Ethereum is often described as a “world computer.” It is a convenient metaphor — but also one of the most damaging misunderstandings in the history of the protocol.
Calling Ethereum a world computer reduces it to an infrastructure for executing applications, competing in the same mental category as cloud providers and internet platforms. It frames the protocol as a decentralized AWS: a global machine whose main goal is to process as many transactions as possible, as cheaply as possible, as fast as possible.
But that is not what Ethereum fundamentally is.
Ethereum is, at its core, a digital open source state — an open, global, permissionless state layer that enables economic activity by creating private property in the digital realm, with a level of credibility and legal-like certainty that no previous system has been able to provide at scale.
Its rules are enforced by code, but its legitimacy comes from something deeper: the resilience of its architecture, secured by hundreds of thousands of validators distributed across jurisdictions, organizations, and individuals. Ethereum’s true breakthrough is not compute. It is the ability to establish a shared, neutral, and unstoppable state — a foundation for ownership, coordination, and economic agreements that can outlive companies, governments, and platforms.
This distinction matters because it changes everything: how we assess Ethereum’s strategy, how we judge the decisions of the Ethereum Foundation, and which metrics truly reflect progress versus noise.
This distinction matters because it changes everything: how we assess Ethereum’s strategy, how we judge the decisions of the Ethereum Foundation, and which metrics truly reflect progress versus noise.
If Ethereum is an Open Source State, then sustainability is not about maximizing throughput or extracting short-term revenue. It is about preserving credible neutrality, strengthening resilience, and expanding the protocol’s ability to support long-term value creation across an ecosystem that no single actor can capture.
That is the lens this article proposes — and the reason we must revisit the metrics that shape the narrative around Ethereum.
To understand what Ethereum can become — and what it must protect in order to remain sustainable — we first need to answer a simpler question:
What is a state actually for?
A state is not merely a government, a flag, or a bureaucracy. At its core, a state is an institutional technology: a system that enables large-scale coordination among people who do not know each other, do not trust each other, and may not even share culture or values.
The primary product of a successful state is predictability — a reliable environment where individuals and institutions can plan, invest, and cooperate over long time horizons. Economists call this the reduction of transaction costs. In practice, this is what makes complex economies possible.
A functioning state provides a bundle of services that can be grouped into five foundational layers.
A state defines what can be owned, who owns it, and under what rules ownership can be transferred. This may sound obvious, but it is the foundation of modern economic life.
Without secure property rights:
investment becomes irrational,
credit becomes fragile or impossible,
long-term planning collapses.
This is why many of the world’s wealthiest nations are not those with the most natural resources, but those with the most credible protection of private property.
The key here is not the existence of laws on paper, but the credibility of enforcement in practice. When people believe that ownership can be arbitrarily confiscated or politically redefined, capital flees — and the economic base erodes.
The second major function of a state is to enable contracts.
Contracts are what allow strangers to cooperate. They are what enable supply chains, lending, employment, insurance, and complex business relationships. In primitive economies, trust is personal. In advanced economies, trust becomes institutional — because agreements can be enforced even when parties have no relationship.
A state with strong contract enforcement provides:
dispute resolution mechanisms,
predictable commercial rules,
consistent interpretation of obligations,
and reliable protection of creditors and counterparties.
The economic implication is profound: contract enforcement turns commerce into a scalable, impersonal system. It transforms fragmented trust networks into global markets.
The uncomfortable truth is that states are, fundamentally, enforcement machines.
Property rights and contracts only exist if there is a mechanism capable of defending them. A state provides external defense and internal security: the ability to prevent private coercion, control violence, and maintain social order.
This is not merely about policing. It is about ensuring that individuals and institutions are not forced to rely on private enforcement, intimidation, or violence to protect their assets and agreements.
In other words:
Security is not a feature of an economy — it is a prerequisite for one.
Markets alone do not reliably produce certain kinds of goods that societies need in order to function and grow: infrastructure, standards, education, research, and basic coordination layers.
Successful states provide public goods that:
increase productivity and connectivity,
reduce systemic friction,
and enable innovation to compound.
Here again, the distinction is not the size of the state, but its quality. Some states spend aggressively and produce little. Others invest in scalable infrastructure and build long-term prosperity. The difference is institutional capacity, governance quality, and resistance to corruption and capture.
Finally, states require sustainability.
They need resources to fund security, infrastructure, and institutions. This is why nearly every successful state develops:
a unit of account (a currency),
and a fiscal system (taxation or equivalent mechanisms).
A stable currency allows economic calculation. A credible fiscal system allows long-term investment and lowers the cost of capital. When monetary credibility collapses, planning becomes impossible; when fiscal credibility collapses, enforcement weakens and institutions decay.
Sustainability, therefore, is not simply about collecting revenue. It is about maintaining legitimacy, predictability, and capacity without becoming extractive.
And this is where many states fail.
Why Some States Succeed (and Others Don’t): The Design Principles
If states provide similar services, why do some generate extraordinary prosperity while others remain fragile, corrupt, or trapped in stagnation?
The difference is not ideology, nor the presence of resources. It is institutional design.
The most successful states tend to share a set of structural principles that make them resilient, credible, and difficult to capture.
The defining feature of a mature state is that laws apply consistently — not selectively.
Rule of law means:
the law is superior to individuals,
enforcement is predictable,
and rules are stable over time.
Without rule of law, the state becomes a personal power structure. When that happens, economic life becomes a political game rather than a productive one.
The most valuable feature of any state is its ability to credibly commit.
Investors, entrepreneurs, families, and institutions make decisions based on expectations of the future. If the state cannot credibly commit to maintaining rules — if it can change them arbitrarily — then long-term capital formation collapses.
A successful state is not necessarily “good.” It is credible.
Credibility is what creates trust without requiring optimism.
The moment a state becomes a participant instead of an arbiter, it begins to destroy the foundation of its legitimacy.
States that choose winners, protect insiders, or enforce politically-driven favoritism eventually become extractive. Their institutions serve power rather than society. Economic productivity becomes secondary to rent-seeking.
Neutrality is not a moral concept. It is an economic one.
The best states assume that power will be abused — and design their institutions accordingly.
They implement mechanisms that make capture difficult:
separation of powers,
independent courts,
distributed authority,
transparency and accountability,
free press or equivalent monitoring forces.
This is why successful states are rarely defined by perfect leaders. They are defined by systems that remain stable even under imperfect leadership.
This principle is deeply underrated.
Systems become abusive when people cannot leave. Exit options discipline power. They create a market for governance and reduce the temptation to extract excessively.
In nation-states, exit takes the form of emigration, capital flight, and competitive jurisdictions. In well-designed systems, the possibility of exit forces institutions to remain credible and restrained.
Strong states are capable states — they can enforce rules, collect revenue, and provide public goods effectively.
But capacity without limits becomes authoritarian. Capacity must be paired with accountability. The strongest states combine:
operational competence,
legal restraint,
institutional stability.
