Burning more doesn’t mean ETH is worth more.
On November 8, Ethereum co-founder Vitalik Buterin posted that ETH’s store-of-value properties should come before the “fee burn” narrative. Here’s the thing: he didn’t call for scrapping EIP-1559—in fact, he argued that the burn mechanism should stay. What he took issue with was treating token burning as the bedrock of ETH’s valuation.
Buterin took aim at a valuation model: assume $1 billion worth of tokens is burned each year, with a 4% discount rate, and you can theoretically arrive at a $25 billion valuation. But that calculation depends on one assumption: fee revenue has to hold steady even when the token price weakens. When the market cools, on-chain activity may cool too, making that supposed “floor” a lot less solid.
He also noted that many of the big burns in the past came from activity within the crypto market itself; one digital land sale burned around $180 million in fees in a single day. Come on—using the most frenzied day to prop up a long-term value narrative makes it all too easy to mistake a cycle for a perpetual-motion machine.
Solana co-founder Anatoly Yakovenko chimed in afterward: a network can’t treat fees themselves as the product. It needs to choose a product that truly delivers value to users and make it great. On that point, the two saw eye to eye.
I’m with Vitalik: keep EIP-1559, but the burn narrative shouldn’t have a monopoly on the answer to what ETH is worth.
On November 8, Ethereum co-founder Vitalik Buterin posted that ETH’s store-of-value properties should come before the “fee burn” narrative. Here’s the thing: he didn’t call for scrapping EIP-1559—in fact, he argued that the burn mechanism should stay. What he took issue with was treating token burning as the bedrock of ETH’s valuation.
Buterin took aim at a valuation model: assume $1 billion worth of tokens is burned each year, with a 4% discount rate, and you can theoretically arrive at a $25 billion valuation. But that calculation depends on one assumption: fee revenue has to hold steady even when the token price weakens. When the market cools, on-chain activity may cool too, making that supposed “floor” a lot less solid.
He also noted that many of the big burns in the past came from activity within the crypto market itself; one digital land sale burned around $180 million in fees in a single day. Come on—using the most frenzied day to prop up a long-term value narrative makes it all too easy to mistake a cycle for a perpetual-motion machine.
Solana co-founder Anatoly Yakovenko chimed in afterward: a network can’t treat fees themselves as the product. It needs to choose a product that truly delivers value to users and make it great. On that point, the two saw eye to eye.
I’m with Vitalik: keep EIP-1559, but the burn narrative shouldn’t have a monopoly on the answer to what ETH is worth.