium)

   • Liquidity Premium = 10-30% (Reflecting compensation for liquidity sacrifice)

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

We view protocol revenue as the cash flow floor in the Ethereum valuation system, rather than a growth engine, also assigning a 10% weight. This layer mainly functions during bear markets or extreme risk phases to depict the valuation lower limit.

Gas and Blob fees provide the minimum operating cost for the network and affect the supply structure through EIP-1559. For valuation, we use Price-to-Sales (P/S) and Fee Yield models, taking the conservative value among them, serving only as a bottom reference. As the mainnet continues to scale, the relative importance of protocol revenue declines, with its core role reflected as a safety margin during downturns.

• Price-to-Sales Model (P/S Floor): ETH Price (PS) = M_PS / Circulating Supply

• Fee Yield Model: ETH Price(Yield) = M_Yield / Circulating Supply

• Cash Flow Floor Pricing (Minimum Value Principle): P_Revenue_Floor = min(P_PS , P_Yield)

If the previous text established Ethereum's "intrinsic value pivot," this chapter introduces an "external environment adaptation system" independent of fundamentals. Valuation cannot operate in a vacuum and must be constrained by three major external factors: Macro Environment (Cost of Capital), Market Structure (Relative Strength), and On-Chain Sentiment (Crowdedness). Based on this, we constructed a Regime Adaptation mechanism to dynamically adjust valuation weights across different cycles—releasing option premiums during loose periods and retreating to the revenue floor during risk-off periods, thereby achieving a leap from static models to dynamic strategies. (Note: Due to space limitations, this article only presents the core logical framework of this mechanism.)

The analysis above is based on internal crypto technical, valuation, and cycle logic. This chapter discusses a problem at a different level: When ETH is no longer priced solely by crypto-native funds but is gradually integrated into the traditional financial system, how will its pricing power, asset attributes, and risk structure change? The "Institutional Second Curve" is not an extension of existing logic, but a redefinition of Ethereum by exogenous forces:

• Change in Asset Attribute (Beta → Carry): Spot ETH ETFs solve compliance and custody issues, essentially still being price exposure; while the future advancement of Staking ETFs introduces on-chain yields into the institutional system via compliant carriers for the first time. ETH thus shifts from a "non-interest-bearing high-volatility asset" to an "allocation asset with predictable yield," expanding potential buyers from trading funds to pension, insurance, and long-term accounts sensitive to yield and duration.

• Change in Usage (Holding → Using): Institutions may no longer just view ETH as a tradable ticker, but start using it as settlement and collateral infrastructure. Whether it's JPMorgan's tokenized funds or the deployment of compliant stablecoins and RWAs on Ethereum, it indicates demand for ETH is shifting from "Holding Demand" to "Running Demand"—institutions not only hold ETH but use it for settlement, clearing, and risk management.

• Change in Tail Risk (Uncertainty → Pricing): As stablecoin regulatory frameworks (like the GENIUS Act) are gradually established, and with increased transparency in Ethereum's roadmap and governance, the regulatory and technical uncertainties most sensitive to institutions are being systematically compressed. This means uncertainty starts being priced in, rather than avoided.

The so-called "Institutional Second Curve" is a change in the nature of demand, providing a real demand source for the "Security Settlement Layer + Monetary Attribute" valuation logic, driving ETH to transition from a sentiment-driven speculative asset to a foundational asset carrying both allocation and functional needs.

In the past week, the industry has undergone a severe deleveraging wash, with market sentiment dropping to freezing point—undoubtedly a "darkest hour" for the crypto world. Pessimism is spreading among practitioners, and Ethereum, as the asset most representative of the crypto spirit, is also in the eye of the storm of controversy.

However, as rational observers, we need to pierce through the fog of panic: What Ethereum is currently experiencing is not a "collapse of value," but a profound "migration of pricing anchor." With L1 scaling advancing directly, L2 being redefined as a network spectrum of different trust levels, and protocol revenue actively giving way to system security and neutrality, ETH's pricing logic has structurally shifted to "Security Settlement Layer + Native Monetary Attribute."