States must fund themselves. But extraction must be sustainable.
A state that taxes too aggressively, or extracts value through corruption and rent-seeking, destroys the very economic base it depends on. This is a recurring historical pattern. Over-extraction leads to lower investment, lower productivity, and eventually declining legitimacy.
The best states maximize long-term compounding, not short-term extraction.
This logic applies to all institutional systems — including digital ones.
Put simply, a state creates value by turning a chaotic world into a predictable one. It enables coordination at scale by providing property rights, enforceable agreements, security, public goods, and sustainable economic infrastructure.
The most successful states succeed not because they do more, but because they do these things with:
credible neutrality,
strong enforcement,
resistance to capture,
and long-term predictability.
Once you understand this, you can begin to see Ethereum not as a decentralized computer, but as something far more consequential:
a global state layer for digital property and coordination — an Open Source State.
And that framing gives us an actionable way to evaluate Ethereum’s evolution: through the lens of institutional credibility, neutrality, resilience, and sustainable value creation.
Human Capital: The Prime Metric of an Open Source State
Human capital matters more than technology.
Protocols do not evolve by themselves. Roadmaps do not ship automatically. Security does not maintain itself. Every major advance in Ethereum’s history — from proof-of-stake, to rollup-centric scaling, to EIP-1559, to account abstraction research — was the outcome of human coordination: researchers, engineers, client teams, educators, governance participants, ecosystem builders, auditors, and community leaders working under imperfect incentives and incomplete information.
Ethereum’s long-term competitiveness therefore depends less on its current codebase and more on its ability to continuously attract, retain, and coordinate exceptional talent.
In fact, states — whether nation-states or digital states — do not win primarily because they are “more advanced.” They win because they can mobilize high-quality human capital and align it toward public goods production: infrastructure, security, dispute resolution mechanisms, and shared standards that benefit the entire society.
This is where state-building becomes non-trivial.
Individuals naturally optimize for their own goals: prestige, wealth, influence, career opportunities, ideological preferences, or even personal rivalries. In a state, the central challenge is to align those diverse motivations toward outcomes that serve the common good — without suppressing individuality or becoming authoritarian.
Successful states do this through:
credible institutions,
shared values,
cultural norms,
and incentive systems that reward contributions to public goods.
The same is true for Ethereum.
Ethereum’s most valuable “asset” may not be ETH, throughput, or market share — but the unique culture that has historically attracted builders who are willing to work on long-term infrastructure, open standards, and research-heavy public goods that do not immediately monetize.
If Ethereum loses the ability to coordinate talent toward these public goods, it will not matter how sophisticated the technology is: the state will decay.
Talent does not coordinate efficiently in a vacuum. It requires a shared mission and constraints that define what is legitimate.
In nation-states, this takes the form of a constitution and core civic values. In open source states, it takes the form of:
shared cultural norms (“credible neutrality”, “open innovation”, “minimal trusted parties”),
governance legitimacy,
and clear boundaries around what the protocol should and should not do.
A constitution is not merely a legal document — it is a coordination device. It reduces conflict by making some questions non-negotiable and providing a stable framework for everything else.
For Ethereum, the implicit constitution has historically included principles like:
neutrality over favoritism,
decentralization over convenience,
long-term resilience over short-term efficiency,
permissionless innovation over gatekeeping,
and openness over capture.
If Ethereum becomes unclear on these values, or allows them to be overridden by short-term narratives, the system loses its ability to coordinate elite talent at scale.
This also leads to a strategic implication that many crypto narratives ignore.
In some markets, network effects push toward a single dominant winner. But states are different. States are not mere platforms; they are value systems. They reflect cultures, preferences, ideologies, and institutional trade-offs.
Because cultures differ, the long-run equilibrium is likely a world of many states — including many digital states. Even if interoperability improves, we should not expect a single blockchain to govern all economic activity.
Therefore, Ethereum should not aim to win by becoming the cheapest or fastest execution environment. It should aim to win by becoming the most credible and resilient base layer for digital property and coordination — and by being the state that attracts the highest quality human capital, capable of building and maintaining the infrastructure that others depend on.
In the long run, the most successful states will be those that can coordinate the greatest human talent toward public goods — without being captured by narrow interests.
That is the real metric of state progress.
Human capital is hard to measure, but we can build a useful proxy dashboard that captures its reality. The trick is to measure quality and coordination capacity — not just raw activity.
Number and quality of active contributors to:
client teams (execution + consensus)
research groups
EIP authors and implementers
Why it matters:
This is the “civil service” of the state — the people who maintain its legal code and infrastructure.
What good looks like:
high contributor diversity
sustained throughput of protocol improvements
no dependence on a single organization
How many independent teams maintain:
execution clients (e.g., Geth, Nethermind, Besu, Erigon)
consensus clients (e.g., Lighthouse, Prysm, Teku, Nimbus)
Share of each client on mainnet
Why it matters:
This is equivalent to institutional redundancy — the ability of the state to survive failures, bugs, or capture.
What good looks like:
balanced market share
multiple independent implementations
strong incentives for new teams to emerge
How much funding goes to:
core dev work
security / audits
research
education and tooling
And how stable that funding is
Why it matters:
A state needs a sustainable public goods budget.
What good looks like:
diversified funding sources (not only EF)
transparent allocation
outcomes tied to measurable improvements
Where top researchers and builders go:
Are they joining Ethereum or leaving for other ecosystems?
Proxy signals:
major contributors moving to other L1s
top teams choosing other ecosystems as default
Why it matters:
Talent flows are the “balance of payments” of a state.
How long does it take Ethereum to:
implement major upgrades
reach consensus on roadmap decisions
react to existential risks (security, centralization, censorship)
Why it matters:
States fail when they cannot act, even if they know what to do.
What good looks like:
consistent delivery without compromising decentralization
clarity in decision-making processes
reduced governance deadlock
Useful but often inflated; should focus on meaningful repos.
Signal of interest, but not necessarily of long-term infrastructure quality.
Useful, but often hype-driven.
If human capital is the prime metric of an Open Source State, then the next question becomes unavoidable:
How does the state sustainably fund and compensate the people who build and maintain its public goods?
This is not a secondary issue. It is one of the defining failure modes of both nation-states and digital states.
Traditional states tend to underpay their civil servants. They compensate with stability, prestige, and pensions — but rarely with truly competitive, market-driven remuneration. The result is predictable: the state often fails to recruit and retain the highest-quality talent for infrastructure, security, and institutional design. The best engineers, economists, lawyers, and operators go elsewhere.
For an Open Source State like Ethereum, this model would be fatal.
Ethereum’s long-term sustainability depends on continuously attracting elite builders to work on the least glamorous but most essential problems:
protocol research,
client engineering,
security auditing,
public infrastructure,
standards and tooling,
education and ecosystem coordination.
This work does not always generate immediate private returns. It is, by definition, a public good. If it cannot be funded — and if the people producing it cannot be rewarded competitively — the state loses capacity. And when a state loses capacity, it begins to decay.
