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Author: Weng Xiaoqi, CEO of Xinhuo Technology; Source: FT Chinese
In the late autumn of 2025, the global crypto asset market experienced a violent correction, with price panic and liquidity concerns reaching the most “extreme” position since 2022.However, when general pessimism enveloped the market, the public also collectively ignored another event of more strategic significance—Ethereum’s Fusaka upgrade completed on December 3.
In previous years, Ethereum upgrades always started to warm up half a year in advance; this year, due to the control of downward sentiment, the upgrade has hardly entered the public eye.However, after our research and judgment, we found that Fusaka is not a simple technical fix. It is an adjustment to the Ethereum economic model and ecological performance, and systematically solves the two core bottlenecks of “value capture” and “user experience” that have been troubled for many years.
What exactly has been upgraded – making the L2 “road” wider and cheaper, plus adding “speed limit signs” and “guardrails”
The strategic significance of Fusaka is to completely eliminate the two core barriers to the global mainstream and application market based on Ethereum: excessive cost and complicated use.
First, it brings about a complete cost revolution.The core mechanism of this upgrade can be vividly understood as “widening the highway” for L2 without significantly increasing the burden on the L1 main network, and significantly reducing the “tolls” for traffic.
This design makes L2’s transaction fees expected to remain at extremely low levels for a long time, and theoretically the cost of a single transaction can be as low as approximately US$0.001.This ultimate cost advantage is a ceiling-breaking breakthrough for high-frequency business.Whether it is on-chain games, decentralized social networking, AI agency settlement, or the frequent settlement of RWA (real world assets) that financial institutions are concerned about, they all truly have the economic foundation of “running on the chain”.At the same time, Fusaka has also made a subtle balance on the L1 main network. It improves efficiency through “speed increase” and “weight limit” (setting an upper limit for transactions). It also lowers the hardware threshold by optimizing node storage requirements, ensuring a balance between efficiency improvement and decentralization.
Secondly, it achieves a leap in user experience, which is the key to achieving large-scale application.Fusaka solves the most criticized problem of blockchain technology for a long time: complex private key management.The upgrade realizes the leap from “remembering mnemonic words” to “fingerprint unlocking” by natively supporting the Passkey solution.Users no longer need to copy and keep complex mnemonics, but can directly call the mobile phone’s fingerprint, FaceID and other security modules to complete the signature.This innovation brings the wallet experience closer to that of a daily app, and coupled with the pre-confirmation mechanism, the goal of “transferring money is as smooth as using an app” is one step closer.The entire Ethereum ecosystem has moved from “technically easy to use” to “really easy to use”, which is the key foundation for introducing more Web2 users and developing applications for the public.
Ethereum economic model shifts from “extreme inflation” model to “deflation”
Of course, the Fusaka upgrade is the most underestimated by the market. It is the subversive improvement of the Ethereum ETH token economic model, which has transformed Ethereum from “extreme inflation” to “slight inflation” or even “deflation”.
Let’s make an interesting analogy. If Ethereum was in the era of “the princes were doing their own thing”, then it has entered the era of “market economy”.In the past, the economic relationship between L1 and various L2s was a bit like the “Emperor and the princes of the countries” in the Spring and Autumn Period: in name, they respected the king, but in fact the princes acted independently. The economic activities generated by the prosperity of L2 did not go through the fees and destruction of the main network, and effectively fed back to the ETH asset itself.After the Fusaka upgrade, this relationship has been linearized and institutionalized, and the economic model has been readjusted to normal market logic – L2 has become a tenant that needs to “pay taxes to the center” regularly and stably, and must pay stable L1 fees for the use of the security and data throughput capabilities provided by L1.Once the transaction volume and activity of L2 increases, it will be directly converted into the economic value capture of L1 (ETH) through this fee mechanism.
This institutionalized “tax payment” brings an invisible repurchase mechanism to ETH that is underestimated by the market.The fees paid by L2 will be burned, which essentially constitutes a stable and endogenous “buyback” mechanism for ETH tokens.Although L2 payment accounted for a very low proportion of burnt volume in the past, after Fusaka’s extreme fee reduction and stimulation of L2 activity, L2 transaction volume will increase exponentially, thereby significantly pushing up L1 burnt volume.We estimate that the relevant fees alone may bring about an additional destruction of approximately 3,000–10,000 ETH per year, which is equivalent to adding a long-term repurchase mechanism to ETH linked to business volume.Fusaka is designed so that the supply of ETH adjusts with business usage, which is a healthier and more resilient valuation basis than a simple deflationary narrative.
The current ETH expansion plan is correct and firm.Combined with subsequent upgrades, the overall TPS of the Ethereum L2 ecosystem has the opportunity to hit the 10,000 level, or even 100,000+ in the long term, and the gas fee used by the network is very user-friendly.This means that ETH will no longer be just a “DeFi network usage fee” and a “deflationary asset in the narrative”, but will gradually become the risk center and settlement layer equity of the entire L2 economy.This improvement in strategic position is the strongest long-term value support brought by Fusaka.
Summary: Anchor core values and welcome the changes of the times
We believe that the strategic value brought by Fusaka is much higher than the current market pricing, and it is worthy of all institutions to re-examine the long-term investment value of the Ethereum ecosystem.The Ethereum Fusaka upgrade is an important underlying economic model change in the crypto-asset industry. The ultimate fee reduction and user experience improvement it brings are the “final step” in realizing the large-scale commercialization of Web3.Institutions that focus on long-term value and basic innovation will eventually take the lead in the next round of industry changes.
