Crypto Current #100

Vitalik Buterin declared this week that Ethereum's rollup-centric roadmap "no longer makes sense." After years of positioning Layer 2 blockchains (L2s) as the future of Ethereum scaling, the co-founder admitted L2s have failed to reach “Stage 2” decentralization, while Ethereum's base layer has scaled faster than expected. For investors watching the ETH token price struggle despite growing ecosystem activity, this was confirmation of what the revenue data has been telling us for over four years. Meanwhile, in the perpetual futures space, Lighter continues pushing boundaries with the launch of LighterEVM, extending its zero-fee trading model into programmable DeFi applications.

What's happening in crypto?

Markets have had a difficult start to February. Bitcoin has fallen to lows of approximately $62k, erasing all gains since Trump’s inauguration, with February on track to mark BTC’s fifth consecutive monthly decline. Ethereum and Solana have underperformed further, while smaller-capitalisation tokens have largely moved in line with the majors. Notwithstanding a small number of notable outperformers - such as HYPE and PUMP, up approximately 30% and 2% YTD respectively - the broader crypto market remains tightly correlated to Bitcoin, offering limited genuine diversification despite thousands of tokens claiming distinct value propositions.

Crypto Price table-Feb-05-2026-10-07-18-0756-PM

Coinbase Markets Podcast featuring Richard Galvin

Richard recently joined the Coinbase Institutional team on their Coinbase Markets Podcast episode in a conversation that spans market structure, the macro backdrop versus crypto beta, key tail risks, and the themes shaping institutional capital allocation.

Richard also discusses how his tech banking background shapes DACM’s investment philosophy, why today’s crypto market increasingly mirrors the early internet, and where he sees the most compelling opportunities looking ahead.

You can listen to the full conversation here, also available on Spotify or Apple Podcasts.

Ethereum's value accrual problem

The market has been telling you something about Ethereum for almost four years. Revenues collapsed while activity increased. Today, Vitalik Buterin made it official in a post on X, declaring the rollup-centric roadmap "no longer makes sense."

The numbers are brutal. Ethereum blockchain revenue fell from $4.3 billion in Q4 2021 to a projected $217 million in Q1 2025. Monthly revenues dropped from $150.8m in January 2025 to $47.5m by February - a 95% decline from peak.

Real economic value of Ethereum has been falling since the end of 2021. Source: Blockworks

Meanwhile, L2 operators extracted the value. In 2024, L2s generated $277M revenue and paid Ethereum $113M (41%). In 2025, L2s generated $129M but paid the Ethereum base chain just $10M (7.7%), keeping $119M in profit. Ethereum sacrificed $103M in revenue to subsidize what was supposed to be its scaling solution.

Base, Coinbase's L2, captures this perfectly. Base generated $75.4M revenue in 2025 - 62% of all L2 revenue - while paying just $4.9M back to Ethereum. Coinbase made over $94M in profits from infrastructure that Ethereum subsidizes.

Buterin admitted three things this week. L2s failed to reach "Stage 2" decentralization; they're stuck at Stage 1, with some explicitly saying regulatory requirements mean they'll never fully decentralize. Ethereum L1 itself is scaling, with gas limit increases coming in 2026. The original vision of L2s as "branded shards" backed by Ethereum's full security no longer works.

His proposed solution, a native rollup precompile, doesn't really fix the core problem. It's not clear why Base would suddenly start paying Ethereum meaningful fees when it's already profitable.

Source: DACM analysis, GrowThePie, CryptoSlate, CCN.

We have held a similar view for some time, and this has been reflected in our portfolio positioning. ETH revenue collapse was visible throughout 2023-2024. We believed L2s were building separate businesses. There was no clear path for value to flow back to ETH holders. If ETH scales via L1 anyway, the L2 complexity looks optional.

The narrative kept shifting - world computer, ultrasound money, L2 settlement layer. Each pivot came because the previous thesis broke.

Compare Solana: monolithic scaling, value captured on L1, simpler economics. That clarity matters for institutional capital trying to understand where value actually accrues.

Ethereum works as technology. The validator set is strong, developer activity remains high, and it dominates DeFi and stablecoin markets. But working technology and sound investment thesis are different questions. The platform processes an enormous volume while collecting minimal revenue. Institutions see this - $1.4B in November ETF outflows was the largest monthly exit since launch.

The path forward means convincing profitable businesses like Coinbase to voluntarily pay substantially higher fees to mainnet. Good luck with those negotiations.

Perp DEX market Lights Up

The decentralized perpetual futures market is among the fastest expanding sectors in crypto, seeing over $7.9 trillion in volume throughout 2025, growing 145% year-over-year. As Ethena founder Guy Young stated in a recent DACM Insights episode, perps are one of crypto's billion dollar cashflow opportunities.

What is a Perpetual Futures DEX?

Perpetual futures (perps) are derivative contracts that allow traders to get leveraged exposure to an asset without an expiration date. Unlike traditional futures, perps never settle - instead, they use a funding rate mechanism to keep prices anchored to spot markets.

A perpetual futures DEX is a decentralized exchange offering these contracts onchain. Unlike centralized exchanges, perp DEXs use smart contracts for order matching, liquidations, and settlement - providing transparency and eliminating counterparty risk. Leading examples include Hyperliquid, dYdX, and Lighter, which collectively processed trillions in volume during 2025.

Within this rapidly growing ecosystem, Lighter has emerged as one of the most dynamic entrants. Since launching in October 2025, the platform has processed over $1.3 trillion in perpetual futures volume, temporarily surpassing incumbent Hyperliquid. Lighter's differentiator is zero trading fees for retail traders while charging professional market makers for faster API access and premium execution. This generated over $40 million in revenue during 2025.

LighterEVM expands the platform

On January 31, Lighter launched LighterEVM, enabling developers to deploy general-purpose smart contracts directly on Lighter. The upgrade connects application logic with Lighter's existing spot and perpetual markets, allowing developers to build DeFi applications that access Lighter's liquidity natively. Both environments settle on Ethereum mainnet, enabling seamless movement between trading and programmable applications.

Applications can now compose with Lighter's order books while benefiting from the same zero-knowledge proof security that verifies all order matching and liquidations. The platform also expanded equity perpetual futures to 24/5 trading with 10x leverage and launched a mobile app for retail traders.

Competition intensifies as platforms differentiate: Hyperliquid's Ventuals for pre-IPO trading, tokenized commodities, and now Lighter's programmable infrastructure. The sector is maturing toward sustainable revenue generation - exactly the cashflow-positive protocols institutional investors increasingly favor.

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Established in 2017, DACM is an institutional investor focused on the digital asset sector. Our team invest across the digital asset sector, from early-stage venture partnerships to listed and derivative markets. DACM has developed a fundamental investment philosophy designed for family office and institutional investors, tested across multiple market cycles.

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