Did L2s break Ethereum’s ultrasound money?

Ethereum’s greatest advertising line was that utilizing it destroyed it, that each transaction burned ETH and shrank the provision. Then the community solved its scaling downside, exercise fled to layer 2s, and the burn collapsed. The scaling labored. The shortage didn’t survive it.

For about eighteen months, Ethereum had one of the best story in crypto, and the story was a paradox: the extra folks used the community, the rarer its token turned. Each transaction burned slightly ETH, and when the community was busy sufficient, it burned greater than it created. Provide went down. The group known as it ultrasound cash, a deliberate jab at Bitcoin’s “sound cash,” full with a bat emoji and a motion.

For some time, the information backed it up. Then Ethereum did the factor it had promised to do for years, which was to scale, and scaling broke the story. Exercise moved to layer-2 networks that pay virtually nothing to the bottom chain, the burn collapsed, and ETH quietly went inflationary once more. That is the story of how Ethereum’s best technical success dismantled its greatest financial narrative, and whether or not a December improve can put the items again.

What ultrasound cash truly meant

The mechanism is price getting precisely proper, as a result of the entire debate activates it.

In August 2021, Ethereum activated EIP-1559, which modified how transaction charges work. As an alternative of paying miners immediately, each transaction now pays a base price that’s burned, completely faraway from circulation. The busier the community, the upper the bottom price, and the extra ETH destroyed. By itself, that’s only a fee-burning mechanism. It turned a financial thesis when Ethereum switched from proof-of-work to proof-of-stake within the September 2022 Merge, which minimize new ETH issuance by roughly 90%, as a result of the community now not needed to pay energy-intensive miners.

Put the 2 collectively, and also you get the ultrasound thesis. Issuance dropped to a trickle after the Merge. Burning continued with each transaction. If burning exceeded issuance, complete ETH provide would shrink over time, making the asset deflationary. And a deflationary asset with rising demand ought to, in idea, recognize. Ethereum would grow to be more durable cash than Bitcoin, whose provide nonetheless grows, therefore “ultrasound.” The monitoring web site ultrasound.cash existed to show precisely this: provide ticking down, daily.

For a stretch after the Merge, it occurred. Provide fell again towards and beneath the extent it sat at in the course of the Merge itself. Burns outpaced issuance. The narrative was not hype; it was, for that window, an correct description of the information. That’s what made it highly effective, and what made its reversal so awkward.

How scaling broke it

The break got here from Ethereum fixing its most well-known downside, and the irony is complete.

Ethereum’s scaling technique is to push transactions off the costly base layer and onto layer-2 rollups, networks like Arbitrum, Optimism, and Base that course of transactions cheaply after which submit compressed information again to Ethereum for safety. The bottom layer turns into a settlement and data-availability layer; the rollups deal with the precise exercise. That is the roadmap Ethereum has pursued for years, and it really works.

The March 2024 Dencun improve was the pivotal second. It launched EIP-4844, “blob” transactions, a separate and much cheaper information channel for rollups to submit their information. Prices for layer 2s dropped by an element of 10 to 100. Exercise that used to occur on mainnet, paying mainnet charges and burning mainnet ETH, moved to rollups paying blob charges that had been, in apply, near zero as a result of blob area was massively oversupplied relative to demand.

The impact on the burn was fast and extreme. Earlier than Dencun, Ethereum burned hundreds of ETH per day throughout busy intervals. After Dencun, each day burn dropped to as little as 50 to 70 ETH. The bottom layer had misplaced its main price supply. With issuance working round 1,700 ETH per day and burn collapsing properly beneath that, the equation flipped: Ethereum started creating extra ETH than it destroyed. By varied measures throughout 2025 and into 2026, internet annual inflation ran someplace between roughly 0.2% and 0.8%, relying on the window. ETH provide crossed again above its Merge-era degree. The deflation was over.

The mechanism that made ultrasound cash true, EIP-1559 burning at scale, had not been eliminated. It had been bypassed. The exercise merely moved to a layer the place the burn doesn’t occur in any significant quantity. Ethereum scaled efficiently and, in doing so, severed the hyperlink between utilization and shortage that the whole thesis relied on.

The bull case: it nonetheless works, simply in another way

The response from Ethereum’s defenders isn’t denial. It’s reframing, and elements of it are genuinely robust.

The primary level is that elastic shortage is the precise characteristic, not everlasting deflation. Ethereum was by no means designed to deflate eternally at a set price. It was designed to burn in proportion to demand, which suggests it turns into deflationary when the community is busy and mildly inflationary when it’s quiet. During times of excessive mainnet exercise, above roughly 16 gwei common gasoline, burn nonetheless exceeds issuance, and ETH nonetheless goes internet deflationary, quickly. The mechanism works precisely as designed; it’s simply {that a} scaled community spends extra time within the quiet regime. On this studying, ultrasound cash was at all times conditional, and the situation is demand, not a promise.

The second level is that issuance remains to be radically decrease than earlier than. Even mildly inflationary, Ethereum points roughly 90% much less ETH than it did below proof-of-work. In comparison with Bitcoin, which at present inflates at round 0.8% yearly on a set schedule, Ethereum’s roughly 0.2% internet inflation in calmer intervals is definitely decrease. Each belongings inflate in 2026; Ethereum, by some measures, inflates much less. The “more durable than Bitcoin” declare survives in a slim, technical type even with out internet deflation.

The third level is that the provision determine overstates the promote stress. Roughly 28% to 30% of all ETH is locked in staking, incomes yield and never circulating. The tradeable float, ETH truly accessible on exchanges, is meaningfully smaller than the headline provide quantity, and it shrinks as extra ETH is staked. A modestly inflating complete provide with a big and rising staked portion is a really completely different stress than the uncooked inflation quantity suggests. Demand from ETFs, treasury firms, and staking can take up 0.2% inflation with out issue.

