"For Ethereum to see a price increase, ultimately it needs to burn more! Even though the Robinhood chain has been very popular recently, earning tens of millions of dollars in a day, the amount delivered to the Ethereum main chain is only a few hundred, a little over a thousand dollars! What does this popularity have to do with Ethereum?"
This is a comment following the article "The Transformation of Layer 1 Public Chain Harmony into Ethereum L2" posted on September 11.
"For Ethereum to see a price increase, ultimately it needs to burn more," I completely agree with this. It is the only way the existing economic mechanism of Ethereum can positively feedback into the price.
However, the following viewpoint "even though... what does this popularity have to do with Ethereum" fundamentally differs from my way of looking at issues.
Before reading Duan Yongping's Q&A, I emphasized in my previous articles: investment is not about looking at the present, but at the future.
After reading Duan Yongping's Q&A, my understanding deepened further: investment is about investing in things you understand. And this "understanding" refers more to understanding the future of that thing, rather than focusing on the present.
The only method that Duan Yongping (and also Buffett and Munger) uses for investment: evaluating a company's value is looking at the total discount of its future free cash flows; this method still focuses on the future, not the present.
So when I assess the value of Ethereum, I don’t look at how much it makes in a day, but rather at everything it has been doing all along, the advantages that are continuously forming, and the moat that has been accumulated, and how much burning it might create in the future.
Regarding this assessment, I have previously written a more detailed method in my comment on Bankless when one of its co-founders liquidated Ethereum. I won’t elaborate on it here.
However, just like in all fields, people’s views on issues are often more misunderstood than understood; they tend to focus on the present and ignore the long-term. Therefore, every time I encounter some issues, especially very core and critical problems, I feel it necessary to share the viewpoints I have previously discussed once again.
How Ethereum can maximize its advantages to achieve sufficient burning of ETH, I will look at from two angles:
First, the most fundamental, non-violable core principle is that the main chain must achieve extreme decentralization in its operations. This ensures both security (ability to resist attacks from the state and AI) and ecological freedom (whether angel or demon can use this public chain without permission).
These two points are the fundamental guarantee for ecological prosperity and should not be shaken.
If we want to ensure that the main chain operates with extreme decentralization, then there must be a performance ceiling for the main chain; even with performance expansions, one day it will encounter limits. Although the expansion of the main chain is currently in full swing, a theoretical upper limit undoubtedly exists.
Therefore, the comprehensive and unlimited expansion of the Ethereum ecosystem will certainly not rely on the main chain but on Layer 2 expansion in the future.
To enable Layer 2 expansion to be attached to Ethereum, the first thing Ethereum must provide is security guarantees (which brings us back to the first point), and next is scaling for Layer 2 expansions (such as blob technology).
In fact, the scaling that Ethereum is currently doing for Layer 2 expansions has already provided enough redundancy, more than sufficient. So the fundamental thing remains to ensure the first point.
Once these two points are achieved, the only logical way forward in the future will be: one main chain of Ethereum, and then Layer 2 expansions attached to it reaching hundreds, thousands, or even tens of thousands.
Of course, this scenario may seem a bit like a fantasy now, but if we believe that the crypto ecosystem is the future, I see no reason to doubt this scenario.
When this scenario is realized, even though each Layer 2 expansion contributes very little to the main net, the fees contributed to the main net by hundreds, thousands, or even tens of thousands of Layer 2 expansions will still be significant—this is the manifestation of Jevons Paradox; when unit fees are lower, it attracts more users, which leads to overall fees being higher.
This is also what Ethereum is currently doing: first building all the infrastructure, lowering unit fees as much as possible, attracting and accumulating more and more users (Layer 2 expansions), and then waiting for the scale effect to form, achieving an increase in overall fees.
This is the path to realization in the future and, in my view, the most feasible way to achieve significant burning of ETH.
Of course, this scenario may also present an unexpected situation: even though there are many Layer 2 expansion systems, the revenue they contribute to the Ethereum main net is still low.
In this case, I think there is still a way that sounds a bit coercive but is actually completely feasible: that is, Ethereum could forcibly upgrade and take back a portion of the revenue from Layer 2 expansions.
This poses no technical problems, and there are already ready-made solutions; I introduced two in previous articles. One of them is the technology used by GNOSIS.
At that time, even if Layer 2 expansions have grievances or dissatisfaction, I wouldn’t believe anyone would dare to take on security risks, sacrificing Ethereum's ecological advantages and therefore separating from the Ethereum ecosystem to build their own independent chain.
So, to summarize, I believe this is a short-term problem, but not a long-term one; there will definitely be solutions.
Therefore, if you believe in this future, following this path will reveal Ethereum's potential value.
Of course, if you do not believe in this future, then it is quite normal to doubt Ethereum's value.
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