For several years, Ethereum experienced a unique phenomenon:
Public goods creators were exceptionally well-compensated — not because the protocol extracted excessively, but because the ecosystem expanded dramatically and the value of ETH appreciated.
In other words, Ethereum’s state-building phase was subsidized by a positive feedback loop:
talented builders created institutional and technical public goods,
those goods increased Ethereum’s credibility and economic activity,
that demand was capitalized into ETH,
which expanded the “state’s balance sheet,”
enabling further funding of talent and infrastructure.
This was a remarkable period: an Open Source State that could pay its builders better than many nation-states, and sometimes even better than traditional private sector alternatives.
But this window is not guaranteed to last.
The Ethereum Foundation (EF) is not an unlimited treasury. Its resources are finite and increasingly constrained relative to the growing demands of the ecosystem.
As Ethereum matures, the cost of maintaining state capacity rises:
research becomes more complex,
security demands increase,
attack surfaces expand,
governance becomes more politically sensitive,
and competition among ecosystems intensifies.
At the same time, the EF’s ability to fund everything centrally becomes less credible.If this leads to a future where:
fewer talented people work on core public goods,
budgets shrink,
and compensation becomes uncompetitive, then Ethereum’s state capacity will weaken — not because the technology failed, but because the human capital engine was starved.
And this is exactly how states decline in the real world.
The right model for an Open Source State is not a traditional bureaucracy. It should be closer to a market-driven system of public goods production — where talent is allocated efficiently and rewarded proportionally to value created.
That requires three structural innovations.
Meritocracy requires measurement. But in public goods, measurement is hard.
The solution is not to abandon measurement, but to develop progressively better proxies for state value creation:
security improvements,
decentralization progress,
client diversity,
reduced censorship risk,
better developer tooling,
upgrades delivered successfully,
reduction of systemic vulnerabilities,
improved institutional neutrality.
This allows the state to create bounties and procurement contracts for well-defined outcomes rather than relying on permanent salaried roles.
In traditional states, procurement is where large fractions of the budget go — often inefficiently and corruptly. In an Open Source State, procurement can be global, transparent, and competitive.
Instead of hiring a small, centralized team, an Open Source State should enable open competition among contributors:
teams compete to deliver core infrastructure,
funding flows to the best performers,
new entrants can challenge incumbents,
and the system continuously attracts global talent.
This is not just “grants.” It is a structured labor market with:
standardized scopes,
clear evaluation criteria,
transparent deliverables,
and renewal based on performance.
The goal is to align the labor market with public goods production while preventing gatekeeping by insiders.
A key advantage of digital states is that they can align compensation with long-term success — something traditional states struggle to do.
This can take the form of:
long-term token-denominated compensation,
vesting tied to measurable milestones,
retroactive public goods funding (rewarding proven impact),
or protocol-level funding mechanisms that scale with usage.
The objective is simple:
public goods builders should have upside comparable to private sector founders — because they are building the infrastructure of a state.
If compensation is capped at low bureaucratic levels, the state will always lose the talent war.
There is a major danger here: any funding system can be captured.
A meritocratic state must therefore combine:
open competition,
transparent evaluation,
plural funding sources,
and strong exit options (including alternative teams and forkability).
The goal is not perfect fairness. The goal is a system that continuously corrects itself and remains difficult to monopolize.
Ethereum’s future cannot rely on the EF alone as the primary funder of state capacity.
As the protocol becomes the foundation for global economic activity, it needs an institutional evolution:
from centralized funding (EF as the “treasury ministry”)
to a distributed, market-based system of talent coordination and compensation.
If Ethereum fails to build that system, it will face a slow and silent decline:
fewer high-quality contributors,
increasing dependence on a narrow set of organizations,
rising technical and governance risk,
and a deterioration of the very neutrality and credibility that make Ethereum valuable.
In the long run, the most successful digital states will not be those with the best technology — but those that can sustainably coordinate, fund, and reward the best human capital in the world.
Ethereum must design itself to win that competition.
If human capital is the most important input for Ethereum’s long-term success, then the next question is unavoidable:
where does the funding come from?
This is not a minor operational detail. It is a structural question that determines whether Ethereum can sustain state capacity — or whether it slowly decays into a volunteer-driven infrastructure that cannot compete for top talent.
Ethereum is deeply shaped by an open source ethos, and that ethos has produced extraordinary outcomes: permissionless innovation, global collaboration, and a culture of public goods.
But open source contains a persistent and dangerous misconception:
Open source is a development model. It is not a sustainable financing model.
Many open source communities drift toward donation-based funding because it “feels pure,” aligned with decentralization, and morally appealing. But donations are historically:
unfair (they reward visibility more than impact),
unstable (they collapse in bear markets),
and non-scalable (they cannot support industrial-scale infrastructure).
This is not an ideological claim. It is an empirical one.
Donation models systematically fail to fund the full-time, elite talent required to maintain critical infrastructure — especially when that infrastructure becomes a global dependency.
Linux is often presented as the ultimate open source triumph. And it is — as a distribution and adoption story.
But Linux is also a cautionary tale about sustainability.
Linux succeeded because it became the shared base layer of the internet, servers, and modern computing. Yet even as it became indispensable, its funding model did not scale proportionally.
Linux did not evolve into a system employing thousands of elite engineers full-time through a unified, sustainable funding mechanism. Instead, much of its development has historically depended on:
fragmented corporate sponsorship,
a relatively small set of key maintainers,
and a large share of part-time, under-compensated volunteer labor.
This works — until it doesn’t.
It creates fragility. It concentrates responsibility. It exposes critical infrastructure to burnout, maintenance risk, and underinvestment. It also limits the ability to attract and retain the absolute best global talent on a full-time basis, because the upside is structurally capped.
Open source can win adoption and still fail the talent war.
Ethereum cannot afford that outcome.
Ethereum is not merely a software project. If it is a state layer for digital property and economic coordination, then it needs what every state needs:
a tax base.
In a healthy state, funding scales with the economic activity the state enables. Roads, courts, defense, and public infrastructure are not paid through donations. They are paid through mechanisms that capture a fraction of the wealth and activity the state makes possible.
Ethereum should follow the same logic.
The funding of Ethereum’s public goods should not be tied to “compute” in the narrow sense. That framing reduces Ethereum to cloud infrastructure. It makes the network compete on the wrong axis: throughput and cheap execution.
Instead, Ethereum should aim to capture funding proportional to economic activity and value settlement, because that is what it truly provides:
property rights,
enforceable digital agreements,
neutral settlement,
and high-assurance economic coordination.
In other words:
Ethereum’s sustainable funding should come from its role as an economic state layer — not as a commodity compute provider.
There is a fear within parts of the ecosystem that capturing value is inherently “extractive” or morally suspicious. But this is a category error.
A state that cannot fund its institutions cannot maintain credibility.
