Author: David Hoffman
Compiled by: TechFlow TechFlow
If you missed last week's news, I sold my Ethereum.
For someone who has built a career, community, identity, and business around Ethereum, making such a choice is not easy.
The decision to sell requires a more detailed explanation than just a few scattered tweets.
It would be best to read this article from Bankless.com.
However, if you prefer the less aesthetically pleasing reading experience of native X articles, the article content is as follows.
tl;dr
The argument that "ETH is money" hasn't failed... it's just been validated. Ethereum has earned its deserved price, and I don't believe its value as an asset will be reassessed, whether it goes up or down.
P.S.: I am very bullish on Ethereum. I expect the Ethereum network to develop exceptionally well in the future. However, I believe that only a small portion of Ethereum's success will be reflected in its price (ETH).
The following is the article content:
ETH becoming a currency has always been a distant dream.
Money is a game of coordination, and coordination is difficult.
The Ethereum project itself is a series of coordination challenges spanning multiple levels, and the idea that "ETH is money" requires success at all of these levels, and to succeed with confidence.
ETH can only become a currency when every layer of the Ethereum technology social stack outperforms its competitors.
Given the ambitious goals of the Ethereum project, achieving the most successful version of Ethereum has always been a formidable challenge. Despite its shortcomings, the Ethereum project has achieved remarkable success, and its current market capitalization is well-deserved.
However, the window of opportunity... the hope that Ethereum would be "re-evaluated" by the market seems to be closing in.
Ethereum is a form of currency in some ways. But it is not the perfect currency that we all strive for.
Ethereum is a coordination game
A Turing-complete blockchain is such a powerful concept that Ethereum's greatest potential lies in the entire cryptocurrency space, encompassing everything.
The only obstacle for Ethereum to achieve 100% dominance in all areas is coordination.
Ethereum's leadership needs to be sufficiently decentralized, and governance requires "coarse consensus" to create credible neutrality, thereby maximizing Ethereum's adoption rate.
Ethereum's leadership needs to react to market dynamics and operate like a startup, constantly facing the threat of being eliminated.
Ethereum L2 needs to be able to operate independently of the underlying layer and make its own market choices, but it also needs to be economically linked to and constrained by the broader Ethereum economy and the Ethereum brand.
The Ethereum roadmap needs to be executed in a specific order to maximize Ethereum's momentum and market dominance, thereby effectively suppressing competition and maximizing people's confidence in Ethereum and ETH.
In order to demonstrate Ethereum's usability to the outside world and maintain its leading position in the competition, key technologies need to be researched and developed at a sufficiently fast pace.
The "ETH as Money" concept aims to create a revolutionary and powerful financial asset that, with its unique attributes as a superior global store of value, will attract previously indifferent people. The Ethereum brand and the strength of ETH must be strong enough to not only make baby boomers feel secure but also, due to the Ethereum project's dominance, encourage them to include ETH as a significant part of their retirement portfolios.
In order to achieve the goal of "ETH as currency", all upstream links of ETH need to operate at a high level.
Ethereum is not Bitcoin—it has chosen a difficult path. Bitcoin, on the other hand, has chosen to strip away all information on its blockchain to elevate its own status.
Ethereum has chosen to add everything to its blockchain to maximize the use of its block space. Only by doing this optimally before its competitors can Ethereum achieve global currency status.
We have made some progress, and Ethereum has reached its maximum potential market capitalization share.
It seems the best time to play this game has already passed.
The environment may never allow this.
Looking back over the years, I see that Ethereum has had to overcome a number of environmental challenges.
Primary assets are inextricably linked to income.
While evaluating smart contract chains based on fees and revenues is very difficult... fees and revenues are clearly ways for smart contract L1 assets to improve their pricing power.
By 2026, we will have a wealth of data proving that all of these things are closely related: L1 activity, L1 fees, and the rise in L1 native asset prices.
- In 2021, ETH was dominant, with the highest L1 revenue market share at the time.
- In 2024, SOL 's L1 revenue market share saw unique growth relative to other parts of the industry, thus establishing its dominant position.
- In 2026, NEAR will undergo a price revaluation, while L1 revenue and NEAR consumption will also see fundamental growth.
You could also look at assets like BNB and TRX—they might be the highest-grossing projects in history. Their price charts are very similar to what I expect ETH to do, provided ETH can maintain its dominance in the L1 fee market for a longer period, not just in 2022.
The strong encryption version did not work.
@0xMakesy is right:
Ethereum represents a powerful version of cryptocurrency —cryptocurrency itself is the end goal, capable of self-sustaining and self-perpetuating. DeFi, NFTs, DAOs—we are the rebels, dedicated to building an alternative financial system created by and serving the people, transforming imagination into currency.
There is also a weaker version: providing efficient ledger infrastructure for the back-end of financial institutions. This weaker version will power the stronger version, translating the demand for internet ledgers into internal cash flows—to cryptocurrencies, to Ethereum, and ultimately to ETH.
Perhaps, if Ethereum had been more efficient, faster, and more effective, and if cryptocurrencies hadn't attracted so many scammers and exploiters, the industry could have earned the influence and respect I've always believed it deserved. But the period when cryptocurrencies truly enjoyed a positive public image was limited to late 2020 and early 2022. Beyond that, cryptocurrencies have been consistently associated with scams, fraud, get-rich-quick schemes, and utterly useless benefits to ordinary people.
