Ethereum co-founder Vitalik Buterin supports viewing ETH as a store of value, rather than a bet that will be destroyed along with transaction fees.

Ethereum co-founder Vitalik Buterin stated that the value of ETH should primarily be regarded as a form of value storage, rather than being measured by the destruction through transaction fees; this also challenges a long-standing investment logic that suggests that the value of cryptocurrencies will increase as they become more scarce.

• Vitalik Buterin believes that ETH should prioritize enhancing the value storage attribute, rather than endlessly pursuing the maximization of the destruction of network transaction fees.
• Buterin indicates that even if the fees destroyed are not sufficient to offset the token issuance, Ethereum should still be retained. EIP-1559.
• Buterin currently places more emphasis on the ETH long-term investment logic, which is built upon the decentralization, anti-censorship, privacy, and security of Ethereum.
• Buterin believes that maximizing Ethereum transaction fees may undermine affordability, decentralization, and the ability to resist external control.
• With the growth of the Ethereum layer-2 network, the fees for mainnet transactions have been reduced, while developers continue to advance work related to privacy and security.

Buterin posted on X, stating that Ethereum should focus on decentralization, security, and the ability to resist external control, rather than maximizing the amount of ETH destroyed through network fees. He argued that EIP-1559 should continue to be retained, but questioned whether the destruction of transaction fees could reliably support the valuation of that asset.

At the time of the above comments being published, the trading price of ETH was close to $2,240. During periods of lower online activity, there were instances where the issuance volume of Ethereum exceeded the destruction volume. The perspective of Buterin prioritizes the long-term reliability of the network over efforts to generate higher transaction fee income for token holders.

Vitalik Buterin Questions the Logic of "Fee Destruction Supporting Valuation" in Ethereum

Buterin raises questions about an economic logic: that is, regarding ETH as an asset whose value can be calculated by predictable transaction fee streams.

This logical assumption is that the value of the destroyed tokens can support the market capitalization of a cryptocurrency, just as sustained income can support the valuation of a company.

In the explanation, Buterin gave an example: assuming that 1 billion dollars worth of tokens are destroyed each year, with a discount rate of 4%, this continuous destruction could theoretically support a valuation of 25 billion dollars.

However, he believes that such calculations rely on the premise that even if the underlying tokens depreciate in value, the fees generated will remain stable.

Buterin wrote: 'Treating ETH as a fee-destroying token, this logic has never seemed so compelling.' He pointed out that a large amount of activity on Ethereum is driven by cryptocurrency speculation.

Between 2021 and 2023, online users destroyed millions of ETH through transaction fees, including during the period when NFT transactions and decentralized finance demand were extremely high.

Buterin believes that a large portion of these activities rely on wealth that is already circulating within the crypto market. Therefore, if the price of ETH drops significantly, it could also weaken the behavior that leads to the generation of these transaction fees.

He acknowledges that tokenizing real-world assets has now brought more financial activities connected to traditional markets for Ethereum, but he does not believe that mature financial products will replicate the extremely high transaction fees associated with speculative NFT exchanges.

Higher Ethereum transaction fees may conflict with the goal of decentralization.

The second part of the argument, Buterin, focuses on what Ethereum would have to become if developers regarded generating transaction fees as their primary goal on the network.

He compared the responsibilities undertaken by a large, revenue-oriented blockchain with those of a large corporation, and argued that to maintain long-term competitiveness, substantial development expenditures and a more interventionist governance approach are necessary.

Buterin Using a hypothetical funding model, it is estimated that if Ethereum adopts a corporate approach, its protocol development may require approximately 700,000 ETH per year.

This kind of expenditure will trigger a series of issues, including who will control this funds and how much compensation can still be reserved for the verifiers.

He believes that maximizing transaction fee revenue may drive up the costs of gas, making Ethereum less accessible to those seeking private and secure financial transactions.

This issue has already arisen in discussions surrounding the economic model of Ethereum. In August, crypto.news reported that after the network shifted more trading activities to lower-cost layer-two systems, the sales volume of ETH declined.

The Dencun upgrade conducted by Ethereum in March 2024 reduced the layer-2 transaction costs, enabling applications to handle activities, but it did not result in the same level of mainnet fees as before.

Therefore, as the number of newly issued tokens exceeded the number removed through EIP-1559, there was net inflation in the supply of ETH during certain periods.

The value storage logic of ETH focuses on security and stability.

The more preferred approach is to ensure that Ethereum maintains reliability over the long term.

He uses decentralization and CROPS to summarize the advantages of the network, where CROPS refers to resistance to censorship and control, open-source development, privacy, and security.

In his view, for those who hold ETH over the long term, the ability of Ethereum to survive amidst technological changes and political pressures should be more important than maximizing the destruction of annual transaction fees.

The directions he mentioned include more conservative protocol development, post-quantum security, as well as reducing reliance on dedicated infrastructure.

Ethereum The current development work also includes Kohaku wallet privacy tools, with the goal of enhancing users' control over their assets while protecting transaction information.

Buterin mentioned that multi-signature wallets, private account abstraction, as well as Fork - Choice Enforced Inclusion Lists, are all technologies that can support their preferred directions.

The proposed FOCIL transaction mechanism will make it more difficult for block builders to exclude transactions that meet the criteria, thereby enhancing resistance to censorship.

He stated that supporting tokenized assets, collateral arrangements, and decentralized transactions does not conflict with this direction, as these services expand the range of activities that ETH holders can engage in, without requiring Ethereum to maximize transaction fees.

Buterin indicates that the destruction mechanism of EIP-1559 should continue to be retained.

Buterin clearly stated that his comments do not imply giving up Ethereum's existing fee destruction system.

Buterin said, " EIP-1559 (including its destruction mechanism) is good, and we should keep them."

According to EIP-1559, Ethereum will eliminate the base fee portion of transaction handling charges, while continuing to issue new ETH to validators. Whether the supply increases or decreases depends on the balance between these two processes.

Buterin believes that even if the fees destroyed over time are less than 10% of the amount required for issuance, ETH can still maintain its attractiveness as a value store.

He linked this stance to the long-term security of Ethereum, stating that as artificial intelligence brings new technical risks, institutions and individuals may increasingly value stable and censorship-resistant infrastructure.