0｜Executive Summary — Fusaka is not a short-term event, but the technical starting point of Ethereum’s financialization era

The significance of Fusaka is severely underestimated.

It is not “just another upgrade,” but the true starting point for Ethereum’s journey toward becoming an Institutional Settlement Layer.

Ethereum is currently at the intersection of two critical curves:

1.Technical Curve: The systematic upgrade path since 2022

Merge → Dencun → Pectra → Fusaka → Verkle

This curve represents Ethereum’s long-term strategy to reduce node costs, enhance consistency, and improve L2 economic efficiency.

Financialization Curve: The systematic influx of capital and traditional finance

1. ETF → On-chain Treasury Bonds → On-chain Fund Products → Institutional Liquidity Management
2. This curve signifies Ethereum’s transition from being “the operating system of crypto” to “the settlement layer of global finance.”

Fusaka sits at the intersection of these two curves. Its core value is not reflected in short-term TPS but in:

• Reducing validator synchronization costs
• Strengthening Rollup security and consistency
• Optimizing L2 data availability (PeerDAS)
• Clearing the path for future stateless clients (Verkle)
• Equipping Ethereum with the stability requirements of traditional finance

Fusaka is not a price catalyst but the starting point for a mid-cycle repricing of ETH. It will determine the pace of institutional adoption of ETH from 2025–2027.

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1. Why Does Ethereum Need Fusaka? (Technical and Market Drivers)

1.1 The Logical Continuation of Ethereum’s Upgrade Roadmap: From a Scaling Narrative to Structural Consistency

Over the past two years, Ethereum’s roadmap has shifted from “pursuing linear scaling” to “building a long-term, consistent operational structure.”

The logical evolution of the upgrade roadmap is as follows:

Comparison of Previous Upgrades

Upgrade	Core Optimization	Upgrade Result and Remaining Issues
Merge	Solved energy and consensus mechanism issues	Brought Ethereum into a state of controlled inflation and stronger economic security
Dencun	Blob space was launched, reducing L2 data costs	L2 fees plummeted by 90%+, but this also introduced structural inconsistencies among Rollups
Pectra	Validator mechanism and signature reconstruction to pave the way for future stateless clients	Integrated validator processes to improve protocol consistency

Fusaka: Cost System Reconstruction + Rollup Consistency Infrastructure

Fusaka’s core purpose is not about TPS but about making Ethereum’s operations more stable, consistent, and predictable in preparation for the subsequent Verkle upgrade. Its key roles include:

• Reducing node synchronization costs
• Improving data availability verification efficiency
• Making the Rollup proving pipeline more unified
• Making the validator mechanism more lightweight
• Enhancing system recovery capabilities

Why is this a turning point?

Because Fusaka introduces PeerDAS (Data Availability Sampling), which is essentially the “true sharding” Ethereum has anticipated for eight years.

Vitalik’s evaluation is critical:

“PeerDAS is significant because it literally is sharding. Ethereum comes to consensus on blocks without any node needing to see all the data.” —Vitalik

This means that for the first time, Ethereum has achieved a system structure where Data Availability (DA) can be confirmed without relying on any single node seeing all the data.

However, Fusaka is still “unfinished sharding” for three reasons:

• L2s can scale, but L1 still requires ZK-EVMs for full scalability.
• Block building remains centralized in a single builder, requiring the future development of distributed block building.
• The mempool is not yet sharded, and transaction scheduling remains centralized.

In other words, Fusaka is “Sharding 1.0″—sufficient for now, but far from its final form.

Value Judgment: Fusaka is a “foundation upgrade” for Ethereum’s operational system. When you repair the foundation, you don’t see a massive increase in TPS, but all future upper-layer structures depend on it.

Image source: Vitalik’s Twitter

1.2 Rollup Proliferation and Lack of Consistency: Fusaka’s Technical Mission is to “Govern Chaos”

The Rollup ecosystem has reached a state of “prosperous chaos,” and Fusaka’s mission is to make this chaos manageable. The prosperity and fragmentation of L2s have significantly impacted the main chain’s technical and economic sovereignty, making L1’s value capture highly passive. Over the past two years, Ethereum Rollups have entered a phase of “prosperity but chaos.”

Current Structural Issues in the Rollup Ecosystem: Prover logic is not unified (different Rollups use different ZK stacks); synchronization and state update speeds vary dramatically; bridging logic is inconsistent, leading to uneven security (multi-sig, third-party sequencers); and after the drop in data costs, the DA security structure has not been unified.

In short:

Rollups are growing rapidly, but each is “connecting to Ethereum in its own way.”

This poses a threat to Ethereum’s long-term “modular structural consistency.”

