Vitalik: ETH should focus on store of value rather than fee burning.

BlockBeats news, November 8 — Ethereum co-founder Vitalik Buterin published a post explaining why he is more optimistic about positioning ETH as a store of value rather than a fee-burning token. He noted that EIP-1559 and its burn mechanism should still be retained, but even if fee burning remains below one-tenth of the break-even level over the long term, there is no need for discouragement, as ETH's value comes from elsewhere. What people value most about Ethereum is decentralization and CROPS—censorship resistance and capture resistance, open source, privacy, and security—and its most practical benefit is stability. In the era of AI disruption, stability will be highly valued, and for asset holders, a store of value is precisely what turns these attributes into practical advantages rather than superfluous ideological ornamentation.

Vitalik gave three reasons.

First, "fee burning supports valuation" was never as strong as it appeared. Under a net present value approach, market capitalization is roughly equal to annual burned fees divided by the discount rate, but the high burn levels from 2021 to 2023 mostly came from crypto-internal use cases. If ETH fell by 90%, the payment capacity of such use cases would collapse in tandem, so there is no real valuation floor to speak of. Now that RWA has grown, external support is somewhat better, but mature businesses are also unlikely to see extreme bubbles with single-day burns of about $180 million again.

Second, if the goal were to optimize burning to sustain a market capitalization of about $270 billion, Ethereum would look more like a world-class company, requiring protocol-internal R&D funding on the order of about 700,000 ETH per year and long-term reliance on strongly interventionist governance, which is hard to reconcile with decentralization and capture resistance, and raising Gas would also crowd out the users who most need privacy and security.

Third, optimizing for store of value is aligned with decentralization and CROPS. Holders first and foremost want to "survive," so they need conservative security trade-offs, moderate ossification of the core protocol, reduced protocol politics, and easy, secure, and private holding and transfers, with minimal dependence on infrastructure. The more native assets there are on L1, and the easier it is for ETH and other assets to be trustlessly exchanged and used as collateral, the stronger the utility of holding ETH.

The conclusion is that the best social reason to care about Ethereum is to let decentralization and CROPS benefit more people and more scenarios. The best private reason to hold ETH is its store-of-value property, and that is precisely the direct result of the above traits.