Ethereum’s Network Is Booming, So Why Is ETH Still Underperforming?

On-chain data shows that the Ethereum blockchain has developed a lot in the past few years, currently processing more activity than ever before.

At the same time, the underlying asset has failed to benefit, as it continues to struggle below $2,000. One analyst believes this disconnect has become one of the biggest debates surrounding the altcoin and the network behind it.

Ethereum Activity Rockets

Aside from the highly anticipated Merge upgrade deployed several years ago, the team behind Ethereum has completed several other, perhaps less hyped but similarly impactful updates over the years that have managed to scale the network. The blockchain is seemingly handling significantly more activity than it did during its proof-of-work years.

Data shared by popular analyst Tanaka claims that Ethereum’s layer-1 generated over $88 million in Real Economic Value (REV) during Q2, up 7% from the previous quarter. However, it’s still down by nearly 70% year-over-year.

Applications built on the world’s second-largest blockchain generated $1.8 billion in fees, meaning that Ethereum itself, which recently celebrated its 11th birthday, captured only around 4.9% of the economic value created by its application layer. The contrast becomes even more apparent when examining the network activity.

Ethereum rollups are currently processing around 1,270 user operations per second, compared to roughly 20.4 UOPS on the mainnet. Robinhood Chain is reportedly processing almost 5 times as many operations as Ethereum’s layer 1.

The analyst described the technical progress as impressive, but questioned how much of that growing activity ultimately benefits $ETH holders. Current data shows:

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– Total $ETH supply: approximately 121.88M

– $ETH in the Beacon Chain: approximately 41.10M

– Roughly 33.7% of the total $ETH supply is securing the network

– Staking issuance yield: around 2.6%

– Recent annualized supply growth: around 0.85%

– Seven-day blob fee burn: only around 0.22 $ETH

Changed Bull Case

The analyst doesn’t believe Ethereum is broken, but noted that $ETH’s long-term investment thesis is undergoing a substantial change. Instead of “more users leading to more fees and more $ETH burn,” the focus now is gradually shifting toward tokenized finance.

The value of Real-World Assets (RWAs) on Ethereum has recently exceeded $17 billion, while the broader stablecoin market is up to almost $300 billion. The analyst argued that Ethereum’s competitive advantage is no longer cheap transactions but its position as the leading settlement layer for institutional finance.

Going forward, they said the key questions are whether layer-2 activity will eventually make blob space economically valuable, whether stablecoins and RWAs generate meaningful on-chain turnover, and whether institutions increasingly hold the underlying asset as reserve collateral for the Ethereum ecosystem.

The analyst will continue to hold and accumulate $ETH as they remain optimistic about its near- and long-term future, especially since Ethereum has already solved its scaling problem.