Did L2 break Ethereum’s ultrasonic money?

The best marketing line for Ethereum was that if you used Ethereum, it would be destroyed and all your transactions would be burned. $ETH and reduced supply. Then the network scaling issue was resolved, activity escaped to layer 2, and the burn collapsed. Scaling worked. Scarcity did not survive it.

For about 18 months, Ethereum had the best story in cryptocurrencies, but that story was contradictory. The more people used the network, the rarer the tokens became. Every deal flared up little by little. $ETHand when the network got busy enough, it ended up burning more than it produced. Supply has decreased. The community calls it ultrasonic money, a deliberate attack on Bitcoin’s “sound money” with its bat emoji and movement.

For a while, the data backed it up. Ethereum then did what it had been promising for years: scaling, but scaling broke the story. Activity migrated to layer 2 networks that paid next to nothing to the base chain, and the burn collapsed. $ETH We quietly fell into inflation again. This is the story of how Ethereum’s greatest technological success dismantled its greatest economic story, and whether the December upgrade can put that piece back together.

What Ultrasound Money Actually Means

This mechanism is worth getting exactly right, because the whole discussion will be about it.

In August 2021, Ethereum enabled EIP-1559, which changed the way transaction fees work. Instead of paying miners directly, all transactions now pay a base fee that is incinerated and permanently removed from circulation. The more congested the network, the higher the base fee. $ETH Destroyed. As such, it is just a fee burning mechanism. This became the theory of money when Ethereum switched from proof of work to proof of stake in the September 2022 merger. $ETH Since the network no longer has to pay energy-intensive miners, issuance has increased by about 90%.

Combining the two gives us the ultrasound theory. After the merger, issuance decreased slightly. Writes continued for each transaction. If the burn exceeds the issue, the total $ETH Supply decreases over time and assets become deflationary. And deflationary assets, where demand increases, should theoretically increase in value. Ethereum will be a more difficult currency than Bitcoin, but Bitcoin’s supply is still increasing, hence the name “ultrasound.” Tracking site Ultrasound.money existed to show you exactly this. This means that the supply is decreasing day by day.

It happened for some time after the merge. Supply has fallen towards or below the level at the time of the merger itself. Burns outperformed the issue. This story wasn’t hype. For that window, it was an accurate description of the data. That’s what made it powerful and what made the reversal so tricky.

How scaling solved the problem

This hiatus comes as Ethereum solved its most famous problem, which is pure irony.

Ethereum’s scaling strategy is to push transactions from an expensive base layer to layer 2 rollups, networks like Arbitrum, Optimism, and Base, which process transactions cheaply and post compressed data to Ethereum for security. The base layer will set in and target=”_blank”>burns will drop to 50-70 per day. $ETH. The base tier has lost its primary source of fees. Approximately 1,700 pieces issued $ETH When the amount burned per day was much lower than that, the equation reversed and Ethereum started producing more energy. $ETH than destroyed. According to various indicators for 2025-2026, the annual net inflation rate hovered between approximately 0.2% and 0.8% depending on the period. $ETH Supply has exceeded the level of the merge era. Deflation is over.

The mechanism that made EIP-1559’s massive combustion, the ultrasonic money, had not yet been removed. It had been bypassed. The activity has simply been moved to a layer where no meaningful amount of writes occur. Ethereum successfully scaled and in doing so broke the relationship between usage and scarcity that the entire thesis relied on.

For bulls: it still works, just done differently

The reaction of Ethereum defenders is not denial. It’s a reframing, and some of it is really powerful.

The first point is that elasticity deficiency, rather than permanent deflation, is the actual feature. Ethereum was not designed to shrink forever at a fixed rate. It is designed to burn in proportion to demand. That is, it is deflationary when the network is congested, and mildly inflationary when it is quiet. During periods of high mainnet activity, the average gas volume exceeds approximately 16 gwei, and the combustion volume still exceeds the issuance volume. $ETH For a time, net deflation continues. The mechanism works exactly as designed. It’s just that scaled networks spend more time in a quiet state. In this interpretation, ultrasound money is always conditional, and conditions are demands rather than promises.

