Ethereum will undoubtedly be the most valuable blockchain for the foreseeable future.
However, the fundamental question is not whether Ethereum is valuable, but rather how ETH, the asset, accrues value from this.
Last cycle, the common assumption was that ETH would directly accrue value from the success of Ethereum. This is the whole “Ultrasound Money” argument in a nutshell: Ethereum would be so useful that it would burn vast quantities of ETH, giving the asset a clear and mechanically enforced source of value.
Now, I think we can say with considerable confidence that this will not be the case. Ethereum’s fees have plummeted with no recovery in sight, and its largest sources of growth, RWAs and institutions, primarily use USD as the base monetary asset, not ETH.
The value of ETH will now depend on how ETH indirectly accrues value from Ethereum’s success. But indirect accrual is far less certain. It rests on the hope that as Ethereum becomes more systemically important, more users and capital will choose to treat ETH as a store of value.
But unlike direct, mechanical value accrual, there is no guarantee this happens. It relies entirely on social preference and collective belief, which isn’t inherently a flaw (this is, after all, how Bitcoin attains its value). But, it does mean that ETH’s appreciation is no longer tied to Ethereum’s economic activity in a deterministic way.
Whether or not ETH can indirectly accrue value remains an open question, and that uncertainty is the crux of the ETH debate.
However, the fundamental question is not whether Ethereum is valuable, but rather how ETH, the asset, accrues value from this.
Last cycle, the common assumption was that ETH would directly accrue value from the success of Ethereum. This is the whole “Ultrasound Money” argument in a nutshell: Ethereum would be so useful that it would burn vast quantities of ETH, giving the asset a clear and mechanically enforced source of value.
Now, I think we can say with considerable confidence that this will not be the case. Ethereum’s fees have plummeted with no recovery in sight, and its largest sources of growth, RWAs and institutions, primarily use USD as the base monetary asset, not ETH.
The value of ETH will now depend on how ETH indirectly accrues value from Ethereum’s success. But indirect accrual is far less certain. It rests on the hope that as Ethereum becomes more systemically important, more users and capital will choose to treat ETH as a store of value.
But unlike direct, mechanical value accrual, there is no guarantee this happens. It relies entirely on social preference and collective belief, which isn’t inherently a flaw (this is, after all, how Bitcoin attains its value). But, it does mean that ETH’s appreciation is no longer tied to Ethereum’s economic activity in a deterministic way.
Whether or not ETH can indirectly accrue value remains an open question, and that uncertainty is the crux of the ETH debate.
https://x.com/AvgJoesCrypto/status/1998529576331522334
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