ETH Is Money Was Always a Longshot

Money is a coordination game, and coordination is hard.

The Ethereum project itself is a stacked set of coordination challenges across multiple layers, and the "ETH is money" thesis required all of them to succeed, and succeed with confidence. 

ETH was going to be money, if and only if, every layer of Ethereum’s techno-social stack did its job better than its competition. 

Given the ambitiousness of the Ethereum project, fulfilling the maximally successful version of Ethereum was always a monumental challenge. The Ethereum project, despite its shortcomings, has done incredibly well, and deserves the market cap that it has. 

Nonetheless, the window of opportunity for Ethereum to be rerated by the market seems to be closing.

ETH is, to some degree, money. But not the maximally successful version that we collectively sought out to achieve. 

Ethereum Is a Coordination Game

A turing-complete blockchain is such a powerful idea that Ethereum’s maximum potential was all of crypto. The whole kit and caboodle. The only obstacle for Ethereum to achieving 100% dominance of absolutely everything was coordination.

Ethereum's leadership needed to be sufficiently decentralized, and governance required "rough consensus" to create the credible neutrality needed to maximize Ethereum adoption at the highest level.

Ethereum's leadership also needed to be responsive to market dynamics, and operate like a startup under the existential threat of irrelevancy. 

In parallel, Ethereum L2s needed to be able to move independently of the base layer and make their own market choices, but they also needed to be economically tied and beholden to the broader Ethereum economy and Ethereum brand. 

Plus, the Ethereum roadmap needed to be executed in a particular order that maximized and preserved Ethereum momentum and market dominance, to quell competition well enough to maximize confidence in Ethereum and ETH. Mission-critical technology needed to be researched and engineered at a sufficiently fast pace for Ethereum to both prove utility to the outside world and its ability to stay ahead of its competition. 

All that said, the "ETH is Money" thesis was about producing a financial asset so revolutionary and so powerful that it compelled otherwise indifferent individuals by its unique properties as a superior global store of value.

Ethereum’s brand and ETH’s prowess needed to be so strong that boomers would feel not just safe, but compelled to have ETH as a meaningful position in their retirement portfolios, because of how dominant the Ethereum project was. 

In order to produce ETH is money, then, everything upstream of ETH needed to work to a very high degree. 

Ethereum is not Bitcoin. It chose the hard path.

Bitcoin chose to strip everything away from its blockchain to elevate the status of BTC. 

Ethereum chose to add everything to its blockchain in order to maximize the utility of its blockspace. Only by doing this in the best possible way, before competitors did, would ETH have achieved its global money status.

We got some of the way there, and Ethereum has achieved the share of its maximum potential market cap that it deserves. 

I fear that the window of time for playing this game has come to a close, though.

It’s Possible the Environment Would Never Allow It 

Looking back over the years, I see a significant amount of environmental challenges that Ethereum would have had to overcome. 

1) L1 assets and revenue are inextricably tied 

Say what you will about the difficulty of valuing smart contract chains based on fees and revenue… but fees and revenue are clearly the way that smart contract L1 assets improve their pricing power. 

By 2026, we have ample amounts of data that all of these things are intimately correlated: L1 activity, L1 fees, and L1 native-asset price appreciation. 

• In 2021, ETH dominance occurred when its L1 revenue market share was highest.
• In 2024, SOL dominance occurred when its L1 revenue market share grew idiosyncratically against the rest of the industry. 
• In 2026, NEAR is experiencing a price rerating, happening alongside a fundamental growth in L1 revenue and NEAR burns.

You can also look at assets like BNB and TRX, perhaps the highest cumulative revenue projects of all time. Their price charts look like how I expected ETH’s to look, had it been able to sustain a more dominant market share of L1 fees for longer than just 2022. 

2) The strong version of crypto hasn’t worked

0xMakesy made a banger on Twitter: 

"i have been incredibly humbled by the inability of fantasy top, friendtech and consumer crypto apps to cross the chasm. crypto in its most ambitious form (of ushering in a new era of user owned software and infrastructure) has failed.

we optimistically tried to blend the personas of investor (people allocating capital to production to receive more money than they put in) and consumer (people willing to pay more for a product than it costs to operate) and found ourselves serving the needs of neither.

where the strong form of crypto failed, the weak form (of commoditized ledger/database tech for financial transactions) has succeeded beyond anyone's expectation. the consequence is that crypto has been reduced to a vassal of traditional finance, both more impactful than any normie anticipated, and deeply disappointing in structure to crypto OGs. reducing global transaction costs as commoditized ledger/database technology reduces drag on global GDP, but this is a marginal improvement over the status quo and one where the value accrues in large part to incumbent intermediaries in reducing overhead and improving margins.

crypto was supposed to be the most egalitarian thing ever. it was insanely ambitious and, if it worked, could have really changed the fabric of society. 

it didn't. it's over. we haven't found the right primitives, and, more importantly, the right culture for delivering the most ambitious version of crypto. it's time to question everything again."

Ethereum represents the strong version of crypto — crypto for its own sake, self-sustaining and self-perpetuating. DeFi, NFTs, DAOs, etc. We were rebels building an alternative financial system by the people, for the people, hooking imagination into money. 

There was also the weak version: efficient ledger infrastructure for the backends of financial institutions. The weak version would fuel the strong one, converting demand for internet ledgers into flows pointing inward — toward crypto, toward Ethereum, and concluding at ETH.

