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ETH Ethereum (ETH) is about to undergo a major upgrade through Fusaka, which will bring about significant changes to the network economy. This upgrade will be available on December 3rd.
This update, known as EIP-7918, introduces a mechanism that directly addresses the long-standing issues of “fair compensation” and “decomposition of contributions” in the Ethereum Layer-2 network.
Previously, the Ethereum L1 network did not charge any fees for transactions sent to the L2 network. As a result, L2 networks like Arbitrum, Optimism, and Base, despite handling billions of dollars in transactions, barely decomposed any ETH at all. This led to increasing criticism within the community, with people arguing that L2 networks were not contributing anything to Ethereum.
The Fusaka upgrade changes this situation. EIP-7918 introduces a new framework that limits the fees charged for transactions on the L2 layer based on the execution costs of those transactions on the L1 layer. This makes the determination of L2 layer fees more transparent and efficient, thereby achieving “true price discovery.” Additionally, it prevents L2 users from facing excessive transaction fees during periods of network congestion. Project developers say that this model is a “win-win” situation for both the Ethereum L1 and L2 ecosystems.
With this new mechanism, L2 holders now need to pay a substantial fee to Ethereum, which will be used directly for the Ethereum decomposition process. Initially, the rate of decomposition is expected to be low, but experts predict that it will increase “slowly and steadily.” In the long term, millions of dollars worth of Ethereum will eventually be decomposed. This will strengthen Ethereum’s deflationary characteristics, and make L2 holders the main drivers of this process.
