Beam Me Up, Ethereum!

Table of Content

1. Trump Victory Fuels Crypto Market Surge

2. Can Ethereum Regain the Spotlight?
2-1. Trump’s stake in the Ethereum ecosystem
2-2. Regulatory relief for staking to bolster fundamentals
2-3. What opportunities lie ahead for the Ethereum ecosystem?
2-4. Ethereum roadmap: Beam Chain and ZK

3. Closing Thoughts: Ethereum Ready to Break Chains and Take Off

 

 

1. Trump Victory Fuels Crypto Market Surge

The crypto market, led by Bitcoin, has seen a dramatic surge following Donald Trump’s victory in the 2024 U.S. presidential election. As of November 26, Bitcoin’s price surpassed $99,000, setting an all-time high. Trump’s pro-crypto stance and his promises of regulatory relaxation have alleviated market uncertainty, fostering optimism among investors and driving bullish trends across the crypto sector.

Trump’s campaign pledged to dismantle restrictive regulations implemented under the Biden administration, such as Operation Chokepoint 2.0 and the SEC’s Staff Accounting Bulletin (SAB) 121. He also vowed to establish clear and consistent regulatory guidelines, enabling traditional financial institutions to resume digital asset services. Additionally, his declaration to establish Bitcoin reserves aims to position the U.S. as a global hub for digital assets, significantly boosting market confidence.

For a detailed breakdown of Trump’s policies, refer to Xangle’s report, “The Trump Effect - How Rising Approval Ratings Fuel Bitcoin's Surge.”

Notably, Ethereum, which has previously struggled with issues such as value capture and regulatory risks, has also experienced a remarkable upswing. Its price surged by 40% within a week, exceeding $3,400. What factors have reignited interest in Ethereum following Trump’s election victory, and what expectations lie ahead? This report examines the current optimism surrounding Ethereum and explores its future prospects.

 

2. Can Ethereum Regain the Spotlight?

2-1. Trump’s stake in the Ethereum ecosystem

Note: Many “Trump meme coins” are sent to his wallets as fan-driven stunts or for publicity, often without his direct involvement.

Donald Trump is not merely a political figure expressing interest in cryptocurrencies; he is the first U.S. president to actively participate in the Ethereum ecosystem.

In December 2022, Trump launched the Trump Digital Trading Cards NFT project, marking his formal entry into the Ethereum ecosystem. The first collection was minted on the Polygon blockchain and featured Trump portrayed in symbolic personas such as a superhero or astronaut. This collection sold out 44,000 units within two days, generating approximately $4.5 million in revenue. Subsequent Ethereum-based NFT collections have also garnered attention and achieved strong sales figures. Buyers of these NFTs received tangible benefits, such as opportunities for dinner with Trump or autographed memorabilia, making the project a successful case study in engaging both his political base and the crypto community. This initiative likely provided Trump with his first real glimpse into the potential of digital assets.

In addition, Trump recently announced the launch of a DeFi project, World Liberty Financial (WLF), further solidifying his involvement in the crypto ecosystem. Built on Ethereum, WLF offers users deposit and lending services. The project’s governance token, WLFI, allows participants to vote on the protocol’s development. However, the Trump family’s potential claim to 75% of the project’s profits has sparked criticism. Despite operational controversies, the project’s launch demonstrates the family’s commitment to exploring the crypto sector and likely provided valuable lessons about the ecosystem.

These actions highlight Trump’s strategic shift from supporting cryptocurrency through rhetoric to actively engaging in its development. Starting with Ethereum, his approach suggests a broader ambition to position both himself and the U.S. as central players in the global digital asset landscape. This focus on Ethereum as a starting point has the potential to draw significant attention to the platform.

2-2. Regulatory relief for staking to bolster fundamentals

After transitioning to a proof-of-stake (PoS) consensus mechanism, Ethereum faced intense scrutiny over whether staking services should be classified as securities. In March 2023, SEC Chair Gary Gensler argued that all tokens utilizing PoS mechanisms should fall under SEC jurisdiction as securities. This stance created significant pressure on Ethereum-based projects, with the SEC actively targeting staking-related services. For instance, in July 2023, the SEC approved Ethereum spot ETFs but excluded staking from these offerings. Without staking options, Ethereum faces inflationary pressures that could dilute token value over time. This limitation has led to lower demand for Ethereum spot ETFs compared to Bitcoin ETFs.

