Ethereum co-founder Vitalik Buterin has argued that ETH should be valued primarily as a store of value rather than through transaction-fee burning, questioning a long-standing investment argument built around the cryptocurrency becoming increasingly scarce.
Summary
- Vitalik Buterin argues ETH should prioritize store-of-value properties over maximizing network transaction fee burns indefinitely.
- Buterin says Ethereum should retain EIP-1559 even when fee burning fails to offset token issuance.
- Ethereum’s decentralization, censorship resistance, privacy and security underpin Buterin’s preferred long-term ETH investment case today.
- Buterin argues maximizing Ethereum transaction fees could undermine affordability, decentralization and resistance to external capture.
- Ethereum’s layer-two growth has reduced mainnet fee burning while developers continue advancing privacy and security.
In a post on X, Buterin said Ethereum should focus on decentralization, security and resistance to outside control instead of maximizing the amount of ETH destroyed through network fees. He maintained that EIP-1559 should remain in place but questioned whether fee burning could reliably support the asset’s valuation.
The comments come as ETH trades near $2,240 and Ethereum continues issuing more tokens than it burns during periods of low network activity. Buterin’s argument places the network’s long-term reliability ahead of efforts to generate higher fees for token holders.
Vitalik Buterin Questions Ethereum’s Fee-Burning Valuation
Buterin challenged the economic reasoning behind treating ETH like an asset whose value can be calculated from a predictable stream of fees.
The argument assumes that the value of burned tokens can support a cryptocurrency’s market capitalization, much as recurring income can support the valuation of a business.
In his explanation, Buterin used an example involving $1 billion in annual token burns and a 4% discount rate. Under that calculation, the recurring burn could theoretically justify a $25 billion valuation.
However, he argued that such calculations depend on fee revenue remaining stable even when the underlying token loses value.
“ETH as fee-burning token never was as strong as it seemed,” Buterin wrote, pointing to the large amounts of Ethereum activity driven by cryptocurrency speculation.
During 2021–2023, network users burned millions of ETH through transaction fees, including periods of intense demand for NFT trading and decentralized finance.
Buterin argued that much of this activity depended on wealth already circulating within cryptocurrency markets. A steep decline in ETH prices could therefore reduce the spending that generated those fees.
He acknowledged that tokenized real-world assets now provide Ethereum with more financial activity connected to conventional markets, although he did not expect mature financial products to reproduce the extreme fees associated with speculative NFT trading.
Higher Ethereum Fees Could Conflict With Decentralization
The second part of Buterin’s argument concerned what Ethereum would need to become if developers treated fee generation as the network’s primary objective.
He compared the responsibilities of a large revenue-focused blockchain with those of a major corporation, arguing that sustained competition would require extensive development spending and more interventionist governance.
Using a hypothetical funding model, Buterin estimated that Ethereum could require approximately 700,000 ETH annually for protocol research and development if it followed a corporate-style approach.
Such spending would raise questions about who controls the funding and how much validator compensation would remain available.
He argued that maximizing transaction-fee revenue could encourage higher gas prices, making Ethereum less accessible to people seeking privacy and secure financial transactions.
The issue has already appeared in debates over Ethereum’s economic model. In August, crypto.news examined declining ETH burns after the network moved more transaction activity onto cheaper layer-2 systems.
Ethereum’s March 2024 Dencun upgrade reduced layer-2 transaction costs, allowing applications to process activity without generating the same level of mainnet fees.
Consequently, ETH supply has experienced periods of net inflation as newly issued tokens exceeded those removed through EIP-1559.
ETH Store-of-Value Case Centers on Security and Stability
Buterin’s preferred approach places greater emphasis on Ethereum remaining dependable over long periods.
He described the network’s strengths through decentralization and CROPS, referring to censorship and capture resistance, open-source development, privacy and security.
For long-term ETH holders, he argued that the network’s ability to survive technological changes and political pressure should carry more weight than maximizing annual fee burns.
He pointed to conservative protocol development, post-quantum security and efforts to reduce dependence on specialized infrastructure.
Ethereum’s existing development work includes Kohaku wallet privacy tools, which seek to protect transaction information while improving users’ control over their assets.
Buterin identified multisignature wallets, private account abstraction and Fork-Choice Enforced Inclusion Lists as technologies that could support his preferred direction.
The proposed FOCIL transaction mechanism would make it harder for block builders to exclude eligible transactions, strengthening censorship resistance.
He maintained that supporting tokenized assets, collateral arrangements and decentralized trading remains compatible with this approach because such services expand what ETH holders can do without requiring Ethereum to maximize fees.
Buterin Says EIP-1559 Burns Should Continue
Buterin made clear that his comments did not amount to a proposal to abandon Ethereum’s existing fee-burning system.
“EIP-1559 (including its burn) is fine and good, we should keep them,” Buterin said.
Under EIP-1559, Ethereum destroys the base portion of transaction fees while continuing to issue new ETH to validators. Whether supply rises or falls depends on the balance between those two processes.
Buterin argued that ETH could retain its store-of-value appeal even if fee burning remained below 10% of the amount needed to offset issuance indefinitely.
He connected that position to Ethereum’s long-term security, arguing that institutions and individuals may increasingly value stable, censorship-resistant infrastructure as artificial intelligence creates new technological risks.
