Curry, Shenchao TechFlow
Shenchao Summary: The narrative of "burn deflation," once considered the foundation of Ethereum's valuation, is being deconstructed by its very creators.
On November 8, Vitalik Buterin explicitly stated that the logic of relying on fee burning to support ETH's valuation never truly held up. Given the sharp decline in mainnet burn volume and six consecutive weeks of net outflows from U.S. spot ETFs, for Ethereum to sustain its current market capitalization of approximately $272 billion through burning alone, it would need to become an extremely aggressive commercial enterprise. To preserve its decentralization principles, Vitalik is attempting to re-anchor ETH’s value proposition from a “cash-flow-generating asset” to a “store of value (SoV).”
During the 2021 to 2023 bull market cycle, the fee burn from the EIP-1559 mechanism enabled the market to construct a perfect net present value (NPV) valuation model for ETH: ETH's market capitalization equals the annual fee burn divided by the discount rate.
Following this logic, as long as on-chain activity remains robust, the continuous burning of ETH can establish a solid theoretical floor price.
But Vitalik personally dispelled this illusion in his latest long-form post, pointing out that this floor price never truly existed, as the majority of burned fees stem from leverage and speculation within the crypto ecosystem itself (such as Yuga Labs’ virtual land sale, which burned $180 million in fees in a single day). Once ETH’s price crashes, the profits and purchasing power of these on-chain activities will shrink in tandem.
The harsher reality is written in the latest ledger.
With Layer 2 completely offloading traffic from the mainnet, Ethereum’s burn mechanism has become largely ineffective. Data shows that Ethereum burned approximately 1.48 million ETH in 2022;
Since 2026, this number has sharply declined to 19,200 ETH. Over the past 30 days through November 8, only 2,694 ETH (approximately $6 million) have been burned across the network, entirely insufficient to offset the newly issued supply during the same period.
Vitalik did the math: to support the current market cap of approximately $272 billion at a 4% discount rate, Ethereum would need to burn about 4.89 million ETH per year. The gap between reality and theory is as high as 149 times.
Refuse to become "L'Oréal"
When organic traffic alone cannot sustain a $270 billion market cap, Ethereum’s only path forward is to proactively invest in growth—like a global multinational corporation.
Vitalik compared it to L'Oréal, a company of similar scale. For Ethereum to operate like a true giant, it would need to invest heavily in research and development and market expansion—approximately 700,000 ETH annually in protocol-funded financing—and establish a highly interventionist governance system to proactively adapt to new markets and trends.
But this struck a nerve with Ethereum.
Actively engaging in "doing business" means raising gas fees to increase burn volume, which directly pushes out users who most need privacy and security from the mainnet; while "intra-protocol financing" and "heavy-handed governance" established to maintain revenue would directly destroy Ethereum’s foundational pillars—decentralization and censorship resistance.
Between "high fee revenue" and "decentralized neutrality," Vitalik clearly chose the latter.
Valuation logic switched to ETH as a store of value (SoV)
If the path of burning fee tokens is not viable, where will ETH's premium come from?
Vitalik's answer was: return to store of value (SoV).
In his view, what people value most in Ethereum is decentralization and CROPS—censorship and capture resistance, open source, privacy, and security. In the past, these attributes were often seen as an ideological stance within tech circles; but today, with institutional capital entering the space and AI disrupting industries, these qualities have effectively become the most critical metrics for asset holders—stability and the ability to survive.
When the market no longer views Ethereum’s mainnet as a “money printer” capable of extracting exorbitant fees, the core demand of ETH holders becomes securely and privately holding assets, along with censorship-resistant transfer freedom.
Finally, the author believes this shift in narrative is not a whim by Vitalik, but rather the most honest adjustment to the roadmap in response to the dual pressures of a sharp decline in burn volume and weak token prices.
When Ethereum fully embraces a rollup-centric scaling path, the depletion of mainnet fee revenue was already inevitable. Vitalik’s long article is essentially a form of expectation management for the entire community:
Abandon using the logic of "ultrasonic money" to calculate ETH's cash flow, and instead view ETH as a foundational digital gold 2.0 with a moat built on security and censorship resistance.
The shift in narrative from “pursuing high-growth cash flows” to “pursuing defensive value storage” will inevitably be accompanied by repricing and turmoil in secondary markets. But in the long-term survival game, abandoning false valuation models may be Ethereum’s first step toward maturity.