For a detailed breakdown of Securities law and risk of staking, refer to Xangle’s report, “Is Staking a Security? A Primer on Staking and Securities Law.”

However, Trump’s presidency could pave the way for new opportunities for Ethereum and DeFi projects. As part of his campaign, Trump pledged to remove Gary Gensler from his position as SEC Chair. While this move alone would not directly resolve the securities classification issue, it symbolizes a potential shift in the SEC’s regulatory approach. Trump has also promised to introduce clear regulatory guidelines, contrasting the SEC’s historically ambiguous stance. This reduction in regulatory uncertainty is likely to restore investor confidence, creating a more favorable environment for Ethereum and DeFi projects. Should staking services be incorporated into Ethereum spot ETFs, demand could increase significantly, strengthening Ethereum’s fundamentals.

2-3. What opportunities lie ahead for the Ethereum ecosystem?

2-3-1. DeFi

The DeFi market has not been free from the grip of regulatory constraints. The SEC has repeatedly flagged potential violations of U.S. securities laws by DeFi projects, citing concerns over unregistered securities sales, investment contracts, and operating unregistered exchanges. These regulatory pressures have not only stifled DeFi’s growth potential but also led investors to question the legal stability of projects.

One prominent example is Uniswap, the largest decentralized exchange (DEX) on Ethereum, which found itself at the center of regulatory scrutiny. In 2021, Uniswap was investigated by the SEC, and in 2024, it received a Wells Notice, focusing on allegations of the UNI token's security status and claims that the protocol functioned as an unregistered securities exchange. The news caused the UNI token’s value to plummet by nearly 40%, underscoring the impact of regulatory actions on token markets. Uniswap Labs countered the SEC’s claims by arguing that "Uniswap is open-source software available for anyone to use, and the UNI token does not represent an investment contract or rely on the efforts of Uniswap Labs." Nevertheless, the SEC’s persistent pressure cast uncertainty not only over Uniswap but the broader DeFi ecosystem as well.

However, following Trump’s election victory, expectations for reduced regulatory uncertainty have fueled optimism in the DeFi space. Projects are increasingly exploring mechanisms such as the Fee Switch, which shares a portion of transaction fees with token holders, to bolster token utility. Currently, most DEXs distribute transaction fees exclusively to liquidity providers (LPs), leaving token holders without direct financial benefits. This has made it challenging for investors to evaluate projects’ fundamentals based on revenue and net income. By introducing Fee Switch mechanisms, projects could share fees with token holders, enabling clearer assessment of fundamentals and establishing self-sustaining economic structures that enhance intrinsic token value.

For example, on November 7, shortly after Trump’s victory, Wintermute, a major U.S. market maker, proposed implementing a Fee Switch on the governance forum of Ethena, a synthetic dollar stablecoin protocol. The proposal suggested allocating a portion of protocol revenue to ENA token holders to strengthen the project’s fundamentals. Following the announcement, the ENA token price surged by over 50%, reflecting the market’s positive response and signaling that DeFi projects are taking proactive steps to enhance their fundamentals amidst expectations of regulatory relief.

Source: Ethena Governance Forum

2-3-2. Layer 2 Ecosystem

Technological advancements like EIP-4844, ZK-Rollups, and Optimistic Rollups have addressed Ethereum’s scalability challenges, driving rapid growth in the Layer 2 ecosystem. Rollup technologies leverage Ethereum as a data availability layer to reduce transaction costs and increase speed. This has enabled Layer 2 solutions to support a higher volume of users and transactions, leading to exponential growth. Over the past year alone, transaction volume on Layer 2 solutions has increased by over 700%.

Source: L2BEAT

This growth has fostered the emergence of services previously unfeasible on Ethereum’s mainnet. For instance, Base, a Layer 2 chain, recently introduced Podcaster, a decentralized social protocol, and Virtual Protocol, an IP-based AI agent generation platform. These innovative services have driven significant growth on Base, with its total value locked (TVL) increasing by over 1,000% in the past year to reach $3.9 billion. Daily transactions on Base have also surged by 2,800%, surpassing 6.8 million. These developments highlight the ongoing opportunities and potential within the Layer 2 ecosystem.

However, challenges remain. The lack of utility for native Layer 2 tokens and the fact that Layer 2 growth does not necessarily translate to an increase in Ethereum’s token value are issues that need to be addressed. While exploring opportunities in the Layer 2 ecosystem, it is crucial to remain cognizant of these limitations and adopt strategic approaches.

