The highly awaited Fusaka Upgrade for Ethereum is set to go live today, introducing crucial enhancements aimed at improving the network”s overall efficiency. Analysts predict that this upgrade could trigger a substantial supply crunch for ETH, potentially driving its price upward during a time of volatility in the broader cryptocurrency market.
According to insights from Bull Theory, the Fusaka Upgrade incorporates elements from earlier updates—Osaka, Fulu, and PeerDAS. However, its most significant contribution lies in addressing one of Ethereum”s longstanding challenges. Layer 2 (L2) solutions have historically benefited from Ethereum”s security while contributing minimal fees back to the network. Even though L2 solutions such as Base, Arbitrum, Optimism, and zkSync generate millions in transaction fees, these amounts often reduced to negligible values when recorded on the Ethereum mainnet. This dynamic resulted in minimal ETH being burned despite L2 solutions handling approximately 85% of all Ethereum transactions.
The Fusaka Upgrade is poised to alter this situation fundamentally. A pivotal enhancement is EIP-7918, which requires that L2 transactions incur real fees payable to Ethereum. This change guarantees that each L2 transaction contributes directly to the burning of ETH, a feature that was not assured prior to this upgrade. Analysts view this adjustment as one of the most significant shifts in value since the implementation of EIP-1559.
Following the Fusaka Upgrade, analysts expect a broader scope of ETH burn, expanding beyond Layer 1 (L1) transactions to include all L2 activities. Previously, the majority of ETH burn originated from mainnet transactions, leading to slight inflation in 2024–2025 as cheaper L2 transactions decreased ETH burn while staking continued to generate new tokens. With the implementation of Fusaka, every L2 blob will incur a minimum fee, which will be subject to burning. As adoption of L2 solutions rises, the rate of ETH burn is also anticipated to increase, further enhancing ETH”s scarcity and positioning the network toward deflation for the first time in years.
Currently, Ethereum issues approximately 620,000 new tokens annually for stakers while burning around 350,000 tokens, resulting in a slight net inflation. However, projections post-Fusaka, even under conservative estimates, suggest that additional burn from L2 transactions could reach between 200,000 and 400,000 ETH per year. When combined with the existing burn rates, this could elevate the total to over 600,000 ETH, leading to a neutral or slightly deflationary state for the cryptocurrency. More optimistic projections suggest that if L2 adoption accelerates and demand for blobs intensifies, annual burn rates could skyrocket to between 900,000 and 1.2 million ETH, resulting in a supply decrease of 200,000 to 300,000 ETH each year.
Another significant feature of the Fusaka upgrade is PeerDAS, which enhances L2 scalability by reducing bandwidth requirements by 85%. This improvement allows L2 solutions to publish more blobs at lower costs, leading to increased fees and consequently more ETH being burned. Additionally, the upgrade increases the block gas limit from 36 million to 60 million, allowing for a greater number of transactions per block. This enhancement suggests that more transactions can occur, thereby collecting higher fees and resulting in increased ETH burn.
Moreover, the reduction in transaction fees for activities such as swaps, bridges, on-chain gaming, and social applications is likely to spur greater usage, further contributing to the rise in transactions and ETH burn. Ultimately, analysts believe that the Fusaka Upgrade marks a critical monetary transformation for Ethereum, indicating that the network is not only improving its scalability but also effectively monetizing that growth.
