From storytelling to coding, how does Ethereum make money after L2 transaction fees fell below 1 cent and it stopped "selling gas"?

Author: Max.S

Ethereum was once the engine of the Web3 narrative. From the grand vision of "Merge" to the "ultrasonic currency" myth brought about by the EIP-1559 burning mechanism, every key moment was accompanied by a consensus frenzy and soaring valuations. However, as we enter 2026, the landscape for Ethereum has changed.

It's no longer a radical dream, but a calm and methodical project.

With the Ethereum Foundation recently updating its 2026 protocol priorities, a clear signal has been released: Scale, Improve UX, and Harden the L1 have become the three main themes. This shift is less a proactive strategic adjustment and more a choice of "engineering for survival" under competitive and practical pressures. Industry competition is forcing this behemoth to shift from "storytelling" to "engineering," and from "narrative-driven growth" to "engineering-driven survival."

Looking back at Ethereum's history, from smart contracts in the ICO era to DeFi Summer, then to the transition to PoS and deflationary narratives, each leap has been accompanied by a strong market narrative. However, entering 2026, the marginal utility of narratives is diminishing, replaced by cold data metrics and underlying architecture restructuring.

The most significant engineering leap in the roadmap is the Glamsterdam hard fork, scheduled for mid-year. This upgrade directly addresses long-standing performance bottlenecks on the Ethereum mainnet, with two key metrics being particularly crucial: first, it significantly increases the mainnet's gas limit from 60 million to 200 million; second, it formally introduces a parallel execution architecture to the mainnet.

For a long time, Ethereum's EVM has used a single-threaded serial processing model. This model has advantages in ensuring state consistency, but it becomes a fatal bottleneck in high-concurrency scenarios. Introducing parallel execution means that Ethereum has expanded from a "one-way street" to a "multi-lane highway".

By using a block-level access list, nodes can predict which transactions will not involve state conflicts, thus enabling them to process multiple transactions simultaneously. Combined with a gas limit increase to 200 million, the computational and transaction volume that each block can accommodate will grow exponentially.

However, this is not without its costs. The increase in the gas cap directly challenges Ethereum's long-held principle of "democratizing full nodes." State expansion will accelerate, drastically increasing the storage and network bandwidth requirements for node hardware. To mitigate this risk, the Ethereum engineering team plans to shift approximately 10% of validators from "re-executing all transactions" to "verifying zero-knowledge proofs" within the year. This is known as "SNARKing the L1," which not only significantly lowers the hardware barrier for full nodes but also marks a watershed moment in Ethereum's evolution from "repetitive labor" to "intelligent verification." This means that Ethereum's underlying computational model is undergoing a qualitative change, outsourcing or pre-positioning heavy computations. L1 is gradually shedding the complex execution layer burden, representing a purely engineering compromise and progress.

Performance anxiety and the overwhelming power of Solana Alpenglow

Ethereum's overhaul of its underlying architecture was largely driven by pressure from competitors' disruptive advancements. By 2026, the performance war in the public blockchain sector had reached a fever pitch. Solana, with its Alpenglow upgrade, completely abandoned its previous Proof-of-History (PoH) and Tower BFT consensus mechanisms, opting instead for the entirely new Votor and Rotor architecture.

The direct result of this underlying restructuring is that Solana's transaction finality has been reduced from 12.8 seconds to less than 150 milliseconds. This is a highly disruptive metric. A latency of 150 milliseconds is already within the response range of traditional Web2 internet infrastructure (such as Google Search or the Visa payment network). For applications that are extremely sensitive to latency, such as high-frequency trading (HFT), full-chain derivatives exchanges, and real-time payments, this constitutes a fatal attraction.

In contrast, while Ethereum's Glamsterdam upgrade and subsequent Heze-Bogota fork aimed to improve TPS and censorship resistance, its complex modular architecture is inherently disadvantaged in terms of cross-chain composability and latency. Although Ethereum's current block cycle is 12 seconds, true finality takes several minutes. While this architecture is robust for settling high-value, low-frequency assets, it proves too cumbersome for consumer-grade applications targeting a massive number of retail users. Ethereum's performance anxiety is essentially a debate between monolithic and modular architectures during the technological explosion expected in 2026.

If Solana's relentless pressure is an external threat, then Ethereum also faces an internal paradox stemming from its own strategy—the "L2 paradox."

With the rollout of Pectra and Fusaka upgrades, and the maturation of PeerDAS technology, Ethereum's Rollup-centric scaling strategy has achieved a major engineering victory. L2 data availability and throughput have increased several times over, and the capacity of data blobs continues to expand. The direct result is that L2 transaction fees have plummeted to $0.001 or even lower.

From a user experience perspective, this is a huge success, perfectly aligning with the "Improve UX" theme of the 2026 roadmap. The proliferation of native account abstraction and intent frameworks is completely hiding complex on-chain interactions within seamless wallet operations.

