There is endless debate in Ethereum circles about whether ETH should be viewed as “money” in the same way that Bitcoin is viewed as a commodity currency.
At Devcon on Thursday, Ethereum Foundation researcher Mike Neuder laid out his case for the fundamental properties of ether as a permissionless and programmable asset, and as a sustainable form of decentralized money. Neuder explored how ETH could serve as a secure global currency with internal guarantees of ownership, censorship resistance, and self-sovereignty across the entire Ethereum multi-layer ecosystem, including ultimately its rollups.
To explain Ethereum’s “unacceptability,” Neuder cited Hayek and Friedman’s proprietary rights, emphasizing the unique property that Ethereum provides to ETH holders that can be transferred, stored, and programmed without permission.
To distinguish Ether from assets that can be restricted by third parties, Neuder criticized centralized stablecoins such as USDC and USDT, noting that despite their similar programmability, they lack true ownership rights. Issuers can and do freeze funds. According to Neuder, this ability makes ETH stand out as a distinct asset within online finance.
A key part of Neuder’s presentation highlighted the expansion of ETH ownership at the Layer 2 level.
But there is a caveat: rollups have not yet reached level 2 of the decentralization classification. Once they do this, they will allow users to deposit and withdraw ETH without permission while maintaining Ethereum ownership rights.
The ability to force withdrawals ensures that users will always be able to get their assets back, even if the rollup sequencer or central operator attempts to censor or disrupt transactions. This is the core feature of what it means to be a Layer 2 network. Arbitrum One and OP Mainnet have already reached Stage 1.
Neuder detailed Ethereum’s commitment to this mechanism as a way to improve scaling while protecting user autonomy in Ethereum’s federation-focused strategy.
The report also looked at Ethereum’s inflation pattern compared to other cryptocurrencies, placing it alongside Bitcoin as an increasingly sound currency.
Since Ethereum’s transition to proof of stake in the 2022 merger, supply growth has slowed significantly, with inflation hovering around 0.9%. This compares to the current 0.8% Bitcoin will maintain until the next halving in 2028. Ethereum achieves this balance through a combination of issuance, staking rewards, and an ETH burn mechanism that fluctuates with network demand, effectively absorbing inflationary pressures during certain periods. large volume of transactions.
Neuder argued that this adaptive model is critical to long-term security, as opposed to Bitcoin’s fixed supply cap, which could pose problems for future network security once the block rewards disappear.
When asked about the stability of the Ether issuance curve, Neuder acknowledged that adjustments to issuance rates over time—from changes in proof-of-work block rewards to ongoing proposals to tune the curve—have sparked ongoing debate over the importance of maintaining “hard guarantees” regarding the overall supply. ether.
While Neuder noted that bending the curve could provide benefits—such as avoiding risks associated with high staking rates or the emergence of a dominant liquid staking token (LST)—he cautioned that frequent changes could undermine confidence in stability.
This uncertainty, in turn, could impact “trusted neutrality,” another core value vital to Ethereum’s long-term sustainability. Assessing long-term trade-offs will require careful analysis, ideally involving macroeconomists, Neuder said.
One of the most important components of Ethereum’s deflationary mechanics is the block burning effect that occurs as a result of second-layer activity. Ethereum pools publish transaction data on the Ethereum network in the form of “blobs”—packets of data that are efficiently stored to reduce costs. As these binaries are published on the mainnet, they are charged a fee, a portion of which is burned, contributing to the overall burning of ETH. This design allows Ethereum to absorb more L2 transactions without overloading the underlying layer, maintaining lower L1 gas fees.
As L2 usage increases, so does the effect of blob burning, adding to Ethereum’s deflationary pressure during periods of high activity like we are seeing this week.
The total dollar value of ETH burned has risen sharply over time, starting in early November, to nearly $15 million. This increase in the amount of ETH burned is due to increased network activity as transaction fees increase the burn rate. The burn rate has reached 182%, leading to a net decline in ETH supply in recent days.
Some members of the Ethereum community choose to downplay Ether’s role as “sound” money or even dismiss it entirely.
For example, Ethereum co-founder Vitalik Buterin tends to discuss the value of Ethereum in terms of its programmability, flexibility, and commitment to decentralization, rather than focusing on ETH as a purely monetary asset. A balance needs to be found, and Neuder emphasized Ethereum’s main goal. , to maintain trustworthy neutrality and resistance to censorship, positioning ETH as a form of digital money based on the spirit of self-sovereignty.
