Vitalik Restructures the ETH Narrative: Abandon Burning Fermes and Return to the Essence of Storing Value

According to Woofun AI, Ethereum co-founder Vitalik Buterin published a long article on the X platform on November 8, completely reshaping the value narrative of ETH, clearly arguing that its core positioning should shift to “value storage” rather than continue to rely on the EIP-1559 combustion mechanism to support market valuations.

Although he emphasized that the burning mechanism of EIP-1559 should be preserved, there is no need to worry too much even if the long-term burning amount does not cover one-tenth of the increase, because the real value anchor of ETH has fundamentally shifted. This view directly challenges the “ultrasonic money” narrative that has been widely accepted in the past few years, and marks a major revision in the Ethereum ecosystem's perception of its own economic model.

When deconstructing the combustion valuation logic, Vitalik Buterin first uncovered the misconceptions behind historical data. The valuation model for traditional burnable tokens usually follows the formula “the market value is equal to the processing fee burned every year divided by the discount rate”. For example, assuming that a token burns 1 billion US dollars steadily every year and the discount rate is 4%, the bottom of its theoretical valuation is 25 billion US dollars.

However, looking back at the data from 2021 to 2023, Ethereum once destroyed millions of coins per year, but this is not the real bottom of value, because most of this burning comes from self-circulation within the coin industry. Take Yuga Labs' Otherside Metaverse Land (Otheract NFT) sale in May 2022, where the daily burning fee is as high as $180 million, and general borrowing activity. These demands are highly dependent on ETH price performance; once the price of ETH falls by 90%, profits from these internal uses will shrink, leading to a cliffside drop in burning volume. The bottom line only makes sense when the source of revenue comes from outside.

According to data compiled by Woofun AI, according to The Block statistics, Ethereum burned about 1.48 million ETH in 2022, while only about 192,000 ETH has been burned so far this year. Although the growth of tokenized physical assets (RWA) has brought more sources of external revenue to Ethereum, making it more qualified to talk about external demand, RWA is a normal and stable mature business and no longer generates extreme burning data such as $180 million per day, which means that the logic of relying on high burning volume to support valuation is unsustainable.

Further analyzing the corporate paradox supported by market capitalization, Vitalik Buterin pointed out that if it really depends on burning fees to support the current market value of about 270 billion US dollars, Ethereum must operate like a large world-class enterprise, the scale of which is equivalent to L'Oréal (L'Oréal).

However, in order to maintain their position in the market, the first priority for large companies is to invest capital. According to AI estimates, L'Oréal's annual R&D expenditure is around 0.58% of its market value. If the Ethereum Foundation follows this rate of expenditure, it will face the risk of almost immediate bankruptcy; if the agreement allocates about 700,000 ETH each year as a funding source, it will cause validators' revenue to be reduced by two-thirds, seriously compromising network security. Second, large enterprises need strong governance structures to continuously make strong decisions to seize new markets, which runs counter to Ethereum's principles of decentralization and censorship resistance.

Furthermore, pursuing high combustion rates essentially means pursuing high gas fees, which will drive out users, especially those most in need of privacy and security protection, thereby weakening the long-term vitality of the network.

When discussing the core metrics of value storage, Vitalik Buterin emphasized “survival” as the primary condition, and reiterated the importance of CROPS characteristics, namely resistance to censorship, resistance to capture, open source, privacy, and security. For institutional users, privacy is not only a technical requirement, but also a mandatory requirement of risk management and data protection regulations. Setting up your own nodes corresponds to enterprise-level “local deployment” requirements. At the Devcon 8 conference held in Mumbai last week, “post-quantum, post-AI” became the main theme. The aim was to gradually shape core agreements and reduce political wrestling at the protocol level by adopting conservative security trade-offs to ensure the network's ability to survive future technological changes. Specific work being promoted includes projects such as multi-signature, privacy wallets, and FOCIL.

Notably, Ethereum is extremely accessible, and Vitalik Buterin notes that his personal laptop can run the node, sync for less than 6 hours, and only take up one-eighth of the hard drive space. As more assets are issued natively on L1, including RWA and decentralized assets, the use of ETH as collateral or medium of exchange will expand further. This complements the positioning of value stores and enhances its practical value as an underlying asset.

The industry's reaction to this view was strong, and Solana co-founder Anatoly Yakovenko publicly responded that he fully agreed and emphasized “processing fees must not be treated as a product.” This consensus marks the industry's recalibration of public chain value evaluation standards. From a social point of view, the best motivation for focusing on Ethereum is to promote the popularity of decentralization and CROPS features, so that more people can enjoy the dividends of censorship resistance and privacy protection; from a personal perspective, the best basis for holding ETH is the value storage attributes given by these characteristics.

This shift in narrative is not only a correction to past speculative narratives, but also a profound reflection on Ethereum's long-term survival strategy. It shows that Ethereum's value no longer depends on short-term transaction popularity or burning data, but rather on its long-term stability and irreplaceable nature as a decentralized, secure, and privacy-preserving infrastructure.

In terms of market dynamics, cryptocurrency investments are still highly risky, and prices fluctuate sharply. Investors may face the risk of losing all of their principal and need to be carefully assessed. Recently, security incidents have been frequent. Keplr wallets have leaked private social login keys due to infrastructure flaws in Web3Auth, a third-party login service provider. About 44,000 Cosmos and Injective accounts have been transferred without authorization, and the total amount of on-chain transfers is about 6 million US dollars — part of this is Web3Auth and Keplr's white hat recovery transfer, which is not equal to actual losses for investors. In terms of traditional financial markets, after Hwang In-hoon acknowledged the affair, the NVDA.US (NVDA.US) board of directors set up an independent committee to investigate. These market fluctuations and security events further highlight the importance of choosing assets such as ETH with a strong security foundation and decentralized characteristics as value storage tools in crypto asset allocation. As the Ethereum narrative is restructured, the market will pay more attention to its long-term fundamentals rather than short-term speculative indicators, which is of profound significance for the healthy development of the entire crypto ecosystem.