The question of whether Ethereum (ETH) can be considered money has become a focal point in the blockchain community. At the Devcon event, Mike Neuder – a researcher at the Ethereum Foundation – presented in-depth arguments from an economic, technological, and philosophical perspective to clarify the role of ETH. According to Neuder, ETH is not just a digital asset but has the potential to become a true global currency.
Here are 5 main reasons why ETH can be considered money:
1️⃣ True Ownership and Freedom Without License
ETH enables financial autonomy thanks to its decentralization and permissionlessness, an important feature that defines money.
Independent Ownership: Users have full control over their ETH assets without going through any intermediaries, similar to owning physical gold or cash.
Censorship Resistance: On Layer 2 (L2) solutions like Arbitrum or Optimism, users can make forced withdrawals, ensuring that their assets are not censored or manipulated by any organization.
ETH is superior to centralized stablecoins like USDC or USDT, which can be censored or have their assets frozen at any time by the issuing organization.
2️⃣ Flexible Inflation Model – Competitive Advantage with Bitcoin
ETH is designed to be a sustainable asset in the long term thanks to its flexible inflation mechanism.
Potential Deflation: Since the implementation of EIP-1559 and the Proof of Stake (PoS) mechanism after The Merge, the ETH issuance rate has decreased from ~4%/year to 0.9%/year. As the Ethereum network explodes in transactions, ETH burns could reduce the total supply – making ETH a deflationary asset.
Comparison with Bitcoin:
Bitcoin has a fixed supply of 21 million BTC, which helps ensure its scarcity value. However, as block rewards decrease in the future, Bitcoin may face the problem of transaction fees not being enough to maintain network security.
ETH has no limited supply, but its smart deflation mechanism helps maintain a balance between demand and supply, ensuring longer-term sustainability.
Mike Neuder commented that: "ETH is a flexible combination of scarcity and long-term sustainability that very few other digital assets have."
3️⃣ "Blob Burn" Effect From Layer 2 (L2)
Layer 2 (L2) technology not only helps Ethereum scale, but also promotes ETH's deflationary potential through the "Blob Burn" effect:
Fee-optimized rollups: L2 protocols like Arbitrum, Optimism, and zkSync package thousands of transactions into “blobs” – small compressed data chunks – before uploading them to the Ethereum mainnet.
Fees burned: A portion of the fees from data blobs will be burned, reducing the total supply of ETH and boosting the value of the asset.
The growing popularity of L2 protocols means that ETH burns will become more intense, adding further deflationary impetus to the Ethereum network.
4️⃣ Centralized Stablecoins Have Weaknesses
Neuder also criticized centralized stablecoins (USDC, USDT) for their limitations:
Censorship risk: Issuers have the power to freeze assets, causing users to lose control of their finances.
Not truly decentralized: Stablecoins depend on intermediaries and are controlled by regulatory bodies, which goes against the decentralized philosophy of blockchain.
In contrast, ETH is a purely decentralized asset. It is not tied to any organization and gives true financial autonomy to its users.
5️⃣ ETH Is A Global Currency
With its outstanding characteristics, ETH is not only a digital asset but also meets all the conditions to become a global currency:
Permissionless: ETH is an asset that anyone in the world can own and trade without legal obstacles.
Flexible Deflation: The ETH burning mechanism ensures that the value of the asset will increase over time, especially in the context of strong growth in demand for Ethereum.
Versatile Collateral: ETH has been widely used as collateral in DeFi protocols, dApps, and NFTs – adding to its liquidity and practical value.
Summary: Is ETH Money?
The answer is yes – if the definition of money is not limited to a means of payment, but also includes a store of value and an instrument of financial autonomy.
Bitcoin is often referred to as “digital gold” – a scarce asset that stores value.
ETH, with its flexible programmability, censorship resistance, and deflationary mechanism, is shaping itself as the “smart money” of the 21st century.
ETH is not only an asset to store value but also the backbone of the global decentralized economy, with the potential to become the digital currency of the future.
Looking Towards The Future 🚀
While Bitcoin serves as a store of value, Ethereum is going further with its goal of becoming a global decentralized financial platform. With technological advances from Layer 2, sharding, and DeFi applications, ETH is redefining the concept of money, not only in the crypto world but also in the global financial system.
ETH is more than just a currency – it could become the monetary foundation of a decentralized world where economic rules are no longer governed by centralized institutions. 🚀
