The Rise and Fall of Ultrasound Money
Ethereum’s best marketing line was that using it destroyed it – every transaction burned ETH and shrank the supply. Then the network solved its scaling problem, activity fled to layer 2s, and the burn collapsed. The scaling worked. The scarcity did not survive it.
What ultrasound money actually meant
The mechanism is worth getting exactly right. In August 2021, Ethereum activated EIP-1559, which made every transaction pay a base fee that is burned – permanently removed from circulation. The busier the network, the higher the base fee, and the more ETH destroyed. This became a monetary thesis when Ethereum switched from proof-of-work to proof-of-stake in the September 2022 Merge, which cut new ETH issuance by roughly 90%. Issuance dropped to a trickle; burning continued. If burning exceeded issuance, total ETH supply would shrink – making the asset deflationary. The community called it “ultrasound money,” a deliberate jab at Bitcoin’s “sound money,” complete with a bat emoji and a movement. For a stretch after the Merge, it happened: supply fell toward and below the level at the Merge itself. The thesis was not hype – it was, for that window, an accurate description of the data.
How scaling broke the burn
Ethereum’s scaling strategy pushes transactions off the expensive base layer onto layer-2 rollups (Arbitrum, Optimism, Base). The March 2024 Dencun upgrade introduced EIP-4844 – “blob” transactions – a separate, cheaper data channel for rollups. Costs for layer 2s dropped by a factor of 10 to 100. Activity that used to happen on mainnet, paying mainnet fees and burning mainnet ETH, moved to rollups paying blob fees that were close to zero because blob space was massively oversupplied. The effect on the burn was immediate and severe. Before Dencun, Ethereum burned thousands of ETH per day during busy periods. After Dencun, the daily burn fell to as low as 50 to 70 ETH. With issuance running around 1,700 ETH per day and burn collapsing well below that, the equation flipped: Ethereum began creating more ETH than it destroyed. By various measures across 2025 and into 2026, net annual inflation ran somewhere between roughly 0.2% and 0.8%, depending on the window. ETH supply crossed back above its Merge-era level. The deflation was over. The mechanism that made ultrasound money true had not been removed – it had been bypassed.
The bull case: it still works, just differently
Defenders offer several counterpoints. First, elastic scarcity is the actual feature, not permanent deflation. During periods of high mainnet activity (above roughly 16 gwei average gas), burn still exceeds issuance temporarily. Second, even mildly inflationary, Ethereum issues roughly 90% less ETH than under proof-of-work. Bitcoin inflates at around 0.8% annually; Ethereum’s roughly 0.2% net inflation in calmer periods is actually lower. Third, roughly 28% to 30% of all ETH is locked in staking, not circulating. The tradeable float is meaningfully smaller, and demand from ETFs, treasury companies, and staking can absorb 0.2% inflation. Fourth, the store-of-value case never rested on deflation alone – utility (settlement for stablecoins, tokenization, DeFi) is the real thesis.
The bear case: the narrative was load-bearing
Skeptics note that daily network fee revenue on Ethereum fell from near $40 million in early 2025 to a local low around $10 million in 2026. This is a value-capture problem: if the base layer captures little fee revenue because activity happens on rollups that pay it almost nothing, then holding ETH is a bet on an asset whose own network is monetizing its users poorly. Robinhood’s own chain is an example – analyses show the base layer capturing a rounding error of economics. The deeper tension is structural: a scaled, efficient Ethereum is less deflationary than a congested, expensive one. The roadmap chose scaling; the asset thesis was sacrificed.
The Fusaka fix and what’s next
The Fusaka upgrade activated on December 3, 2025. Its headline features were PeerDAS and expanded blob capacity, but buried in it is EIP-7918, the “blob base fee bound.” It ties the minimum blob fee to the execution base fee – roughly the execution base fee divided by 16 – so that even in quiet periods rollups pay a meaningful minimum, ensuring a minimum stream of ETH is burned. Fidelity Digital Assets modeled what would have happened if EIP-7918 had been active since blobs launched: on 93% of days since the 2024 Dencun upgrade, the adjusted fee would have exceeded the actual fee, generating an estimated additional $78.6 million (roughly 24,641 ETH) in cumulative blob-fee revenue. Blockworks noted that had the mechanism been introduced in June 2025, burnt blob fees would have been nearly 8x higher. However, this is a floor, not a restoration. EIP-7918 prevents the burn from collapsing to zero; it does not recreate the thousands-of-ETH-per-day burn of the congested mainnet era.
Sound money versus ultrasound money, honestly compared
Bitcoin offers fixed scarcity – capped at 21 million coins, predictable issuance, current inflation around 0.8% annually. Ethereum offers elastic scarcity – supply responds to network demand. The ultrasound-money era was the brief window when Ethereum appeared to offer both certainty of deflation and utility. That window closed not because Ethereum failed but because it succeeded at scaling. A holder in 2026 chooses between guaranteed scarcity with no yield and demand-driven scarcity with staking yield and network utility. The loss of ultrasound money is less a defeat than a clarification.
What this means for holding ETH
The clean way to see it: the ultrasound thesis was strongest right after the Merge, and it has been dismantled steadily since Dencun in March 2024. Over that same window, ETH has underperformed against both Bitcoin and its own former highs. Whether EIP-7918 fixes the price depends on two numbers over the next year: net ETH supply and base-layer fee revenue. If both turn up meaningfully, the thesis has a second life. If not, ultrasound money was a phase, and Ethereum’s investment case stands on utility alone.
Frequently asked questions
- What is Ethereum ultrasound money? The thesis that ETH would become deflationary via EIP-1559 burning and the Merge’s 90% issuance cut, making it a superior store of value to Bitcoin.
- Is Ethereum still deflationary in 2026? Not on a net basis – net supply growth is around 0.2% to 0.8% annually. Temporary deflation can occur during high mainnet activity.
- Why did layer 2s break the burn? The Dencun upgrade moved activity to rollups paying near-zero blob fees; the daily burn dropped from thousands of ETH to as low as 50-70 ETH.
- What is EIP-7918? A change in the December 2025 Fusaka upgrade that sets a minimum blob fee (execution base fee / 16) to restore a burn floor. Fidelity modeled it would have added ~$78.6M in cumulative burn across 93% of days since 2024.
- Did Fusaka restore ultrasound money? No – it put a floor under the burn but does not recreate the post-Merge deflation. Sustained net deflation depends on blob activity and execution fees.
Disclaimer: This article is for information and educational purposes only. Figures are accurate as of July 17, 2026.
