New Fire Technology Livio: The Value of Ethereum Fusaka Upgrade is Undervalued

Article Author: Executive Director and CEO of New Fire Technology, Weng Xiaoqi
Source: FT Chinese Network

In late autumn of 2025, the global cryptocurrency market experienced a severe correction, with price panic and liquidity concerns reaching their most "extreme" levels since 2022. However, while widespread pessimism enveloped the market, the public collectively overlooked another strategically significant event—the completion of the Fusaka upgrade on Ethereum on December 3.

In previous years, Ethereum upgrades were always preheated six months in advance; this year, due to the prevailing bearish sentiment, the upgrade barely entered the public eye. However, our analysis reveals that Fusaka is not merely a technical patch; it is an adjustment to Ethereum's economic model and ecological performance, systematically addressing the long-standing core bottlenecks of "value capture" and "user experience."

What exactly was upgraded—widening and cheapening the "road" for L2, along with "speed limit signs" and "guardrails."

The strategic significance of Fusaka lies in its complete elimination of the two core barriers to Ethereum's global mainstream and application market: excessive costs and complex usage.

First, it brought about a thorough 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 mainnet, while drastically reducing the "toll fees" for passage.

This design allows L2 transaction fees to potentially remain at extremely low levels for the long term, with the theoretical cost of a single transaction dropping to about $0.001. This extreme cost advantage represents a ceiling-breaking breakthrough for high-frequency businesses. Whether it’s on-chain gaming, decentralized social networking, AI agent settlements, or the frequent settlements of RWAs (real-world assets) that financial institutions are concerned about, there is now a genuine economic foundation for "running on-chain." At the same time, Fusaka also achieved a delicate balance for the L1 mainnet; by "speeding up" and "weight limiting" (setting a cap on transactions), it enhanced efficiency while optimizing node storage requirements, lowering hardware thresholds, and ensuring a balance between efficiency improvements and decentralization.

Secondly, it achieved a leap in user experience, which is key to large-scale applications. Fusaka addressed the long-criticized issue of complex private key management in blockchain technology. 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 safeguard complex mnemonic phrases but can directly use their phone's fingerprint, FaceID, and other security modules to complete signatures. This innovation brings the wallet experience closer to that of everyday apps, and combined with a pre-confirmation mechanism, it brings the goal of making "transfers as easy as using an app" one step closer. The entire Ethereum ecosystem is transitioning from "technically usable" to "truly usable," which is a key foundation for attracting more Web2 users and developing applications for the general public.

Ethereum's economic model shifts from "extreme inflation" to "slight inflation" or even "deflation."

Of course, one aspect of the Fusaka upgrade that the market has underestimated is its disruptive improvement of the Ethereum ETH token economic model, transitioning Ethereum from "extreme inflation" to "slight inflation" or even "deflation."

We can draw an interesting analogy: previously, if Ethereum was in an era of "feudal lords acting independently," it has now entered an era of "market economy." The economic relationship between past L1 and various L2s resembled the "Son of Heaven and the vassal lords" during the Spring and Autumn period: nominally respecting the king, but in reality, the lords acted independently, and the economic activities generated by L2's prosperity did not effectively feed back into the ETH asset itself through mainnet fees and destruction. After the Fusaka upgrade, this relationship has been linearized and institutionalized, readjusting the economic model to a normal market logic—L2 has become a tenant that needs to regularly and stably "pay taxes to the center," having to pay stable L1 fees for the security and data throughput provided by L1. Once L2's transaction volume and activity increase, it will directly convert into economic value capture for L1 (ETH) through this fee mechanism.

This institutionalized "tax payment" brings an undervalued invisible buyback mechanism for ETH. The fees paid by L2 will be burned, essentially constituting a stable, endogenous "buyback" mechanism for the ETH token. Although the proportion of burning from L2 payments was extremely low in the past, after Fusaka drastically reduces fees and stimulates L2 activity, L2 transaction volumes will grow exponentially, significantly increasing L1's destruction volume. We estimate that related fees could potentially bring an additional destruction of about 3,000 to 10,000 ETH annually, equivalent to adding a long-term buyback mechanism linked to business volume for ETH. The design of Fusaka allows ETH's supply to adjust according to business usage, which is a healthier and more resilient valuation foundation than a purely deflationary narrative.

The current ETH scaling solution is correct and resolute. Combined with subsequent upgrades, the overall TPS of the Ethereum L2 ecosystem has the opportunity to reach the 10,000 level, and even long-term 100,000+ levels, with network usage gas fees being very user-friendly. This means that ETH will no longer just be the "network usage fee for DeFi" and a "deflationary asset in narrative," but will gradually transform into the risk hub and settlement layer equity of the entire L2 economy. This strategic elevation is the strongest long-term value support brought by Fusaka.

Conclusion: Anchoring core values and embracing the era of change.

We believe that the strategic value brought by Fusaka far exceeds the current market pricing, warranting all institutions to reassess the long-term investment value of the Ethereum ecosystem. The Ethereum Fusaka upgrade represents a significant transformation in the underlying economic model of the cryptocurrency asset industry, and the extreme cost reduction and leap in user experience it brings are the "final push" for the large-scale commercialization of Web3. Institutions focused on long-term value and foundational innovation will ultimately gain an advantage in the next round of industry transformation.

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