A protocol that cannot fund its public goods cannot remain secure or neutral.
Ethereum has a premium because it provides the strongest guarantees in the market: security, legitimacy, resilience, credible neutrality, and predictable settlement. That premium is not a bug. It is the foundation of sustainability.
Protecting that premium is rational.
It is similar to how Apple defends its premium not because it hates consumers, but because premium margins finance:
better hardware,
better software,
better supply chain control,
and long-term R&D investment.
Ethereum’s “premium” finances something even more important:
the human capital needed to maintain the world’s most credible digital state layer.
There is no contradiction between open access and sustainable funding. In fact, sustainable funding is what protects open access over time.
Ethereum today faces a serious strategic risk: the gradual normalization of a donation-like model for funding its public goods.
This drift is often justified by open source ideology. It is presented as the “pure” path. But in practice it leads to a predictable outcome:
shrinking budgets,
fewer full-time contributors,
growing dependence on narrow corporate interests,
and deteriorating institutional capacity.
This is how open source becomes fragile.
Ethereum is too important to become a global dependency built on part-time volunteer labor and inconsistent donations.
The reality is simple:
Ethereum needs industrial-scale public goods production,
which requires industrial-scale funding,
and that funding must scale with economic activity.
A state layer that refuses to capture value is not virtuous. It is undercapitalized.
And an undercapitalized state eventually loses its best talent — and with it, its ability to defend neutrality, security, and long-term legitimacy.
Open source should remain the distribution model. Forkability should remain the anti-capture mechanism. Permissionless participation should remain the cultural core.
But financing must evolve.
A sustainable Open Source State must design mechanisms that:
reinvest a share of economic activity into public goods,
fund full-time elite builders,
and preserve the long-run institutional capacity of the state.
Anything else is a slow retreat into fragility — even if adoption remains high.
These metrics measure the equivalent of a state’s GDP and monetary velocity.
What it measures: total economic value settled on Ethereum (L1 + settlement anchored to Ethereum).
Why it matters: this is the closest analog to a state’s economic activity and legitimacy as a settlement layer.
Healthy trend: long-term growth (adjusted for spam and wash).
Red flags: volume growth driven by manipulation, or migration away from Ethereum.
What it measures: how much stablecoin liquidity lives and moves on Ethereum (L1 and L2s anchored to Ethereum).
Why it matters: stablecoins are the “money layer” of the digital state; their presence signals deep economic usage.
Healthy trend: rising supply + rising settlement share.
Red flags: stablecoin activity migrating to other ecosystems.
What it measures: the volume and value of economic activity in rollups that rely on Ethereum for settlement and/or data availability.
Why it matters: Ethereum’s fiscal future is rollup-centric; the state’s tax base increasingly lives in L2 jurisdictions that still depend on Ethereum.
Healthy trend: growth in rollup activity while maintaining Ethereum anchoring.
Red flags: rollups shifting to alternative DA/settlement layers.
What it measures: size and growth of tokenized treasuries, credit, and other RWAs on Ethereum.
Why it matters: strong signal of institutional legitimacy and long-term settlement use.
Healthy trend: organic growth without excessive incentives.
Red flags: short-lived, incentive-driven spikes.
These metrics track Ethereum’s ability to convert economic activity into security and public goods funding.
What it measures: total fees paid to the protocol across L1 execution and EIP-4844 blobspace.
Why it matters: this is the closest analog to direct tax revenue — it’s how much economic activity is already “funding the state.”
Healthy trend: stable fee base diversified across use-cases (not only speculative peaks).
Red flags: fees collapse structurally or become too dependent on cyclical speculation.
Even though these fees do not fund the EF directly, they remain the best proxy for sustainable state-level funding capacity.
What it measures: how economic value is currently allocated:
burned (EIP-1559),
paid to validators/stakers (security budget),
and what could be redirected to public goods under future designs.
Why it matters: a state needs a reinvestment channel; burn-only narratives may weaken long-term state capacity.
Healthy trend: security budget remains strong + space opens for sustainable reinvestment mechanisms.
Red flags: value capture exists but no reinvestment into public goods emerges.
What it measures: total MEV extracted from users and how concentrated it is across builders/relays/validators.
Why it matters: MEV functions like an implicit tax on economic activity — often unaccountable and prone to oligopoly.
Healthy trend: MEV becomes less concentrated, more transparent, and increasingly recycled into security/public goods.
Red flags: MEV grows faster than economic activity and becomes dominated by a few entities.
What it measures: total blob fee revenue, utilization rates, number of rollups posting blobs, and fee elasticity.
Why it matters: blobspace may become Ethereum’s primary fiscal base in a rollup-centric world.
Healthy trend: rising blob revenue without pricing out usage.
Red flags: blob revenue collapses when fees rise or rollups migrate to other DA layers.
What it measures: issuance levels, net issuance after burn, validator returns, and total security budget in dollar terms.
Why it matters: defense is the first duty of a state; underfunded security eventually collapses neutrality and credibility.
Healthy trend: sufficient security budget with reasonable dilution.
Red flags: security budget becomes too low to sustain resilience, or excessive issuance undermines monetary credibility.
These metrics measure whether Ethereum is compounding state capacity or starving it.
What it measures: total funding dedicated to core public goods:
client teams,
audits/security,
core research,
infrastructure/tooling,
ecosystem coordination/education.
Breakdown by source:
EF,
Gitcoin / RPGF,
corporate procurement,
DAOs/treasuries,
protocol-aligned mechanisms (if any).
Why it matters: this is the state’s institutional investment budget.
Healthy trend: stable or growing funding with diversified sources.
Red flags: declining funding and rising dependence on a single sponsor.
What it measures: what percentage of public goods funding depends on voluntary donations versus structurally-linked economic capture (fees, automated funding, procurement).
Why it matters: donation reliance is historically unstable and fails to attract elite full-time talent.
Healthy trend: donations are complementary, not foundational.
Red flags: increasing reliance on donations to fund core infrastructure.
Suggested definition:
Donation Drift Index = (Donation-based funding / Total public goods funding)
What it measures: the average runway of critical teams (months of funding secured), plus volatility across market cycles.
Why it matters: public goods cannot depend on bull markets.
Healthy trend: most critical teams have 18–36+ months runway secured.
Red flags: core teams operate with short runways, frequent funding crises, or rely on ad hoc grants.
States win by attracting the best builders; underpaying creates institutional decay.
What it measures: a composite proxy of how competitive Ethereum public goods compensation is relative to:
top tech salaries (FAANG equivalents),
other L1/L2 ecosystems (foundations, labs),
private sector alternatives (security, infra engineering).
Why it matters: if Ethereum cannot pay competitively, it loses the talent war.
Healthy trend: compensation remains competitive for elite full-time contributors.
Red flags: compensation becomes structurally lower than alternatives.
What it measures: estimated FTE working on:
client teams,
protocol research,
security/audits,
critical tooling.