Against the backdrop of high macro real interest rates, liquidity not yet being loose, and on-chain growth options not yet permitted to be priced by the market, ETH's price naturally converges to a structural value range supported by settlement certainty, verifiable yield, and institutional consensus. This range is not a sentiment bottom, but a value pivot after stripping away platform growth premiums.

As long-term builders of the Ethereum ecosystem, we refuse to be "mindless bulls" for ETH. We hope to use a rigorous logical framework to carefully demonstrate our prediction: Only when macro liquidity, risk appetite, and network effects simultaneously meet market state trigger conditions will higher valuations be re-factored in by the market.

Therefore, for long-term investors, the critical question now is not anxiously asking "Can Ethereum still go up," but to clearly recognize—in the current environment, which layer of core value are we buying at a "floor price"?

Disclaimer: This article was assisted by AI tools such as ChatGPT-5.2, Gemini 3, and Claude Opus 4.5 during the creation process. The author has made every effort to proofread and ensure the information is true and accurate, but omissions are inevitable, and we ask for your understanding. It should be specially noted that the crypto asset market universally experiences deviations between project fundamentals and secondary market price performance. The content of this article is for information consolidation and academic/research exchange only, does not constitute any investment advice, and should not be considered as a recommendation for any token.

On February 3, 2026, Vitalik published a significant reflection on the Ethereum scaling roadmap on X. As the practical difficulties of Layer 2 evolving into a fully decentralized form are being re-evaluated, and with the mainnet's own throughput expected to increase significantly in the coming years, the original assumption of relying solely on L2 for throughput scaling is being corrected. A new "Settlement-Service" collaborative paradigm is forming between L1 and L2: L1 focuses on providing the highest level of security, censorship resistance, and settlement sovereignty, while L2 evolves into "differentiated service providers" (such as privacy, AI, high-frequency trading). Ethereum's strategic focus is returning to the mainnet itself, reinforcing its positioning as the world's most trusted settlement layer. Scaling is no longer the sole objective; security, neutrality, and predictability are once again becoming Ethereum's core assets.

Core Changes:

• Ethereum is entering an "L1-First Paradigm": With direct mainnet scaling and continuously decreasing fees, the original assumption relying on L2 to shoulder the core role of scaling no longer holds.

• L2 is no longer "Branded Sharding," but a Trust Spectrum: The progress of L2 decentralization is much slower than expected, making it difficult to uniformly inherit Ethereum's security. Their role is being redefined as a spectrum of networks with different trust levels.

• Ethereum's core value is shifting from "Traffic" to "Settlement Sovereignty": The value of ETH 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 native monetary asset.

• Scaling strategy is adjusting towards protocol internalization: Based on continuous direct L1 scaling, the exploration of protocol-layer native verification and security mechanisms may reshape the security boundary and value capture structure between L1 and L2.

• Valuation framework acts a structural migration: The weight of security and institutional credibility has risen significantly, while the weight of fees and platform effects has decreased. ETH's pricing is shifting from a cash flow model to an asset premium model.

This article will analyze the paradigm shift in Ethereum's pricing model and valuation reconstruction according to a layered approach: Facts (technological and institutional changes that have occurred), Mechanisms (impact on value capture and pricing logic), and Deductions (implications for allocation and risk-return).

To understand the long-term value of Ethereum, the key lies not in short-term price fluctuations, but in its consistent design philosophy and value orientation.

• Credible Neutrality: Ethereum's core goal is not the maximization of efficiency or profit, but to become a set of credibly neutral infrastructure—with open rules, predictability, no favoritism towards any participant, no control by a single entity, and where anyone can participate without permission. The security of ETH and its on-chain assets ultimately depends on the protocol itself, not on any institutional credit.

• Ecosystem First, Not Revenue First: Multiple key upgrades of Ethereum reflect a consistent decision-making logic—actively foregoing short-term protocol revenue in exchange for lower usage costs, larger ecosystem scale, and stronger system resilience. Its goal is not to "collect tolls," but to become the 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 are located on a connection spectrum with varying degrees to the mainnet: some inherit mainnet security and pursue efficiency, while others position themselves with differentiated functions. This enables the system to serve both global settlement and high-performance applications simultaneously, rather than L2s being "Branded Shards."

