A Critical Date is Approaching for Ethereum – Here’s What to Expect

Ethereum (ETH) is poised to make a critical shift in its network economy with the Fusaka upgrade, which will go live on December 3rd.

This update, known as EIP-7918, introduces a mechanism that directly addresses the long-debated “fair payment” and “burn contribution” issues of Ethereum Layer-2 (L2) networks.

Until now, Ethereum L1 did not charge a base fee to L2s. This led to L2 networks like Arbitrum, Optimism, and Base burning almost no significant ETH despite their billions of dollars in transaction volume. This led to increasing criticism within the community that L2s were not contributing to Ethereum.

This situation changes with the Fusaka update. EIP-7918 introduces a new framework that caps L2 fees based on the cost of executing transactions on Ethereum’s L1. This will allow L2 fees to be determined more quickly and transparently, leading to “true price discovery.” It will also prevent L2 users from facing exorbitant transaction fees during periods of high network congestion. According to the project developers, this model represents a “double win” for both the Ethereum L1 and L2 ecosystems.

With the new mechanism, L2s will now pay a meaningful base fee to Ethereum, which will directly contribute to the ETH burn mechanism. Initially, the burn rate is expected to be low, but experts predict the process will grow “slowly and steadily,” leading to the burning of millions of dollars worth of ETH over the long term. This will reinforce Ethereum’s deflationary nature and make L2s the primary driver of this process.

*This is not investment advice.