There’s no denying that demand to use the Ethereum network is at absolutely insane levels. If we take the metrics from Token Terminal below and annualize it, we can see that Ethereum is currently generating $12 billion worth of revenue per year. On top of that, over 80% of that revenue is being burned which drives value back to ETH holders everywhere.

I realise that some people view high fees as a “bearish” thing for Ethereum but I’ve never really understood the logic behind this. Ethereum is a network that sells one product - decentralized blockspace - and that product is in very short supply while the demand to use it is through the roof. Ethereum deals with this dynamic by auctioning off blockspace to the highest bidder which means that inevitably people will end up getting priced out. Of course, Ethereum is dealing with its scaling woes by utilizing layer 2’s where instead of the individuals paying Ethereum for its blockspace, the layer 2 network pays for it while also making much more efficient use of it (via transaction compression and other techniques).

What I personally find most bullish about Ethereum’s fee revenue is that most of it is being burned which effectively produces a “dividend” of sorts for all ETH holders. Logically, as fee revenue is continuously burned in perpetuity, it should drive value directly to ETH leading to an increased price over time. Then throw in all of ETH’s other demand drivers - DeFi, NFTs, staking etc - and you have a recipe for one of the most bullish assets on the planet. Some people will push back on me when I bring up these points by saying that while this is all bullish for ETH as an asset, it is bearish for actual Ethereum network adoption. Obviously I believe this view is totally misguided and comes from people who are generally just misinformed about Ethereum’s roadmap.

So ultimately I ask the bears - how is a network that generates $12 billion+ worth of revenue a year (and burns most of it) while also driving value to its native asset via numerous other means considered bearish? If the answer is that it’s because it prices people out of the network then I feel that the bears are misunderstanding Ethereum’s design which actually works to create a symbiotic relationship between the network and its users without sacrificing core properties such as decentralization and security. I really think that this is the crux of it - many people just assume that Ethereum’s layer 1 is the best Ethereum can offer them. I expect that as we progress through the layer 2 rollout and adoption phase, the narrative around Ethereum scaling will very quickly shift to a positive one.

The last thing to touch on here is that Ethereum is still a very young network with plenty of growth potential left. I’m betting that eventually Ethereum’s layer 1 (with sharding) will be generating $100’s of millions (if not billions) of dollars per day in fee revenue while users are enjoying a seamless and cheap experience at layer 2. For context, during the more active times, Ethereum already generates anywhere from $30 million to $70 million a day in fee revenue - so I don’t believe it’s farfetched to speculate that it may generate billions in daily fee revenue one day soon. And, as a reminder, 70-80% of that fee revenue will be burned forever - I really don’t understand how anyone could possibly be bearish on ETH.

Have a great day everyone,
Anthony Sassano

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All information presented above is for educational purposes only and should not be taken as investment advice.