Why it matters: state capacity is ultimately human capacity.
Healthy trend: stable or growing FTE across cycles.
Red flags: gradual reduction of FTE while complexity increases.
What it measures: how much core progress depends on a few individuals or entities.
Why it matters: concentrated capacity creates fragility and capture risk.
Healthy trend: diversified teams and redundant institutions.
Red flags: a few key individuals becoming single points of failure.
These are “state decay indicators” — signals that the funding model is becoming brittle.
What it measures: how dependent the ecosystem remains on EF as the primary funder.
Why it matters: a mature state cannot depend on one treasury.
Healthy trend: EF share gradually declines as other mechanisms grow.
Red flags: EF remains overwhelmingly dominant or EF funding declines without replacement.
What it measures: whether reliance on donations increases over time.
Why it matters: donation drift is the open source failure mode.
Healthy trend: donation drift declines or stays low.
Red flags: donation drift rises while core needs grow.
What it measures: operational symptoms of underinvestment, such as:
fewer major audits,
declining bug bounty competitiveness,
increasing critical incidents,
delays in key upgrades.
Why it matters: underfunding shows up first as operational degradation.
Healthy trend: stable or improving security posture and delivery velocity.
Red flags: recurring funding crises and increasing operational failures.
The Currency of the Economic Zone: ETH, Monetary Stability, and Demand as State Policy
Every state, physical or digital, faces a foundational monetary question:
What is the currency of its economic zone?
If Ethereum is an Open Source State — a settlement layer for digital property and economic coordination — then ETH is not merely a speculative asset. It is the state’s fiscal backbone. The value of ETH determines the state’s capacity to fund public goods, attract elite human capital, and maintain long-term resilience.
This creates a reality that many in the ecosystem are uncomfortable acknowledging:
ETH’s valuation is not a vanity metric. It is state capacity.
A state whose currency collapses cannot fund institutions, cannot maintain security, and cannot retain elite talent. A digital state is no different.
If a meaningful share of Ethereum’s sustainable funding is meant to come from economic activity — rather than donations — then ETH must sit closer to the center of that activity.
That means increasing demand for ETH in ways that are structurally tied to the state’s “tax base”:
settlement,
capital formation,
collateral,
liquidity and reserve roles,
and the payment rails of the ecosystem.
But this is not trivial.
Modern economies require relatively stable units of account. Most economic agents cannot operate efficiently in a currency whose purchasing power fluctuates wildly. This is why stablecoins have become the dominant medium of exchange in crypto: they are an economic necessity.
Ethereum therefore faces a difficult but solvable dilemma:
ETH must be central to state capacity and sustainable funding,
while stablecoins must be central to day-to-day economic activity.
The state needs both layers to work together.
A practical approach is to treat Ethereum’s monetary system as two-layered:
ETH functions as:
the state’s native asset,
the security asset backing the validator set,
the ultimate settlement collateral,
and the medium through which many forms of value capture are anchored.
ETH is closer to what gold and sovereign bonds represent for nation-states: the reserve foundation of state credibility.
Stablecoins are the medium of exchange. They enable:
wages,
lending,
commerce,
accounting,
risk management,
and predictable economic coordination.
This is not a weakness. It is what mature monetary systems look like: one layer for reserves and credibility, another for transactional stability.
The strategic requirement for Ethereum is to ensure that the transactional layer remains aligned with ETH and contributes to ETH demand — directly or indirectly.
If ETH cannot be adopted directly as the dominant currency of economic activity in the short run — because its volatility makes it difficult as a unit of account — then an alternative is to create a stable monetary layer that remains economically aligned with ETH.
The most obvious mechanism is an ETH-backed stablecoin.
An ETH-backed stablecoin can become the transactional unit of the economic zone, while ensuring that usage creates indirect demand for ETH through collateralization.
In other words:
stablecoin usage increases,
collateral requirements increase,
ETH demand rises indirectly,
and Ethereum’s fiscal base strengthens.
This model does not require forcing ETH into everyday commerce. It creates a bridge: a stable unit of account that reinforces the reserve asset.
It is also consistent with Ethereum’s values: it is open, permissionless, and grounded in transparent collateralization rather than centralized banking.
However, the design matters enormously:
overcollateralization requirements,
liquidation mechanisms,
governance neutrality,
censorship resistance,
and systemic risk management.
This is not a trivial instrument — it is monetary infrastructure.
But if Ethereum is serious about becoming a durable state, it cannot avoid thinking in these terms.
Today, many decisions in the Ethereum ecosystem explicitly avoid discussing ETH price. The prevailing cultural norm is that “we don’t optimize for price.”
That ethos may feel intellectually pure, but it creates a strategic blind spot.
A mature state does not ignore the consequences of monetary policy just because it does not want to appear political. It is perfectly possible to avoid short-term price manipulation while still doing something essential:
systematically evaluating how each major decision affects long-term supply and demand for the currency.
Ethereum already has a relatively predictable supply system:
issuance policy is known and constrained,
burn dynamics are transparent,
and there is high certainty around monetary mechanics.
That means the most important strategic variable is demand.
If demand for ETH weakens structurally, the entire state weakens:
the security budget becomes fragile,
public goods funding becomes constrained,
and the ability to attract elite full-time contributors erodes.
Ignoring demand is not neutrality. It is negligence.
Ethereum’s economic model also faces a second-order problem:
How do you grow blockspace demand without collapsing blockspace value?
Over the last few years, Ethereum has dramatically expanded blockspace supply — first through efficiency improvements, and then through the rollup-centric roadmap (blobs and abundant data availability). In principle, this is necessary: a state must expand capacity to serve more economic activity.
But there is a hidden risk:
If supply grows so aggressively that blockspace becomes marginal and underpriced,
the system can collapse its own fiscal base.
This is a digital version of the Laffer Curve problem: the relationship between extraction and the health of the tax base is non-linear.
Too much extraction drives users away.
But too little extraction — especially via subsidized or near-zero pricing — can also be destructive, because it underfunds institutions and eliminates the economic signal that a scarce resource should produce.
A state needs not only demand, but sustainable pricing power over its public infrastructure.
If Ethereum treats blockspace as a free commodity rather than a scarce resource with economic value, it risks turning its most valuable fiscal lever into a low-margin utility. And low-margin utilities cannot fund world-class institutional capacity.
This does not mean Ethereum should maximize fees in the short term. It means Ethereum should maintain strategic awareness of:
price elasticity,
minimum viable fee floors,
and the relationship between supply expansion and long-term demand for ETH as the reserve asset.
Ethereum should not fear defending its premium.
Premium is not greed. Premium is reinvestment capacity.
To evaluate whether Ethereum is strengthening or weakening its monetary backbone, we can track a set of demand-centric metrics.
