I’ll be quick. I assume you read Part 1. If you didn’t, you should. The article has been extremely widely circulated, rising to the top of Hacker News, r/cryptocurrency, featured on a popular YouTube channel , and has turned out to be the most accessed article I’ve ever written.
In it I explained how “Ethereum is not a decentralized peer-to-peer system. It is a system with an unaccountable ruling class exploiting the working class.”
I also pointed out it had “complicity in the classes that benefit from the decisions of the ruling class at the expense of the working class.”
I also challenged those complicit classes to ask themselves what they thought might happen to them when the working class was milked for all they were worth by the ruling class. I wrote: “Do you think the ruling class will suddenly stop seeking victims to enrich themselves?”
The article was published on August 6th, 2021, a day or two after the London hard fork that was marketed as the “ultra-sound money monetary policy” by Ethereum’s ruling class.
Finally, I pointed out in the original article that Ethereum had become “just like the corrupt fiat money system we’re trying to escape.”
Ethereum’s Actual Innovation— Making Deflation As Bad As Inflation
The flaw with the fiat system isn’t inflation per se. It is that the inflated money supply is given to insiders and privileged people who then benefit at the expense of those who lack that privilege.
The flaw isn’t inflation. The flaw is how alterations in the monetary policy affect the different classes.
Ethereum’s London hard fork, and their alleged “ultra sound” monetary policy show how deflation can reproduce the exact same flaw.
The London hard fork did not lower fees. It burned them. This fee burn reduces the outstanding supply of Eth. And this is what they call “ultra sound”.
Fees on Eth, like on all blockchains, are a function of the data size of the transaction, not of the value of the transaction. So whether you’re transacting $1 worth or $1 million worth of Eth, the fee is going to be pretty much the same. Now if fees were negligible that wouldn’t be an issue. But fees on Ethereum are anything but negligible.
Since the London hard fork, fees have shot up 400% on average, from about $10 per transaction to about $50 per transaction.
Average Ethereum Transaction Fee in USD June — November 23, 2021
In retrospect, the ruling class yet again failed to deliver on its promises. Everyone had been led to believe that this ‘upgrade’ would make fees more predictable, yet nobody predicted that fees would increase 400%.
Who Was Hurt and Who Benefited?
Eth price in USD has appreciated since the hard fork by about 10%. In anticipation of the hard fork it rose over 100%.
However, the new monetary policy outrightly favours the wealthy class at the expense of the working class and the users of the system:
- Miners — the working class — now earn less for their work as fees are burned instead of rewarded to them. (Read part 1 to see how unfairly this class has been treated.)
- Those who now stake get new coin rewards, earning an estimated reward of over 5% annualized on their staked coins (according to stakingrewards.com)
- If you’re in the wealthy class and can stake on your own with the minimum 32 Eth, or $130,000 or more worth of it, you won’t notice the $50–$100 fee to stake your coins. And you’ll earn over $6,500 worth of new coins in a year. You’ll earn it without doing any work at all, just like the people close to the money printer in the corrupt fiat system.
- However, if you’re in the not wealthy “Etherian class” — say you’ve only got a few hundred dollars worth of coins, like $500 — it will cost you $50-$100 to transfer your coins in your staking transaction to the pool, plus any additional fees they charge. With your $400 of remaining value you will earn a meager $20 of new coins in the year. It will take you 5 years just to earn back your transaction fee! So it doesn’t make sense for normal Etherian class people to stake, even with staking pools.
- Just like everything we’ve observed before on Ethereum, the rich benefit at the expense of the poor.
- While deflation of the money supply is occurring, and this has led to a short term spike in the value of Eth, it has come at the expense of the users of the system, who now must pay sky-high fees — it is in fact those burned, sky-high fees, paid by users of the system that are what account for all of the deflation and pay for the new coins issued to the wealthy class.
Just as “Part 1” warned, that Etherean class, which had complicitly done nothing for the miners when they repeatedly had their pay cut in past hard forks, have now become the next victims of the ruling class’ change to the rules to further enrich the already wealthy class.
To paraphrase a famous quote “First they came for the miners’ money, and I said nothing because I was not a miner. Then they came for my money and there was no one left to speak for me.”
We can see in Ethereum’s diabolical new monetary policy how deflation can be just as unfair as inflation when implemented to serve the interests of a wealthy and ruling class. Fees that are absolute prices regardless of value affect the poor in much greater proportion than the rich. Reducing the money supply only by reducing that which was previously paid to the working class, also enriches the wealthy class while impoverishing the working class. This is Ethereum’s new monetary policy. It rewards the rich (staking rewards), burns the money previously earned by workers and paid for by users (mining fee rewards), and increases that money paid by users (400% fee increases).
Is It Immoral to Own A Large Eth Stake?
I have a friend who told me he recently bought a stack of Eth as an investment and we discussed this issue today. He has no interest in using the Ethereum chain for any of its Dapps, DeFi, NFTs, DAOs, DEXes or any other things that run on it. He is in the ‘wealthy class’. When I pointed out to him that fees had increased dramatically, he immediately concluded, because of the class he was in, that this was a good thing, because it would cause the price of Eth to appreciate, since more fees were being burned. When I pointed out to him this was coming at the expense of miners and ordinary users he was shocked that he hadn’t realized this. He had been lured into this system of enrichment without it being explained to him who would be paying for his enrichment. He had entered the trade without malicious intent to exploit others, but being in the Eth wealthy class made him profit from and desire that which was harmful and unfair to the working and ordinary classes of users. As the saying goes “the road to hell is paved with good intentions”.
Being in the wealthy class of Ethereum makes you complicit in exploiting the working class and user class of Ethereum. It is a system in which those classes can’t really win and you can’t really lose. So go for it if that’s the game you wanna play. But you’re a hypocrite if you criticize the fiat system. You’re involved in an equally unfair and unjust system, it’s just one where you’re now the beneficiary of the unfairness and injustice.
Again, as I said in Part 1, as a bitcoiner I find this intolerable and unacceptable. I especially condemn it on these grounds because Ethereum promoters prey on naive and not rich investors getting them excited about mis-represented DeFi, NFTs, DEXes and the like which have even higher fees than ordinary transactions. When paid by the unsuspecting newcomers those higher fees enrich those wealthy promoters even more at the newcomers’ expense. It’s shameful. But it has been this way in Ethereum, and it will not stop until the whole thing comes crashing down when there are no more suckers left to bleed.