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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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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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