Bankless Co-founder’s ETH Sell-Off Confession: Ethereum Did the Right Thing, But “ETH is Money” Has No Future

Original article by David Hoffman, Co-founder of Bankless

Translation by Qin Xiaofeng, Odaily (@QinXiaofeng 888 )

Last week, David Hoffman, a staunch Ethereum believer and co-founder of Bankless, posted that he had "sold his last ETH," sparking intense discussion within the Ethereum community (recommended reading: Bankless Founder Liquidates ETH, Ethereum Faith Collectively Shattered).

On May 27, David Hoffman published a long thread on X explaining why he sold his ETH. He stated that the sale was not due to a bearish view on ETH, but rather because he believes the 'ETH is Money' narrative has essentially played out, and he wishes to reallocate his capital to other opportunities he sees in the market. At the same time, he expressed strong optimism about the Ethereum network and its entire ecosystem.

Below is the original text from David Hoffman, translated by Odaily.

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Money is a coordination game, and coordination is never easy.

The Ethereum project itself is a multi-layered, stacked collection of coordination challenges, and the 'ETH is Money' thesis requires that all these layers succeed—and succeed confidently.

ETH can only become money if and when each layer of the Ethereum techno-social stack performs better than its competitors.

Given the ambition of the Ethereum project, achieving its maximum version of success was always an immense challenge. Despite its shortcomings, the Ethereum project has performed admirably and currently holds a market cap it rightfully deserves.

Nevertheless, the window of opportunity for the market to revalue Ethereum seems to be closing.

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

Ethereum is a Coordination Game

A Turing-complete blockchain is such a powerful concept that Ethereum's maximum potential is to become the entire crypto world—all-encompassing, all-inclusive. The only barrier preventing Ethereum from achieving 100% absolute dominance is coordination.

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

Simultaneously, Ethereum's leadership must respond quickly to market dynamics and operate like a startup facing an existential threat of obsolescence.

At the same time, Ethereum's Layer 2 (L2) solutions need the autonomy to act independently of the base layer and make their own market choices, yet they must remain economically bound to and constrained by the broader Ethereum economy and brand.

Furthermore, Ethereum's roadmap needs to be executed in a specific order to maximize and sustain Ethereum's momentum and market dominance, effectively quelling competition and maximizing confidence in Ethereum and ETH. Those critical mission technologies require sufficiently fast research and engineering development so that Ethereum can both prove its utility to the outside world and demonstrate its ability to stay ahead of competitors.

In summary, the core of the 'ETH is Money' thesis is the creation of a revolutionary and powerful financial asset that, through its unique properties as a superior global store of value, attracts those who are otherwise indifferent.

Ethereum's brand and the strength of ETH must be so powerful that old-school investors (baby boomers) not only feel safe but also feel compelled to include ETH as a significant component of their retirement portfolios, due to the overwhelming dominance of the Ethereum project.

Therefore, for 'ETH is Money' to be realized, everything upstream of ETH must operate with high efficiency.

Ethereum is not Bitcoin. It chose the difficult path.

Bitcoin chose to strip away everything on its blockchain to elevate the status of BTC. Ethereum chose to add everything onto its blockchain to maximize the utility of its blockspace. Only by doing this optimally, and ahead of competitors, can ETH attain its status as global money.

We made some progress, and Ethereum has achieved its fair share of its maximum potential market cap. But I fear the window for playing this game has closed.

The Environment May Never Have Allowed It to Succeed

Looking back over the past few years, I see a multitude of environmental challenges that Ethereum needed to overcome.

(1) L1 Assets Are Inextricably Linked to Revenue

No matter how you view the difficulty of valuing smart contract chains based on fees and revenue... fees and revenue are clearly how smart contract L1 assets enhance their pricing power.

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

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

In 2024, SOL's dominance occurred when its L1 revenue market share grew uniquely relative to the rest of the industry.

In 2026, NEAR is experiencing a price revaluation alongside fundamental growth in its L1 revenue and NEAR token burns.

You can also look at assets like BNB and TRX, which are perhaps the highest cumulative revenue projects in history. Their price charts look like what I originally expected ETH's chart to look like—had ETH maintained its higher market share of L1 fees longer than 2022.

(2) The Strong Version of the Crypto Vision Failed to Materialize

0xMakesy posted a brilliant thread on Twitter:

"Fantasy Top, FriendTech, and consumer crypto applications failing to cross the chasm humbles me immensely. The most ambitious form of crypto (ushering in a new era of user-owned software and infrastructure) has failed.

We optimistically tried to merge the roles of investors (those who allocate capital to production expecting more capital back) and consumers (those willing to pay above operating costs for a product) and ended up satisfying the needs of neither.

Where strong version crypto failed, weak version crypto (commoditized ledger/database technology for financial transactions) has succeeded beyond anyone's expectations. The result is that crypto has been relegated to an appendage of traditional finance—which is both more impactful than any ordinary person expected, and structurally deeply disappointing for crypto OGs. As commoditized ledger/database technology, reducing global transaction costs reduces the drag on global GDP, but it is merely a marginal improvement over the status quo, with a significant portion of its value flowing to existing intermediaries, lowering their overheads and increasing their profit margins.

Crypto was supposed to be the most egalitarian thing ever. Its ambition was wildly crazy, and if successful, it could have genuinely changed the structure of society.

But it didn't. The game is over. We didn't find the right primitives, and more importantly, the right culture to realize the most ambitious version of crypto. It's time to question everything again."

Ethereum represents the strong version of crypto—crypto for crypto's sake, self-sustaining, self-perpetuating. DeFi, NFTs, DAOs, and so on. We are the rebels building an alternative financial system, of the people, for the people, infusing imagination into money.

