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The challenge with Ethereum’s economics today is that $ETH is losing ground on two fronts currently Ultrasound Money (Revenue): L1 revenue has been deteriorating due to Ethereum forfeiting the most valuable part of the stack (congestion gas pricing fees + MEV) to L2s, while optimizing for the least valuable part of the stack (settlement + DA), as seen in the 90%+ profit margins of L2s In parallel, applications are increasingly recapturing their own MEV rather than letting it leak to L1 blockchain validators (e.g., Aave using Chainlink SVR to recapture liquidation MEV + apps launching their own app chains / L2s like Uniswap) As Ethereum continues to scale blobspace for L2s and scale the L1, transaction fees become a race to the bottom in terms of marginal cost, while apps continue to capture more of the revenue pie Ethereum doesn’t exist in isolation, it has to compete with other alt L1s (and L2s) on speed and cost, which push down revenue if demand doesn’t scale up as well, at least for the foreseeable future Ethereum needs absolutely insane amounts of onchain volume/activity for its economics to make sense in terms of revenue at scale, or get back to where it was in 2021, and how much will L2s and apps make in comparison in that world? Programmable Money (SoV): Gas tokens are being abstracted away in the background via account abstraction and paymaster solutions, any form of value can be used to pay for any services (incl gas), nobody will need to hold surplus reserves of ETH for gas on any network or even know the asset exists L2s don’t just scale access to ETH, they scale access to every asset issued on Ethereum, ETH therefore has to compete with every other form of value on its network And by bridging ETH to a trusted/centralized L2, that ETH ends up having the same exact trust assumptions as every other assets bridged over, negating much of its ‘censorship-resistant SoV’ advantages USD Stablecoins have been the clear PMF of crypto and more and more crypto markets these days are denominated in USD, it won’t be any different when tokenized assets scale up as people want to trade against the world reserve currency The world hasn’t changed, people don’t want to use a highly volatile cryptocurrency for day-to-day payments unless they absolutely have to, stablecoins offer a better UX and more stability for 99% of people The best argument ETH has for this is that it’s unironically the second best crypto asset SoV, so you should diversify into it after buying BTC, not the best argument imo That or Ethereum is able to successfully pivot to recapture a better share of the revenue pie back from L2s (e.g., based rollups), and/or have a really good ‘ETH is money’ psyops campaign Nothing is guaranteed to work, it’s really up to you how optimistic you are on how Ethereum’s pivot will play out Either way, a few years ago, neither of these forms of value accrual were in question, but now they are And when you’re a rank #2 $210B asset just after BTC, yes you are held to higher standards than other cryptos, with current metrics compared to historical metrics to measure growth