Mainstream Moment: NFTs, EIP-1559, and Rollups Take Off (2021)

In 2021, Ethereum became a cultural phenomenon. DeFi continued to grow, but the story that pulled Ethereum into mainstream headlines was NFTs. At the same time, Ethereum executed one of its most economically important protocol changes: EIP-1559, part of the London upgrade, which restructured fees and introduced a burn mechanism.

This era is where Ethereum’s identity broadened beyond finance into culture and consumer apps–and where the network’s monetary dynamics changed in a way that still shapes narratives today.

1) NFTs: why they mattered beyond art

NFTs (non-fungible tokens) existed earlier, but 2021 made them mainstream. The big idea is simple: an NFT is a unique on-chain token that can represent ownership, provenance, or membership.

NFTs unlocked new categories:

digital art with on-chain provenance,
in-game items and virtual goods,
membership passes and community identity,
royalties and creator monetization models,
metaverse land and collectibles.

Even critics of NFT speculation acknowledged a real breakthrough: Ethereum could coordinate global digital property markets with a common settlement layer.

From an index lens, NFTs were valuable because they expanded the user base. New users didn’t come for yield–they came for culture, identity, and collecting.

2) EIP-1559: a fee market redesign

The London upgrade (activated in August 2021) introduced EIP-1559. Rather than a pure first-price auction for fees, Ethereum adopted a model with:

a base fee that adjusts with block demand,
optional tips to prioritize transactions,
and crucially, the base fee is burned (removed from supply).

This redesign had multiple effects:

improved user experience by making fees more predictable,
reduced overpayment in certain conditions,
and introduced a direct link between network usage and ETH supply dynamics.

When the network is heavily used, more ETH is burned. That created a narrative shift: ETH could behave more like an asset with usage-linked scarcity.

For a Virtual Ethereum Index, EIP-1559 is a major milestone because it turns part of network activity into an observable monetary signal: burn rate.

3) High fees accelerate Layer 2 adoption

NFT mania and sustained DeFi use kept fees high. This accelerated a transition already brewing: rollups became the scaling strategy of choice.

The rollup thesis:

execute many transactions off-chain (or in a separate environment),
post compressed data and proofs to Ethereum,
inherit Ethereum’s security while achieving far lower costs.

Rollups reframed Ethereum as a layered ecosystem:

L1 as settlement and data availability,
L2s as high-throughput execution environments.

This architecture would become central to Ethereum’s roadmap, especially after proto-danksharding in 2024.

4) Institutional attention grows

By 2021, Ethereum was no longer a niche developer network. Institutions began paying closer attention to:

on-chain markets and stablecoins,
Ethereum’s potential as a settlement layer,
and the coming Proof of Stake transition.

Even when institutions were cautious about direct usage, the narrative shifted: Ethereum was now a credible technology trend that could shape future financial infrastructure.

5) The “ultrasound money” meme and monetary debate

EIP-1559 catalyzed a new meme: “ultrasound money,” the idea that ETH could become meaningfully deflationary under high usage once issuance fell after the Merge.

Whether or not the meme was accurate in all conditions, the underlying point mattered: Ethereum was evolving its monetary policy in response to platform economics.

For an index, this introduced a broader set of monetary indicators:

issuance rate (then PoW, later PoS),
burn rate,
net supply change,
fee revenue and demand for blockspace.

6) What this era means for a Virtual Ethereum Index

2021 expanded the scope of “Ethereum activity.” It wasn’t only financial transactions. It included cultural markets, identity signals, and consumer apps.

Metrics that became more important:

NFT minting and trading volume (and unique wallet counts),
ETH burn rate and net issuance,
Layer 2 growth and the share of transactions moving off L1,
protocol revenue across DeFi and NFT marketplaces,
user adoption indicators (new addresses, active wallets, retention).

2021 also reinforced the platform thesis: Ethereum can host many economies at once–finance, art, games, communities–and settle them on a common layer. That multi-economy capacity is the kind of optionality an index like VEI tries to capture.

In the next article, Ethereum delivers on its biggest technical promise since the whitepaper: the transition to Proof of Stake via the Merge in 2022.

Reference: VEI.XYZ™

Index Notes for VEI

A useful way to read Ethereum’s history is to separate narrative from mechanics. Narratives bring users; mechanics keep them. For VEI, consider tracking a blend of (a) usage demand (fees, settlement volume, L2 activity), (b) supply/security structure (issuance, burn, staking participation, validator concentration), and (c) builder momentum (developer tools, audit density, open-source contributions). Over time, Ethereum’s “economic value” often shows up first in these structural indicators before it shows up in price.

Another practical tip: compare signals across cycles. When activity returns after a downturn and the ecosystem retains more users and more builders than the previous cycle, that’s compounding. When upgrades reduce friction (fees, UX, capital efficiency), adoption tends to follow. The index mindset is not to predict a single event, but to measure whether Ethereum’s platform economy is widening or narrowing across layers.

VEI Lens: A quick checklist

When you revisit this era later, ask: What new market did Ethereum enable (capital formation, trading, culture, scaling)? What new standard or upgrade reduced friction? What new risk emerged (security, governance, concentration), and how did the ecosystem respond? These three questions–market, standard, risk–help keep an index grounded in fundamentals rather than headlines.

Practical takeaway

If you are building dashboards for VEI.XYZ™, treat Ethereum like an economy with sectors: settlement, data availability, staking/security, consumer apps, and developer infrastructure. Each sector has different “health” indicators, and the composite is often more informative than any single metric such as price, transaction count, or TVL.

Additional VEI context

In index terms, small shifts in participation can matter more than single headlines: a steady rise in active builders, safer contract patterns, and cheaper cross-layer settlement often signal durable growth. In index terms, small shifts in participation can matter more than single headlines: a steady rise in active builders, safer contract patterns, and cheaper cross-layer settlement often signal durable growth. In index terms, small shifts in participation can matter more than single headlines: a steady rise in active builders, safer contract patterns, and cheaper cross-layer settlement often signal durable growth. In index terms, small shifts in participation can matter more than single headlines: a steady rise in active builders, safer contract patterns, and cheaper cross-layer settlement often signal durable growth. In index terms, small shifts in participation can matter more than single headlines: a steady rise in active builders, safer contract patterns, and cheaper cross-layer settlement often signal durable growth.

Glossary: Rollup
Glossary: Layer 2 (L2)
Directory: Offchain Labs (Arbitrum)
Blog: DATs and Corporate Ethereum Strategy: Digital Asset Treasury Companies as a Mainstream Access Route