ETH Deep Research Report: Token Future Development and Future Trajectory

Yael

/Nov 19, 2025

Key Takeaways

• Ethereum is transitioning to a rollup-centric model, improving scalability and reducing user fees.

• EIP-4844 significantly lowers the cost for rollups to publish data, enhancing their economic viability.

• Institutional accumulation and staking are reshaping ETH's liquid supply and market dynamics.

• Layer-2 networks are capturing transaction demand, leading to increased utility for ETH as a settlement layer.

• Regulatory clarity and macroeconomic factors remain critical risks influencing ETH's price and adoption.

Executive summary

Ethereum (ETH) is moving from single‑chain throughput limits to a rollup‑centric, data‑available L1 that services many Layer‑2s. Protocol upgrades since the Merge (notably Proto‑Danksharding / EIP‑4844) and continued L2 adoption are structurally lowering user fees and expanding capacity, while EIP‑1559’s burn and PoS issuance mechanics keep supply dynamics sensitive to on‑chain demand. Recent developments make ETH’s long‑term value capture increasingly tied to rollup growth, staking economics, and capital flows (including ETFs and treasury allocations). For technical background on these upgrades, see the official Ethereum roadmap and Dencun / Proto‑Danksharding details. (ethereum.org)

What changed technically — short recap of key upgrades

EIP‑1559 (London, 2021) introduced a protocol base fee that is burned on each transaction. That burn mechanism materially altered ETH’s monetary dynamics and makes fee pressure an on‑chain variable affecting supply. (eips.ethereum.org)
The Merge (Sept 2022) replaced PoW with PoS, reducing issuance and enabling staking and validator economics that determine ongoing ETH supply growth.
Shapella (Shanghai + Capella) unlocked withdrawals for stakers and finalized the Merge lifecycle; withdrawals and the exit queue mechanics remain gated to protect network security. See the withdrawals FAQ for precise mechanics. (docs.ethstaker.org)
Dencun / Proto‑Danksharding (EIP‑4844) introduced temporary “blob” data to reduce the cost of posting rollup data to L1 — a direct, measurable improvement for rollup economics and user fees. The roadmap beyond proto‑danksharding targets full Danksharding and other consensus upgrades. (staging.ethereum.org)

Why this matters: EIP‑4844 reduces the marginal cost for rollups to publish data; rollups are where most scale and UX improvements happen. As mainnet becomes a cheaper, secure data‑availability layer, L2 throughput, UX and use‑case diversity (gaming, payments, microtransactions) grow faster.

Market and monetary dynamics: supply, staking and burns

Post‑Merge issuance dropped dramatically compared with PoW levels, but ETH’s net issuance today depends on the balance between staking rewards (issuance) and EIP‑1559 burns (demand/fee driven). High rollup activity increases the burn rate; quiet periods lower it. Quantitative on‑chain research shows the relationship is dynamic — ETH can be deflationary during fee surges and mildly inflationary when activity and base fees are low. (eips.ethereum.org)
Institutional accumulation and staking have meaningfully changed the liquid float. Recent institutional and treasury flows (and indexed products) have absorbed sizable amounts of available ETH; Coin Metrics–sourced industry reports note that institutional accumulation can outpace net issuance during concentrated inflows, tightening tradable supply. This makes price sensitive to new demand and exchange reserve trends. (sec.gov)
Staking participation remains a core supply‑side driver. With a significant share of ETH locked in consensus (liquid staking and native staking combined), short‑term selling pressure can be muted because validator exits are subject to protocol churn and queue limits. For withdrawal mechanics and how the sweep/queue works, refer to the official staking withdrawals documentation. (docs.ethstaker.org)

Layer‑2 growth: adoption, capacity and economic impact

Layer‑2 networks (optimistic and zk rollups, plus EVM‑compatible chains anchored to Ethereum) continue to capture transaction demand and TVL. Industry trackers show material TVL growth across L2s, with the largest rollups holding most activity and value. As rollups move to use blob space, per‑tx costs on L2s decline and user activity becomes more price‑sensitive in a positive way (more transactions at lower cost). (l2beat.com)
The rollup‑centric model also changes where fees are created and burned: L2s reduce direct L1 calldata usage and shift the base‑fee economics, meaning ETH’s burn profile will evolve with L2 adoption rather than simply L1 transaction counts. The net effect is broader utility for ETH as a settlement and security layer and increased protocol capture when rollups scale.

