Right now, there’s a paradox building in the digital assets industry.
On the surface, investors might think this will reduce how much of the blockchain’s native asset will get bought up…
But today, I’ll show you why the opposite is true.
And it’s thanks to one of the most classic paradoxes in economics.
To understand why, we need to go back to 2008, before Bitcoin or Ethereum mined their first blocks.
In the early 2000s, the Houston, Texas, metropolitan area experienced a massive population surge.
The growing economy around oil, medical, and its proximity to major ports on the Gulf of Mexico meant expansion. And this expansion meant city traffic was getting worse.
The city was adamant about addressing it. Their solution was a $2.8 billion infrastructure project that expanded the Katy Freeway.
The massive undertaking would transform this stretch of road between Katy and Houston from a more standard six-lane highway into one of the widest highways in the world, with 26 lanes in its broadest section, once complete.
Source: supercarblondie.com
Completed in 2008 and opened in 2009, the city viewed it as a major success. After all, it was a modern marvel and an incredible engineering feat.
But the public didn’t see it that way… Traffic got worse, not better, in the years that followed.
The increase in roadway and access to the main artery in and out of the Houston area attracted even more commuters.
The solution to the congestion issues made the problem even worse. The increase in efficiency of the highway system resulted in even more demand for it.
More room to drive meant more drivers on the road. It was a classic Jevon’s Paradox… An effect where more efficiency increases the demand.
I’ve written about William Stanley Jevons – for whom the paradox is named – in The Bleeding Edge before, most recently in A New Asset Class Is Coming…
William Stanley Jevons was a 19th-century economist who accurately predicted that the steam engine’s efficient use of coal would increase demand.
Jevons’ paradox suggests that more efficient use of a commodity or resource breeds increased demand and consumption of said resource, because increased efficiency makes these resources cheaper to use.
In cases of boosted efficiency, we’d probably expect the resource price to trend lower, but higher demand continues driving prices higher.
Simply put, increased efficiency leads to lower costs per unit but increased demand and consumption.
Many Houston residents viewed the massive Katy Freeway expenditure as a failure. A waste of $2.8 billion that failed to account for the added volume of traffic.
But digging deeper, there was a massive added benefit to both the increased roadway and increased traffic…
Toll revenue for Harris County Toll Road Authority (HCTRA) – where Houston sits – surged in the years that followed.
In the chart below, we can see the growth rate of toll revenue accelerated starting in 2009…
Source: urbanreforminstitue.org
Revenue nearly doubled within six years. And excepting when Hurricane Harvey hit Houston in 2017 and COVID-19 kept people off the roads in 2020, that revenue has continued to grow.
For the city, this didn’t seem like a failure. That revenue continues to fund other transportation projects as well as the maintenance of the Katy Freeway, among other endeavors.
Now, these types of public infrastructure projects are difficult for everyday investors to participate in and profit from.
But a similar restructuring is about to transpire on the Ethereum public blockchain that folks can get ahead of…
On December 3, the Ethereum network is scheduled to undergo an upgrade.
The upgrade is called Fusaka, short for “Fulu-Osaka.” And it aims to lower transaction fees and improve scalability.
For anybody who has followed public blockchains, this is the type of improvement we hear about constantly… More transactions and lower costs per transaction.
It’s almost standard operating procedure for anybody in the digital asset space to read that line next to a scheduled upgrade.
But this one is different.
Fusaka aims to boost Ethereum’s capacity from 30 transactions per second to 100,000 transactions per second.
That’s a 3,333x uptick in capacity.
It’s one of the most impactful upgrades we will likely ever witness in terms of how much activity the Ethereum blockchain can handle.
Developers are redesigning how Ethereum manages transactions. It’s a massive infrastructure overhaul.
One way this is possible is thanks to something called “blobs.”
Blobs enable layer-two networks on Ethereum to interact with the main layer – layer-one. They package up transaction data and send it to Ethereum to communicate all the changes that have taken place on the layer-two.
This keeps the layer-one and layer-two in consensus on the state of everything at any given moment.
It’s how all the various chains stay on the same page.
The Fusaka upgrade improves the pricing and the number of blobs that can happen. It also addresses the growth in terms of the number of blobs that can happen on the network in the future.
It’s a long-term solution for growth.
I could write a book trying to fully unpack how much Fusaka can accomplish. There are 12 significant improvements packed into the upgrade. Each one has a subtle nuance that requires pages of text to unpack.
But the main takeaway is that these 12 improvements are paving the way for the Jevons Paradox to happen in real-time for Ethereum.
Transaction fees are about to get cut substantially, and volume levels are about to grow from 30 to 100,000 per second.
On the surface, one might think this would reduce the amount of ETH used to pay for transactions, but the Jevons Paradox tells us that would be shortsighted.
Just like Houston expanding their roadway by several orders of magnitude saw toll revenue accelerate, we’re about to see demand for ETH soar as transaction costs decrease and the Ethereum userbase expands.
We have been covering the intersection of AI x crypto for most of 2025 here at Brownstone Research in issues like The Permissionless Agentic Economy and last week’s issue, The Forgotten Code.
The central theme of late is how the user interface is changing thanks to AI.
It’s no longer about somebody downloading a wallet, writing down private keys, onramping fiat into stablecoins or crypto, connecting a wallet to a website, and signing several transactions… An experience that can lead to frustration, steep learning curves, and a significant amount of time.
What we’re seeing now is that chatbots – a form of agentic AI – are becoming the new user interface of public blockchains.
They are eliminating all the hassles.
Instead of trying to manually connect to a site and sign transactions… The user is just telling the AI what they want to do.
“Find the best yield for my USD stablecoin.”
It’s a process that removes all the complexity.
What’s more, these bots operate 24/7/365. They are managing assets in real-time throughout the day. The result is more transactions, easier onboarding, and more users.
And it all gets accelerated thanks to Fusaka. That’s because the costs come down to a level where business models become viable.
We’re starting to see solutions where companies are paying transaction fees for the user. This means user onboarding gets even easier, again.
The impact here is better marketing campaigns, improved revenue models, and better user experiences.
This is how Fusaka creates more demand for the network than ever before… It’s paving the way for this new user interface to onboard new users and generate constant transaction activity autonomously.
The future interface of crypto is about to be accelerated thanks to the improvements being brought on by one of Ethereum’s most significant upgrades.
This is a classic example of investing in one of the most profitable paradoxes…
Don’t be fooled into thinking lower costs mean less demand for the native asset. Instead, be armed and ready for when demand accelerates in the year ahead.
Your Pulse on Crypto,
Ben Lilly
Senior Crypto Analyst, The Bleeding Edge
P.S. If you want to learn more about what projects at the intersection of artificial intelligence and crypto Jeff and I have been watching, you can join us over at Permissionless Investor.
We’ve been following the development of this trend, as well as the rise of AI agents… and now, we’ve identified a handful of projects that sit at the cross-section of these two major technologies that we like for taking advantage of the opportunity.
You can go here to learn more.
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