The second point is that issuance is still significantly lower than before. Even with moderate inflation, Ethereum issuance drops by about 90% $ETH than under proof of work. Compared to Bitcoin, which currently inflates at about 0.8% per year on a fixed schedule, Ethereum’s halcyon net inflation rate of about 0.2% is actually low. Both assets will inflate in 2026. Ethereum inflation is not that great in some ways. The “harder than Bitcoin” argument persists in a narrow technical form even without net deflation.

The third point is that supply is exaggerating selling pressure. Approximately 28% to 30% of the total $ETH It is fixed in staking and generates income, but it is not in circulation. tradable float, $ETH The actual quantity available on exchanges is significantly smaller than the headline supply and shrinks as it increases. $ETH The bet is on. A moderately inflated total supply and a large increase in the stake portion will result in very different pressures than the raw inflation numbers would suggest. Demand from ETFs, treasury companies, and staking can easily absorb 0.2% inflation.

And the fourth point is simply that the case for the store of value has never relied solely on deflation. As long as the demand for Ethereum’s block space, which serves as stablecoin, tokenization, and DeFi payments, grows faster than supply, the price is likely to rise regardless of whether supply increases by 0.2% per year. Rarity was a good thing. Practicality is the real theme.

Kuma’s case: The story was taxing.

The skeptic’s view is that the ultrasound story is not just marketing, but is doing real work in investment litigation, and losing it is more important than the restructuring acknowledges.

The candid version comes from on-chain data and the people who were watching it. Ethereum’s daily network fee revenue has fallen from around $40 million in early 2025 to around $10 million, the lowest in the region, in 2026. This is not just a burn problem. It’s a question of value generation. If the base layer earns little fee income because the activity occurs in a rollup and pays almost nothing, $ETH This is when its proprietary network bets on assets that are under-revenued by its users. Some analyzes link this directly to a decline in developers and a decline in whale support, marking the end of ultrasonic money. $ETH There was a clear, quantitative reason to evaluate it.

The deeper problem is structural and indisputable. Large and efficient Ethereum is less deflationary than crowded and expensive Ethereum. This is the tension at the heart of the entire discussion. Making Ethereum a better infrastructure, making transactions cheaper, increasing capacity, and allowing activity to roll up faster is what will reduce burn. Ethereum cannot be the cheap, high-throughput payment layer it wants to be and at the same time be the fee-burning deflationary asset that ultrasonic theory requires. These are directly contradictory and we chose to scale in our roadmap. The theory of wealth has, in a real sense, been sacrificed to the technology roadmap.

Then there’s the issue of rollups clarifying value. Layer 2 uses Ethereum for security and pays a pittance for the privilege. Robinhood’s own chain is one example. Analysis of the enterprise’s L2 shows that the base layer captures rounding errors in economics while providing security that makes the overall arrangement reliable. If the future of Ethereum is for thousands of rollups to be settled cheaply, then Ethereum provides a huge amount of value and captures very little of that value, and no amount of reframing the story will solve the value capture problem that exists in the fee structure.

The fix no one is talking about

This brings us to December 2025. This upgrade was designed, in part, to address exactly this, and was ignored by most of the market.

The Fusaka upgrade went into effect on December 3, 2025. Its highlight features were around further scaling, PeerDAS, and blob capacity expansion. But embedded within it is EIP-7918, or “BLOB base rate bound,” which is the most direct attempt yet to repair the burn. The problem Dencun posed was that if execution costs were dominant and blob demand was soft, blob fees could plummet to near zero (1-way). This means that rollups consume Ethereum capacity for next to nothing and consume almost nothing. EIP-7918 sets a lower limit. This ties the minimum blob price to the execution base price (approximately the execution base price divided by 16), so that even during slow periods, the rollup pays the lowest price that makes sense, and the lowest stream price is paid. $ETH I’ll get burned.

The modeling is impressive. Fidelity Digital Assets analyzed what would have happened if EIP-7918 had been active since Blob’s inception and found that on 93% of the days since the Dencun upgrade in 2024, the adjusted charges exceeded the actual charges, generating an estimated additional $78.6 million, or approximately $24,641. $ETHcumulative blob-fee revenue. Blockworks noted that if this mechanism had been introduced in June 2025, Blob writes would have been nearly eight times more expensive. The intention is clear. Restore the floor under the burn as stablecoins, DeFi, and tokenization move to rollups. $ETH Capture value from the activity rather than subsidize it.