• Long-Termist Technical Route: Ethereum adheres to a slow but certain evolutionary path, prioritizing system security and credibility. From the PoS transition to subsequent scaling and confirmation mechanism optimizations, its roadmap pursues sustainable, verifiable, and irreversible correctness.

Security Settlement Layer: 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 as a Security Settlement Layer marks the establishment of "Settlement Sovereignty." It is a transition for Ethereum from a "Confederation" to a "Federation," representing the "Constitutional Moment" of the establishment of the Ethereum digital nation, and a significant upgrade to Ethereum's architecture and core.

After the American Revolutionary War, under the Articles of Confederation, the 13 states were like a loose alliance. Each state printed its own currency and levied tariffs on others. Every state was free-riding: enjoying common defense but refusing to pay; enjoying the alliance's brand but acting independently. This structural problem led to reduced national credit and an inability to unify foreign trade, severely hindering the economy.

1787 was America's "Constitutional Moment." The new Constitution granted the federal government three key powers: the power to tax directly, the power to regulate interstate commerce, and the power to unify currency. But what truly brought the federal government "to life" was Hamilton's economic plan of 1790: the federal assumption of state debts, repayment at face value to rebuild national credit, and the establishment of a National Bank as a financial hub. A unified market released economies of scale, national credit attracted more capital, and infrastructure construction gained financing capability. The US moved from 13 mutually guarded small states to become the world's largest economy.

Today's structural dilemma in the Ethereum ecosystem is exactly the same.

Each L2 is like a "Sovereign State," with its own user base, liquidity pool, and governance token. Liquidity is fragmented, cross-L2 interaction friction is high, and L2s enjoy Ethereum's security layer and brand without being able to return value to L1. Locking liquidity on their own chain is short-term rational for each L2, but if all L2s do this, the core competitive advantage of the entire Ethereum ecosystem is lost.

The roadmap Ethereum is currently advancing is essentially its constitution-making and the establishment of a central economic system, that is, the establishment of "Settlement Sovereignty":

• Native Rollup Precompile = Federal Constitution. L2s can freely build differentiated functions outside the EVM, while the EVM part can obtain Ethereum-level security verification through native precompiles. Not connecting is an option, but the cost is losing trustless interoperability with the Ethereum ecosystem.

• Synchronous Composability = Unified Market. Through mechanisms like Native Rollup Precompiles, trustless interoperability and synchronous composability between L2s and between L2 and L1 are becoming possible. This directly eliminates "interstate trade barriers," and liquidity is no longer trapped in respective silos.

• L1 Value Capture Reconstruction = Federal Taxing Power. When all critical cross-L2 interactions return to L1 for settlement, ETH re-becomes the settlement hub and trust anchor for the entire ecosystem. Whoever controls the settlement layer captures the value.

Ethereum is using a unified settlement and verification system to turn a fragmented L2 ecosystem into an irreplaceable "Digital Nation." This is a historical inevitability. Of course, the transition process may be slow, but history tells us that once this transition is complete, the released network effects will far exceed the linear growth of the fragmentation era. The US used a unified economic system to turn 13 small states into the world's largest economy. Ethereum will also transform a loose L2 ecosystem into the largest Security Settlement Layer, and even a global financial carrier.

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

Applying traditional corporate valuation models (P/E, DCF, EV/EBITDA) to Ethereum is essentially a category error. Ethereum is not a company aiming for profit maximization, but an open digital economic infrastructure. Corporations pursue shareholder value maximization, while Ethereum pursues the maximization of ecosystem scale, security, and censorship resistance. To achieve this goal, Ethereum has repeatedly actively suppressed protocol revenue (e.g., via EIP-4844 introducing Blob DA to structurally lower L2 data publishing costs and suppress L1 revenue from rollup data)—which approximates "revenue self-destruction" from a corporate perspective, but from an infrastructure perspective, is sacrificing short-term fees for long-term neutrality premium and network effects.

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

The ethval.com launched by the Hashed team at the end of 2025 provided a detailed set of reproducible quantitative models for Ethereum, but traditional static models struggle to capture the dramatic pivot in Ethereum's narrative in 2026. Therefore, we reused their systematic, transparent, and reproducible underlying models (covering yield, money, network effects, and supply structure), but reshaped the valuation architecture and weighting logic:

1. Structural Restructuring: Mapping models to four value quadrants: "Security, Money, Platform, Revenue," aggregated for pricing.

