ETH Token Utility Is Deteriorating: A Rollup-Centric Ethereum Needs Rethinking

This is not a price discussion about ETH token —this post focuses on Ethereum's evolving architecture and how current design choices affect ETH’s role within the protocol.

Specifically, this piece aims to reassess how Ethereum’s shift toward a rollup-centric architecture—combined with sequencer economics and abstracted fee mechanisms—is steadily eroding the utility of ETH as a protocol asset. As transaction execution moves off-chain and value accrues to application and infrastructure layers, ETH risks becoming economically obsolete within its own ecosystem, reduced to a passive settlement token with declining relevance.

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Ethereum’s recent market underperformance may be indicative of deeper architectural and economic dynamics—specifically, a growing disconnect between network usage and value accrual to the ETH token. As Ethereum evolves into a modular, multi-layer ecosystem, a significant portion of activity has migrated to Layer 2s (L2s) and sidechains, raising important questions about ETH’s role and utility within this new paradigm.

Layer 2 networks and Ethereum-adjacent sidechains increasingly extract utility from Ethereum’s underlying infrastructure—namely its security, developer tooling, and EVM compatibility—while bypassing ETH as a core economic asset. These platforms leverage Ethereum’s credibility while redirecting liquidity, transaction flow, and value capture to their own native tokens and ecosystems.

Polygon, for example, positioned itself early on as an Ethereum scaling solution and received support from Ethereum Foundation + Vitalik. However, its architecture relies on its own validators, consensus model, and token (MATIC/POL), which is used for both transaction fees and staking. As a result, Polygon leeches from Ethereum's network, TVL, and developer mindshare without reinforcing ETH’s monetary premium or contributing to the security of Ethereum mainnet.

L2 solutions such as Base, Arbitrum, and Optimism are structurally closer to Ethereum, in that they settle data to Layer 1. However, their economic models often do not reinforce ETH demand in a meaningful way. Users on these networks typically pay fees denominated in the rollup’s native UI currency (e.g., stablecoins or ETH surrogates), not ETH itself. Sequencers collect fees and periodically post transaction data to Ethereum mainnet using ETH—but in many cases (e.g., Coinbase’s Base), this ETH is sold rather than staked or reinvested within the ecosystem. The result is an increase in ETH-denominated sell pressure without any corresponding increase in demand or utility.

Moreover, the abstraction of ETH from end users further erodes its role as a utility token. If rollups and applications can operate entirely using stablecoins or app-specific tokens, and if ETH is only used behind the scenes (and immediately sold), its function as a transactional or capital asset becomes increasingly marginal. In effect, ETH risks being reduced to a mere settlement token for rollup operators, rather than a broadly used currency or store of value within the ecosystem.

The Ethereum Foundation continues to champion a rollup-centric roadmap as the path toward scalable, decentralized infrastructure. While this model offers tangible benefits—lower transaction costs, better throughput, and modular flexibility—it also creates new economic trade-offs. Value accrual shifts to application and infrastructure layers, rather than consolidating around the base protocol asset (ETH). This is a departure from Ethereum’s earlier design assumptions, where ETH was envisioned as a multi-functional asset: the native gas token, staking collateral, medium of exchange, and reserve currency for decentralized applications.

As a long-time participant in the Ethereum ecosystem, I’ve observed this shift with increasing concern—not due to a lack of technical progress, but due to the weakening alignment between protocol growth and ETH value. Ethereum is scaling, but ETH is not capturing the upside of that scale. Competing ecosystems—such as Solana or vertically integrated L1s—are increasingly offering tighter economic alignment between usage and token utility, which may present challenges to Ethereum’s long-term competitiveness.

This is a critical juncture. Ethereum must balance scalability with economic coherence. If Ethereum becomes primarily a settlement layer for EVM-compatible rollups that abstract away ETH, then ETH’s utility—and by extension, its long-term value proposition—will disappear.