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If there were no outside demand for Ether then Ether would we worthless in USD. What you are saying is, that there is demand for the network services from beyon

If there were no outside demand for Ether then Ether would we worthless in USD. What you are saying is, that there is demand for the network services from beyond existing Ether holders, thereby creating demand for Ether by USD (or other currency) holders. Whether people transacting on the network care strongly about the costs vs alternatives to create a proper link with fiat is not so easy to show because there isn't always a direct 1-to-1 correspondence between services (and there are switching costs, too) - so the "inherently priced in fiat" is tough to show, I think. Also, being priced in fiat might still not create demand for Ether from fiat holders - that comes from outside demand as per the above.

pa7x1 3y ago
> If there were no outside demand for Ether then Ether would we worthless in USD. What you are saying is, that there is demand for the network services from beyond existing Ether holders, thereby creating demand for Ether by USD (or other currency) holders. Demand to settle a transaction on the network is demand for ETH. Because the base_fee of a transaction is burnt, destroyed, so ETH needs to be acquired to use it as a settlement layer. Much in the same way to how heating your house with a gas boiler is demand for gas. Similarly, when natural gas prices skyrocket (cue Ukraine invasion), alternative forms of heating start to look more attractive, and consumers may change their behaviors lowering the thermostats. In the case of Ethereum, alternative settlement layers will look more attractive or some users may lower their use. The same mechanisms are in place. I agree though that the relationship is not linear, that's not what I implied. Simply that the revenues of the network are priced in fiat, because the price is set by an auction to include your transaction on the scarce blockspace. And given at least some users will be sensitive to the price of the transaction in USD they will, at the margin, set the prices for a transaction in USD and therefore the fee revenues of the network. By the way I appreciate you engaging rationally on this topic in HN. Not a common sight when discussing anything related to crypto but much appreciated.
- RandomLensman 3y ago
  Thank you, likewise, needs two to have a rational discussion. I agree that there can be some link based on the utility of the network and with less of a speculative frenzy it might actually be stronger now. Not dissimilar perhaps to (other?) commodities, which have some link to economic activity but are not directly producing the activity themselves (and they can also have speculative phases). And commodities also have conceptual issues around their use in long-term investment for that reason (but at the same time they exist and trade).

pa7x1 3y ago

> If there were no outside demand for Ether then Ether would we worthless in USD. What you are saying is, that there is demand for the network services from beyond existing Ether holders, thereby creating demand for Ether by USD (or other currency) holders. Demand to settle a transaction on the network is demand for ETH. Because the base_fee of a transaction is burnt, destroyed, so ETH needs to be acquired to use it as a settlement layer. Much in the same way to how heating your house with a gas boiler is demand for gas. Similarly, when natural gas prices skyrocket (cue Ukraine invasion), alternative forms of heating start to look more attractive, and consumers may change their behaviors lowering the thermostats. In the case of Ethereum, alternative settlement layers will look more attractive or some users may lower their use. The same mechanisms are in place. I agree though that the relationship is not linear, that's not what I implied. Simply that the revenues of the network are priced in fiat, because the price is set by an auction to include your transaction on the scarce blockspace. And given at least some users will be sensitive to the price of the transaction in USD they will, at the margin, set the prices for a transaction in USD and therefore the fee revenues of the network. By the way I appreciate you engaging rationally on this topic in HN. Not a common sight when discussing anything related to crypto but much appreciated.

RandomLensman 3y ago
Thank you, likewise, needs two to have a rational discussion. I agree that there can be some link based on the utility of the network and with less of a speculative frenzy it might actually be stronger now. Not dissimilar perhaps to (other?) commodities, which have some link to economic activity but are not directly producing the activity themselves (and they can also have speculative phases). And commodities also have conceptual issues around their use in long-term investment for that reason (but at the same time they exist and trade).