ETH used as collateral (total ETH collateral in DeFi, stablecoins, lending)
ETH locked in staking (and concentration of staking providers)
ETH-denominated economic activity (fees paid in ETH, ETH settlement flows)
ETH velocity (how often ETH changes hands relative to supply)
Share of stablecoin supply backed by ETH (directly or indirectly)
Growth of ETH-backed stablecoins vs fiat-backed stablecoins
Stablecoin settlement volume anchored to Ethereum (L1 + L2s)
Fee floor stability (minimum fee levels over time, avoiding long-term zero pricing)
Blob fee revenue trend (as rollup tax base)
Price elasticity of usage (does demand collapse when fees rise?)
Subsidy dependence (how much usage is driven by incentives and near-free blockspace)
Security budget in $ terms (issuance + priority fees + MEV distribution)
Public goods reinvestment rate (how much of economic activity is reinvested into core infrastructure)
In traditional states, one of the most important lessons of economic history is that fiscal policy is not linear.
Governments tend to assume that higher taxation always leads to higher revenue. But beyond a certain point, higher taxes shrink the economic base: people work less, invest less, evade more, or move capital elsewhere. Revenue eventually declines.
This dynamic is often summarized by the Laffer Curve: the relationship between tax rates and tax revenue is not a straight line — it is an inverted U-shape.
Ethereum, as an emerging Open Source State, faces an analogous problem.
Before discussing funding models, human capital, and fiscal sustainability, we must start with the foundational question:
Does Ethereum still provide the three core services that define a state?
Every successful state, physical or digital, rests on three primary pillars:
Property rights (who owns what)
Enforcement of rules and contracts (how agreements and constraints are enforced)
Security and credible force (how the system resists attack, coercion, and capture)
Without these pillars, everything else becomes irrelevant. No monetary system, no public goods funding, no human capital coordination matters if ownership is insecure, rules are unreliable, or security collapses.
Ethereum’s advantage has historically been that these pillars are exceptionally strong — and that they are defended through technology and decentralization rather than through political authority. But that strength must be monitored with real metrics.
In a traditional state, property rights rely on courts, police, and legal interpretation. In Ethereum, they rely on:
the protocol’s state transition rules,
the consensus mechanism,
and the legitimacy of finality.
Ethereum’s “property rights guarantee” is the ability to own and transfer digital assets with the highest known assurance in the world — not because laws say so, but because the state is extremely difficult to rewrite.
A) Finality reliability
Finality time distribution (how stable finality is over time)
frequency of missed finality events
reorg frequency and depth (ideally near-zero)
Why it matters:
Property rights are only as strong as the reliability of final settlement.
B) Censorship resistance indicators
percentage of blocks that exclude certain transactions (censorship proxies)
OFAC-related compliance patterns (as a proxy for external pressure)
inclusion delay distribution for “sensitive” transactions
Why it matters:
If property transfers can be censored, property rights are not universal.
C) State access neutrality
ability of any user to hold and transfer assets without permission
wallet-level neutrality (no systemic blacklisting at protocol level)
neutrality of core infrastructure providers (RPC, relays, builders)
Why it matters:
Property rights require universal access, not conditional inclusion.
daily transaction counts
“number of NFTs minted”
gas used as a proxy for property rights
These measure activity, not the quality of ownership guarantees.
A state is not only about owning assets — it is about making agreements enforceable. Ethereum’s smart contracts are its legal machinery: automated rules that execute without courts and without discretion.
But contract enforcement is only as good as:
the consistency of the execution environment,
the predictability of protocol changes,
and the ability to preserve invariant rules over time.
A) Execution reliability
client correctness metrics (consensus failures, critical bugs)
incident rate affecting contract execution
MEV-related execution integrity (front-running, sandwiching prevalence)
Why it matters:
Contracts must execute predictably under real adversarial conditions.
B) Governance predictability / protocol stability
frequency of breaking changes
compatibility stability for core primitives
“social layer intervention rate” (how often social coordination overrides protocol expectations)
Why it matters:
Rule stability is the rule of law of a digital state.
C) Economic integrity of execution
rate of failed transactions due to congestion
execution cost volatility (gas volatility distribution)
average execution latency under stress events
Why it matters:
Enforcement is not only correctness — it’s reliability under load.
raw TPS
total gas throughput
“number of contracts deployed”
These are volume metrics, not enforcement quality metrics.
A state’s most basic duty is security: the ability to prevent coercion, maintain continuity, and resist capture.
Ethereum achieves this not through a monopoly of physical violence, but through:
economic security (stake),
decentralized validator distribution,
client diversity,
and the cost to attack.
If property rights and contract enforcement are the “law,” security is the “military and police” of the system.
A) Validator decentralization
distribution of validators across entities
staking concentration (top 5, top 10)
geographic distribution (where available)
concentration of block proposal rights
Why it matters:
A state cannot be neutral if defense is controlled by a few.
B) Staking and LST concentration risk
LST market share (liquid staking dominance)
correlation between staking providers and governance influence
dominance of a single operator (centralization risk)
Why it matters:
This is the “oligarchy risk” for Ethereum’s security apparatus.
C) Client diversity
execution client diversity (avoid monoculture)
consensus client diversity
correlation of major client failures with systemic risk
Why it matters:
A monoculture is a national security threat. Diversity is redundancy.
D) Security budget in $ terms
total rewards to validators (issuance + fees)
MEV share of total block value
cost to acquire or corrupt majority stake
Why it matters:
If the state cannot fund defense, it cannot remain sovereign.
E) Censorship and coercion resistance
relay and builder concentration (MEV supply chain centralization)
rate of censored transactions
diversity of block-building pipeline
Why it matters:
A captured block-building market becomes a captured state.
price of ETH as a standalone indicator
“number of nodes” without quality weighting
“hashrate-style analogies” without staking structure context
These can be noisy or manipulated.
Ethereum is often described as a “world computer.” It is a convenient metaphor — but also one of the most damaging misunderstandings in the history of the protocol.
Calling Ethereum a world computer reduces it to an infrastructure for executing applications, competing in the same mental category as cloud providers and internet platforms. It frames the protocol as a decentralized AWS: a global machine whose main goal is to process as many transactions as possible, as cheaply as possible, as fast as possible.
But that is not what Ethereum fundamentally is.
Ethereum is, at its core, a digital open source state — an open, global, permissionless state layer that enables economic activity by creating private property in the digital realm, with a level of credibility and legal-like certainty that no previous system has been able to provide at scale.
Its rules are enforced by code, but its legitimacy comes from something deeper: the resilience of its architecture, secured by hundreds of thousands of validators distributed across jurisdictions, organizations, and individuals. Ethereum’s true breakthrough is not compute. It is the ability to establish a shared, neutral, and unstoppable state — a foundation for ownership, coordination, and economic agreements that can outlive companies, governments, and platforms.
This distinction matters because it changes everything: how we assess Ethereum’s strategy, how we judge the decisions of the Ethereum Foundation, and which metrics truly reflect progress versus noise.
This distinction matters because it changes everything: how we assess Ethereum’s strategy, how we judge the decisions of the Ethereum Foundation, and which metrics truly reflect progress versus noise.