Fusaka’s Mission: To make Rollups manageable, predictable, and verifiable. It aims to transform Ethereum into a more “neutral yet integrated” underlying layer with:

• A baseline for a unified proving pipeline
• More predictable DA sampling
• More consistent settlement finality
• A more rational asynchronous verification relationship between L1 and L2
• A foundation for future L2 interoperability and cross-chain security

Fusaka is a necessary step to transition the Rollup ecosystem from a series of “self-operating island chains” to a “standardized internet.” It aims to solve the “mismatch problem between L1 resources and the L2 puzzle.”

1.3 Market Context: Ethereum Enters the Institutional Adoption Cycle (Financialization-Driven Upgrades)

The approval of ETFs is only the first phase of Ethereum’s financialization; true adoption has yet to begin. Beyond technical drivers, the market drivers for launching Fusaka at this moment are even more noteworthy. We are entering an “Institutional Adoption Cycle,” characterized by:

• ETH Spot ETFs as a long-term capital entry point: ETH has been integrated into the mainstream U.S. asset allocation framework, and the ETF’s creation/redemption mechanism forms a structural inflow model.
• Financial institutions are treating Ethereum as a “technical foundation” rather than a “speculative asset.”

Image source: rwa.xyz

Institutions like BlackRock, Fidelity, Franklin Templeton, and WisdomTree are experimenting with:

• On-chain Treasury bonds
• On-chain money market funds
• On-chain short-term debt products
• On-chain yield management

These products all require a stable underlying blockchain with controllable validation costs and consistent data availability.

• Ethereum has become the “default platform” for U.S. financial institutions conducting on-chain experiments. This includes BUIDL (BlackRock On-chain Fund), Franklin OnChain U.S. Treasury Fund (BENJI), stable yield products from Ondo/Mountain Protocol, and several RWA-specific L2s currently in deployment.

These institutional on-chain financial activities all demand a more stable, rapidly synchronizing, and cost-controllable Ethereum base layer—which is precisely why Fusaka is appearing at this time.

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2. A Deep Dive into the Fusaka Upgrade: Reducing System Friction and Accelerating Ethereum’s Value Capture and Financialization

Fusaka is essentially about reducing Ethereum’s system friction costs while creating a closed-loop “value capture path” for the first time: the larger the L2 scale, the stronger ETH’s value capture becomes.

2.1 Technical Evolution: Core Protocol Improvements (Reducing System Friction Costs)

The core idea: Fusaka is not about an explosive increase in TPS but about “making Ethereum run faster, more stably, cheaper, and more reliably.”

Fusaka’s technical core can be broken down into four main lines:

Core Upgrade Protocol	Upgrade Content	Significance
1. EIP-7607: Parallel Validation and Synchronization	Allows clients to synchronize faster and reduces block finality latency.	Reduces the operational burden on Ethereum full nodes, enhancing overall network fault tolerance.
2. Realtime Proving	Transitions block proving from a batch process to “real-time generation,” making Rollup state proofs easier to standardize and paving the way for Verkle Trees and a Stateless Ethereum.	Enables a faster, more predictable, and more auditable on-chain data flow.
3. Proposer-Builder Separation (PBS) Ecosystem Integration	Clarifies the interface between Proposers and Builders, reducing structural risks caused by MEV cartels and making the sequencing market more transparent.	Increases the transparency and monopoly resistance of the on-chain sequencing and execution process.
4.1 PeerDAS 4.2 EIP-7918	PeerDAS allows L2s to publish more blob data at a lower cost, creating more room for scaling and sustainable growth. EIP-7918 forces L2s to pay a real blob cost, which is then directly burned.	PeerDAS acts as an accelerator, directly reinforcing the flywheel effect of value capture. EIP-7918 turns L2s into a natural burn engine for ETH.

2.2 EIP-7918: Fusaka’s Most Critical “Value Capture” Logic

This is the most underestimated yet truly game-changing part of Fusaka for ETH’s economic model.

The pre-upgrade problem: 85% of Ethereum transactions occur on L2s, but the fees for blobs published by L2s are near zero. As a result, the more prosperous L2s became, the lower ETH’s burn rate was. This led to slight inflation for ETH in 2024–2025.

The core function of EIP-7918: It forces L2s to pay a real cost for blobs. This expands the scope of ETH burning from being mainly limited to L1 to encompassing all L1 and L2 activities. Now, every L2 transaction automatically contributes to the ETH burn, turning L2s into a natural burn engine for ETH.

Post-Fusaka:

• Every L2 blob will have a minimum cost.
• This cost will be directly burned.
• The growth of all L2s will lead to a synchronized increase in ETH burning. The higher the adoption rate of L2 tokens, the more ETH is burned, and the scarcer ETH becomes. Ethereum effectively gains a brand new burn mechanism driven by the entire L2 ecosystem.