2-3-3. Liquid Statking

Liquid staking, which lowers the barriers to entry for staking and addresses liquidity issues, has become the largest sector within the Ethereum ecosystem. As of 2024, liquid staking services account for approximately 30% of Ethereum’s total value locked (TVL), representing $36 billion in assets.

Liquid staking, however, faces potential risks related to its classification as a security. The SEC has raised concerns that liquid staking services may constitute investment contracts, initiating discussions based on the Howey Test. These regulatory risks have created challenges for liquid staking platforms, particularly in their efforts to scale profitability amid uncertainty.

If these regulatory hurdles are cleared, liquid staking projects are poised for significant growth. Lido, the largest liquid staking platform, is one of the few projects consistently generating substantial revenue outside the mainnet. Over the past year, Lido has reported approximately $100 million in revenue. Distributing just 1% of its annual revenue to token holders would result in $1 million in direct benefits, providing tangible value to Lido’s token holders while strengthening the platform’s fundamentals.

2-4. Ethereum roadmap: Beam Chain and ZK

At the DEVCON conference in Bangkok on November 12, Ethereum Foundation researcher Justin Drake unveiled the roadmap for Ethereum's consensus layer. The plan includes redesigning the current Beacon Chain into the Beam Chain to create a faster, more efficient, and secure blockchain. While the roadmap highlights nine key updates, the following three stand out as the most significant:

1) Ethereum aims to reduce its slot time—the unit for block creation and validation—from 12 seconds to 4 seconds. Currently, 32 slots constitute an epoch (the cycle during which blocks are validated and finalized), taking approximately 384 seconds for block confirmation. By shortening the slot time, block creation and transaction processing will be significantly faster, improving overall network performance and user experience. Additional updates are planned to ensure finality within a single slot, further enhancing network efficiency.

2) The roadmap proposes lowering the staking requirement for Ethereum validators from the current 32 ETH to just 1 ETH. This change is expected to attract more validators, thereby strengthening network decentralization. Additionally, the issuance curve of Ethereum will be recalibrated. Validator incentives are closely tied to Ethereum’s token economics, as staking rewards drive validator participation and influence token valuation. The impact of these changes on network security and token price will be a critical area to watch.

3) Ethereum plans to integrate a zkVM (Zero-Knowledge Virtual Machine) directly into its ecosystem. This will simplify validation processes and maximize network efficiency by leveraging ZK (zero-knowledge) technology. ZK proofs enable verification of transaction validity without revealing specific details, reducing the computational burden on nodes. This approach will significantly increase transaction throughput and reduce block size, paving the way for higher scalability.

Other notable updates include validator separation and quantum resistance features.

Ethereum roadmap is expected to dramatically improve network scalability, security, and decentralization while revolutionizing user experiences. As Drake emphasized, this roadmap represents a long-term vision, with technical specifics still subject to refinement and change. While some critics argue that the plan's timeline is overly extended, the successful realization of this roadmap could mark another major leap forward for Ethereum.

 

3. Closing Thoughts: Ethereum Ready to Break Chains and Take Off

The optimism surrounding the crypto market following Trump’s election victory in 2024 has extended beyond Bitcoin, creating new opportunities for Ethereum's ecosystem. Trump’s pro-crypto stance and deregulatory policies are reducing the regulatory uncertainties that have long hindered Ethereum-based projects, laying the groundwork for stronger fundamentals and renewed innovation.

Regulatory easing around staking has reignited interest in sectors like DeFi and liquid staking, while advancements in rollup technology are accelerating the expansion of the Layer 2 ecosystem. Projects within Ethereum’s ecosystem are seizing this opportunity to address challenges and create new revenue models. For instance, Fee Switch implementations by platforms like Ethena and Lido are offering direct value to token holders while fostering sustainable ecosystem growth.

That said, several challenges remain. The expansion of Layer 2 does not inherently translate into higher Ethereum native token value, and the lack of utility for L2-native tokens continues to be a pressing issue. Addressing these hurdles will require ongoing efforts, including expanding block space and refining fee models.

Ultimately, Ethereum’s ecosystem is expected to continue evolving, driven by its technological advancements and the favorable regulatory climate. From DeFi and liquid staking to rollup-powered services, the ecosystem’s dynamic growth is likely to solidify Ethereum’s position in the global crypto market. The statement "Ethereum’s breakthrough moment is coming" may no longer be mere speculation but a reflection of current trends and the promise of a bright future.