A month after social streams celebrated Ethereum's 10th birthday, it approaches a long-awaited all-time high, but it's not social media hype that drives it. By legitimizing stablecoins, the GENIUS Act put it back in the spotlight as the main blockchain processing their transfers. At the same time, the SEC gave the green light for the GDLC ETF, extending already long list of ETFs with exposition to ETH. All of this, while Ethereum treasury companies became a hot topic.
It's a good moment to look closer at the state of the second-biggest cryptocurrency.
The DeFi Infrastructure
When Vitalik published the Ethereum white paper in 2013, he envisioned a "world computer" that could run any application. The vision was criticised and both vague and impractical—in the end EVM is an extremely slow computer. However, in 10 years since the launch, it evolved into something much more practical: a "world ledger." While Bitcoin is a ledger for… Bitcoin, Ethereum became a ledger for digital assets and financial contracts—stablecoins, tokenized stocks, NFTs, insurance policies, or programmable agreements that execute automatically.
As we noticed discussing the GENIUS Act, crypto has a huge growing use case, and it's stablecoins. Stablecoins have grown from $6 billion to $270 billion in just 6 years—a 45x increase—while the entire ecosystem now moves $27.6 trillion annually, surpassing Visa and Mastercard combined.
This isn't speculative trading volume but real economic activity, with emerging markets driving adoption often being effectively dollarized. On top of that, the US government decided to actively use web3 infrastructure in their politics rather than suppress it.
Layer 2
Layer 2 solutions are secondary blockchains built on top of Ethereum's main network that process transactions faster and cheaper while inheriting the security of the underlying Layer 1. These L2s have transformed Ethereum from a congested network struggling with 15 transactions per second into a scalable ecosystem now processing over 250 TPS collectively, with a clear path to 5,000+ TPS as blob space increases.
| Ticker | Name | TVL |
|---|---|---|
| BASE | Base | $4,891,238,692 |
| ARB | Arbitrum One | $3,292,025,684 |
| POL | Polygon POS | $1,243,194,355 |
| LINEA | Linea | $581,438,640 |
| UNI | Unichain | $544,757,983 |
| OP | Optimism | $471,847,232 |
| GNO | Gnosis Chain | $343,973,391 |
| SCROLL | Scroll | $265,244,489 |
| MNT | Mantle | $233,039,519 |
| STRK | StarkNet | $132,200,697 |
This expanded throughput has enabled entirely new categories of applications that were previously impossible due to high fees and slow settlement times. Prediction markets like Polymarket being the best example. For a long-time staying theoretical, they finally materialized.
L2 Misalignment
Ethereum's Layer 2 strategy has created a paradox: the more successful L2s become, the less value flows back to Ethereum itself.
Networks like Base and Arbitrum capture the majority of transaction fees while relying on Ethereum's expensive security infrastructure. This creates what critics call a "parasitic" relationship—L2s benefit from Ethereum's brand, security, and network effects without proportionally compensating the base layer or ETH holders.
Vitalik has acknowledged this challenge, proposing solutions like higher minimum blob fees and faster withdrawal times to keep more economic activity on L1, but the fundamental tension between L2 success and L1 value capture remains unresolved.
Transparency Challenges
Openness and transparency of blockchain are both great selling points and source of challenges. Bitcoin focused on transparency and simplicity of its layer 1, passing solving potential problems on external implementations. However, for Ethereum that runs code directly, it poses two major challenges stemming from the same root: when every transaction is visible to everyone, sophisticated actors can exploit this visibility while ordinary users lose both money and privacy.
MEV: The Invisible Tax
This transparency has enabled what critics call an "invisible tax" on every Ethereum user through MEV (Maximal Extractable Value) extraction - the practice of extracting additional profit by manipulating the order and placement of transactions in a block.
For example, when you try to buy a token, MEV bots can see your pending transaction and quickly insert their own trades before and after yours to profit from the price impact. These "sandwich attacks" and other MEV strategies have extracted over $2 billion from regular users since tracking began. The situation has become so severe that despite Ethereum's decentralized ethos, 95% of blocks are now produced by just two specialized builders who optimize for MEV extraction, while 54% of transaction fees flow through private channels that bypass public visibility entirely. This creates a "glass house" effect where sophisticated actors can see and manipulate every transaction, turning what was designed as a fair, permissionless system into one dominated by high-frequency trading dynamics. ethereum.org arxiv.org
Privacy
The same transparency makes financial privacy nearly impossible, creating what Vitalik Buterin has identified as one of Ethereum's most urgent problems. Every transaction reveals amounts, counterparties, and trading strategies to the entire world—making it unsuitable for enterprises, institutions, or individuals who need confidentiality.
