Bankless Founder: Why I Sold All My ETH

Author: David Hoffman

Compiled by: Jiahua, ChainCatcher

If you missed the news last week, I sold my ETH.

For someone who has built a career, community, identity, and business landscape around Ethereum, making this decision was not easy.

The reasons for the decision to sell require a more thorough explanation than scattered tweets on Twitter.

The argument that "ETH is money" has not failed... it has simply been realized. Ethereum has achieved the ETH price it deserves, and I believe that ETH as an asset will not be revalued, either upwards or downwards.

“ETH is money” is a core narrative proposed by author David Hoffman in 2019 and promoted long-term through Bankless, advocating that ETH should become a global store of value, and was once one of the most mainstream bullish logics for Ethereum.

Note: I am extremely optimistic about Ethereum. I expect Ethereum as a network to perform exceptionally well from now on. However, I believe that only a small part of this success will be reflected in ETH.

The main text is as follows:

ETH is Money has Always Been a Wish

Currency is a coordination game, and coordination is very difficult.

The Ethereum project itself is a series of coordination challenges stacked on multiple levels, and the argument that "ETH is money" requires success at all these levels, and that success must be unquestionable.

ETH can only become money when every layer of the Ethereum technology social stack performs better than its competitors.

Given the ambitious nature of the Ethereum project, achieving its most successful version has always been a tremendous challenge. Despite its shortcomings, the Ethereum project has done exceptionally well and fully deserves its current market value.

Nevertheless, the window of opportunity for the market to "revalue" $ETH seems to be closing.

To some extent, ETH is indeed money. But it is not the most successful version we collectively pursue.

Ethereum is a Coordination Game

A Turing-complete blockchain is such a powerful idea that Ethereum's greatest potential is the entire crypto world. It encompasses everything.

The only obstacle to Ethereum achieving 100% absolute dominance over everything is coordination.

Ethereum's leadership needs to be sufficiently decentralized, and governance requires "rough consensus" to create reliable neutrality, thereby maximizing Ethereum's adoption at the highest level.

Ethereum's leadership needs to respond quickly to market dynamics and operate like a startup facing the threat of marginalization.

Ethereum L2 needs to be able to operate independently of the base layer and make its own market choices, but at the same time, they also need to be economically bound and constrained by the broader Ethereum economy and brand.

Ethereum's roadmap needs to be executed in a specific order to maximize and maintain Ethereum's momentum and market dominance, thereby fully quelling competition and maximizing people's confidence in Ethereum and ETH.

The development and engineering of key technologies need to be fast enough for Ethereum to prove its practicality to the outside world while staying ahead of competitors.

The argument that "ETH is money" lies in creating an extremely revolutionary and powerful financial asset that, due to its unique nature as an excellent global store of value, attracts individuals who would otherwise be indifferent.

The strength of Ethereum's brand and ETH needs to be strong enough to make traditional large funds not only feel secure but also proactively view ETH as an important position in their retirement portfolios due to the dominance of the Ethereum project.

To achieve "ETH is money," everything upstream of ETH needs to operate perfectly.

Ethereum is not Bitcoin; it has chosen the difficult path. Bitcoin chose to strip everything from its blockchain to elevate the status of BTC.

Ethereum chose to add everything to its blockchain to maximize the utility of its block space. Only by doing this better than its competitors can ETH gain its status as a global currency.

We have come a long way, and Ethereum has already achieved its deserved maximum potential market value share.

I worry that the time window for playing this game has closed.

The Larger Environment May Never Allow It to Happen

Looking back over the past few years, I see that Ethereum originally needed to overcome numerous challenges from the larger environment.

1. L1 Assets are Inextricably Linked to Revenue

No matter how difficult you say it is to evaluate smart contract chains based on fees and revenue, fees and revenue are clearly the way for smart contract L1 assets to enhance their pricing power.

By 2026, we will have ample data showing that all these factors are closely related: L1 activity, L1 fees, and the price appreciation of L1 native assets.

In 2021, when ETH's L1 revenue market share was at its highest, it dominated.

In 2024, when SOL's L1 revenue market share surged in the industry, it dominated.

In 2026, NEAR is experiencing price revaluation, while its L1 revenue and NEAR burn volume are showing fundamental growth.

You can also look at assets like BNB and TRX, which may be the highest cumulative revenue projects of all time. Their price charts look like what I once expected ETH to look like—provided that ETH can maintain its L1 fee dominance longer than just the period of 2022.

2. Strong Versions of Cryptocurrency Have Failed to Work

@0xMakesy put it well:

Ethereum represents a strong version of cryptocurrency, existing for the sake of crypto itself, self-sustaining and self-perpetuating. DeFi, NFTs, DAOs, we were rebels, building an alternative financial system for the people, connecting imagination to the monetary system.

At the same time, there is a weak version: efficient ledger infrastructure provided for financial institutions' backends. The weak version will fuel the strong version, converting the demand for internet ledgers into inward flows of funds, flowing into cryptocurrencies, flowing into Ethereum, ultimately converging into ETH.

Perhaps if Ethereum had executed better, faster, and stronger, if cryptocurrency had not attracted such a large group of speculative fraudsters and value extractors, the industry could have gained the influence and respect I have always believed it deserved.

