The world of blockchain and cryptocurrency thrives on debate, innovation, and ideological divergence. One such flashpoint emerged when Bitcoin core developer Jeremy Rubin published an article predicting that ETH—the asset—could eventually go to zero, despite the continued success of the Ethereum network itself. In response, Ethereum co-founder Vitalik Buterin stepped in with a detailed rebuttal, defending the long-term value and necessity of ETH within the ecosystem.
This high-level exchange between two influential figures underscores a critical discussion about digital asset valuation, network economics, and the future of decentralized platforms.
Jeremy Rubin’s Argument: ETH Has No Inherent Value Proposition
Jeremy Rubin began by stating that ETH lacks a clear value proposition in official documentation. While many assume ETH’s primary utility is paying for gas fees, Rubin argues this alone isn’t sufficient to sustain its value—especially since there's no protocol-level mandate requiring ETH for transaction fees.
He introduced a hypothetical token called BuzzwordCoin, built on the ERC-20 standard. By default, every BuzzwordCoin transaction would require ETH to cover gas. But this creates problems:
- Users must sell BuzzwordCoin early to acquire ETH, creating artificial downward pressure.
- It introduces third-party dependency on ETH’s price stability.
- It limits design flexibility for new tokens.
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Rubin proposed an alternative: allow contracts like BuzzwordCoin to pay miners directly in their own token. This concept is known as economic abstraction—the ability to use non-native assets to pay for computation and storage on a blockchain.
Four Objections to Economic Abstraction (And Rubin’s Rebuttals)
- Lack of Software Support
Currently, Ethereum miners prioritize transactions based on gas paid in ETH. ETH is treated specially in the protocol. However, projects like WETH (Wrapped ETH) already treat ETH as a standard ERC-20 token. Rubin believes software can evolve to support broader payment options without compromising functionality. - Difficulty Pricing Multiple Tokens
Critics argue miners can’t efficiently assess the value of dozens—or hundreds—of different tokens. But Rubin counters that rational miners already model future ETH prices to maximize profits. Adding support for other token valuations isn't a radical leap—it’s an extension of existing economic behavior. - Contracts Without Tokens
Not all smart contracts issue tokens. Can they still pay fees? Rubin says yes—users could pay in a mix of available assets (e.g., LemonadeCoin + TeaBucks), while miners use decentralized exchanges to convert unwanted tokens into preferred ones. - Proof-of-Stake Requires ETH
In Ethereum’s current PoS model, validators stake ETH to participate. Rubin acknowledges this but suggests a theoretical alternative: Heterogeneous Deposit Proof-of-Stake (HD-PoS), where validators stake diverse assets using a weighted vector system. While unproven, he claims consensus might still be achievable if weight vectors align closely.
Vitalik Buterin’s Response: Protocol-Level Changes Will Anchor ETH’s Value
Vitalik Buterin didn’t dismiss Rubin’s points lightly. Instead, he acknowledged that in today’s Ethereum, much of the critique holds water—if no changes were made. But Ethereum is evolving.
He highlighted two key proposals under community review that would harden ETH’s role at the protocol level, making it increasingly indispensable:
1. EIP-1559 and Fee Burning Mechanism
One major upgrade already implemented—EIP-1559—introduced a dynamic base fee that is permanently burned rather than given to miners or validators. This means:
- A portion of every transaction fee is removed from circulation.
- As network usage grows, more ETH is destroyed—potentially making ETH deflationary.
- Even if block producers accept alternative ERC-20 tokens as tips, they must still pay the base fee in ETH—and that ETH gets burned.
This creates structural demand: to transact reliably, users need ETH.
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2. State Rent (Storage Maintenance Fees)
Another proposed mechanism involves charging ongoing fees for data storage—commonly referred to as state rent or “storage maintenance.” Under this model:
- Each byte of stored data incurs a small per-block fee.
- If unpaid, data becomes "dormant" and requires a Merkle proof to reactivate.
- These fees are also subject to burning.
Buterin estimates that over two-thirds of transaction fees could eventually be destroyed through these combined mechanisms.
This transforms ETH from a mere medium of exchange into a scarce resource required for network sustainability.
Addressing HD-PoS: Why Heterogeneous Staking May Not Work
Buterin also addressed Rubin’s HD-PoS idea directly—and rejected it on security grounds.
His core concern: How does the protocol determine fair exchange rates between staked assets?
Possible solutions—like using on-chain decentralized exchanges—are vulnerable:
- They require subsidies to remain secure.
- Malicious actors could create “pathological tokens” designed to game the system.
- Any reliance on internal pricing mechanisms opens doors to manipulation via plutocratic governance models.
As Buterin previously warned in a 2018 essay, such systems risk becoming de facto plutocracies, where wealth concentration dictates control—not decentralization.
Therefore, he concludes:
“If the community doesn’t adopt HD-PoS, then staking ETH becomes the only way to earn transaction fee income. In that case, even under standard discounted cash flow models, ETH cannot have zero value.”
Core Keywords
- Ethereum (ETH)
- Economic abstraction
- Gas fees
- Proof-of-Stake (PoS)
- EIP-1559
- Token value proposition
- Fee burning
- State rent
Frequently Asked Questions
❓ Can ETH really go to zero?
While possible in theory under extreme scenarios (e.g., total network failure or irrelevance), current protocol upgrades like EIP-1559 and potential state rent make this highly unlikely. With increasing amounts of ETH being burned, scarcity is rising—supporting long-term value.
❓ Does economic abstraction threaten ETH’s dominance?
Only if widely adopted at the protocol level—which Ethereum is actively resisting. The ecosystem is moving toward reinforcing ETH’s role through mandatory fee payments and destruction mechanisms.
❓ Why can’t other tokens replace ETH for gas?
Technically, they could in some edge cases (e.g., layer-2 solutions or meta-transactions). But core protocol rules ensure that final settlement and security guarantees still depend on ETH, especially in consensus and fee markets.
❓ What happens to ETH when fees are burned?
Burned ETH is permanently removed from circulation. This reduces supply over time, potentially leading to deflationary pressure—especially during periods of high network activity.
❓ Is Ethereum becoming more centralized with PoS?
While PoS lowers energy use, concerns about centralization persist. However, mechanisms like shard chains and ongoing research into distributed validation aim to maintain decentralization at scale.
❓ How does state rent improve Ethereum?
State rent discourages bloat by charging for persistent data storage. This keeps the network efficient, lowers hardware requirements for nodes, and ensures long-term sustainability—while generating recurring demand for ETH.
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