If Ethereum is an Open Source State, then sustainability is not about maximizing throughput or extracting short-term revenue. It is about preserving credible neutrality, strengthening resilience, and expanding the protocol’s ability to support long-term value creation across an ecosystem that no single actor can capture.
That is the lens this article proposes — and the reason we must revisit the metrics that shape the narrative around Ethereum.
To understand what Ethereum can become — and what it must protect in order to remain sustainable — we first need to answer a simpler question:
What is a state actually for?
A state is not merely a government, a flag, or a bureaucracy. At its core, a state is an institutional technology: a system that enables large-scale coordination among people who do not know each other, do not trust each other, and may not even share culture or values.
The primary product of a successful state is predictability — a reliable environment where individuals and institutions can plan, invest, and cooperate over long time horizons. Economists call this the reduction of transaction costs. In practice, this is what makes complex economies possible.
A functioning state provides a bundle of services that can be grouped into five foundational layers.
A state defines what can be owned, who owns it, and under what rules ownership can be transferred. This may sound obvious, but it is the foundation of modern economic life.
Without secure property rights:
investment becomes irrational,
credit becomes fragile or impossible,
long-term planning collapses.
This is why many of the world’s wealthiest nations are not those with the most natural resources, but those with the most credible protection of private property.
The key here is not the existence of laws on paper, but the credibility of enforcement in practice. When people believe that ownership can be arbitrarily confiscated or politically redefined, capital flees — and the economic base erodes.
The second major function of a state is to enable contracts.
Contracts are what allow strangers to cooperate. They are what enable supply chains, lending, employment, insurance, and complex business relationships. In primitive economies, trust is personal. In advanced economies, trust becomes institutional — because agreements can be enforced even when parties have no relationship.
A state with strong contract enforcement provides:
dispute resolution mechanisms,
predictable commercial rules,
consistent interpretation of obligations,
and reliable protection of creditors and counterparties.
The economic implication is profound: contract enforcement turns commerce into a scalable, impersonal system. It transforms fragmented trust networks into global markets.
The uncomfortable truth is that states are, fundamentally, enforcement machines.
Property rights and contracts only exist if there is a mechanism capable of defending them. A state provides external defense and internal security: the ability to prevent private coercion, control violence, and maintain social order.
This is not merely about policing. It is about ensuring that individuals and institutions are not forced to rely on private enforcement, intimidation, or violence to protect their assets and agreements.
In other words:
Security is not a feature of an economy — it is a prerequisite for one.
Markets alone do not reliably produce certain kinds of goods that societies need in order to function and grow: infrastructure, standards, education, research, and basic coordination layers.
Successful states provide public goods that:
increase productivity and connectivity,
reduce systemic friction,
and enable innovation to compound.
Here again, the distinction is not the size of the state, but its quality. Some states spend aggressively and produce little. Others invest in scalable infrastructure and build long-term prosperity. The difference is institutional capacity, governance quality, and resistance to corruption and capture.
Finally, states require sustainability.
They need resources to fund security, infrastructure, and institutions. This is why nearly every successful state develops:
a unit of account (a currency),
and a fiscal system (taxation or equivalent mechanisms).
A stable currency allows economic calculation. A credible fiscal system allows long-term investment and lowers the cost of capital. When monetary credibility collapses, planning becomes impossible; when fiscal credibility collapses, enforcement weakens and institutions decay.
Sustainability, therefore, is not simply about collecting revenue. It is about maintaining legitimacy, predictability, and capacity without becoming extractive.
And this is where many states fail.
Why Some States Succeed (and Others Don’t): The Design Principles
If states provide similar services, why do some generate extraordinary prosperity while others remain fragile, corrupt, or trapped in stagnation?
The difference is not ideology, nor the presence of resources. It is institutional design.
The most successful states tend to share a set of structural principles that make them resilient, credible, and difficult to capture.
The defining feature of a mature state is that laws apply consistently — not selectively.
Rule of law means:
the law is superior to individuals,
enforcement is predictable,
and rules are stable over time.
Without rule of law, the state becomes a personal power structure. When that happens, economic life becomes a political game rather than a productive one.
The most valuable feature of any state is its ability to credibly commit.
Investors, entrepreneurs, families, and institutions make decisions based on expectations of the future. If the state cannot credibly commit to maintaining rules — if it can change them arbitrarily — then long-term capital formation collapses.
A successful state is not necessarily “good.” It is credible.
Credibility is what creates trust without requiring optimism.
The moment a state becomes a participant instead of an arbiter, it begins to destroy the foundation of its legitimacy.
States that choose winners, protect insiders, or enforce politically-driven favoritism eventually become extractive. Their institutions serve power rather than society. Economic productivity becomes secondary to rent-seeking.
Neutrality is not a moral concept. It is an economic one.
The best states assume that power will be abused — and design their institutions accordingly.
They implement mechanisms that make capture difficult:
separation of powers,
independent courts,
distributed authority,
transparency and accountability,
free press or equivalent monitoring forces.
This is why successful states are rarely defined by perfect leaders. They are defined by systems that remain stable even under imperfect leadership.
This principle is deeply underrated.
Systems become abusive when people cannot leave. Exit options discipline power. They create a market for governance and reduce the temptation to extract excessively.
In nation-states, exit takes the form of emigration, capital flight, and competitive jurisdictions. In well-designed systems, the possibility of exit forces institutions to remain credible and restrained.
Strong states are capable states — they can enforce rules, collect revenue, and provide public goods effectively.
But capacity without limits becomes authoritarian. Capacity must be paired with accountability. The strongest states combine:
operational competence,
legal restraint,
institutional stability.
States must fund themselves. But extraction must be sustainable.
A state that taxes too aggressively, or extracts value through corruption and rent-seeking, destroys the very economic base it depends on. This is a recurring historical pattern. Over-extraction leads to lower investment, lower productivity, and eventually declining legitimacy.
The best states maximize long-term compounding, not short-term extraction.
This logic applies to all institutional systems — including digital ones.
Put simply, a state creates value by turning a chaotic world into a predictable one. It enables coordination at scale by providing property rights, enforceable agreements, security, public goods, and sustainable economic infrastructure.
The most successful states succeed not because they do more, but because they do these things with:
credible neutrality,
strong enforcement,
resistance to capture,
and long-term predictability.
Once you understand this, you can begin to see Ethereum not as a decentralized computer, but as something far more consequential:
a global state layer for digital property and coordination — an Open Source State.
And that framing gives us an actionable way to evaluate Ethereum’s evolution: through the lens of institutional credibility, neutrality, resilience, and sustainable value creation.
Human Capital: The Prime Metric of an Open Source State
Human capital matters more than technology.
Protocols do not evolve by themselves. Roadmaps do not ship automatically. Security does not maintain itself. Every major advance in Ethereum’s history — from proof-of-stake, to rollup-centric scaling, to EIP-1559, to account abstraction research — was the outcome of human coordination: researchers, engineers, client teams, educators, governance participants, ecosystem builders, auditors, and community leaders working under imperfect incentives and incomplete information.
