According to Woofun AI, on November 8, Vitalik published an article on the X platform, proposing that Ethereum should shift from “fee destruction” to focus on “value storage” attributes, pointing out that the destruction mechanism has limitations on valuation support. However, at the same time, he made it clear that the EIP-1559 destruction mechanism itself works well and should continue to be maintained. Even if the fee destruction rate falls below 10% of the break-even point for a long time, there is no need to be disappointed; there is another source of value for ETH.
For a long time, the market has been accustomed to using net present value theory to construct valuation models for tokens that are destroyed based on fees. The core simplified formula is widely used: market value = fee value destroyed each year ÷ discount rate. To illustrate this logic, we can assume an ideal scenario: if an asset can steadily destroy $1 billion worth of tokens each year, and the market uses a discount rate of 4% — that is, investors think the current $1 billion is equivalent to $1.04 billion a year from now — then the theoretical valuation of that asset is anchored at around $25 billion. According to this linear derivation, $25 billion seems to form an indestructible valuation base: when the price falls below this line, investors can buy and sell some of the tokens year by year to maintain their holdings to obtain returns that exceed market benchmarks.
However, looking back at market performance between 2021 and 2023, although Ethereum removed a large amount of ETH through processing fees, this never formed a truly reliable bottom support. According to data compiled by Woofun AI, large-scale destruction during this period was mainly due to speculation within the crypto ecosystem rather than solid external demand. For example, during the rush to buy NFTs, there was an extreme situation where the Internet destroyed about 180 million US dollars in processing fees in a single day;
In addition, high-frequency borrowing activities also contributed to a large amount of destruction. However, the essence of this revenue is internal circulation. Once the price of ETH falls to one-tenth of what it was, participants' ability to pay plummets, and the amount destroyed collapsed. The so-called valuation bottom is only persuasive when revenue is supported by demand outside the crypto market, such as real-world assets (RWA).
Although Ethereum is gradually receiving external support as the RWA economy grows, it is difficult for a mature and stable business model to reproduce the huge processing fee consumption scenario in the speculative frenzy.
If they insist on relying on fees to provide a basis for the current market value of ETH of about 270 billion US dollars, Ethereum will be forced to operate like a large world-class enterprise, roughly equivalent to L'Oréal. This analogy reveals the huge costs behind maintaining high levels of destruction. First, the continued status of large enterprises depends on huge investments. According to AI estimates quoted by Vitalik, L'Oréal's annual R&D expenditure accounts for around 0.58% of the market value. If Ethereum follows the same ratio of financial support within the agreement, the foundation's funds will run out quickly, which means that about 700,000 ETH will be consumed every year, causing validators' income to be reduced by about two-thirds. This is just R&D costs; other expenses for companies to maintain competitiveness have not been factored in. Second, enterprises need to carry out active governance and make clear market and product choices in the face of technological and cultural changes. Along this path, Ethereum will have to maintain a highly intrusive governance structure for a long time. Continued allocation of large sums of money and strengthened governance not only raise political risks, but it is also more difficult to increase the degree of decentralization and resistance to capture of Ethereum.
Furthermore, pursuing high destruction amounts essentially means pursuing higher gas prices, which will keep users who need privacy and security the most out of the door. Maximizing “price x usage” and allowing as many people as possible to use the network within secure resource limits are two completely different optimization goals. The former clearly goes against the original purpose of decentralization and anti-capture.
As a store of value asset, Ethereum's core metrics should return to survival, security, and privacy. When asked what they value most about Ethereum, the most common answers were decentralization and CROPS, that is, censorship-resistant and resistant to capture, open source, privacy, and security. These attributes are also extremely valuable to organizations: for individuals, privacy may be an abstract idea; however, for institutions, privacy is directly linked to actual needs such as risk management and data protection compliance, as well as security requirements for self-running nodes. For ETH holders, if the goal is to keep up with financial trends and charge fees, they may expect strong leaders to continuously adjust the agreement; but if it is mainly to store value, the primary measure is whether the network can survive for a long time.
This means that Ethereum needs to take careful security trade-offs and seriously address the challenges posed by quantum computing and AI. Once the core agreement is completed, it should gradually stabilize, transfer innovation to the upper echelons, and set a high threshold for new features that increase complexity or may be controlled by interest groups. Users should be able to keep their assets safe and private, and be confident that transactions will not be blocked by block builders. Multiple signatures, privacy tools, privacy account abstraction, and FOCIL are working to achieve these goals.
At the same time, reducing dependency on infrastructure service providers is critical: currently users can run nodes on laptops, taking up less than six hours of synchronization, taking up about one-eighth of the hard disk space, and performing better than in 2019. There is a synergy between value storage and application growth: the richer the RWA and decentralized assets issued natively on L1, the more useful it is to hold ETH — such as secure exchange and collateral participation. The overall conflict between these uses and decentralization is less than simply seeking to maximize fees. From a social perspective, the significance of Ethereum is to give more people and applications decentralization, privacy, and security; from the perspective of holders, the value storage properties of ETH stem from these underlying guarantees.