Is Ethereum's $240 Billion Market Cap Justified With Only $6 Million in Monthly Fees?

Jeff Dorman (0:00)

Bitcoin would be an incredibly boring country since you can't do anything with it. You don't spend it, you don't use it.

It's literally a country of just rocks. If I ran Ethereum or Solana or Avalanche or one of the other 100 blockchains that think they're important, tell me, give me the number. How big does your network have to get before you start turning on fees and revenues, and who are you gonna get those fees and revenues? If you give me an answer, I might be the first investor, but nobody can do it.

Laura Shin (0:29)

Hi, everyone, welcome to Unchained, your know-how resource for all things crypto. I'm your host, Laura Shin. Thanks for joining this live stream. And first, we'll take a quick word from the sponsors who make this show possible. This episode is brought to you by Nexo, the premier digital assets wealth platform. Earn daily interest on your crypto or borrow funds all through one platform trusted by more than 10 million clients. Find out more at nexo.com. Geo restrictions, eligibility and terms apply. Not listening to Bits and Bips yet? It's our weekly crypto and macro market show with Ram Allawalia, Austin Campbell and Chris Burkins. Search Bits and Bips and subscribe.

Today's guest is Jeff Dorman, chief investment officer and co-founder at Arca. Welcome, Jeff.

Hi, thanks for having me back.

Vitalik Buterin made headlines this week when he tweeted that ETH should focus on being a store of value more than being a fee-burning token. He gave a few different reasons. The fee-burning meme for ETH was never that strong. Quote, optimizing for ETH as a fee-burning token would demand Ethereum and ETH function in ways that are very hard to make compatible with decentralization and capture resistance. And his third reason was, quote, optimizing for ETH as a store of value is aligned with Ethereum focusing on its unique strength. Unique strengths, decentralization and crops. So before we get into your opinion on what's going on here, can you just explain what the difference is between a store value token and a fee-burning token?

Jeff Dorman (2:01)

Sure. And before I get started, just a quick disclaimer, the views expressed are my own as of today and not investment advice. So I think, look, there have been a lot of different opinions and theses around what a cryptocurrency should be in terms of its value drivers, right? So if you go back to the kind of original Bitcoin days and everything was just some sort of derivative of Bitcoin, like a non-smart contract, a platform currency, the idea was that these are going to be stores of value, meaning that over time with inflation, you can protect your purchasing power by owning these because in theory, the price of these assets will go up more so than inflation, which is the exact opposite of fiat currencies which tend to go down relative to inflation and therefore, you actually lose purchasing power, right? That was the sort of original thesis of what Bitcoin could be. Then obviously, things got layered on like, oh, actually it's going to be a medium of exchange. People are going to actually use this to spend and then 15 years later, we know that nobody spends Bitcoin, so that's not really true. And then you had the smart contract platforms come in and it was like, well, how do you think about these tokens, right? Are these supposed to be currencies? Are they supposed to be the same store of value, medium of exchange? Or are they more like platforms where you actually want to look at the revenue and the financial projections of these? Or are they utility coins, something that actually is just useful, something that you have to own in order to use the network? And we've been now going back and forth for 10 years on this and what these are.

And as a result, you have a myriad of different opinions and theories, none of which are very well quantified, but that's the gist of it. Are you actually supposed to own the token and hold on to it simply because it is going to keep your purchasing power over time? Or is it something else that actually can be valued in some sort of a financial basis or in some sort of a usefulness utility basis?

Laura Shin (4:07)

All right, so let's talk about some of the key developments in recent years that affected ETH as money or how it could be considered money. So the first one would be EIP 1559 That was implemented back in 2021 and it tied high levels of activity on the network to burning ETH.

But it sort of got, I don't know, reverse is not quite the right word, but it lost its importance in the spring of 2024 when Ethereum did its DENKUN upgrade. And that caused the relationship between activity on the network and the fee burning to kind of decouple. So I'm curious, like, what's your opinion about what type of asset ETH has been, like for these last few years now after DENKUN? Like, in a way, like, what I'm asking is, why did he even need to make this clarification about what ETH is, given that ETH is 11 years old?