The honest caveat is that this is a floor, not a restoration. EIP-7918 prevents combustion from reaching zero. It doesn’t reproduce thousands of things$ETH– Daily burn in the era of crowded mainnets. Whether it creates measurable and sustained deflation will depend on how much activity flows through the blob and how high execution-based fees run, which the market is still watching closely. This is a serious and well-designed attempt to reconnect use and scarcity. It’s not going back to 2022.

Honest comparison between sound money and ultrasonic money

Since the entire paper is built around Bitcoin, this comparison is more interesting than either side admits, so it’s worth removing the tribalism and putting the two monetary models side by side.

Bitcoin provides fixed scarcity. The supply schedule is written into the protocol, with a cap of 21 million coins that will be halved approximately every four years on a predictable schedule. Holders now know with certainty what will happen to Bitcoin issuance in 2030 and 2040. That certainty is the whole product. Bitcoin does not respond to demand, does not burn, and does not adjust. With only on-schedule issuance towards the hard cap, the current inflation rate is about 0.8% per year and has been trending toward zero for decades. The tradeoff that Bitcoin holders accept is that the base layer offers little native utility and no revenue. You hold on to certainty and give up productivity in exchange.

Ethereum provided elastic scarcity and still provides some elasticity. Supply responds to network demand: more usage leads to more consumption, which can increase demand $ETH Net deflation. Less usage means less combustion, allowing for gentler expansion. Its appeal was that it was a token that became rarer when it was most used, and the scarcity of the asset was tied to the success of the network. The trade-off that has become clear in the L2 era is that elasticity affects both directions.

Supply in response to demand is deflationary only when the demand for the burnable layer is high, and Ethereum intentionally moved demand to the non-burnable layer. It turns out that Bitcoin’s rigidity, often criticized for its inflexibility, is what makes it able to keep its financial promises. Ethereum’s flexibility, often praised for its sophistication, turns out to be conditional on its financial promise.

The honest scorecard is that these are different products for different buyers, not better and worse versions of the same thing. Bitcoin sells certainty and asks us to abandon practicality. Ethereum sells utility and asks you to accept that its scarcity depends on how that utility is used. The era of ultrasonic money was a brief period in which Ethereum seemed able to provide both deflationary certainty and network practicality, and that period closed not because Ethereum failed, but because it succeeded in scaling.

Holders choosing between these in 2026 will actually be choosing between guaranteed scarcity with no yield or demand-driven scarcity with staking yield and network utility. Framed this way, Ultrasound Money’s loss is more of a revelation than a defeat. Ethereum was never going to become Bitcoin, and that burn masked how different the two bets really were.

What this means for retention $ETH

Stripping away the narrative conflict, the real question becomes whether the ultrasound story matters to prices. And the unpleasant answer is that it’s hard to tell. $ETH Nevertheless, it underperformed throughout the period.

How to understand it clearly: Ultrasonic theory was strongest immediately after the merger, but has been steadily dismantled since Denkun in March 2024. In the same window, $ETH It has consistently underperformed both Bitcoin and its historical highs. Either the market was pricing in the loss of the deflationary narrative, or the market just didn’t care about the narrative at all. $ETHThe problems lie elsewhere, such as leaking L2 values, conflicts with Solana, and complete difficulty with modular roadmaps. Both readings are defensible and point to different conclusions about whether correcting burn corrects prices.

The most honest view is that ultrasonic money was a proxy for the real question that still stands: Can Ethereum capture value from its own success? When networks were congested and costs were high, the answer was clearly yes. The burns made it legible. As networks expanded and became cheaper, the answers became vague and the burns stopped telling the story. EIP-7918 is an attempt to make the answer more readable again by putting a floor below the value capture.

Whether it works or not will be determined by next year’s two numbers, not marketing. $ETH supply, and base layer fee income. If both yield meaningful results, the paper will have a second life. Otherwise, ultrasonic money is a stage, not an asset, and the Ethereum investment case will need to be judged solely on practicality, an argument that is more difficult, time-consuming, and less tweetable than the shrinking supply argument.

FAQ

Disclaimer: This article is for informational and educational purposes only and does not constitute financial or investment advice. It describes financial mechanisms and network upgrades, but their impact is uncertain and still evolving. There is nothing here to recommend buying or selling any assets. Always do your own research. Supply, combustion, and inflation figures are continuous and accurate as of July 17, 2026.