Ethereum May Return to Deflation for the First Time in Years — The Post-Fusaka Annual ETH Economic Model:

Metric	Before Fusaka	After Fusaka (Conservative)	After Fusaka (High Growth)
Annual Issuance	~620,000 ETH	Unchanged	Unchanged
Annual Burn (L1)	~350,000 ETH	~350,000 ETH	~350,000 ETH
Annual Burn (L2)	~0	+200,000–400,000 ETH	+550,000–850,000 ETH
Net Supply Change	Slight Inflation	Near Zero Inflation or Slight Deflation	Significant Deflation (−200k~−300k/year)

This is considered the most important value-capture upgrade since EIP-1559. The combination of EIP-7918 and PeerDAS will accelerate a flywheel effect:

• PeerDAS accelerates L2 growth (increasing burns): PeerDAS reduces bandwidth needs by 85%, so L2 nodes can publish more blobs at a lower cost. More blobs mean more fees paid, and more fees paid mean more ETH burned.
• Gas limit increase (increasing burns): The block gas limit is set to jump from 36 million to 60 million. More transactions per block mean more base fees collected, and base fees are automatically burned.

• Lower L2 fees (increasing burns): Cheaper transactions, bridging, on-chain gaming, and social apps on L2s lead to more usage, more blob publishing, and consequently, more ETH burned. Ethereum is effectively monetizing its own scaling.

This upgrade finally aligns Ethereum with Rollups.

• Before Fusaka: L2 growth → Less ETH burned → Inflationary effect on ETH.
• After Fusaka: L2 growth → More ETH burned → Deflationary effect on ETH.

Conclusion: Deflation brings positive momentum. The shift from needing L1 transactions to burn ETH to a system where both L1 and L2 activities contribute to deflation will make the price more stable as the supply becomes scarcer. This is a super-bullish, long-term positive for ETH.

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2.3 From $3,000 to $8,000: An Empirical Analysis of ETH’s Financial Advancement Through Rate Cuts, RWA Adoption, and Institutional Stability

RWAs and on-chain treasury pools are not just narratives; they are evidence of Ethereum’s transition from financial infrastructure to a financial system.

• Rate Cut Certainty from December to Early 2026: A Highly Certain Bullish Catalyst
• ETF Assets Under Management: $17.825 Billion Unlike the short-term volatility of ETF creations and redemptions, institutional on-chain holdings exhibit “low turnover + high stability” characteristics. For example, Coinbase’s on-chain wallet holding $440 million in ETH has a monthly turnover rate of just 0.3%, far below the 5% average for the ETF market. More importantly, the Trump administration’s policy to include crypto assets in 401(k) retirement accounts has opened a $12.5 trillion channel for long-term funds to enter the market. These funds, directly allocated to ETH through compliant on-chain custody, provide “anti-cyclical” support for its price.
• RWA Tokenization Enters an Explosive Phase Institutions are directly driving the acceleration of real-world asset circulation on-chain. BlackRock’s Ethereum-based BUIDL token has reached a scale of $2.385 billion, converting traditional assets like U.S. Treasury bonds into programmable tokens. Hong Kong’s compliant stablecoin issuer, Circle Innovation, is further exploring the “stablecoin + RWA” combination model, planning to issue a stablecoin pegged to offshore RMB on Ethereum for cross-border trade settlement scenarios. According to RWA.xyz, the on-chain tokenized asset market grew by 113% year-over-year in 2025, with Ethereum accounting for 82% of the transaction share.
• Layer 2 Infrastructure Faces Essential Demand High-frequency trading demand from institutions is driving Layer 2 performance upgrades. Arbitrum has already supported Robinhood in launching over 200 tokenized U.S. stock trades, with daily on-chain trading volumes exceeding $1.2 billion. The L2 network TEN, led by R3, completed a $9 million funding round to develop compliance-focused clearing modules for institutions, with plans to integrate HSBC’s cross-border payment system in Q4. Layer 2 transaction volume share increased from 21% in 2024 to 47%, becoming the “performance buffer” for institutional entry.

Summary: The above factors represent significant and highly certain bullish catalysts. While short-term fluctuations and regulatory risks may arise, they do not alter the long-term trend. Additionally, institutional holdings exhibit high stability.

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3. Fusaka’s Underlying Impact on Ethereum’s Long-Term Competitive Landscape

Although the focus of the Fusaka upgrade lies in internal structural optimization, its impact extends beyond technology, quietly reshaping Ethereum’s competitive position within the entire industry. The combination of PeerDAS and EIP-7918 establishes a “structurally consistent, predictable, and auditable” foundational framework for Ethereum, upgrading it from “ecosystem leadership” to “system-level stability leadership.”

This is why institutions almost default to choosing Ethereum for on-chain financial experiments: it provides a robust settlement layer, a unified data availability model, and a sustainable cost structure. In this context, the expansion of Layer 2 no longer dilutes Ethereum’s value but directly feeds back into ETH’s scarcity.

Therefore, Fusaka is not just a technical iteration but lays the groundwork for higher-dimensional competition, including Verkle Trees, stateless clients, distributed block building, and institutional on-chain finance.

In the new cycle of public chains, Ethereum’s competitive advantage is shifting from “performance” to “structural security + financial-grade usability,” and this advantage will be further amplified over the next 2–3 years.