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Ethereum's deflationary 'ultrasound money' thesis ends as scaling shifts activity to low-fee layer-2s, collapsing ETH burn.

Protocol Fundamentals
18 Jul 2026
Crypto news
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Neutral
Ethereum's deflationary 'ultrasound money' thesis ends as scaling shifts activity to low-fee layer-2s, collapsing ETH burn.

Ethereum's promise of becoming deflationary through transaction fee burning (ultrasound money) worked briefly after the 2022 Merge but collapsed after the March 2024 Dencun upgrade shifted activity to cheaper layer-2 rollups. This caused the daily ETH burn to drop drastically, making ETH mildly inflationary again. The December 2025 Fusaka upgrade introduced a minimum fee floor to restore some burn, but it won't return to previous levels. The shift highlights a trade-off: Ethereum's scaling success reduces its scarcity narrative, making its investment case rely more on utility than deflationary supply dynamics.

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