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It is meant to be spent as gas in order to compensate for the energy costs of the computations in its smart-contracts. Why expend some amount of ETH building a

by ntr-- 6y ago

It is meant to be spent as gas in order to compensate for the energy costs of the computations in its smart-contracts. Why expend some amount of ETH building and executing products when you can just HODL and wait for the price to go up? Additionally, ease of spending drives up adoption which is a clear benefit to any currency.

Sargos 6y ago
>Why expend some amount of ETH building and executing products when you can just HODL and wait for the price to go up? Most people aren't going to have a choice. ETH is required to be spent when making transactions and using dapps, NFTs, etc. Even L2s like Optimism, zkSync, etc will be spending ETH when writing to the L1 even if the end users are shielded from that. There is a built in economy that burns ETH so demand won't be a problem.
- FeepingCreature 6y ago
  Yes, but that's exactly the problem. With any currency, spending happens when you see something that is worth more to you in sum over the future than the value of the currency. So when the value of the currency gets lower, you are eager to jump on opportunities; conversely, when the value of the currency gets higher, you are reluctant to jump on opportunities. To a first approximation, you spend inflationary money as early as you can, but deflationary money as late as you can. And that's the Ethereum blockchain ecosystem you get with a deflationary ETH - an ecosystem where everybody spends as late as they can. Does that sound like it will lead to a vibrant offering of services to you, cause it doesn't to me. This is also why I never got into Bitcoin. Why would I ever spend a bitcoin? As a currency it's near worthless, ironically; people who spend it will in the long run always be outcompeted by people who buy and hold. (Before the bubble bursts, anyways.) The medium of transaction should not be an investment vehicle; those purposes are directly opposed.
  - deleted 6y ago
    [deleted]
yokem55 6y ago
Because while the fee burn does act as a deflationary force on the eth economy, there is still the inflationary force of the staking rewards. If transaction volume falls too much, then the staking rewards will outpace the fees burned and the eth economy will see overall inflation. At some point (insert hand-waivium here) an equilibrium will be reached between transaction demand, eth asset price, and staking demand (as more eth is staked, individual staking returns will fall, but overall inflation goes up).

by ntr-- 6y ago

Sargos 6y ago

>Why expend some amount of ETH building and executing products when you can just HODL and wait for the price to go up? Most people aren't going to have a choice. ETH is required to be spent when making transactions and using dapps, NFTs, etc. Even L2s like Optimism, zkSync, etc will be spending ETH when writing to the L1 even if the end users are shielded from that. There is a built in economy that burns ETH so demand won't be a problem.

FeepingCreature 6y ago
Yes, but that's exactly the problem. With any currency, spending happens when you see something that is worth more to you in sum over the future than the value of the currency. So when the value of the currency gets lower, you are eager to jump on opportunities; conversely, when the value of the currency gets higher, you are reluctant to jump on opportunities. To a first approximation, you spend inflationary money as early as you can, but deflationary money as late as you can. And that's the Ethereum blockchain ecosystem you get with a deflationary ETH - an ecosystem where everybody spends as late as they can. Does that sound like it will lead to a vibrant offering of services to you, cause it doesn't to me. This is also why I never got into Bitcoin. Why would I ever spend a bitcoin? As a currency it's near worthless, ironically; people who spend it will in the long run always be outcompeted by people who buy and hold. (Before the bubble bursts, anyways.) The medium of transaction should not be an investment vehicle; those purposes are directly opposed.
- deleted 6y ago
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yokem55 6y ago

Because while the fee burn does act as a deflationary force on the eth economy, there is still the inflationary force of the staking rewards. If transaction volume falls too much, then the staking rewards will outpace the fees burned and the eth economy will see overall inflation. At some point (insert hand-waivium here) an equilibrium will be reached between transaction demand, eth asset price, and staking demand (as more eth is staked, individual staking returns will fall, but overall inflation goes up).