[DennisP]

ETH is not a memecoin and it has a real economic model. It's used to pay transaction fees, which are mostly burned. There's a small amount of issuance but most of the time that's less than the burn, so the supply shrinks. You can model it as a company, where fee burn is revenue, issuance is cost, the net is earnings, and earnings are distributed to ETH holders like a company doing stock buybacks. You can calculate a PE ratio; when I checked sometime last year the PE was around 100.

[defiamazing]

Having an economic model doesn't make it not a memecoin. LINK has an economic model and most would agree that there's no reason for it to exist other than to dump on retail. The burn is there in large part to enshrine ETH so that investors can dump on retail, otherwise fees could be paid in other ways. It provides no liquidation or dividend rights. The closest thing to that is rights to MEV, which the base fee controller actively prevents. Value is speculative and if it went to zero then the network would completely die unless it forked to disable the burn.

[DennisP]

You need ETH to pay transaction fees. As long as there's more demand for blockspace than the space available, ETH will have a non-speculative value.

The reason for the burn was the 1559 upgrade, which fixed the horrible user experience of guessing what minimum fee level would get your transaction through in a timely manner, and often either overpaying, or underpaying and suffering long delays. If not for the fee burn, the 1559 protocol would be trivial for validators to exploit.

[defiamazing]

Basically you're arguing for chartalism, it has value because validators say it's the only thing they'll accept. That can change at any time, it's not the same as a company's stock's value being backed by liquid revenue. Imagine situations where the network just decides they want to accept other tokens at the expense of ETH. Imagine what happens to network security if there's a huge speculative dump - would network hard fork to avoid other protocols getting owned? What happens to ETH then?

[DennisP]

Not at all. The validators get a small portion of the transaction fee for themselves and certainly they could ask for something different. But the ETH burn is built into the protocol. In theory that could be changed, if you got agreement not just from validators but from the rest of the ecosystem too. But nobody wants to change it. 1559 became very popular within days of hitting production, since it improved user experience so much. And the bigger the ecosystem gets, the harder it is to make fundamental changes.

But sure, in theory all the protocol rules could be changed. In theory Bitcoin could change their 21M supply limit. In theory, a company could sell its fixed assets and pivot to an entirely different business, or the US could change its constitution and take away property rights. But in practice, we usually estimate values based on the way things are working now, and put little weight on unlikely fundamental changes that might happen someday.

[defiamazing]

The difference is that the US would not do that in response to a speculative dump. With ETH, the system stops working and everything breaks without a HF. So it’s valuable because it’s valuable.

If the company pivoted to a different business, it would likely violate securities laws. Corporate governance is in place to stop that from happening.

US taking away all property rights is significantly less likely than an ETH hard fork. Hard forks have happened.

Ecosystem is getting smaller because everyone knows there are currently no useful DeFi projects. ETH is failing to pump again so this is the peak of network security.

Bitcoin is also a memecoin for the same reason, but at least it’s a credibly neutral memecoin unlike ETH.

[DennisP]

Ethereum would not stop working just due to a price crash. It would get cheaper for an attacker to purchase majority stake, but good luck purchasing that much without making the price go back up.