Ethereum’s Biggest Mistake (and How to Fix It) | Sam Kazemian
Apr 28, 2025
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Sam Kazemian, co-founder of Frax Protocol, dives into Ethereum's identity crisis. He argues that Ethereum has confused ETH as an asset with the technology itself, undermining its role as a store of value. The conversation examines the post-EIP-1559 and proof-of-stake landscape, discussing how these changes affected ETH's valuation. Kazemian emphasizes the importance of social consensus in shaping Ethereum's future narrative and urges the community to redefine its identity for better market perception.
ETH should be perceived as a commodity-like store of value rather than tied to discounted cash flow models, to enhance its market valuation.
Creating a strong social consensus on ETH's identity is crucial for the community to navigate its future and solidify its value proposition.
The distinction between Ethereum the technology and ETH the asset is essential for avoiding confusion and reinforcing ETH's legitimacy in the market.
Deep dives
Re-evaluating the Position of ETH
The conversation emphasizes the need to position ETH as a store of value commodity rather than relying on discounted cash flow (DCF) models, which some experts argue is detrimental to ETH's valuation. Sam Kazmian suggests that the Ethereum community should prioritize understanding ETH as a cultural solution to valuation issues rather than as an asset tied to cash flows from smart contracts or investments. By reframing the narrative, the community can reinforce ETH as a fundamental store of value, akin to gold, rather than as a tech stock dependent on cash flow. This shift could stabilize and potentially increase the value of ETH in comparison to Bitcoin and other digital assets.
Separation of Technology and Asset
A clear distinction between Ethereum the technology and Ethereum the asset is essential for the future of the network and its valuation. Kazmian stresses that while ETH the technology can flourish independently, its market value as an asset must be understood separately to avoid confusing the two. Past events, such as the transition to proof of stake and the implementation of EIP-1559, have created misunderstandings about the relationship between technological advancements and asset valuation. This disconnect has manifested in discussions that fail to pinpoint the true nature of ETH and hinder its acceptance as a reliable store of value.
The Challenge of Social Consensus
Creating a solid social agreement on the nature of ETH and its valuation is crucial for Ethereum's future. The community must collectively define what ETH represents, establishing a coherent narrative that all stakeholders can rally around. Kazmian points out that without a shared understanding, discussions become chaotic, leading to misaligned efforts and confusion. By fostering a unified vision, the Ethereum community can better navigate its path forward and enhance ETH's acceptance as a legitimate store of value, similar to Bitcoin.
The Danger of Focusing on DCF Models
Emphasizing DCF models for ETH may lead to a downward spiral in its market perception, positioning it as a low-value asset rather than recognizing its potential as a cultural and functional commodity. Kazmian argues that by continually focusing on floor prices based on cash flow discussions, the community inadvertently sets a limit on ETH's valuation. This focus diverts attention from the intrinsic value and utility of ETH within the blockchain ecosystem, which should be acknowledged as vital to its growth and adoption. A broader perspective that encompasses ETH's role as a commodity could better align its value proposition with its actual usage.
Balancing Technology and Community Values
Moving forward, Ethereum must strike a balance between fostering technological development and maintaining a strong community identity around the ETH asset. Kazmian highlights the necessity for technological evolution that supports ETH's role as a stable store of value while enforcing social commitments that prevent volatility. This includes ensuring a predictable emission model that allows stakeholders to understand and communicate the nature of ETH effectively. By addressing community-driven values while nurturing technological growth, Ethereum can position itself favorably in the competitive landscape of digital assets.
Ethereum has achieved groundbreaking technological success, but has it failed to properly define ETH the asset?
In this episode, Frax founder Sam Kazemian joins us to discuss what he believes is Ethereum’s biggest mistake: confusing the ETH asset with Ethereum the technology. Sam argues that post-EIP-1559 and Proof of Stake, ETH unintentionally shifted toward a discounted cash flow (DCF) valuation model, undermining its potential as a commodity-like store of value.
We explore how the Ethereum community can reclaim a stronger narrative around ETH and why social consensus — not just tech — determines an asset’s destiny.
0:00 Intro
4:43 Classifying ETH
17:50 ETH/BTC Collapse
33:39 ETH Revenues
44:35 Blue-Money Gospel
53:44 What ETH Needs
1:10:08 ETH Internet Bond Narrative
1:19:49 Final Thoughts
