Nansen: Ethereum's Fusaka Upgrade Pivotal for Capturing Layer-2 Value

Introduction: The Next Frontier in Ethereum's Evolution

The Ethereum ecosystem stands on the precipice of a transformative shift. While the transition to Proof-of-Stake via The Merge and the introduction of proto-danksharding with Dencun were monumental achievements, a new critical upgrade is now in focus. According to a pivotal analysis from blockchain analytics firm Nansen, the upcoming "Fusaka" upgrade is positioned as the essential next step for Ethereum to solidify its economic foundation and successfully capture the burgeoning value generated by its Layer-2 (L2) scaling ecosystem. This upgrade, centered on enhancing fee market mechanics and transaction inclusion processes, is not merely a technical improvement but a strategic economic imperative. As L2 networks like Arbitrum, Optimism, Base, and zkSync Era drive an ever-increasing share of user activity and transaction volume, Ethereum's base layer must evolve to ensure its security and value accrual models remain robust and sustainable. The Fusaka upgrade represents Ethereum's direct response to this challenge, aiming to refine how value flows through the stack and is ultimately anchored to the mainnet.

Understanding the Fusaka Upgrade: Core Components and Objectives

The Fusaka upgrade, a name derived from developer discussions within the Ethereum community, encompasses a set of interrelated Ethereum Improvement Proposals (EIPs) designed to overhaul the network's transaction fee mechanism. Its primary components are expected to include proposals like EIP-7702, which introduces a new transaction type for smart contract wallets with better gas efficiency and batching capabilities, and continued work on maximal extractable value (MEV) mitigation. However, the central theme of Fusaka is the refinement of the fee market post-Dencun.

Following Dencun's implementation of blob-carrying transactions through EIP-4844, which drastically reduced data costs for L2s, a new dynamic emerged. While L2 transaction fees plummeted, the economic relationship between L2s and Ethereum's base layer (L1) entered a new phase. Fusaka aims to optimize this relationship by making L1 block space more efficient and predictable for high-volume users like L2 sequencers. The upgrade seeks to address lingering inefficiencies in how transactions are ordered and included in blocks, creating a more transparent and fair system that reduces overhead for rollups and enhances the overall user experience across the stack.

The Layer-2 Boom: Value Creation vs. Value Capture

To grasp Fusaka's necessity, one must first understand the current landscape. Data from Nansen and other analytics platforms reveals a stark reality: Ethereum Layer-2 networks have collectively surpassed the mainnet in key daily activity metrics. Networks like Arbitrum One and OP Mainnet regularly see higher daily transaction counts and active addresses than Ethereum L1. This represents a phenomenal success for Ethereum's scaling roadmap—users are adopting scaling solutions en masse.

However, this success presents a complex economic puzzle. A significant portion of the fee revenue generated by user activity on L2s is retained within those ecosystems to pay for sequencer operations, governance incentives, and native token rewards. While L2s do pay fees to Ethereum L1 for data publication (via blobs) and settlement assurances, analysts argue that this may not be commensurate with the total economic value they generate. Nansen's report underscores that without deliberate design, there is a risk of "value leakage," where economic activity flourishes on L2s without proportionally strengthening Ethereum's core security budget (i.e., fees paid to validators). The Fusaka upgrade is engineered as a mechanism to better align this value flow, ensuring Ethereum captures a sustainable fee premium for the unparalleled security and decentralization it provides as the foundational settlement layer.

Historical Context: From EIP-1559 to Dencun to Fusaka

The Fusaka proposal is not an isolated event but the latest chapter in Ethereum's continuous evolution of its fee economics. This journey provides critical context:

• Pre-EIP-1559 Era: Originally, Ethereum used a simple auction-style gas market, leading to highly volatile and unpredictable fees during congestion, poor user experience, and significant MEV exploitation.
• The London Upgrade (EIP-1559): Implemented in August 2021, this was a paradigm shift. It introduced a base fee that is burned (making ETH deflationary) and a priority fee (tip) for validators. It improved fee predictability but did not fully solve issues of transaction ordering fairness.
• The Dencun Upgrade (EIP-4844): Activated in March 2024, this was a scaling-focused milestone. By introducing blob storage, it separated data availability costs from execution gas costs, reducing L2 fees by over 90% almost overnight. It successfully kickstarted the "rollup-centric" roadmap but also altered L1 fee dynamics.
• Fusaka's Role: Positioned as the logical successor, Fusaka builds upon this foundation. Where Dencun made data cheap for L2s, Fusaka aims to make L1 execution and settlement more efficient and economically aligned for them. It addresses the post-Dencun landscape, optimizing for an ecosystem where L2s are the primary users of L1 block space.