2. Weight Rebalancing: Significantly increasing the weight of security and settlement premium, weakening the marginal contribution of protocol revenue and L2 expansion.

3. Risk Control Overlay: Introducing a circuit breaker mechanism sensing macro and on-chain risks, making the valuation framework adaptable across cycles.

4. Removing "Circular Reasoning": Models containing current price inputs (like Staking Scarcity, Liquidity Premium) are no longer used as fair value anchors, but retained only as indicators for position and risk appetite adjustment.

Note: The following models are not for precise point prediction, but to depict the relative pricing direction of different value sources in different cycles.

We view the security settlement layer as Ethereum's most core source of value and assign it a 45% benchmark weight; this weight is further increased during periods of rising macro 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 block space fully backed by Ethereum itself. Any high-performance execution environment relying on external trust assumptions does not constitute an extension of the Ethereum entity.

Under this framework, ETH's value is mainly reflected as the credit premium of a global sovereign-less settlement layer, rather than protocol revenue. This premium is jointly supported by structural factors such as validator scale and degree of decentralization, long-term security record, institutional adoption, clarity of compliance paths, and protocol-endogenous Rollup verification mechanisms.

In specific pricing, we mainly use two complementary methods: Validator Economics (Yield Equilibrium Mapping) and Staking DCF (Perpetual Staking Discount), to jointly depict the institutional premium of ETH as the "Global Secure Settlement Layer."

• Validator Economics (Yield Equilibrium Pricing): Based on the ratio of annualized staking cash flow per ETH to the target real yield, deriving a theoretical fair price. This expression is used to depict the equilibrium relationship between yield and price, serving as a directional relative valuation tool rather than an independent pricing model.

• Staking DCF (Perpetual Staking Discount): Viewing ETH as a long-term asset capable of generating sustainable real staking yields, discounting its cash flow in perpetuity. Essentially, this value layer does not benchmark against the revenue capability of platform companies, but is similar to the settlement credit of a global clearing network.

We view the monetary attribute as Ethereum's second core source of value and assign it a 35% benchmark weight, becoming the main utility anchor in neutral markets or during on-chain economic expansion. This judgment is not based on the narrative that "ETH equals USD," but 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.

For pricing, we use an extended form of the Quantity Theory of Money (MV = PQ), but model ETH's usage scenarios in layers to address the order-of-magnitude differences in circulation velocity across different scenarios:

1. High-Frequency Settlement Layer (Gas Payment, Stablecoin Transfers)

   • M_transaction = Annual Transaction Settlement Volume / V_high

   • V_high ≈ 15-25 (Referencing historical on-chain data)

2. Medium-Frequency Financial Layer (DeFi Interaction, Lending Liquidation)

   • M_defi = Annual DeFi Settlement Volume / V_medium

   • V_medium ≈ 3-8 (Based on mainstream DeFi protocol capital turnover rate)

3. Low-Frequency Collateral Layer (Staking, Restaking, Long-term Locking)

   • M_collateral = Total ETH Collateral Value × (1 + Liquidity Premium)

   • Liquidity Premium = 10-30% (Reflecting compensation for liquidity sacrifice)

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

We view protocol revenue as the cash flow floor in the Ethereum valuation system, rather than a growth engine, also assigning a 10% weight. This layer mainly functions during bear markets or extreme risk phases to depict the valuation lower limit.

Gas and Blob fees provide the minimum operating cost for the network and affect the supply structure through EIP-1559. For valuation, we use Price-to-Sales (P/S) and Fee Yield models, taking the conservative value among them, serving only as a bottom reference. As the mainnet continues to scale, the relative importance of protocol revenue declines, with its core role reflected as a safety margin during downturns.

