Ethereum has always had a strong social orientation. Its commitment to the creation of public goods has been a defining feature of the network since its inception. Among all major crypto projects, Ethereum arguably represents the most socially-minded vision, in contrast to Bitcoin’s more libertarian ethos.
However, Ethereum also introduced a key innovation that is often overlooked: its social approach is not rooted in statism or heavy bureaucracy. Instead, Ethereum promotes non-custodial, permissionless infrastructures where the provision of public goods is not captured by small elites or centralized structures. The philosophy of subtraction perfectly encapsulates this — these goods are so important that no one should control them.
This approach, while noble, can also lead to a kind of structural immobility. In rapidly changing environments, Ethereum sometimes finds itself unable to adapt swiftly. And yet, this very resistance to capture is what has generated an unprecedented level of trust in the protocol.
Ethereum is unique in its commitment to decentralization. While Bitcoin pioneered this path, Ethereum has been steadily building toward it while offering a broader platform for innovation and economic activity.
The Forgotten Piece: Ethereum’s Economic Design
This strong social and technological ethos has often come at the expense of clear economic design. Economics in Ethereum has frequently been treated as a necessary evil rather than a foundational pillar. While the protocol showcases world-class innovation in cryptography and scalability, economic sustainability has rarely taken center stage.
You only need to look at any Ethereum conference agenda: deeply technical talks abound, but discussions on financial design are rare. There is a cultural bias against “financial excess,” even as the community embraces overengineering in other areas.
This leaves Ethereum as arguably the most advanced technological project in the space, yet also one of the most chaotic when it comes to financial architecture.
I recall attending a talk in London back in 2019 where Vitalik spoke. At that time, Ethereum had a high token issuance model. I asked whether ETH, as an asset, was meant to capture value. Finance wasn’t mentioned at all in that talk. Vitalik's answer referred vaguely to ongoing work — likely alluding to EIP-1559, which in hindsight became one of the most important financial upgrades the protocol has seen.
The Scalability-First Mandate
For years, the Ethereum Foundation has focused almost entirely on scalability. Rightly so — scaling was essential. The decision to scale via Layer 2s has proven successful. The ecosystem has multiplied its capacity 16-fold across different layers.
But this singular focus came at a cost. All other aspects — especially the economic ones — were deprioritized. Gas fees were deliberately collapsed to incentivize activity. The idea was simple: let’s maximize scalability now and worry about value capture later.
In August 2023, I wrote about how this had broken ETH’s demand dynamics. The token’s economic role had weakened to the point where Ethereum wasn’t just failing to earn — it was actively subsidizing usage on its network.
Introducing the Laffer Curve
The Laffer Curve is an economic theory that illustrates the relationship between tax rates and tax revenue. If tax rates are 0%, the government collects nothing. If tax rates are 100%, the government also collects nothing — because no one will work if all their earnings are taxed.
Between these extremes lies an optimal point (T*), where tax revenue is maximized. To the left of T*, increasing rates increases revenue. To the right, increasing rates leads to lower revenue due to economic contraction.
Applying Laffer to Ethereum
In crypto terms: if you set protocol fees to 0, you maximize usage — but at the cost of having no resources to fund development, security, or governance. No value is captured.
Ethereum's current design, especially post-Dencun, has pushed fees so low that any further gains in scalability are marginal — while the network’s sustainability has been severely undermined. The outcome? A broader sense of decline, reduced incentive to hold ETH, and even internal tensions within the Foundation.
Correcting Course: Towards a Sustainable Equilibrium
Ethereum never needed to push fees this low to scale effectively. EIP-7762 now proposes to address this flaw by setting a minimum fee floor. It’s a critical step. The ecosystem must capture enough value to remain viable.
While it’s true that gas fees may not be the only way Ethereum captures value, they remain one of the clearest indicators of ETH demand. If ETH is to be the central asset of a new digital economy — if ETH is Money — it needs robust transactional activity as proof.
Conclusion: Ethereum Must Defend Its Premium
Ethereum has reached a turning point. Its technological lead is intact, but its economic foundation needs reinforcement. If we accept that Ethereum’s security, neutrality, and openness are public goods, then these must be funded — and value must be captured.
Some in the community may fear that increasing fees could undermine scalability. But the real question we should be asking is: Should Ethereum defend its premium? I believe it absolutely should.
We often assume this is purely a market-driven issue. But pricing — and how we set it — matters deeply. Should Apple start selling iPhones at the price of its cheapest competitors? It might boost short-term adoption, but in the long run, it would damage the brand, reduce margins, and make it harder to sustain excellence in product development.
Apple has shown year after year that there is a resilient demand for quality — a demand that remains even when prices rise. It doesn’t try to compete in the lowest-price segment because its strength lies in offering a superior product that users trust and are willing to pay a premium for.
Ethereum is no different. It has inelastic demand: there are use cases that require the trust and neutrality Ethereum provides. These users aren’t just looking for the cheapest execution — they’re looking for the most secure and credible environment. The protocol must ensure it has the resources to keep delivering that level of quality.
We cannot afford to confuse open access with zero extraction. The Laffer Curve reminds us that there is such a thing as too little, and Ethereum may have crossed that line.
Ethereum must defend its premium — without fear.
