Bankless co-founder liquidates ETH: Ethereum did the right thing, but "ETH is money" has no future

Original article from David Hoffman, Co-founder of Bankless

Translated by Odaily (@QinXiaofeng 888 )

Last week, one of Ethereum's most steadfast believers, Bankless co-founder David Hoffman, publicly stated he had "sold his last ETH," sparking intense debate within the Ethereum community (Recommended reading: "Bankless Founder Liquidates ETH, Ethereum Faith Collectively Shattered").

On May 27, David Hoffman published a long post on X explaining why he sold his ETH. He stated that selling ETH was not because he is bearish on ETH, but because he believes the 'ETH is Money' narrative has largely played out, and he wishes to reallocate his capital to other opportunities he sees in the market. At the same time, he expressed that he remains extremely bullish on the Ethereum network and the entire ecosystem.

The following 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, cascading collection of coordination problems, and the 'ETH is Money' thesis requires all these layers to succeed, and to succeed with confidence.

For ETH to become money, every single layer of the Ethereum techno-social stack must perform better than its competitors.

Given the ambition of the Ethereum project, achieving its maximum potential for success was always a monumental challenge. Despite its shortcomings, the Ethereum project has performed remarkably well and deserves its current market capitalization.

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 initially collectively pursued.

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 and all-inclusive. The only barrier preventing Ethereum from achieving 100% absolute dominance is coordination.

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

At the same time, Ethereum's leadership must be responsive to market dynamics and operate like a startup facing an existential threat of being outcompeted.

Simultaneously, Ethereum's Layer 2s (L2s) need the freedom to act independently from the base layer and make their own market choices, yet they must remain economically tied to and constrained by the broader Ethereum economy and the Ethereum brand.

Furthermore, Ethereum's roadmap needs to be executed in a specific order to maximize and maintain Ethereum's momentum and market dominance, effectively quelling competition and maximizing confidence in Ethereum and ETH. Those critical technical tasks require sufficiently fast research and engineering development, allowing Ethereum to 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 was to create a revolutionary and powerful financial asset that, by virtue of its unique properties as a superior global store of value, would attract those who were previously indifferent.

The Ethereum 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 part of their retirement portfolios, simply because the Ethereum project is so dominant.

Therefore, for the goal of 'ETH is Money' to be realized, everything upstream of ETH must function with high effectiveness.

Ethereum is not Bitcoin. It chose the difficult path.

Bitcoin chose to strip everything off 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 before its competitors, could ETH attain its status as global money.

We made some progress, and Ethereum has captured its deserved share of its maximum potential market cap. But I fear the window of opportunity to play 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 would have needed to overcome.

(1) L1 Assets Are Inextricably Linked to Revenue

No matter how you look at the difficulty of evaluating smart contract chains based on fees and revenue... fees and revenue are clearly how smart contract L1 assets derive their pricing power.

By 2026, we have ample data showing 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 uniquely grew 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 arguably the highest cumulative revenue projects in history. Their price charts look like what I would have expected ETH's to look like – if ETH had maintained its higher market share of L1 fees for longer than it did in 2022.

(2) The Strong Version of the Crypto Vision Did Not Materialize

0xMakesy posted a brilliant thread on Twitter:

"I feel incredibly humbled that Fantasy Top, FriendTech, and consumer crypto apps failed to cross the chasm. The most ambitious version of crypto – ushering in a new era of user-owned software and infrastructure – has failed.

We optimistically tried to merge the roles of investors (who allocate capital to production expecting more back) and consumers (who pay more than the cost of a product for its utility), and found we didn't satisfy the needs of either side.

Where strong version crypto has failed, weak version crypto (commoditized ledger/database tech for financial transactions) has succeeded beyond anyone's expectations. As a result, crypto has been reduced to an adjunct of traditional finance – which is both more impactful than any ordinary person expected, and yet structurally deeply disappointing for crypto OGs. As commoditized ledger/database technology, reducing global transaction costs reduces friction in global GDP, but this is merely a marginal improvement to the status quo, and a large portion of its value flows to existing intermediaries, lowering their overheads and increasing their profit margins.

Crypto was supposed to be the most egalitarian thing ever. Its ambition was insane, and if it succeeded, it could have truly changed the fabric 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 strong version crypto – crypto for the sake of crypto, self-sustaining, self-perpetuating. DeFi, NFTs, DAOs, and so on. We were the rebels building an alternative financial system of the people, by the people, injecting imagination into money.

There is also 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, translating demand for internet-native ledgers into a flow that rushes into the crypto world, into Ethereum, and ultimately converges on ETH.

Perhaps, if Ethereum had executed better, faster, and stronger, and 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 time the public held a positive view of crypto was from late 2020 to early 2022.

Outside that brief window, crypto's reputation has been scams, fraud, get-rich-quick schemes, and utterly useless to ordinary people.

(3) ETH as Money Depends on Strong Version Crypto

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

Money is a coordination game, and 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 maintained them better than ETH did after 2021.

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

(4) Ethereum's Utility Also Helps Other Money

Is Bitcoin money? Is the US Dollar money? Is Gold money? It doesn't matter! Anything considered money gets tokenized on Ethereum.

In 2020, Nic Carter argued on the Bankless show that stablecoins could be parasitic to ETH as Ethereum's native unit. At that time, stablecoin supply on Ethereum was $3 billion. Now, it's $163 billion, a 54x increase.

The utility Ethereum provides is helping anything that is money expand its monetary network. That's 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 these utilities for $ETH as money are clearly weaker than what the US government sees in the Ethereum 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 charges no markup for everything it does. This is the nature of open-source software, and this is Ethereum's strength. Ethereum offers its entire suite of critically 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 amount of applications will occur on Ethereum. It is, and will continue to be, one of the most impactful open-source software projects ever built by humans, and being a 'non-profit protocol' is one of its core characteristics.

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

Ultimately, as blockspace commoditizes, fees trend towards zero. As long as it is Ethereum doing the commoditizing, and not a competitor, then Ethereum maintains its margin and dominance.

Ultimately, the fat protocol thesis gives way to the fat application thesis, and applications consume the remaining profit margins. As long as they are applications running on Ethereum, and not on a competitor's, this is fine for ETH.

'ETH is Money' is difficult to reconcile with 'Ethereum is a giver, not a taker'. Ethereum's architecture is intentionally designed to flow all value back into its ecosystem, extracting only the minimum necessary to sustain the network.

Architecturally, ETH is not privileged within Ethereum, and this is a feature, not a bug. ETH could only become money if Ethereum won a war it was architecturally designed to abstain from.

If Ethereum could have maintained an incredible market dominance, this vision could have been realized.

The 'ETH is Money' Thesis Demands Too Much from Ethereum

The 'ETH is Money' thesis demands everything from Ethereum to be perfect. Its margin for error is smaller than I originally thought. The momentum of Ethereum 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 was not going according to plan.

The Ethereum Foundation (EF) needs to be decentralized and allow alternative power structures to emerge. But it also needs to operate with the urgency and momentum of a startup facing an existential threat in response to market forces.

L2 teams need the freedom to make autonomous decisions, but also need 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 faster.

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

However, the 'ETH is Money' thesis has not failed

It just hasn't realized its full potential.

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

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 the fees, and the rollup-centric roadmap means L2s will take 97% of the profit margins.

As for the ETH asset itself, I increasingly find it difficult to see a structural revaluation – upwards or downwards – for ETH.

My reason for selling my ETH is not because I am bearish on ETH itself, but because I believe the 'ETH is Money' thesis has played out, and I want to reallocate my capital today to other opportunities I see emerging in the market.