• Price-to-Sales Model (P/S Floor): ETH Price (PS) = M_PS / Circulating Supply

• Fee Yield Model: ETH Price(Yield) = M_Yield / Circulating Supply

• Cash Flow Floor Pricing (Minimum Value Principle): P_Revenue_Floor = min(P_PS , P_Yield)

If the previous text established Ethereum's "intrinsic value pivot," this chapter introduces an "external environment adaptation system" independent of fundamentals. Valuation cannot operate in a vacuum and must be constrained by three major external factors: Macro Environment (Cost of Capital), Market Structure (Relative Strength), and On-Chain Sentiment (Crowdedness). Based on this, we constructed a Regime Adaptation mechanism to dynamically adjust valuation weights across different cycles—releasing option premiums during loose periods and retreating to the revenue floor during risk-off periods, thereby achieving a leap from static models to dynamic strategies. (Note: Due to space limitations, this article only presents the core logical framework of this mechanism.)

The analysis above is based on internal crypto technical, valuation, and cycle logic. This chapter discusses a problem at a different level: When ETH is no longer priced solely by crypto-native funds but is gradually integrated into the traditional financial system, how will its pricing power, asset attributes, and risk structure change? The "Institutional Second Curve" is not an extension of existing logic, but a redefinition of Ethereum by exogenous forces:

• Change in Asset Attribute (Beta → Carry): Spot ETH ETFs solve compliance and custody issues, essentially still being price exposure; while the future advancement of Staking ETFs introduces on-chain yields into the institutional system via compliant carriers for the first time. ETH thus shifts from a "non-interest-bearing high-volatility asset" to an "allocation asset with predictable yield," expanding potential buyers from trading funds to pension, insurance, and long-term accounts sensitive to yield and duration.

• Change in Usage (Holding → Using): Institutions may no longer just view ETH as a tradable ticker, but start using it as settlement and collateral infrastructure. Whether it's JPMorgan's tokenized funds or the deployment of compliant stablecoins and RWAs on Ethereum, it indicates demand for ETH is shifting from "Holding Demand" to "Running Demand"—institutions not only hold ETH but use it for settlement, clearing, and risk management.

• Change in Tail Risk (Uncertainty → Pricing): As stablecoin regulatory frameworks (like the GENIUS Act) are gradually established, and with increased transparency in Ethereum's roadmap and governance, the regulatory and technical uncertainties most sensitive to institutions are being systematically compressed. This means uncertainty starts being priced in, rather than avoided.

The so-called "Institutional Second Curve" is a change in the nature of demand, providing a real demand source for the "Security Settlement Layer + Monetary Attribute" valuation logic, driving ETH to transition from a sentiment-driven speculative asset to a foundational asset carrying both allocation and functional needs.

In the past week, the industry has undergone a severe deleveraging wash, with market sentiment dropping to freezing point—undoubtedly a "darkest hour" for the crypto world. Pessimism is spreading among practitioners, and Ethereum, as the asset most representative of the crypto spirit, is also in the eye of the storm of controversy.

However, as rational observers, we need to pierce through the fog of panic: What Ethereum is currently experiencing is not a "collapse of value," but a profound "migration of pricing anchor." With L1 scaling advancing directly, L2 being redefined as a network spectrum of different trust levels, and protocol revenue actively giving way to system security and neutrality, ETH's pricing logic has structurally shifted to "Security Settlement Layer + Native Monetary Attribute."

Against the backdrop of high macro real interest rates, liquidity not yet being loose, and on-chain growth options not yet permitted to be priced by the market, ETH's price naturally converges to a structural value range supported by settlement certainty, verifiable yield, and institutional consensus. This range is not a sentiment bottom, but a value pivot after stripping away platform growth premiums.

As long-term builders of the Ethereum ecosystem, we refuse to be "mindless bulls" for ETH. We hope to use a rigorous logical framework to carefully demonstrate our prediction: Only when macro liquidity, risk appetite, and network effects simultaneously meet market state trigger conditions will higher valuations be re-factored in by the market.

Therefore, for long-term investors, the critical question now is not anxiously asking "Can Ethereum still go up," but to clearly recognize—in the current environment, which layer of core value are we buying at a "floor price"?

Disclaimer: This article was assisted by AI tools such as ChatGPT-5.2, Gemini 3, and Claude Opus 4.5 during the creation process. The author has made every effort to proofread and ensure the information is true and accurate, but omissions are inevitable, and we ask for your understanding. It should be specially noted that the crypto asset market universally experiences deviations between project fundamentals and secondary market price performance. The content of this article is for information consolidation and academic/research exchange only, does not constitute any investment advice, and should not be considered as a recommendation for any token.