Vitalik Buterin explained why burning ETH does not determine its value

Ethereum co-founder Vitalik Buterin stated that the long-term value of ether (ETH) should be linked to its role as a store of value rather than the volume of burned fees. In a post on social network X dated November 8, 2026, he explained why the economic significance of the EIP-1559 mechanism, in his opinion, was previously overestimated.

Buterin emphasized that the mechanism of burning part of the fees, introduced in Ethereum in 2021, needs to be preserved. However, he considers it acceptable if the volume of destroyed ETH remains indefinitely less than 10% of the number of new coins issued to reward validators.

Why Fee Burning Does Not Determine ETH Value

Buterin's argument is based on a token valuation model through the volume of burned fees. According to it, the asset's capitalization is calculated as the ratio of the annual value of destroyed tokens to the discount rate.

However, the Ethereum co-founder believes that this model does not provide a reliable lower bound for the value of ETH. For its application, it is necessary to consider the sustainability of revenues that create demand for operations on the network.

Buterin gave an example with Ethereum's market capitalization of about $270 billion. In his estimation, attempting to justify such a value solely through fee burning would require organizing Ethereum's financing model akin to a large international corporation comparable to the French cosmetics company L’Oréal.

In the scenario he considered, annual expenses on protocol research and development could reach 700,000 ETH. This would require financing directly through the network mechanism and could reduce validator revenues by about two-thirds.

Moreover, such a model, according to Buterin, would require more active centralized management and encourage an increase in gas prices – the unit of measurement for computational resources in Ethereum. Rising fees could limit network access for users who particularly value privacy and security.

Buterin Links ETH Value to Ethereum's Reliability

Instead of maximizing fee burning, Buterin suggests focusing on decentralization and the principles of CROPS. This concept combines resistance to censorship and control capture of the network, open source, privacy, and security.

In his opinion, the combination of these properties ensures the long-term reliability of Ethereum. Buterin believes that in the context of artificial intelligence (AI) development, the stability of technological infrastructure will gain additional significance.

The main criterion for an asset performing the function of a store of value, he named the ability of the underlying network to continue to exist and operate reliably over the long term.

Buterin associates this task with the development of protection against quantum computing and the gradual limitation of large-scale changes to the base protocol. He also noted that increasing the number of assets issued directly on the main Ethereum network could expand the practical ways of using ETH.

Buterin's statement reflects a shift in emphasis in the discussion of Ethereum's economic model. Previously, proponents of the "ultrasound money" concept linked the value of ETH primarily to the reduction of supply through fee burning.

At the same time, Buterin does not propose abandoning EIP-1559. His position is that ETH burning should remain part of the network's mechanism, but the long-term value of the cryptocurrency, in his assessment, is determined by a broader set of Ethereum properties.