Ethereum’s Fee Shake-Up: How Low Fees Made a Corporate Winner (and Left ETH Puzzled)

Ethereum had its busiest year — but the token didn’t get the memo

Ethereum hummed like a busy subway station in 2025: tons of transactions, massive DeFi activity, and no chokepoints. You’d think that kind of traffic would be a one-way ticket to moon-town for ETH, right? Not quite. Despite record usage on the network, the native token slid about 10% year-to-date and underperformed against Bitcoin. In plain terms: the chain is thriving, the coin is… meh.

What happened is a classic case of good tech, weird money flows. A big upgrade that made using Ethereum way cheaper did exactly that — it made transactions cheaper — but it also shrank the fees that used to be a meaningful source of revenue and token-burning pressure. Less burning = less automatic tailwind for the price. Cue cognitive dissonance.

Who kept the pizza money? Layer-2s and a corporate top dog

Layer-2 networks — the speed lanes that bundle transactions and post them to the main chain — used to send a hefty chunk of their fees back to Ethereum as part of the whole security/settlement sandwich. In 2024 they brought in a few hundred million in revenue and sent tens of millions back to the mainnet. Fast-forward to 2025: total Layer-2 revenue dropped roughly in half, but the amount paid to the mainnet collapsed even more dramatically. Instead of the double-digit tens of millions flowing to the core chain, only about $10 million made it back. That left roughly a hundred million-plus sitting with Layer-2 operators as profit — a big shift in where value actually lands.

One Layer-2 in particular gobbled a huge slice of the pie. A network tied to a major U.S. exchange pulled in the lion’s share — more than three quarters of the sector’s take in some tallies — while older, more decentralized rivals trailed behind with much smaller revenue figures. In plain language: user funnels and product integration beat decentralization in the short-term money game.

The upgrade that tilled the ground for this change accomplished its technical goal: cheaper, faster transactions and more headroom for growth. But the side effect was a major shift in tokenomics — less fee-burning and, therefore, less direct support for ETH’s price from on-chain activity.

So what now? Inflation, consolidation, and a confused market

Because fewer fees are being burned, Ethereum’s supply dynamics have nudged toward a more inflationary posture. Small percentage changes in issuance matter at scale, and the decreased deflationary pressure showed up in higher inflation metrics compared to the post-merge baseline. At the same time, staking remains popular and institutional interest keeps climbing, so the picture is mixed: demand for settlement and security is strong, but the automatic mechanism that used to shave supply is weaker.

On the user side, the network looks healthier than ever. Total value locked in DeFi on Ethereum climbed, and when you add Layer-2 activity into the mix, the ecosystem controls a huge share of the market. Transactions are accelerating without the manic spikes usually seen in speculative bubbles, which suggests real usage rather than short-term gambling.

But investors are left doing math that now includes corporate balance sheets: a significant portion of the ecosystem’s economic upside is getting booked by centralized players running Layer-2 rails. That changes incentives and raises questions about who benefits from growth. Will those profits eventually trickle back to ETH holders? Maybe — some analysts expect long-term benefits if Ethereum keeps winning as the industry’s settlement layer. Others see a prolonged disconnect between on-chain activity and token price until tokenomics and incentives get rebalanced.

Final thought: Ethereum traded some short-term fee income for a smoother, cheaper, more scalable network. That feels great if you’re building or using apps, slightly awkward if you were counting on fees to keep supply tight. Either way, the next few upgrade cycles and where Layer-2 profits go will determine whether the token catches up with the chain — or the chain keeps growing while the coin sits on the porch wondering where its share went.