The Undervalued Ethereum Fusaka Upgrade: Scaling, Lower Fees, From Inflation to Deflation

Xiao Qi Weng: The Strategic Value Brought by Fusaka Far Exceeds Current Market Pricing, Deserving a Reassessment of Ethereum’s Long-Term Investment Value by All Institutions

Author: Xiao Qi Weng

Source: FTChinese.com

In the late autumn of 2025, the global crypto asset market experienced a sharp correction, with price panic and liquidity concerns reaching their most “extreme” levels since 2022. However, while widespread pessimism engulfed the market, the public collectively overlooked another event of greater strategic significance—the Fusaka upgrade completed by Ethereum on December 3.

In previous years, Ethereum upgrades were always hyped up six months in advance; this year, due to prevailing bearish sentiment, the upgrade barely entered the public’s view. However, our analysis shows that Fusaka is not just a simple technical patch—it is an adjustment to Ethereum’s economic model and ecosystem performance, systematically solving the two core bottlenecks that have plagued it for years: “value capture” and “user experience.”

What exactly was upgraded—making the L2 “roads” wider and cheaper, plus adding “speed limits” and “guardrails.”

The strategic significance of Fusaka lies in completely eliminating the two core barriers that have hindered Ethereum from entering global mainstream and application markets: high costs and complex usage.

First, it brings a complete cost revolution. The core mechanism of this upgrade can be vividly understood as “widening the expressway” for L2 without significantly increasing the L1 mainnet’s burden, while drastically reducing the “toll” for passage.

This design enables L2 transaction fees to remain at extremely low levels for the long term, theoretically reducing the per-transaction cost to as low as $0.001. This extreme cost advantage is a breakthrough for high-frequency businesses. Whether it’s on-chain gaming, decentralized social, AI agent settlements, or the frequent settlements of RWA (real-world assets) that financial institutions care about, all now truly have the economic foundation to “run on-chain.” Meanwhile, Fusaka also achieves a delicate balance for the L1 mainnet, “accelerating” while “limiting weight” (setting transaction caps), improving efficiency while optimizing node storage requirements, lowering hardware barriers, and ensuring a balance between efficiency and decentralization.

Secondly, it achieves a leap in user experience, which is key to large-scale adoption. Fusaka addresses one of the most criticized long-standing issues of blockchain technology: complex private key management. The upgrade natively supports the Passkey solution, enabling a leap from “remembering mnemonic phrases” to “fingerprint unlocking.” Users no longer need to write down and keep complicated mnemonics, but can directly use their phone’s fingerprint, FaceID, and other security modules for signing. This innovation brings wallet usage closer to everyday apps, and, combined with the pre-confirmation mechanism, brings us one step closer to the goal of “making transfers as easy as using an app.” The entire Ethereum ecosystem is moving from being “technically usable” to “truly easy to use,” which is a critical foundation for attracting more Web2 users and launching mass-market applications.

Ethereum’s Economic Model Shifts from “Hyper-Inflationary” to “Deflationary”

Of course, one aspect of the Fusaka upgrade that has been most underestimated by the market is its disruptive improvement of Ethereum’s ETH token economic model, shifting Ethereum from “hyper-inflationary” to “mildly inflationary” or even “deflationary.”

To use an interesting analogy, if Ethereum used to be an “era of feudal lords ruling their own territories,” it is now entering an “era of a marketized economy.” The previous economic relationship between L1 and various L2s was somewhat like the Spring and Autumn Period’s “Son of Heaven and vassal states”: nominally respecting the king, but in reality, the vassals acted independently, and the economic activity generated by L2 prosperity did not effectively feed back to ETH assets through mainnet fees and burning. After the Fusaka upgrade, this relationship has been linearized and institutionalized, readjusting the economic model to a normal market logic—L2s have become tenants who must regularly and stably “pay taxes to the center,” paying stable L1 fees for the security and data throughput provided by L1. Once L2 transaction volumes and activity increase, this fee mechanism directly translates into economic value capture for L1 (ETH).

This institutionalized “taxation” brings an underestimated implicit buyback mechanism for ETH. Fees paid by L2s are burned, which essentially forms a stable, endogenous “buyback” mechanism for the ETH token. Although L2 burns used to be negligible, after Fusaka’s extreme fee reduction and stimulation of L2 activity, L2 transaction volumes will grow exponentially, significantly increasing L1 burns. We estimate that the related fees alone could bring an additional burn of about 3,000–10,000 ETH per year, equivalent to a long-term buyback mechanism for ETH that is linked to business volume. Fusaka’s design makes ETH supply adjust according to business usage, providing a healthier and more resilient valuation basis than a simple deflationary narrative.

The current ETH scaling solution is correct and resolute. Combined with subsequent upgrades, the overall TPS of the Ethereum L2 ecosystem could reach the 10,000 level, or even the long-term 100,000+ range, while network gas fees remain very user-friendly. This means that ETH will no longer just be the “network usage fee for DeFi” or a “deflationary asset in narrative,” but will gradually become the risk center and settlement layer equity of the entire L2 economy. This elevation of strategic position is the strongest long-term value support brought by Fusaka.

Conclusion: Anchor Core Value, Embrace the Era of Change

We believe that the strategic value Fusaka brings far exceeds its current market pricing and deserves a reassessment of Ethereum’s long-term investment value by all institutions. The Ethereum Fusaka upgrade is a significant foundational economic model transformation for the crypto asset industry. Its extreme fee reduction and leap in user experience are the “final push” needed for Web3’s large-scale commercial adoption. Institutions focused on long-term value and foundational innovation will ultimately gain the upper hand in the next wave of industry transformation.