MEV, proposer‑builder separation and censorship/centralization risks

MEV (miner / max extractable value) dynamics moved into the PoS and post‑Merge world with proposer‑builder separation (PBS) and relay networks. PBS affects block‑building economics, searcher strategies, and potential centralization vectors — both an efficiency and a governance/security risk if left unaddressed. Flashbots and ecosystem research detail how builders, relays and validators interact and why privacy/auction designs matter for fairness and censorship resistance. (writings.flashbots.net)
Why investors should care: concentrated MEV capture (or centralized block building) can change fee flows, validator revenue composition and perceptions of decentralization — all material to long‑term ETH valuation.

Key macro and regulatory considerations

Institutional products (spot ETFs / ETPs and custody solutions) have materially increased tradable demand for ETH. Fund inflows and large treasury allocations can compress free float and amplify on‑chain supply shocks during rallies; conversely, redemptions can create rapid price pressure.
Regulatory clarity (e.g., jurisdictional decisions about ETH staking products, liquid staking tokens, token classification) is a continuing macro risk. Policy changes that affect institutional access or token classification would change demand curves quickly.
Macro liquidity, fiat rates, and risk appetite still correlate with crypto markets broadly; ETH benefits from both speculative cycles and structural demand (DeFi, tokenization, payments) but is not insulated from macro shocks.

Price outlook — scenarios and catalysts Note: this is not investment advice; these are scenario outlines tied to technical and market drivers.

Bull case (higher probability if rollups scale, fees rise modestly and ETFs keep net inflows): Continued rollup adoption pushes L2 usage up, blob economics reduce transaction frictions, ETF flows and treasury buys compress liquid supply — burn + staking + demand create a positive feedback loop for price. Key catalysts: significant L2 UX wins, strong ETF inflows, materially lower exchange reserves. (l2beat.com)
Base case (broad adoption with moderate volatility): Rollups keep growing, fee burns are steady but not extreme, staking ratio increases slowly, and markets digest ETF rotations. ETH price follows broader risk assets but benefits from long‑term secular demand as L2 activity grows. (ethereum.org)
Bear case (slower rollup adoption, regulatory headwinds, or macro liquidity shock): Lower fees reduce burn, exchange selling increases, or regulatory action constrains institutional demand — supply‑side locks weaken and price can underperform. PBS centralization or MEV‑related controversies could also undermine sentiment. (writings.flashbots.net)

Practical takeaways for ETH holders and builders

For long‑term holders: understand staking exit mechanics and queue risk before moving large positions in and out of staking; consider liquidity and LST (liquid staking token) counterparty risk. Use hardware wallets and cold custody for large, long‑term holdings.
For active users / traders: follow L2 fee and TVL trends (trackers such as L2Beat) and monitor exchange reserve flows and ETF filings; these metrics often lead short‑term price moves. (l2beat.com)
For builders and validators: follow PBS and MEV developments — optimizer and privacy mechanisms will influence revenue and censorship risk. Participation in open builder/relay ecosystems that prioritize fair execution is important for long‑term health. (writings.flashbots.net)

Risk checklist (what to monitor weekly/monthly)

Protocol upgrades and client release advisories (coordinate node/client upgrades carefully).
L2 TVL and transactions per second trends (L2Beat and project dashboards).
Net ETH issuance vs EIP‑1559 burn rate (on‑chain metrics providers like Glassnode / Coin Metrics).
Exchange reserves and ETF flows (market data and filings).
MEV/PBS centralization signals and relay builder concentration.

Conclusion — how to think about ETH from here Ethereum’s value proposition has layered from a single L1 transaction market to a settlement and data‑availability layer for an expanding L2 ecosystem. That structural shift — backed by EIP‑4844 and the broader roadmap toward Danksharding — makes ETH’s long‑term trajectory more dependent on L2 adoption, staking economics, and institutional flows than simple L1 usage metrics. Investors and builders should track L2 economics, burn vs issuance, and custody/staking design when forming views about ETH’s future.

Security and custody note — a brief word on hardware wallets If you hold ETH for the long term or participate in on‑chain staking and DeFi, private key security is fundamental. A hardware wallet that supports Ethereum and EVM chains, clear signing UI, and a trusted backup/recovery model reduces key compromise risk. OneKey’s hardware wallet family delivers offline key storage, a polished app experience for managing multiple EVM assets and staking workflows, and integration with common dapps — making it a practical option for users who want a balance of security and usability when holding ETH or interacting with L2s.