There also exists a weak version of crypto: providing efficient ledger infrastructure for the backends of financial institutions. The weak version was supposed to fuel the strong version, generating demand for internet-based ledgers that would flow into the crypto world, into Ethereum, and ultimately converge on ETH.

Perhaps, if Ethereum had executed better, faster, stronger, if crypto hadn't attracted so many scammers and predators, the industry might have won the influence and respect I always thought it deserved. But the only period the public held a positive view of crypto was from late 2020 to early 2022.

Outside that brief window, crypto's reputation has been one of scams, fraud, get-rich-quick schemes, and being useless for ordinary people.

(3) ETH as Money Depended on the Strong Version of Crypto

ETH performed well as internet money precisely when everyone was forced online. The world discovered crypto for the first time, and in that brief window, it was cool.

Money is a coordination game; a currency's Schelling point is maintained by belief. In 2021, more people believed in ETH: it was cool, disruptive, and populist. Bitcoin shared these traits and has preserved them better than ETH post-2021.

This reality leads to a disconcerting possibility: the strong version of crypto may never have reached a stable equilibrium. The COVID-19 pandemic was an extremely distorted monetary era, and ETH as money may have been sustained only because of that distortion. If so, then ETH becoming money always depended on the strong version of crypto performing better than it actually did.

(4) Ethereum's Utility Also Helps Other Monies

Is Bitcoin money? Is the US dollar money? Is gold money? Irrelevant! Anything considered money will be tokenized on Ethereum.

In 2020, Nic Carter argued on the Bankless podcast that stablecoins could be parasitic on ETH as Ethereum's native unit. At that time, stablecoins on Ethereum were worth $3 billion. Today, that figure is $163 billion—a 54x increase.

The utility Ethereum provides is helping whatever is money to expand its monetary network. This is why the US is so bullish on crypto for stablecoin applications. Ethereum is helping the US maintain dollar hegemony, and leveraging this fact is now explicit government policy.

The positive spillover effects of this utility on $ETH as money are clearly less strong than what the US government sees in Ethereum's stablecoin ecosystem.

Ethereum is a Giver, Not a Taker

At its core, Ethereum is a giver, not a taker.

• It provides the world's most secure blockspace to L2s at cost.
• It tokenizes the world's assets at cost.
• It secures billions of dollars in DeFi at cost.

Ethereum doesn't charge any markup for everything it does. This is the nature of open-source software, and this is Ethereum's strength. Ethereum provides its full suite of incredibly important values to the world at cost.

Ethereum is noble. Ethereum is good. Ethereum is the world's most successful non-profit organization.

Of course, a massive number of applications will happen on Ethereum. It is, and will continue to be, one of the most impactful open-source software projects ever built by humanity, and being a "non-profit protocol" is a core feature of it.

This is why the path for ETH to become money depends on a very high and sustained market dominance.

Ultimately, as blockspace commoditizes, fees will trend toward zero. As long as the commoditization is happening on Ethereum rather than its competitors, Ethereum can maintain its margins and dominance.

Ultimately, the Fat Protocol Thesis will give way to the Fat Application Thesis, and applications will eat the remaining profit margins. As long as they are applications running on Ethereum rather than competitors, this is fine for ETH.

The concepts of "ETH is Money" and "Ethereum is a Giver, Not a Taker" are difficult to reconcile. Ethereum's architecture is intentionally designed to give value back to its ecosystem, extracting only the minimum necessary to sustain the network.

Architecturally, ETH is not in a privileged position within Ethereum, and this is a feature, not a bug. ETH can only become money if Ethereum wins a war in which it architecturally refuses to participate.

This vision could have been realized if Ethereum had been able to maintain an incredibly high market dominance.

The 'ETH is Money' Thesis Demands Extremely High Performance from Ethereum

The 'ETH is Money' thesis requires everything about Ethereum to be perfect. Its margin for error is smaller than I originally thought. The momentum Ethereum had in 2021 and 2022 made ETH becoming money seem like the default path.

In hindsight, Solana's rise in 2021, accompanied by rising anti-Ethereum sentiment, was the first major signal that the coordination game for Ethereum and ETH wasn't going according to plan.

The Ethereum Foundation (EF) needed to decentralize and allow alternative power structures to emerge. But it also needed to operate with the urgency and drive of a startup facing an existential threat.

L2 teams needed the freedom to make their own decisions, but also needed to operate under the larger brand umbrella of Ethereum and ETH. The technical synchronous integration between Ethereum and its L2s needed to be executed much more quickly.

The value of smart contract chains is determined by fees, and to break free from this paradigm, Ethereum needed to rewrite the rules through the sheer power of its success.

However, the 'ETH is Money' thesis hasn't failed

It just hasn't lived up to its full potential.

Ethereum did the noble thing, choosing the most difficult, most ambitious, most ideologically pure path for its future. It achieved some incredible victories while also failing some tests. It earned the market cap it deserved.

I am extremely bullish on the Ethereum network and its ecosystem: Ethereum is architecturally designed to maximize the success of its applications, L2s, and ecosystem. The Fat Application Thesis means Ethereum's applications will capture all fees, and the Rollup-centric roadmap means L2s will take 97% of the profit margin.

As for the ETH asset, I find it increasingly difficult to see a structural upward or downward revaluation for ETH.

The reason I sold my ETH therefore is not because I am inherently bearish on ETH, but because I believe the 'ETH is Money' thesis has been fully played out, and I want to reallocate my capital today to other opportunities I see in the market.