The recent conviction of a Tornado Cash developer for "operating an unlicensed money transmitter" has intensified this debate, with critics arguing it criminalizes privacy tools and open-source code. Vitalik has responded by pushing privacy to the forefront of Ethereum's roadmap, promoting solutions like Railgun and Privacy Pools while advocating for privacy to become a default wallet feature rather than a separate application. ethereum-magicians.org ethresear.ch
Proof-of-Stake
One of the most questionable parts of the Ethereum design remains the migration to Proof-of-Stake. While Bitcoin Proof-of-Work miners have to constantly innovate and do the work, PoS is effectively a rich get richer scheme, where big holders can passively accumulate more without further effort. This makes it very unlikely that the "power structure" in the Ethereum ecosystem will change in the future.
Lyn Alden explains it well, noting that Proof-of-Stake naturally leads to centralization and acts more like corporate ownership than decentralized money. In PoS systems, the people with the most coins get the most voting power and earn more coins through staking rewards. She compares this to a political system where your vote count depends on your wealth, which would inevitably concentrate power among a few major players.
She also points out that PoS systems are far more complex and vulnerable than Bitcoin's proof-of-work approach. While Bitcoin's energy-based system is straightforward and self-correcting (bad miners just lose money on wasted electricity), PoS requires complicated punishment mechanisms and human intervention to handle disputes. Examples like Solana's 17-hour downtime requiring manual restarts show that PoS blockchains essentially become "equity-like" platforms controlled by large stakeholders rather than truly decentralized money that can't be easily manipulated by governments or powerful entities.
That said, PoS is also what makes possible things that Bitcoin intentionally opted out from. It may also be why banks and Silicon Valley were always in favor of Ethereum, securing its future as the second biggest cryptocurrency.
TradFi Pays Attention
Following the hype around Bitcoin treasury companies, with Tom Lee's Ethereum Treasury BitMine (BMNR) accumulating over 1.15 million ETH while publicly targeting 5% of total ETH supply. Unlike Bitcoin treasury companies that rely purely on price appreciation, Ethereum-focused vehicles offer a theoretical advantage through staking yields, potentially providing steady revenue streams for shareholders.
Finally, exposure to Ethereum is available through 9 ETFs, with more awaiting approval:
| Ticker | Fund Name | AUM (Market Cap) | Expense Ratio |
|---|---|---|---|
| ETHA | iShares Ethereum Trust ETF | $15.02B | 0.25% |
| ETHE | Grayscale Ethereum Trust (ETH) | $4.54B | 2.50% |
| FETH | Fidelity Ethereum Fund | $3.12B | 0.25% |
| ETH | Grayscale Ethereum Mini Trust (ETH) | $2.91B | 0.15% |
| ETHW | Bitwise Ethereum ETF | $537.74M | 0.20% |
| ETHV | VanEck Ethereum ETF | $260.87M | 0.20% |
| EZET | Franklin Ethereum ETF | $80.51M | 0.19% |
| CETH | 21Shares Core Ethereum ETF | $48.09M | 0.21% |
| QETH | Invesco Galaxy Ethereum ETF | $32.98M | 0.25% |
More ETFs are coming.The SEC's approval of the GDLC ETF, opens door for a further regulated exposure to diversified cryptocurrency portfolios that include significant Ethereum allocations.
Playbook α
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- Three data-driven Layer 2 portfolio allocations
Conclusion
At the beginning of the second decade, nothing seems to endanger Ethereum's place as the second-biggest cryptocurrency. While it took a different ideological and practical route than Bitcoin, it's clear that this gap represents real market needs and use cases that will not go away. While Bitcoin dominance remains strong, Ethereum's dominance among "altcoins" is equally persistent, and Layer 2 blockchains keep finding their use cases, from cheaper stablecoin transfers to the explosion of prediction markets.