Bankless co-founder sells all ETH: Ethereum did the right thing, but “ETH is money” has no future

Original article from Bankless co-founder David Hoffman

Translation by Odaily Planet Daily Qin Xiaofeng (@QinXiaofeng 888 )

Last week, Ethereum's most devout believer and Bankless co-founder David Hoffman proactively announced 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 lengthy 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 essentially played out, and he wishes to reallocate his capital to other opportunities he sees in the market. At the same time, he expressed continued strong optimism about the Ethereum network and the entire ecosystem.

The following is the original text from David Hoffman, translated by Odaily Planet Daily.

————————————————————

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

The Ethereum project itself is a multi-layered, stacked collection of coordination puzzles, and the "ETH is Money" thesis requires all these layers to succeed, and to do so with confidence.

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

Given the ambition of the Ethereum project, achieving its maximum successful version has always been a monumental challenge. Despite its shortcomings, the Ethereum project has still performed remarkably well, and its current market cap is well-deserved.

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 originally 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 entirety of the crypto world – all-encompassing, everything included. The only obstacle 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 swiftly to market dynamics and operate like a startup facing an existential threat of being rendered obsolete.

At the same time, Ethereum's Layer 2s (L2s) need to be able to act independently of the base layer, making 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 mission-critical 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 to create a revolutionary and powerful financial asset that, through its unique attributes as a superior global store of value, attracts even 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 component of their retirement portfolios, simply because the Ethereum project is so dominant.

Therefore, to achieve the "ETH is Money" goal, everything upstream of ETH must function with high effectiveness.

Ethereum is not Bitcoin. It chose the difficult path.

Bitcoin chose to strip everything from its blockchain to elevate BTC's status. Ethereum chose to add everything to its blockchain to maximize the utility of its block space. Only by doing this in the best possible way, ahead of competitors, can ETH attain its global monetary status.

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

The Environment May Have Never Allowed It to Succeed

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

(1) L1 Assets Are Inextricably Linked to Revenue

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

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

In 2021, ETH's dominance occurred when its share of L1 revenue market 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 arguably the highest cumulative earners in history. Their price charts look like what I would have expected for ETH – if ETH had maintained its higher market share of L1 fees for longer than it did after 2022.

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

0xMakesy posted a brilliant thread on Twitter:

"The failure of Fantasy Top, FriendTech, and consumer crypto applications to cross the chasm makes me incredibly humbled. The most ambitious form of crypto technology (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 in return) and consumers (those willing to pay more than operational cost for a product), only to find we satisfied the needs of neither side.

Where strong-version crypto failed, weak-version crypto (commoditized ledger/database technology for financial transactions) succeeded beyond anyone's expectations. The consequence is that crypto has been relegated to a subsidiary of traditional finance – which is both more impactful than anyone ordinary expected, and structurally deeply disappointing to crypto OGs. As commoditized ledger/database technology, reducing global transaction costs reduces the 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 overhead and improving their profit margins.

Crypto was supposed to be the most egalitarian thing ever. Its ambition was insane, and if successful, 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 the strong version of crypto – crypto for crypto's sake, self-sustaining, self-perpetuating. DeFi, NFTs, DAOs, and more. We are the rebels, building an alternative financial system of the people, for the people, injecting imagination into money.

There is also the weak version of crypto: providing efficient ledger infrastructure for the backends of financial institutions. The weak version was supposed to fuel the strong version, channeling demand for internet ledgers into a flow that reaches inside the crypto world, to Ethereum, and ultimately converges on ETH.

Perhaps, if Ethereum had executed better, faster, and stronger, if crypto had not attracted so many scammers and predators, the industry would 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 scams, frauds, 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 the Schelling point of a currency is sustained by belief. In 2021, more people believed in ETH: it was cool, disruptive, and populist. Bitcoin had the same characteristics and maintained them better than ETH after 2021.

This reality leads to 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 might have been sustained only because of that distortion. If so, then ETH becoming money always depended 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 will be tokenized on Ethereum.

In 2020, Nic Carter argued on the Bankless show that stablecoins could be parasitic to ETH as the native unit of Ethereum. At that time, stablecoins on Ethereum amounted to $3 billion. Today, that figure is $163 billion, a 54x increase.

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

The positive spillover effects of these utilities on $ETH as money are clearly not as strong as 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 block space 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 anything it does. This is the nature of open-source software, and this is Ethereum's strength. Ethereum offers its full suite of vitally important value 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.

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

Eventually, as block space commoditizes, fees will tend towards zero. As long as it is Ethereum doing the commoditization, and not a competitor, then Ethereum can maintain its profit margins and dominance.

Eventually, the fat protocol thesis will give way to the fat application thesis, where applications will consume the remaining margin. As long as these are applications running on Ethereum and not on a competitor's chain, this is fine for ETH.

"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, charging only the minimum necessary to sustain the network.

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

This vision could have been achieved if Ethereum could maintain an incredibly high market dominance.

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

The "ETH is Money" thesis requires everything about Ethereum to be perfect. Its margin for error is smaller than I originally thought. Ethereum's momentum 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 drive of a startup facing an existential threat, responding to market forces.

L2 teams need the freedom to make autonomous decisions, yet must operate under the larger brand umbrella of Ethereum and ETH. The technical synchronization integration between Ethereum and its L2s needed to be executed more swiftly.

The value of a smart contract chain is determined by fees, and to break free from this paradigm, Ethereum would need to rewrite the rules through the sheer force of its own success.

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

It simply did not realize its full potential.

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

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 margin.

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

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