Ethereum has long been the cornerstone of decentralized innovation, but a growing debate questions whether ETH should also be recognized as money—not just a utility token or speculative asset. While Bitcoin is often hailed as digital gold, Ethereum’s native currency, ether, presents a more nuanced case. In a recent talk at Devcon, Ethereum Foundation researcher Mike Neuder made a compelling argument for ETH as a resilient, programmable, and permissionless form of decentralized money.
His insights shed light on how Ethereum is evolving beyond a platform for smart contracts into a foundational layer for a new financial paradigm—one where property rights, censorship resistance, and self-sovereignty are encoded into the system.
Permissionless Ownership: The Core of ETH as Money
At the heart of Neuder’s argument lies the concept of permissionless ownership. Drawing from economists like Friedrich Hayek and Milton Friedman, he emphasized that true property rights require assets to be freely transferable, storable, and programmable without third-party interference.
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ETH meets all three criteria. Unlike centralized stablecoins such as USDC or USDT—where issuers can freeze accounts or block transactions—ether cannot be censored by any entity. This distinction is critical. When funds are frozen, as Tether did in response to a U.S. Department of Justice request, it undermines the very notion of individual financial sovereignty.
In contrast, ETH operates on a trustless network. Whether you're sending tokens across borders or deploying code on a decentralized application (dApp), no intermediary can stop you. This makes ether not just a currency, but a vehicle for economic freedom.
The Rise of Rollups and Layer-2 Expansion
One of the most transformative developments in Ethereum’s evolution is its shift toward a rollup-centric roadmap. Layer-2 (L2) rollups like Arbitrum One and OP Mainnet are scaling Ethereum by processing transactions off-chain while anchoring security to the mainnet.
However, not all rollups are equally decentralized. Neuder highlighted the importance of reaching Stage 2 decentralization, as defined by L2Beat, where users can permissionlessly bridge ETH in and out of rollups. Currently, many L2s operate at Stage 1, meaning their sequencers (central coordinators) still hold significant control.
But the goal is clear: full decentralization. A key mechanism enabling this is forced withdrawal—a user’s ability to exit a rollup and reclaim their ETH even if the sequencer becomes uncooperative or attempts censorship. This feature ensures that Ethereum’s core principles of self-sovereignty extend beyond Layer 1.
As rollups mature, so does ETH’s role as money. More activity on L2s means more transaction data posted to Ethereum in the form of “blobs,” which incur fees—part of which are burned.
The Blob Burn Effect: Fueling Deflation
A crucial yet often overlooked component of Ethereum’s monetary policy is the blob burn mechanism. Introduced with the Dencun upgrade, blobs allow rollups to post large volumes of transaction data efficiently. Each blob submission includes a base fee, a portion of which is permanently burned.
This creates a direct link between network usage and deflationary pressure. As L2 activity grows—driven by cheaper transactions and higher throughput—the blob burn intensifies. During periods of peak demand, this can lead to net deflation, where more ETH is burned than issued through staking rewards.
Recent data shows this effect in action: in early November, the total dollar value of ETH burned surged to nearly $15 million. At times, the burn ratio reached 182%, meaning for every 100 ETH issued, 182 were destroyed—a net reduction in supply.
This dynamic sets Ethereum apart from fixed-supply models like Bitcoin. Instead of relying solely on scarcity via halvings, Ethereum uses an adaptive monetary policy that responds to real-time demand.
Is ETH a Sound Currency?
Following the 2022 Merge to proof-of-stake, Ethereum’s inflation rate dropped to around 0.9%, comparable to Bitcoin’s current 0.8%. But unlike Bitcoin, whose security will eventually depend entirely on transaction fees after block rewards diminish post-halving, Ethereum balances issuance with burning.
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Neuder argued this model enhances long-term security. By adjusting staking rewards and incorporating fee burns, Ethereum avoids the potential risk of under-securing the network when block subsidies decline.
Still, debates persist about the stability of ETH’s issuance curve. Some propose tweaking reward rates to prevent excessive centralization from dominant liquid staking tokens (LSTs). But Neuder cautioned that frequent changes could erode credible neutrality—the idea that no single group should influence protocol decisions.
Maintaining trust in Ethereum’s monetary policy requires transparency, predictability, and broad consensus.
Programmability vs. Pure Monetary Function
Not everyone agrees that ETH should be framed primarily as money. Ethereum co-founder Vitalik Buterin often emphasizes the network’s programmability, decentralization, and social legitimacy over its monetary attributes.
For Buterin, Ethereum’s value lies in its ability to support complex applications—from decentralized identity to quadratic voting—not just peer-to-peer payments.
Yet Neuder’s perspective doesn’t contradict this view; it complements it. ETH can be both a programmable asset and sound money. Its dual nature allows developers to build financial systems where money itself is code—secure, transparent, and resistant to manipulation.
Frequently Asked Questions (FAQ)
Q: Can ETH be considered "sound money" like Bitcoin?
A: Increasingly, yes. With low inflation (~0.9%), a deflationary burn mechanism, and strong decentralization, ETH shares many traits of sound money. Its adaptive model even offers advantages in long-term network security.
Q: How does the blob burn affect ETH supply?
A: Blob fees from Layer-2 transactions contribute to ETH burns. During high usage, more ETH is burned than issued, leading to net deflation—a powerful economic tailwind.
Q: What prevents centralized control of Ethereum?
A: Credible neutrality, permissionless participation, and mechanisms like forced withdrawals on rollups ensure no single entity can control the network or freeze assets.
Q: Why is forced withdrawal important for Layer-2 rollups?
A: It guarantees users can always reclaim their funds even if a rollup’s sequencer acts maliciously or goes offline—preserving self-sovereignty across layers.
Q: Does staking affect ETH’s monetary policy?
A: Yes. Staking increases issuance but also secures the network. Combined with EIP-1559 burns, it creates a balanced system where supply responds dynamically to demand.
Q: Will Ethereum ever become deflationary permanently?
A: It already experiences periods of deflation during high activity. Sustained deflation depends on continued growth in transaction volume and L2 adoption.
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The conversation around ETH as money isn’t about replacing Bitcoin—it’s about expanding what digital money can do. Ether combines scarcity, security, and programmability in a way no other asset does. As rollups mature and credible neutrality holds firm, ETH is increasingly positioned not just as fuel for dApps, but as a global, censorship-resistant currency rooted in user sovereignty.
Whether you see it as money, collateral, or code, one thing is clear: ETH is foundational to the future of decentralized finance.