Ethereum Fusaka Upgrade Launches Today, Promising Enhanced ETH Burn

The Fusaka Upgrade for Ethereum is set to go live on Wednesday, promising significant network enhancements. This development may lead to a supply crunch for ETH, potentially raising its price amidst current market challenges.

Impact of Layer 2 Solutions

Fusaka integrates elements from previous upgrades but crucially addresses Ethereum's fee structure issues.
Layer 2 (L2) solutions have historically utilized Ethereum's security without significantly contributing fees back to the network.
EIP-7918 mandates that L2 transactions pay actual fees to Ethereum, ensuring every L2 transaction contributes to ETH burning.

Post-Fusaka Projections

The upgrade broadens ETH burn sources from mainly Layer 1 (L1) to all L2 activities.
Previously, L2s reduced ETH burn due to cheaper transactions, leading to slight inflation.
Post-upgrade, L2 blobs will incur costs, increasing ETH scarcity as L2 adoption rises.
Projections indicate additional L2 activity could burn 200,000 to 400,000 ETH annually, potentially neutralizing or deflating ETH supply.
Bullish scenarios predict burn rates could reach 900,000 to 1.2 million ETH annually, decreasing supply by 200,000 to 300,000 ETH each year.

Monetary Transformation for Ethereum

PeerDAS reduces bandwidth requirements by 85%, enhancing L2 growth and increasing ETH burn.
Block gas limit increases from 36 million to 60 million, allowing more transactions per block.
Lower transaction fees could boost usage in swaps, bridges, on-chain gaming, and social apps, driving more ETH burn.
Overall, the upgrade signals Ethereum's effective monetization of network scaling.

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