Ethereum co-founder Vitalik Buterin wants ETH holders to judge the token by how well it holds value, not by how much of it the network burns, arguing that ETH’s case as a store of value (SoV) rests on Ethereum’s decentralization.
In a four-part thread on X on Sunday, Buterin said EIP-1559, the fee mechanism that destroys part of what users pay for transactions, “is fine and good, we should keep them.” But he added that the community “should not feel sad if fee burn is < 10% of breakeven indefinitely; the value of ETH comes from elsewhere.”
What ETH is for has been a live argument among Ethereum developers and investors for some time. “This is not an engineering problem. This is a political economy problem,” Gitcoin founder Kevin Owocki said on Unchained in August, during an episode on a proposal to change ETH issuance. He described rival camps “in a debate about what is Eth.”
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A Floor That Wasn’t
Buterin walked through the valuation math behind the burn thesis: divide the fees a token burns each year by a discount rate, so $1 billion burned at 4% implies a $25 billion floor. He said that floor never really held for Ethereum, because most of the ETH burned from 2021 to 2023 came from activity inside crypto, from lending to a “digital monkey sale” that he said burned $180 million in fees in one day. Had ETH fallen tenfold, that spending would have shrunk with it.
“The floor argument only works if the backing of the revenue stream is external,” he wrote, adding that the growing market for tokenized real-world assets now gives Ethereum a better claim to that backing.
Corporate-Scale Costs
To justify a market cap of about $270 billion with burned fees alone, Buterin argued, Ethereum would have to operate like a major global company on the order of L’Oreal, which he placed 55th. Citing an AI estimate that L’Oreal spends about 0.58% of its market cap a year on research, Buterin wrote in the same post that Ethereum would need “in-protocol funding to the tune of ~700k ETH per year,” cutting validator revenue by two-thirds. Buterin wrote that the network would also need “highly interventionist governance.” Optimizing for the burn would also mean higher gas prices, he said, which could price out users who most need privacy and security.
Survival as the Test
The first test for a store of value, Buterin wrote, is “to survive.” He pointed to conservative security choices, partial ossification of the protocol, and work on multisigs and private holdings. He also cited EIP-8288, a draft proposal he co-authored that he tied to holding ETH both privately and safely, and said FOCIL aims to stop block builders from blocking transactions. He said a node running on his laptop “synced in < 6 hours” and uses only an eighth of his hard drive.
“The best private reason to hold ETH is its SoV properties, which are a direct consequence of that decentralization and CROPS,” Buterin wrote, using his shorthand for censorship and capture resistance, open source, privacy and security.
Related Listen: Vitalik Finally Says ETH Matters. Zak Cole: ‘Should Have Said That 5 Years Ago’
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