But the only phase in which cryptocurrency maintained a positive brand image among the public was from the end of 2020 to the beginning of 2022. Outside of this narrow time window, cryptocurrency's reputation has been one of fraud, scams, get-rich-quick schemes, and being of no use to ordinary people.

ETH is Money Depends on "Strong Cryptocurrency"

At the moment when everyone was forced online, ETH emerged as internet money. The world discovered cryptocurrency for the first time, and in that brief time window, it was very cool.

Currency is a coordination game, and a currency's Schelling point (consensus focal point) is coalesced by belief. In 2021, the broad public believed in ETH: it was cool, disruptive, and populist. Bitcoin has the same attributes and retained them better than ETH after 2021.

This raises a disturbing possibility: the strong version of cryptocurrency may never have been a stable equilibrium. The COVID-19 pandemic was an extremely distorting time for money; perhaps "ETH as money" was only sustained because of this distortion.

If that is the case, ETH becoming money will always depend on the strong version of cryptocurrency being able to perform better than in reality.

3. Ethereum's Utility is Also Beneficial to Other Currencies

Is Bitcoin money? Is the dollar money? Is gold money? It doesn't matter—whatever is money will be tokenized on Ethereum.

In 2020, Nic Carter proposed on Bankless that stablecoins are likely to parasitize ETH as the native unit of Ethereum. At that time, Ethereum had $3 billion in stablecoins. Today, that number is $163 billion, a 54-fold increase.

The utility provided by Ethereum is helping to expand the monetary network of any asset that truly belongs to money, which is why the U.S. is so optimistic about popularizing stablecoins through cryptocurrency. Ethereum is helping the U.S. maintain dollar hegemony, and leveraging this fact is the government's explicit policy.

Clearly, the positive spillover effects that $ETH gains as money are far weaker than what the U.S. government sees in the Ethereum stablecoin ecosystem.

Ethereum is a Giver, Not a Taker

Essentially, Ethereum is a giver, not a taker.

It provides the world's safest block space to L2 at cost.

It tokenizes assets from around the world at cost.

It secures billions of dollars in DeFi at cost.

Ethereum does not charge any markup for everything it does.

This is the essence of open-source software and the power of Ethereum. Ethereum provides its entire suite of extremely important value to the world at cost.

Ethereum is noble. Ethereum is excellent.

Ethereum is the most successful nonprofit organization in the world.

Naturally, incredible mass adoption will happen on Ethereum. It has been and will continue to be the most influential open-source software project built by humanity, and being a "nonprofit protocol" is one of its core characteristics.

This is why the path for ETH to become money depends on its ability to maintain sustained and extremely high market dominance.

Ultimately, as block space is commoditized, fees will drop to zero. As long as the commoditization is achieved by Ethereum and not its competitors, Ethereum can maintain its margins and dominance.

Ultimately, the fat protocol theory (which suggests that the vast majority of economic value will be captured and monopolized by the underlying foundational protocol, such as Ethereum, rather than by the application layer built on top of it, as in traditional internet) will give way to the fat application theory, where applications will consume the remaining profits.

As long as they are applications of Ethereum and not competitors, this is not a problem for ETH.

It is difficult to reconcile the views of "ETH is money" and "Ethereum is a giver, not a taker." Ethereum's architecture is intentionally designed to give everything back to its ecosystem and only asks for the minimum needed to maintain network operations.

Architecturally, ETH is not prioritized within Ethereum; this is a feature, not a flaw. ETH can only become money when Ethereum wins a battle it architecturally refuses to participate in.

If Ethereum can maintain incredible market dominance, this could work.

This Argument Places Too High Demands on Ethereum

"ETH is money" requires everything about Ethereum to go smoothly. The tolerance for error is much smaller than I initially thought. The momentum of Ethereum in 2021 and 2022 made it feel like "ETH is money" was a default path.

In hindsight, Solana's rise in 2021, accompanied by a surge in anti-Ethereum sentiment, was the first major sign that the coordination game of Ethereum and ETH was not going as planned.

The Ethereum Foundation needs to decentralize and allow alternative power structures to emerge. But it also needs to respond to market forces with the urgency and drive of a startup facing the threat of obsolescence.

L2 teams need to have the freedom of self-determination but also need to operate under the larger umbrella brand of Ethereum and ETH. The technical synchronization and integration between Ethereum and its L2s need to be executed much faster.

Smart contract chains are valued through fees; to break free from this model, Ethereum needs to rewrite the rules with overwhelming success.

My Reason for Selling

It simply has not realized its maximum potential.

Ethereum has done something noble by choosing the most difficult, ambitious, and ideologically pure path for its future.

It has achieved some incredible victories but has also failed to win in certain challenges.

Ethereum has earned its deserved market value.

I am very optimistic about the Ethereum network and its ecosystem—Ethereum is architecturally designed to maximize the success of its applications, L2s, and ecosystem. The fat application theory means that Ethereum's applications take all the fees, while the rollup-centric roadmap means L2s take 97% of the profits.

As for ETH as an asset, I find it hard to see it being structurally revalued, either upwards or downwards.

Therefore, my reason for selling ETH is not a bearish view on ETH, but rather that I believe the argument "ETH is money" has been realized, and I want to allocate funds to other opportunities in the market that I am optimistic about.