Ethereum's Fusaka Upgrade Enhances UX But Falls Short on Revenue Hopes

The Fusaka upgrade introduced a fee floor for blob data on Ethereum, aiming to stabilize Layer 2 transaction costs and boost network revenue.

Bitwise revised its expectations, noting that increased network capacity offset fee increases, resulting in minimal revenue impact.

Despite falling short on revenue, the upgrade improved user experience and Layer 2 margins.

The Ethereum network has experienced a dramatic drop in transaction fees since 2021, attributed to the switch to Proof-of-Stake and the Fusaka and Dencun upgrades. These improvements have enhanced capacity and efficiency, reducing mainnet congestion and lowering costs.

Analysts are divided on Ethereum's long-term growth potential. While the Fusaka upgrade provided a temporary boost in network activity, JPMorgan remains skeptical, citing historical patterns of short-lived activity and competition from Layer 2 solutions.

Institutional adoption and technological developments are now major drivers of crypto prices. The Fusaka upgrade's enhancements, along with Ethereum's energy efficiency and scalability, support a more optimistic outlook.

Despite these positives, Ethereum's price volatility and macroeconomic uncertainties pose challenges. In 2025, Ethereum's price dropped 29% despite rising network activity, indicating a divergence between utility and price.

Ethereum's growing adoption by public companies and through ETFs and RWA tokenization highlights new demand layers but also amplifies exposure to macroeconomic shocks.

What is the Impact of the Fusaka Upgrade on Ethereum?

The Fusaka upgrade aimed to increase Ethereum's network revenue by setting a fee floor for blob data used by Layer 2s. However, the increased throughput and capacity offset the fee increases, resulting in minimal revenue impact.

Instead, the upgrade primarily improved user experience and Layer 2 margins. The introduction of a minimum fee for blob data helped stabilize fee volatility, which is crucial for the long-term viability of Layer 2 solutions.

This shift underscores the importance of protocol-level changes in enhancing Ethereum's scalability and usability. While the financial benefits were not as expected, the user-centric improvements are significant in maintaining Ethereum's competitive edge.

How Are Institutional Investors Reacting to Ethereum's Upgrades?

Institutional adoption is a key factor in Ethereum's long-term success. The transition to Proof-of-Stake and the implementation of upgrades like Fusaka have made Ethereum more attractive to institutions due to its energy efficiency and scalability.

ETFs and RWA tokenization have further solidified Ethereum's role in the financial system. Public companies now hold a significant portion of Ethereum's supply, indicating growing institutional confidence.

However, the market remains cautious. JPMorgan analysts caution against overestimating the impact of recent network activity, noting the structural challenges Ethereum faces from Layer 2 solutions and other blockchains.

What Are the Risks and Limitations of Ethereum's Current Strategy?

Despite Ethereum's technological advancements, its price remains volatile. The 2025 price drop highlights the divergence between network activity and price performance, raising concerns about speculative fragility.

Network stress, including address poisoning and centralized Layer 2 risks, also poses challenges. While protocol upgrades have mitigated some bottlenecks, vulnerabilities persist.

Ethereum's growing adoption by institutions introduces new layers of exposure to macroeconomic shocks. Institutional strategies using hedging mechanisms are critical in managing exposure to these risks.

The future of Ethereum depends on continued innovation and regulatory clarity. The upcoming Glamsterdam upgrade is expected to address some of these challenges, but long-term success will depend on overcoming existing pressures and maintaining a strong technical roadmap.