TLDR
- Ethereum’s Fusaka upgrade increased network data capacity and lowered transaction fees.
- The upgrade led to a temporary spike in transactions and active addresses on Ethereum.
- Layer-2 networks like Base now generate the majority of layer-2 revenue, reducing Ethereum’s role.
- JPMorgan analysts highlight increasing competition from faster blockchains like Solana.
- Ethereum faces capital fragmentation due to platforms like Uniswap and dYdX moving to their own chains.
Ethereum, one of the most widely used blockchain networks, has experienced a boost in activity following its recent Fusaka upgrade. The upgrade, completed in December 2025, increased the network’s data capacity and lowered transaction fees. However, JPMorgan analysts remain skeptical about whether this short-term surge will result in sustained growth for the network.
Fusaka Upgrade Sparks Short-Term Activity Boost
Ethereum’s Fusaka upgrade has led to a noticeable increase in transactions and active addresses. The upgrade, which raised the number of “blobs” per block, allowed for more data to be stored on the blockchain. As a result, congestion decreased, transaction fees dropped, and throughput improved, particularly benefiting layer-2 networks.
Layer-2 networks like Base, Arbitrum, and Optimism have benefited the most from these improvements. These networks rely on Ethereum for data availability, but they are also starting to shift away from Ethereum itself. Base, for instance, now generates the majority of layer-2 revenue, signaling a potential shift in Ethereum’s role within the ecosystem.
Ethereum Faces Challenges Amid Competitive Landscape
While Ethereum’s Fusaka upgrade has provided a temporary boost, JPMorgan points out that the network still faces long-term challenges. Competition from faster and more cost-effective blockchains, such as Solana, is intensifying. As a result, Ethereum may struggle to maintain its market share as users and developers explore alternative blockchain options.
In addition to external competition, Ethereum’s internal dynamics also show signs of strain. The rise of application-specific chains, like those used by Uniswap and dYdX, has resulted in capital fragmentation. These platforms are increasingly operating on their own chains, drawing liquidity and revenue away from Ethereum’s main network.
Declining Activity and Rising Supply Weigh on Ethereum’s Future
The ongoing fragmentation of liquidity, combined with declining activities such as NFTs and ICOs, presents a troubling outlook for Ethereum. JPMorgan analysts note that lower fee burning and an increase in the ether supply are direct consequences of these shifts. Furthermore, the decline in Ethereum’s total value locked (TVL) suggests a weakening of its dominance in the blockchain space.
While the Fusaka upgrade improved network performance temporarily, JPMorgan remains doubtful about Ethereum’s ability to sustain growth. The upcoming Glamsterdam upgrade, scheduled for later this year, may bring additional changes.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
