Vitalik Buterin argues ETH should be valued as a store of value rather than as a fee-burning token. He says Ethereum should keep its fee burn but focus on decentralization, security and resistance to outside control.
Ethereum co-founder Vitalik Buterin argued that ETH should be valued primarily as a store of value rather than through transaction-fee burning. His position questions an investment case built on ETH becoming increasingly scarce.
ETH trades near $2,240, and Ethereum continues issuing more tokens than it burns during periods of low network activity. Buterin places the network's long-term reliability ahead of efforts to generate higher fees for token holders.
Buterin questions the fee-burn valuation
Buterin challenged the idea that ETH's value can be calculated from a predictable stream of fees. In his example, $1 billion in annual token burns and a 4% discount rate could theoretically justify a $25 billion valuation.
However, he argued that such calculations assume fee revenue stays stable even when the token loses value. Much of the activity behind past burns depended on wealth already circulating within crypto markets, so a steep price decline could cut the spending that generated those fees.
Higher fees could conflict with decentralization
Buterin also argued that treating fee generation as the main goal would change what Ethereum has to become. Using a hypothetical funding model, he estimated that Ethereum could require approximately 700,000 ETH annually for protocol research and development under a corporate-style approach.
He added that maximizing fee revenue could encourage higher gas prices, making Ethereum less accessible to people seeking privacy and secure financial transactions.
The fee-burn debate has a practical backdrop. Ethereum's March 2024 Dencun upgrade reduced layer-2 transaction costs, and ETH supply has since seen periods of net inflation as newly issued tokens exceeded those removed through EIP-1559.
The store-of-value case rests on security
Buterin's preferred approach stresses Ethereum staying dependable over long periods. He described the network's strengths as decentralization and CROPS, which stands for censorship and capture resistance, open-source development, privacy and security.
He did not propose dropping the fee burn. According to Buterin: "EIP-1559 (including its burn) is fine and good, we should keep them" — he said in a post on X.
Buterin argued that ETH could keep its store-of-value appeal even if fee burning remained below 10% of the amount needed to offset issuance indefinitely.
Source: crypto.news
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