Ethereum

Ether is the fuel of a programmable settlement layer. Every transaction on Ethereum pays for computation in ETH, every validator posts ETH as the collateral that secures the chain, and every application built on top ultimately denominates its security in it. Where bitcoin is a ledger of balances, Ethereum is a ledger of programs, and ether is what running them costs.

That gives ether two distinct claims on value at once: it behaves as a commodity, consumed to buy blockspace, and as a capital asset, staked to earn a yield paid in more ether. Those two stories respond to different things - the first to network activity, the second to interest rates and staking economics - which is why ETH does not trade as a simple high-beta version of bitcoin.

There is no supply cap. Instead there is a balance: new ether is issued to validators, and part of every transaction fee is destroyed. When the network is busy the burn can exceed issuance and the supply falls; when it is quiet, supply grows slowly.

The largest genuine use is paying for blockspace: token transfers, stablecoin payments, decentralised exchange trades, lending protocol interactions, and the data that layer-2 networks post back to the main chain. Every one of those pays a fee in ether, and part of that fee is burned.

The second use is staking. Validators lock 32 ETH each and are paid for proposing and attesting to blocks; liquid staking tokens let smaller holders do the same through a pool while keeping a tradeable claim. The resulting yield is the closest thing crypto has to a native risk-free rate, and it competes directly with dollar money-market yields for the same capital.

The third is collateral. Ether backs a large share of on-chain lending, and the same coins that secure the chain are frequently rehypothecated through liquid staking derivatives - a leverage chain that is invisible in the price until it unwinds.

Since the transition to proof of stake in September 2022, ether is issued only to validators. The rate depends on how much is staked in total: more stake means more issuance in absolute terms but a lower yield per validator. The step down from mining was roughly ninety percent - the single largest supply change in the asset's history, and it happened on a scheduled date.

The destruction side arrived a year earlier. Since the fee market reform of August 2021, every transaction pays a base fee that is burned rather than paid to a validator, with an optional tip on top. The base fee rises when blocks fill and falls when they empty, so the burn is a direct function of demand for blockspace.

The 2024 upgrade that gave layer-2 networks their own cheap data lane changed this arithmetic. Rollup activity now posts to a separate fee market, which cut costs for users and cut the mainnet burn at the same time. The network became cheaper and more used while burning less - a genuine tension between adoption and the supply story that anyone pricing ETH has to hold in their head.