And the fourth level is solely that the store-of-value case by no means rested on deflation alone. So long as demand for Ethereum’s blockspace, its function as settlement for stablecoins, tokenization, and DeFi, grows quicker than provide, worth can rise no matter whether or not provide ticks up 0.2% a yr. Shortage was a pleasant story. Utility is the true thesis.

The bear case: the narrative was load-bearing

The skeptical studying is that the ultrasound story was not simply advertising, that it was doing actual work within the funding case, and that dropping it issues greater than the reframing admits.

The blunt model comes from the on-chain information and the folks watching it go away. Day by day community price income on Ethereum fell from close to $40 million in early 2025 to a neighborhood low round $10 million in 2026. That isn’t only a burn downside; it’s a value-accrual downside. If the bottom layer captures little price income as a result of exercise occurs on rollups that pay it virtually nothing, then holding ETH is a guess on an asset whose personal community is monetizing its customers poorly. Some analyses have tied this on to developer attrition and lowered whale help, framing the tip of ultrasound cash as the tip of a interval when ETH had a clear, quantifiable motive to understand.

The deeper downside is structural and laborious to argue away: a scaled, environment friendly Ethereum is much less deflationary than a congested, costly one. That is the stress on the heart of the entire debate. The very factor that makes Ethereum higher as infrastructure, low cost transactions, extra capability, exercise on quick rollups, is the factor that reduces the burn. Ethereum can’t concurrently be a budget, high-throughput settlement layer it needs to be and the fee-burning deflationary asset the ultrasound thesis wanted. These are in direct battle, and the roadmap selected scaling. The asset thesis was, in an actual sense, sacrificed to the expertise roadmap.

Then there’s the value-capture query that rollups sharpen. Layer 2s use Ethereum for safety and pay it a pittance for the privilege. Robinhood’s personal chain is an instance: analyses of company L2s present the bottom layer capturing a rounding error of the economics whereas offering the safety that makes the entire association credible. If Ethereum’s future is hundreds of rollups settling to it cheaply, then Ethereum is offering huge worth and capturing little of it, and no quantity of narrative reframing fixes a value-capture downside that lives within the price construction.

The repair no person is speaking about

Which brings us to December 2025, and the improve that was designed, partially, to deal with precisely this, and that a lot of the market ignored.

The Fusaka improve activated on December 3, 2025. Its headline options had been about scaling additional, PeerDAS and expanded blob capability. However buried in it was EIP-7918, the “blob base price sure,” which is probably the most direct try but to restore the burn. The issue Dencun created was that blob charges may collapse to near-zero, one wei, when execution prices dominated and blob demand was mushy, which meant rollups consumed Ethereum’s capability virtually without cost and burned virtually nothing. EIP-7918 units a flooring: it ties the minimal blob price to the execution base price, roughly the execution base price divided by 16, in order that even in quiet intervals rollups pay a significant minimal, and a minimal stream of ETH will get burned.

The modeling is placing. Constancy Digital Belongings analyzed what would have occurred if EIP-7918 had been energetic since blobs launched, and located that on 93% of days because the 2024 Dencun improve, the adjusted price would have exceeded the precise price, producing an estimated further $78.6 million, roughly 24,641 ETH, in cumulative blob-fee income. Blockworks famous that had the mechanism been launched in June 2025, burnt blob charges would have been almost 8x greater. The intent is specific: restore a flooring below the burn in order that as stablecoins, DeFi, and tokenization migrate to rollups, ETH nonetheless captures worth from that exercise as an alternative of subsidizing it.

The trustworthy caveat is that this can be a flooring, not a restoration. EIP-7918 prevents the burn from collapsing to zero; it doesn’t recreate the thousands-of-ETH-per-day burn of the congested mainnet period. Whether or not it produces measurable, sustained deflation is dependent upon how a lot exercise flows by blobs and the way excessive execution base charges run, and the market remains to be watching. It’s a severe, well-designed try to reconnect utilization and shortage. It’s not a return to 2022.

Sound cash versus ultrasound cash, truthfully in contrast

As a result of the whole thesis was constructed as a shot at Bitcoin, it’s price placing the 2 financial fashions facet by facet with out the tribalism, because the comparability is extra fascinating than both camp admits.

Bitcoin presents mounted shortage. The provision schedule is written into the protocol, capped at 21 million cash, and halves on a predictable timetable roughly each 4 years. A holder is aware of at this time, with certainty, what Bitcoin’s issuance will probably be in 2030 and 2040. That certainty is the whole product. Bitcoin doesn’t react to demand, doesn’t burn, doesn’t alter; it merely points on schedule towards a tough cap, and its present inflation runs round 0.8% yearly, trending towards zero over many years. The trade-off Bitcoin holders settle for is that the bottom layer presents little native utility and no yield. You maintain it for the knowledge, and also you quit productiveness in alternate.

Ethereum provided, and to a level nonetheless presents, elastic shortage. Provide responds to community demand: excessive utilization burns extra and might push ETH internet deflationary; low utilization burns much less and lets gentle inflation by. The enchantment was a token that turns into scarcer exactly when it’s most used, tying the asset’s shortage to the community’s success. The trade-off, which the L2 period uncovered, is that elasticity cuts each methods.

A requirement-responsive provide is barely deflationary when demand is excessive on the layer that burns, and Ethereum intentionally moved demand to layers that don’t burn. Bitcoin’s rigidity, typically criticized as rigid, turned out to be the factor that made its financial promise keepable. Ethereum’s flexibility, typically praised as subtle, turned out to be the factor that made its financial promise conditional.