Three Ethereum’s Evolving Narratives

The Negative Narrative

Ethereum has long been the dominant smart contract platform, but over the past two years it faced a negative narrative that its growth wasn’t translating into corresponding value for ETH holders. This concern – often dubbed Ethereum’s “value capture problem” – stemmed from the observation that Ethereum’s vast utility wasn’t accruing back to the price of its native coin. One major driver of this issue has been Ethereum’s own scaling strategy.

Layer 2 solutions, such as rollups, have emerged as a response to alleviate congestion on the Ethereum mainnet. By processing transactions off-chain and then batching them back onto the main chain, these solutions offer faster and cheaper transactions, significantly enhancing the user experience. However, this shift presents potential challenges regarding Ethereum’s value capture. As more transactions are processed on Layer 2s like Arbitrum and Optimism, the fees and economic activity that would traditionally benefit the Ethereum mainnet are increasingly redirected. This migration reduces the demand for ETH, as users engage more with the Layer 2 ecosystem than the base layer. Consequently, the economic incentives that drive ETH’s value – such as base layer gas fees and validator revenue – could diminish, potentially impacting ETH’s price and its utility as a primary asset within the ecosystem.

The Price-Narrative Feedback Loop

It's essential to recognize a fundamental dynamic in crypto markets: narratives tend to follow price, not the other way around. Bullish or bearish storylines often emerge after significant price movements, as participants seek to rationalize what has already occurred in the market. This perspective reframes how we understand Ethereum’s evolving perception. The recovery in ETH price recently didn't merely reflect renewed interest—it created the conditions for new narratives to surface and gain traction.

Indeed, as ETH began regaining strength, new narratives have emerged that paint a far more optimistic picture for Ethereum. These fresh storylines suggest that Ethereum’s position in the crypto ecosystem is strengthening in ways that could ultimately resolve the old value capture concerns. In particular, Ethereum’s dominant role in the stablecoin economy, the rise of ETH as a corporate treasury asset, and major technical upgrades to scale Ethereum mainnet on its roadmap are converging to bolster Ethereum’s long-term outlook. Below, we explore each of these developing narratives and why they matter.

Narrative 1: Ethereum’s Stablecoin Dominance

One of Ethereum’s greatest strengths today is its role as the settlement layer of choice for USD-backed stablecoins. Ethereum is the primary home for these digital dollars. As of mid-2025, the Ethereum network hosts roughly 50% of the entire stablecoin supply in circulation. This makes Ethereum by far the largest base for stablecoins, outstripping all other blockchains. In fact, if one excludes the opaque, USDT-dominated Tron network from the analysis, Ethereum’s share of the stablecoin market climbs to around 75%.

Source: https://defillama.com/stablecoins/chains

Crucially, Ethereum is also the chain of choice for regulated stablecoins. While Tron’s stablecoin activity is almost entirely in Tether’s USDT (often used for its low fees but less transparent), Ethereum supports a wide mix of trusted USD stablecoins. USD Coin (USDC) – one of the most regulated and transparent stablecoins – is predominantly issued on Ethereum. Approximately 61% of all USDC in circulation resides on Ethereum. Other major regulated fiat-backed coins (like BlackRock USD) predominately issued on Ethereum.

Source: https://defillama.com/stablecoins

This narrative gains even more momentum in light of the recent passage of the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) in the U.S. Senate. The legislation provides a clear regulatory framework for fiat-backed stablecoins, including mandatory 1:1 reserves, public audits, and licensing for issuers. While the Act is neutral in technical design, its impact disproportionately benefits regulated stablecoins—most notably USDC, which already enjoys strong institutional backing and compliance standards.

Since majority regulated stablecoins resides on Ethereum, the GENIUS Act effectively serves as a major regulatory tailwind for Ethereum itself. As financial institutions and fintech companies gain confidence in compliant stablecoins, demand for them such as USDC is likely to grow significantly. Given that Ethereum is the primary issuance and transaction layer, this growth will directly enhance Ethereum’s on-chain activity, fee generation, and validator revenue. In other words, regulatory clarity around stablecoins amplifies Ethereum’s role as the backbone of the digital dollar system, reinforcing its narrative as essential financial infrastructure for both crypto and traditional finance.

Narrative 2: ETH as a Treasury Asset: Companies Bet on Ethereum

Another powerful emerging narrative is the idea of ETH as a treasury reserve asset for institutions and companies. This concept – pioneered by Bitcoin’s narrative (with corporations like MicroStrategy holding BTC) – is now taking hold for Ethereum. In the past months, a wave of firms have started accumulating ETH for their balance sheets, essentially treating ETH as a long-term store of value and strategic investment.

For example, Nasdaq-listed BTC Digital (BTCT), originally a Bitcoin mining firm – revealed it moved $1 million of its cash into ETH and plans to keep increasing that position. Around the same time, Bit Digital (BTBT), another mining company, shifted its entire treasury from BTC to ETH to pursue Ethereum staking.

The most dramatic example of this narrative is SharpLink Gaming (Nasdaq: SBET) – a company that has effectively reinvented itself as an “Ethereum holding company.” In June 2025, SharpLink established an Ethereum treasury strategy and raised funding to aggressively buy ETH. In just a few weeks, the firm amassed approximately 280,706 ETH.

Source: https://www.sharplink.com/

Notably, Ethereum co-founder Joseph Lubin (CEO of ConsenSys) joined as SharpLink’s chairman to guide this strategy. Lubin argued that large ETH treasuries will help “right-size” the supply-demand dynamics of ETH, which has a vast supply in circulation but historically not enough institutional holders or sinks of demand. By effectively locking up ETH in corporate treasuries, this trend can reduce circulating supply and align Ethereum’s usage with investor value. The market has responded in kind, SharpLink’s stock price surged nearly 5× since it adopted the ETH reserve strategy, reflecting investor approval of the move.

Overall, the “ETH as a treasury asset” narrative is gaining momentum fast. We’re witnessing the early stages of what could become a broader adoption of ETH by corporate treasuries, crypto funds, and even nation-state funds down the line.

Narrative 3: Ethereum’s zkEVM Roadmap

Ethereum’s third emerging narrative is a technological one. After successfully transitioning to proof-of-stake and implementing fee burning, the Ethereum community is now tackling the ultimate challenge: scaling the base layer while preserving decentralization and censorship-resistance. The centerpiece of this plan is an initiative to integrate zkEVM (zero-knowledge Ethereum Virtual Machine) proofs directly into Ethereum’s Layer-1. In early July 2025, Ethereum Foundation researchers revealed a roadmap for a Layer-1 zkEVM upgrade aimed at radically improving how blocks are verified and secured.

The idea is to allow Ethereum validators to verify entire blocks via succinct ZK proofs instead of re-executing every transaction, which would massively speed up verification and reduce the hardware requirements to run a full node. This is expected to boost Ethereum’s throughput (more transactions per second) and make the network even more resilient to censorship or attacks, since verification becomes faster and can be done by anyone with modest hardware.

Ethereum Foundation’s goal is to ship a working Layer-1 zkEVM within about a year. The zkEVM implementation is being designed with an emphasis on censorship-resistant scaling – enabling what developers call “real-time proving.” This means block validations via ZK proof can happen within the 12-second slot time of each Ethereum block, effectively making finality almost instant. The target is to prove and verify 99% of blocks in under 10 seconds each (with only rare outlier blocks needing longer). Just as importantly, the Ethereum team insists that this must be achieved in a decentralized, accessible way. They introduced the concept of “home proving,” aiming to ensure that even individual stakers running nodes at home can generate and verify ZK proofs without relying on supercomputers or cloud clusters.