Maybe if Ethereum had executed better, faster, stronger, and if crypto hadn't attracted such a swarm of grifters and extractors, the industry would have earned the clout and respect I always assumed it was owed. But the only stretch where crypto ever held a positive brand with the public ran from late 2020 to early 2022.

Outside that narrow window, crypto's reputation has been grifts, scams, get-rich-quick schemes, and being useless to the average person.

3) ETH is money dependent on strong crypto 

ETH excelled as internet money at the exact moment everyone was forced onto the internet. The world discovered cryptocurrency for the first time, and for that brief window, it was cool.

Money is a coordination game, and a currency's schelling point is held together by belief. In 2021, more people believed in ETH: it was cool, disruptive, and populist. Bitcoin had the same properties, and held onto them far better than ETH did after 2021.

This reality raises an uncomfortable possibility: the strong version of crypto may never have been a stable equilibrium. COVID was an exceptionally distorted era for money and maybe ETH-as-money only held up because of that distortion. If so, ETH being money always depended on the strong version of crypto working better than it ever actually has.

4) The utility of Ethereum helps other monies, too 

Is Bitcoin money? Are dollars money? Is gold money? It doesn’t matter! Whatever is money becomes tokenized on Ethereum.

In 2020, Nic Carter argued on Bankless that stablecoins are likely parasitic to ETH as a native unit to Ethereum. Ethereum had $3B of stablecoins at that time. Today, it has $163B, a 54x surge.

The utility Ethereum provides is helping increase the monetary network of whatever *is* money, which is why the U.S.A. is so bullish on crypto for stablecoin adoption. Ethereum is helping the United States maintain dollar hegemony, and it's the explicit policy of the administration to leverage this fact. 

The positive spillover effects to $ETH as money are clearly not as strong as what the U.S. government sees in Ethereum’s stablecoin ecosystem. 

Ethereum Is a Giver, Not a Taker

At its heart, Ethereum is a giver, not a taker. 

It supplies L2s with the world's most secure blockspace, at cost. It tokenizes the assets of the entire world, at cost. 

It secures billions of dollars in DeFi, at cost. 

Ethereum takes no markup for anything it does.

This is the nature of open source software, and this is the power of Ethereum. Ethereum supplies its full set of incredibly important values to the world… at cost. 

Ethereum is noble. Ethereum is good.

Ethereum is the world’s most successful non-profit. 

Naturally, incredible amounts of adoption will happen on Ethereum. It is, and will continue to be, perhaps the most impactful open source software project humanity has ever built, and being a "non-profit protocol" is one of its core features. 

This is why the path for ETH to become money depended on a very high and sustained level of market dominance. 

Eventually, fees would drop to zero as blockspace became commoditized. So long as it was Ethereum doing the commoditization and not a competitor, then Ethereum could retain its margins and dominance. 

Eventually, the fat protocol thesis would give way to the fat app thesis, and the applications would eat up the rest of the margins. So long as they were Ethereum applications and not competitors, this would be okay for ETH. 

It’s hard to square "ETH is money" with "Ethereum is a giver, not a taker." Ethereum's architecture is intentionally designed to give everything back to its ecosystem, and only take the minimum necessary to sustain the network. 

Architecturally, ETH is not prioritized in Ethereum, and this is a feature, not a bug. ETH becomes money only if Ethereum wins a fight it architecturally declines to fight.

This would have worked, had Ethereum been able to maintain an incredible level of market dominance. 

The ETH Is Money Thesis Asked a Lot of Ethereum

"ETH is money" required everything to go right for Ethereum. The margin of error was smaller than I originally gave credit for. The momentum Ethereum had in 2021 and 2022 made it seem like ETH as money was the default path. 

In hindsight, Solana’s rise in 2021 alongside a rise in anti-Ethereum sentiment was the first big indicator that the coordination game of Ethereum and ETH was not going according to plan. 

The EF needed to be decentralized and allow for alternative power structures to emerge. But it also needed to respond to market forces with the urgency and drive of a start up under existential threat of irrelevance. 

L2 teams needed to have the freedom of self-determination, but also needed to do so under the bigger umbrella brand of Ethereum and ETH. Technical synchronous integrations across Ethereum and its L2s needed to be executed much faster. 

Smart contract chains are valued by fees, and to escape from that paradigm, Ethereum needed to rewrite the rules by brute force of success.

The ETH Is Money Thesis Didn’t Fail, Though

It also just didn’t succeed to its fullest potential. 

Ethereum did the noble thing and chose the hardest, most ambitious, most ideologically pure path for its future. 

It has achieved some incredible victories, and it's also failed some challenges as well. 

It has earned the market cap that it deserves. 

I am incredibly bullish on Ethereum the network and its ecosystem: Ethereum is architecturally designed to maximize success for its apps, L2s, and ecosystems. The fat-app thesis means Ethereum’s apps take all the fees, and the rollup-centric roadmap means that L2s take 97% margins. 

As for ETH the asset, I have a harder time seeing ETH being structurally rerated in any direction — up or down. 

The reason I sold my ETH accordingly is not because I am bearish ETH per se, but rather that I think the "ETH is money" thesis has played out, and I’d like to allocate my capital to other opportunities I see in the market today.