How to NOT value Ethereum and how to do it RIGHT
The speaker questions company-style approaches to valuing Ethereum, arguing that lower prices can coincide with greater use and value transferred but lower fees. They also point to post-Dencun supply growth and Ethereum’s shift toward a fee-generating network commodity, while noting that rollups contribute little in gas fees and that scaling can involve a modest decentralization trade-off.
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The speaker says Base, Ethereum’s biggest rollup gas consumer, pays only about 0.04% of Ethereum’s gas fees, illustrating a fee-capture problem as rollups take traffic from Ethereum. That also complicates a company-style valuation, which the speaker says looks unsuitable when cheaper Ethereum use can mean more activity and value transferred but less revenue from charges.
The speaker says Ethereum’s supply has grown since the Dencun upgrade in early 2024, undermining the “ultra sound money” valuation approach. As an alternative lens, the speaker contrasts Bitcoin as money to hold with Ethereum as a commodity spent to use its network, where countable fees could inform valuation.
The speaker says the Ethereum Foundation and core developers are prioritizing censorship resistance, open-source development, and privacy, noting that transactions and wallets can be traced. The guest also says increasing block space requires more computing power to verify and validate the blockchain and can modestly reduce decentralization.
TECHNOLOGY
“But base only, despite being the biggest roll up gas consumer, they pay only about 0…”—
“So, this goes along with several changes that the Ethereum Foundation and its core developers have agreed upon, which have basically four main points, which are the increasing the censorship…”—
MARKETS
“And for example, if you value it like a company, we've seen the cheaper Ethereum gets, the more it gets used, but also the more expensive it looks, because it…”—
“But also, it doesn't work anymore because since early 2024 when the Dencun upgrade hit, which is quite an interesting period and I will show you a few slides later…”—
Ethereum Valuation Models
The speaker argues that company-style metrics and price targets produce widely divergent Ethereum valuations, while supply growth undermines the idea of valuing ETH primarily as scarce money.
Ethereum Scaling Strategy
The speaker says rollups have shifted activity away from Ethereum and contributed little in gas fees, while developers now plan to scale the Layer 1 through higher gas limits and other upgrades.
Scaling And Decentralization
In response to concerns about Layer 1 scaling, the speaker acknowledges trade-offs in compute requirements but says developers are aware of the decentralization implications.
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