Technical Deep Dive: Key EIPs and Their Impact on Layer-2 Economics

While the exact bundle of EIPs for Fusaka is still under community discussion, several key proposals are central to the conversation about L2 value capture:

• EIP-7702: Proposed by Vitalik Buterin, this allows externally owned accounts (EOAs) to temporarily act as smart contracts for a single transaction. This greatly enhances usability and gas efficiency for advanced operations—a boon for wallet developers and users on both L1 and L2. More efficient transactions mean lower overall costs.
• Proposer-Builder Separation (PBS) & MEV-Boost Refinements: A core part of Ethereum's roadmap is fully implementing PBS to mitigate MEV centralization risks. Fusaka may include steps toward this by refining how block builders construct blocks. For L2s, a fairer and more transparent block building process reduces their operational costs and risks when submitting batches to L1.
• Transaction Inclusion List Enhancements: Proposals aimed at guaranteeing transaction inclusion can prevent censorship and ensure L2 sequencer batches are included promptly without paying exorbitant priority fees. This predictability lowers operating costs for L2s.

The cumulative effect of these changes is to create a smoother "highway" between L2s and L1. By reducing friction, inefficiency, and uncertainty in the settlement process, Ethereum makes itself a more attractive and cost-effective base layer. This encourages L2s to settle more frequently or with larger batches, thereby increasing—and stabilizing—the fee revenue returned to Ethereum validators.

Comparative Landscape: How Major Layer-2 Networks Are Positioned

The impact of Fusaka will be felt across all Ethereum Layer-2 networks but may affect them differently based on their technology stack and economic models.

• Optimistic Rollups (Arbitrum One, OP Mainnet): As mature ecosystems with high volumes, they stand to benefit significantly from reduced and predictable batch submission costs. Their economics are directly tied to L1 gas prices for fraud proof verification (in Arbitrum's case) and data posting.
• ZK-Rollups (zkSync Era, Starknet): These networks also post data to L1 but rely on validity proofs. Efficiency gains from Fusaka could lower their fixed operational costs per batch.
• Stack-Centric Networks (Base using OP Stack): Networks built on shared codebases like the OP Stack or Arbitrum Orbit chains could see standardized cost reductions across their entire ecosystem.
• Emerging Validium & Volition Chains: Networks that use alternative data availability layers may see a shifting cost-benefit analysis if Ethereum L1 becomes more efficient, potentially making pure rollup models more competitive.

Nansen's analysis suggests that while all L2s benefit from a more efficient Ethereum, those with the highest transaction volumes and most frequent settlement intervals will see the most substantial operational improvements. This could further incentivize consolidation of activity onto networks that can leverage these efficiencies most effectively.

Strategic Conclusion: Securing Ethereum's Long-Term Foundation

The Fusaka upgrade represents a critical maturation in Ethereum's development trajectory. It moves beyond foundational scaling (Dencun) to focus on sophisticated economic optimization. For the broader market and crypto readers, the implications are profound:

Fusaka is fundamentally about reinforcing Ethereum's economic moat. By fine-tuning its fee market to better serve its largest clients—Layer-2 networks—Ethereum is proactively ensuring that its security budget grows in tandem with ecosystem expansion. A secure, well-funded base layer is what makes the entire multi-chain L2 ecosystem viable; it is the trusted root of trust.

For stakeholders—from ETH holders and validators to L2 developers and end-users—the upgrade promises greater stability and predictability in network economics. It is a move from explosive growth phase management to sustainable ecosystem stewardship.

What to Watch Next:

1. Final EIP Selection: The community must converge on the specific bundle of EIPs that will constitute the Fusaka upgrade.
2. Testnet Deployment: Monitoring deployments on testnets like Sepolia will provide real-world data on performance impacts.
3. L2 Adaptation: Observe how major Layer-2 teams adjust their batch posting strategies and fee models in response to the new economics post-Fusaka.
4. Security Budget Metrics: Post-upgrade, analysts will closely watch metrics like total fees burned (base fee) versus priority fees paid to validators to assess the change in value capture dynamics.

In conclusion, as articulated by Nansen's research, the Fusaka upgrade is not just another technical hard fork; it is a pivotal strategic initiative for Ethereum to assert its role as the dominant value settlement layer in a multi-chain future. By optimizing for its Layer-2 partners today, Ethereum is securing its own resilience and value accrual for decades to come