Ethereum co-founder Vitalik Buterin has argued that ETH should be valued as a store of value rather than as a token priced on the fees it burns. In a series of posts on X, he outlined why the burn story was never as strong as it looked and warned that chasing it could undermine the blockchain’s decentralization.
Why Fee Burning Is Not Enough to Value ETH
Buterin first challenged the economic argument behind fee burning, which uses a net present value (NPV) model to estimate a token’s worth based on the fees removed permanently from circulation. Under this approach, a network that burns tokens worth $1 billion each year, with a 4% discount, could theoretically support a $25 billion valuation, he explained.
“If the valuation drops lower than that, then someone could buy an asset expected to pay $1 per year forever for less than $25 (by buying some tokens, and then selling >4% of their supply each year so their share of the total pie remains the same), and so by buying the asset you reliably beat the market,” Buterin wrote.
According to him, however, Ethereum’s earlier fee-burning activity, especially between 2021 and 2023, did not fully meet those conditions, with much of the demand coming from crypto-related activities. This meant that a sharp drop in the price of ETH could also reduce a user’s ability to pay transaction fees.
Ethereum currently has a fully diluted market cap of over $260 billion, according to CoinGecko. For Buterin, justifying such a market cap through burns would make the network a corporation on the scale of L’Oreal, which he placed at number 55. An AI-generated estimate he shared puts L’Oreal’s R&D at roughly 0.58% of market cap every year, and to match that, he says, would take about 700,000 ETH in annual protocol funding, which would cut validator revenue by two-thirds.
In such a situation, he thinks governance will have to be “highly interventionist,” with optimizing for burns to some degree resulting in higher gas prices, which he says could price out users who need privacy and security most.
Keeping EIP-1559 but Not Chasing Burn Targets
Buterin was not calling for an end to fee burning, as he explicitly supported keeping EIP-1559 and its burn mechanism. He added, however, that the community shouldn’t be disappointed if fee burning indefinitely stays below 10% of Ethereum’s breakeven level.
CROPS—his shorthand for censorship and capture resistance, open source, privacy, and security—is what he says people value most about Ethereum. Therefore, for someone holding the ETH token, these qualities translate into the ability to keep assets safe and accessible, even as technology changes.
“If your primary reason to hold ETH is as an SoV, then you will be judging ETH by SoV-ish metrics,” he stated. “And what is the first and most important SoV-ish metric? To survive.”
ETH Market Context
The comments come as ETH trades above $2,100, having lost nearly 5% of its value in 24 hours and more than 7% in the last week, according to CoinGecko. The token is down 8% across two weeks and nearly 15% over the past 30 days, and remains nearly 37% lower than where it was 12 months ago. Meanwhile, spot ETFs anchored to the token saw a sixth straight week of outflows, with about $365 million leaving the funds last week.