However, this raises a pointed question: when users enjoy a smooth transaction experience of $0.001 on L2, do they really care what consensus mechanism the underlying Ethereum mainnet uses? The "decentralized legitimacy" that the Ethereum community is so proud of, and the censorship-resistant network composed of tens of thousands of independent validator nodes, are becoming an invisible, abstracted backend database in the eyes of most end users.

When application execution is completely migrated to Arbitrum, Base, or ZKsync, and the mainnet merely serves as a verification layer for data availability and state roots, Ethereum not only loses direct access to end users but also faces the risks of liquidity disruption and hollowing out of the application layer. This is not only a decoupling of technical architecture but also a decoupling of brand perception and user mindset.

The way ETH captures value has changed from "selling gas" to "selling secure settlement services".

The evolution of technological approaches will ultimately be reflected in asset pricing models. The current changes in Ethereum are triggering a fundamental reshaping of the ETH value capture logic.

For most of 2021 to 2024, ETH's value was primarily supported by the "world computer" narrative and the gas fee burning mechanism introduced by EIP-1559. The higher the on-chain activity, the more ETH was burned, and the stronger the deflationary expectation of "Ultra Sound Money." This model is essentially a consumer-facing retail logic—Ethereum is "selling gas."

However, by 2026, the situation had changed dramatically. As execution layer activity irreversibly migrated to L2, mainnet gas consumption decreased significantly. Although L2 required to pay L1 for data availability (DA), with the continuous expansion of the Blob space, this revenue was far from sufficient to fill the gap left by the loss of L1 execution layer fees. ETH's burn rate dropped significantly, even returning to microinflation during the trough, severely testing traditional deflationary expectations.

From a quantitative finance valuation perspective, Ethereum's DCF (Discounted Cash Flow) model is undergoing a rewriting. Ethereum is transforming from a high-margin computing platform geared towards retail into a low-margin, high-certainty "secure settlement layer" geared towards businesses (L2 and even L3). Its new business model is no longer "selling gas," but rather "selling economic security" and "censorship-resistant finality."

Under this paradigm, the yield structure of ETH as a monetary asset is changing. The implementation of ePBS (proposer-builder separation at the protocol level) will restructure the MEV supply chain, making the distribution of MEV rewards in the validator network smoother and more predictable.

The benchmark returns from staking and restaking will replace gas burning as the core support for ETH's valuation. This makes ETH's asset attributes more similar to traditional government bonds or institutional-grade clearing and settlement assets. It no longer needs those fancy Meme coin transactions to contribute fees, but instead relies on its massive staked capital to provide an immutable trust endorsement for the entire decentralized finance empire.

In 2026, Ethereum will no longer try to convince the world with narratives, but will prove itself with engineering capabilities.

This transformation is not only an "engineering survival" move for Ethereum under competition and real-world pressures, but also a redefinition of "what ETH is." When users no longer care about the underlying L1 layer, and when ETH's value capture model shifts from gas sales to security and settlement, ETH must find a new narrative to establish its place in the digital world.

Whether Ethereum can successfully transform and whether ETH can capture the value of its thriving ecosystem will be a key issue that quantitative finance practitioners and all finance enthusiasts must pay close attention to in the coming years.

However, by 2026, the situation had changed dramatically. As execution layer activity irreversibly migrated to L2, mainnet gas consumption decreased significantly. Although L2 required to pay L1 for data availability (DA), with the continuous expansion of the Blob space, this revenue was far from sufficient to fill the gap left by the loss of L1 execution layer fees. ETH's burn rate dropped significantly, even returning to microinflation during the trough, severely testing traditional deflationary expectations.

From a quantitative finance valuation perspective, Ethereum's DCF (Discounted Cash Flow) model is undergoing a rewriting. Ethereum is transforming from a high-margin computing platform geared towards retail into a low-margin, high-certainty "secure settlement layer" geared towards businesses (L2 and even L3). Its new business model is no longer "selling gas," but rather "selling economic security" and "censorship-resistant finality."

Under this paradigm, the yield structure of ETH as a monetary asset is changing. The implementation of ePBS (proposer-builder separation at the protocol level) will restructure the MEV supply chain, making the distribution of MEV rewards in the validator network smoother and more predictable.

The benchmark returns from staking and restaking will replace gas burning as the core support for ETH's valuation. This makes ETH's asset attributes more similar to traditional government bonds or institutional-grade clearing and settlement assets. It no longer needs those fancy Meme coin transactions to contribute fees, but instead relies on its massive staked capital to provide an immutable trust endorsement for the entire decentralized finance empire.

In 2026, Ethereum will no longer try to convince the world with narratives, but will prove itself with engineering capabilities.

This transformation is not only an "engineering survival" move for Ethereum under competition and real-world pressures, but also a redefinition of "what ETH is." When users no longer care about the underlying L1 layer, and when ETH's value capture model shifts from gas sales to security and settlement, ETH must find a new narrative to establish its place in the digital world.

Whether Ethereum can successfully transform and whether ETH can capture the value of its thriving ecosystem will be a key issue that quantitative finance practitioners and all finance enthusiasts must pay close attention to in the coming years.