ETH is a currency that relies on a "strong cryptocurrency".
Ethereum's rise to prominence as a cryptocurrency coincided precisely with the moment when everyone was forced to connect to the internet. The world discovered cryptocurrency for the first time, and it became incredibly popular during that brief window of opportunity.
Currency is a form of coordinated game, and the value of a currency is tied to people's beliefs. In 2021, the public generally believed in Ethereum (ETH): it was cool, disruptive, and popular. Bitcoin also possessed these qualities and maintained them better than Ethereum after 2021.
This raises a disturbing possibility: strong cryptocurrencies may never have reached a stable equilibrium. The abnormal distortion of the monetary system during the COVID-19 pandemic may have benefited Ethereum's status as a currency from this distortion. If so, Ethereum's status as a currency has always depended on the strong cryptocurrency system functioning better than it actually does.
Ethereum's practicality also contributes to the development of other currencies.
Is Bitcoin a currency? Is the US dollar a currency? Is gold a currency? It doesn't matter—whatever the currency, it will be tokenized on Ethereum.
In 2020, Nick Carter debated the "no bank account" case.
Stablecoins are likely to be tied to Ethereum, rather than being Ethereum's native tokens. At the time, the total amount of Ethereum's stablecoins was $3 billion. Today, its total stablecoin amount has reached $163 billion, a 54-fold increase.
Ethereum's utility helps expand the monetary network to encompass all forms of currency, which is why the US is so optimistic about cryptocurrencies and their application in stablecoins. Ethereum is helping the US maintain the dollar's hegemony, and leveraging this fact is a clear policy of the US government.
The positive spillover effects of Ethereum: It is clear that the value of the currency is far less than what the US government sees in the Ethereum stablecoin ecosystem.
Ethereum is a giver, not a taker.
Ethereum's core is about givers, not takers.
It provides the world's most secure block space for L2 at cost price.
It tokenizes global assets at cost price.
It secures billions of dollars in the DeFi space at cost price.
Ethereum transactions are free of charge.
This is the essence of open-source software, and the power of Ethereum. Ethereum provides the world with its full and vital value at cost.
Ethereum is noble. Ethereum is good.
Ethereum is the world's most successful non-profit organization.
Ethereum will naturally achieve tremendous adoption. It is, and may become, the most influential open-source software project in human history, and its "non-profit protocol" is one of its core characteristics.
This is why Ethereum's path to becoming a currency depends on its consistently high market dominance.
Ultimately, as blockchain space becomes commoditized, transaction fees will drop to zero. As long as it is Ethereum, and not its competitors, that commoditizes blockchain space, Ethereum can maintain its profit margins and dominance.
Ultimately, the protocol bloat theory will be superseded by the application bloat theory, with applications taking up the remaining profit margins. As long as these applications are Ethereum applications and not competitors, this is fine for Ethereum.
The idea that "ETH is currency" and "Ethereum is a giver, not a taker" are difficult to reconcile. Ethereum's architecture was designed to give back all resources to the ecosystem, taking only the minimum resources needed to maintain the network.
From an architectural perspective, Ethereum does not prioritize Ether (ETH), which is not a flaw but a characteristic. Ether will only become a currency when Ethereum wins games that it would not otherwise participate in based on its architecture.
This approach might work if Ethereum can maintain its remarkable market dominance.
The argument that Ethereum is a currency has led to many questions about Ethereum.
The realization of "ETH as currency" requires everything to go smoothly for Ethereum. Its margin for error is much smaller than I initially anticipated. Ethereum's strong momentum in 2021 and 2022 made "ETH as currency" seem inevitable.
In hindsight, Solana's rise in 2021 and the surge in anti-Ethereum sentiment were the first major signs that the coordination game between Ethereum and ETH was not proceeding as planned.
European financial groups need decentralization and the emergence of other power structures. But they also need to respond to changes in market forces with the same urgency and drive as startups facing the threat of elimination.
The L2 team needs to have autonomy in decision-making, but it also needs to operate within the larger brand framework of Ethereum and ETH. Technical synchronization and integration between Ethereum and its L2 team needs to be implemented more quickly.
The value of a smart contract chain depends on transaction fees, and to break free from this model, Ethereum needs to rewrite the rules with the power of strong success.
The argument that Ethereum is a currency has not failed.
However, it did not fully realize its potential.
Ethereum has made a noble choice, opting for the most difficult, ambitious, and pure path of ideals for its future.
It achieved some incredible victories, but also encountered some challenging failures.
Ethereum's market capitalization has reached its deserved level.
I am extremely bullish on the Ethereum network and its ecosystem—Ethereum's architecture is designed to maximize the success rate of its applications, L2-level services, and the ecosystem as a whole. The "big applications" theory means that Ethereum applications will capture all transaction fees, while the Rollup-centric roadmap means that L2-level services will capture 97% of the profits.
As for assets like Ethereum, I find it hard to imagine that its structural valuation will change in any direction—whether it goes up or down.
So the reason I sold my ETH wasn't because I was bearish on ETH, but because I thought the argument that "ETH is currency" was outdated, and I wanted to allocate my funds to other opportunities in the market that I saw.
