ETH Demand Shift: Ethereum Upgrade May Concentrate Holdings Among Institutional Operators

Ethereum's next major upgrade, scheduled for 2027, will introduce 'Frame Transactions,' allowing users to pay transaction fees with stablecoins instead of ETH. However, this change has sparked concerns about whether it will lead to a collapse in demand for ETH.

The current system requires users to hold some ETH in their wallets to cover gas fees, resulting in scattered and idle gas reserves across millions of accounts. EIP-8141 changes this by consolidating gas demands into the hands of a few wallet operators, Paymaster service providers, and application developers, who need to hold large amounts of ETH.

This shift will change the price formation mechanism for ETH, as scattered retail buying gives way to institutional holdings. The total demand for ETH may not decline but its holder profile will fundamentally change, with dozens of operators centrally holding large amounts of ETH instead of millions of individual users.