The Death of Ultrasound Money
As Layer 2 Scaling Solutions Take Over, Ethereum Disappears
On the opening page of the next ten-year chapter of Ethereum, the “ultrasound money” narrative lies dead, the token’s price remains far from the dreams of investors, while the Ethereum treasury companies make analysts sweat.
The irony? All of it is also a symptom of its success.
The Meme
EIP-1559 (Aug 2021) introduced a burning mechanism to Ethereum that destroys a portion of transaction fees. On days when network activity is high, it's likely that more ETH will be burned than issued, leading to deflation.
In the world of crypto, deflation is a powerful counterspell to one of the biggest demons: money printing.
If strict monetary policy, with limited supply, makes Bitcoin “sound money,” then money with shrinking supply must be even better—the “ultrasound money” meme was born.
Dencun Upgrade
In March 2024, the Dencun upgrade introduced proto-danksharding (EIP-4844) with a new type of transaction called “blobs.”
Blobs allow for storing large amounts of data off-chain making transactions more efficient impacting Layer 2 fees. In fact, the impact was so significant that it was considered the most important upgrade since the shift to proof-of-stake in September 2022:
Two things happened next:
Ethereum's inflation rate increased, reaching 0.74% in September.
Revenues fell from over $600 million in March to $120 million in May.
Wait, why?
A Feature Not a Bug
The least exciting for Ethereum “hodlers” side of the Layer 2 success is that it keeps 95-99% of the transaction fees.
In August, BASE, a Coinbase blockchain that doesn't even plan to release its own token, retained $226.40 for every $1 expense connected to posting transaction data and proofs onto Ethereum's base layer. That's barely 0.44% going back to the main chain. The same is true for other L2s.
This keeps the burn rate super low making Ethereum inflationary again.
You may wonder: if the reason for it is just lower transaction volume, why wasn’t the monetary policy adjusted again? The reasons are many:
Any change in EIP-1559 would require a hardfork, therefore a broad consensus across validators, developers, and the community—that’s not easy.
At the same time, Ethereum's primary goal was always scalability, not being deflationary. L2s solved the core problem - cheap, fast transactions. The deflationary aspect was a nice side effect, not an objective.
Ethereum's long-term vision is to become a "settlement layer" for L2s. That mission was accomplished and optimizing for L1 fee burning would work against it by making L2s more expensive to operate again.
Most likely, L2 stakeholders would resist any change that increases L2 costs. Coinbase (BASE) is the biggest holder of Ethereum.
From a utility perspective, the current system works great. Users get cheap transactions, L2s are profitable, and Ethereum remains secure. What died is the meme of Ethereum becoming “Bitcoin 2.0”.
Is Ethereum a TCP/IP of Money?
As Ethereum L1 is quietly transforming from a user platform into background infrastructure, to understand possible futures, we may start to look for a good analogy. It helps that initially Ethereum was often called the “Internet of Money.” So, what is the protocol underlying the Internet?
Right now, reading those words you're a user of TCP/IP. It's a protocol underlying literally everything online. You might know about it very well, but when was the last time this acronym popped up in your thoughts? Likely, not this week or even month.
But it wasn't always the case. In the early days of the internet, TCP/IP was absolutely central to discussions about internet technology:
In the 1970s-1990s, TCP/IP was constantly discussed and not yet taken for granted. The protocol suite was competing with other networking standards like OSI, IPX/SPX, and AppleTalk. Network engineers, researchers, even early internet adopters had to explicitly choose TCP/IP and understand its architecture. Publications, conferences, and technical discussions frequently explained why TCP/IP's design principles (like packet switching) were superior.
The transition from ARPANET to the modern internet in 1983, when TCP/IP became mandatory, was a major technological milestone that required extensive explanation and advocacy. People needed to understand concepts like IP addressing, routing, and the layered protocol stack.
Does it sound familiar already?
Succeed and Disappear
Why don't you hear about TCP/IP often anymore? The answer may sound weird, but true for all the most successful technologies that solved the problem they aimed to solve:
It became invisible—so successful and ubiquitous that it's assumed rather than discussed. Modern internet conversations focus on higher-level concerns: web applications, cloud services, social media, AI, cybersecurity, and user experience. The underlying networking protocols "just work" for most people.
Additionally, many internet services now abstract away the networking layer entirely. Developers work with REST APIs, WebSockets, or cloud services without needing to think about IP packets or TCP connections.
Is this what happens to Ethereum? Quite possibly.
Just as TCP/IP became invisible by succeeding at its core mission, Ethereum L1 may be following the same path—with the success of L2s making the base layer less visible to users, and ironically, less valuable as a trendy investment.
In the end, the price of the token is not essential to maintain Ethereum's utility—and that might be exactly why the 'ultrasound money' dream had to die for Ethereum to truly fulfill the “Internet of Money” mission.
Related: Ethereum's Second Decade
i'm not sure the story ends there. the reason tcp/ip could not become money is because they didn't finish the protocol. status code 402 never being enforced / finished is the issue for web2. for web3, the payment mechanism is mostly built in, though for reads, something more will have to be developed. that being said, it can still become money for all of the people who use it, but the user base will always be more oriented toward transhumanists/futurists