Ethereum’s long-term competitiveness therefore depends less on its current codebase and more on its ability to continuously attract, retain, and coordinate exceptional talent.
In fact, states — whether nation-states or digital states — do not win primarily because they are “more advanced.” They win because they can mobilize high-quality human capital and align it toward public goods production: infrastructure, security, dispute resolution mechanisms, and shared standards that benefit the entire society.
This is where state-building becomes non-trivial.
Individuals naturally optimize for their own goals: prestige, wealth, influence, career opportunities, ideological preferences, or even personal rivalries. In a state, the central challenge is to align those diverse motivations toward outcomes that serve the common good — without suppressing individuality or becoming authoritarian.
Successful states do this through:
credible institutions,
shared values,
cultural norms,
and incentive systems that reward contributions to public goods.
The same is true for Ethereum.
Ethereum’s most valuable “asset” may not be ETH, throughput, or market share — but the unique culture that has historically attracted builders who are willing to work on long-term infrastructure, open standards, and research-heavy public goods that do not immediately monetize.
If Ethereum loses the ability to coordinate talent toward these public goods, it will not matter how sophisticated the technology is: the state will decay.
Talent does not coordinate efficiently in a vacuum. It requires a shared mission and constraints that define what is legitimate.
In nation-states, this takes the form of a constitution and core civic values. In open source states, it takes the form of:
shared cultural norms (“credible neutrality”, “open innovation”, “minimal trusted parties”),
governance legitimacy,
and clear boundaries around what the protocol should and should not do.
A constitution is not merely a legal document — it is a coordination device. It reduces conflict by making some questions non-negotiable and providing a stable framework for everything else.
For Ethereum, the implicit constitution has historically included principles like:
neutrality over favoritism,
decentralization over convenience,
long-term resilience over short-term efficiency,
permissionless innovation over gatekeeping,
and openness over capture.
If Ethereum becomes unclear on these values, or allows them to be overridden by short-term narratives, the system loses its ability to coordinate elite talent at scale.
This also leads to a strategic implication that many crypto narratives ignore.
In some markets, network effects push toward a single dominant winner. But states are different. States are not mere platforms; they are value systems. They reflect cultures, preferences, ideologies, and institutional trade-offs.
Because cultures differ, the long-run equilibrium is likely a world of many states — including many digital states. Even if interoperability improves, we should not expect a single blockchain to govern all economic activity.
Therefore, Ethereum should not aim to win by becoming the cheapest or fastest execution environment. It should aim to win by becoming the most credible and resilient base layer for digital property and coordination — and by being the state that attracts the highest quality human capital, capable of building and maintaining the infrastructure that others depend on.
In the long run, the most successful states will be those that can coordinate the greatest human talent toward public goods — without being captured by narrow interests.
That is the real metric of state progress.
Human capital is hard to measure, but we can build a useful proxy dashboard that captures its reality. The trick is to measure quality and coordination capacity — not just raw activity.
Number and quality of active contributors to:
client teams (execution + consensus)
research groups
EIP authors and implementers
Why it matters:
This is the “civil service” of the state — the people who maintain its legal code and infrastructure.
What good looks like:
high contributor diversity
sustained throughput of protocol improvements
no dependence on a single organization
How many independent teams maintain:
execution clients (e.g., Geth, Nethermind, Besu, Erigon)
consensus clients (e.g., Lighthouse, Prysm, Teku, Nimbus)
Share of each client on mainnet
Why it matters:
This is equivalent to institutional redundancy — the ability of the state to survive failures, bugs, or capture.
What good looks like:
balanced market share
multiple independent implementations
strong incentives for new teams to emerge
How much funding goes to:
core dev work
security / audits
research
education and tooling
And how stable that funding is
Why it matters:
A state needs a sustainable public goods budget.
What good looks like:
diversified funding sources (not only EF)
transparent allocation
outcomes tied to measurable improvements
Where top researchers and builders go:
Are they joining Ethereum or leaving for other ecosystems?
Proxy signals:
major contributors moving to other L1s
top teams choosing other ecosystems as default
Why it matters:
Talent flows are the “balance of payments” of a state.
How long does it take Ethereum to:
implement major upgrades
reach consensus on roadmap decisions
react to existential risks (security, centralization, censorship)
Why it matters:
States fail when they cannot act, even if they know what to do.
What good looks like:
consistent delivery without compromising decentralization
clarity in decision-making processes
reduced governance deadlock
Useful but often inflated; should focus on meaningful repos.
Signal of interest, but not necessarily of long-term infrastructure quality.
Useful, but often hype-driven.
If human capital is the prime metric of an Open Source State, then the next question becomes unavoidable:
How does the state sustainably fund and compensate the people who build and maintain its public goods?
This is not a secondary issue. It is one of the defining failure modes of both nation-states and digital states.
Traditional states tend to underpay their civil servants. They compensate with stability, prestige, and pensions — but rarely with truly competitive, market-driven remuneration. The result is predictable: the state often fails to recruit and retain the highest-quality talent for infrastructure, security, and institutional design. The best engineers, economists, lawyers, and operators go elsewhere.
For an Open Source State like Ethereum, this model would be fatal.
Ethereum’s long-term sustainability depends on continuously attracting elite builders to work on the least glamorous but most essential problems:
protocol research,
client engineering,
security auditing,
public infrastructure,
standards and tooling,
education and ecosystem coordination.
This work does not always generate immediate private returns. It is, by definition, a public good. If it cannot be funded — and if the people producing it cannot be rewarded competitively — the state loses capacity. And when a state loses capacity, it begins to decay.
For several years, Ethereum experienced a unique phenomenon:
Public goods creators were exceptionally well-compensated — not because the protocol extracted excessively, but because the ecosystem expanded dramatically and the value of ETH appreciated.
In other words, Ethereum’s state-building phase was subsidized by a positive feedback loop:
talented builders created institutional and technical public goods,
those goods increased Ethereum’s credibility and economic activity,
that demand was capitalized into ETH,
which expanded the “state’s balance sheet,”
enabling further funding of talent and infrastructure.
This was a remarkable period: an Open Source State that could pay its builders better than many nation-states, and sometimes even better than traditional private sector alternatives.
But this window is not guaranteed to last.
The Ethereum Foundation (EF) is not an unlimited treasury. Its resources are finite and increasingly constrained relative to the growing demands of the ecosystem.
As Ethereum matures, the cost of maintaining state capacity rises:
research becomes more complex,
security demands increase,
attack surfaces expand,
governance becomes more politically sensitive,
and competition among ecosystems intensifies.
At the same time, the EF’s ability to fund everything centrally becomes less credible.If this leads to a future where:
fewer talented people work on core public goods,
budgets shrink,
and compensation becomes uncompetitive, then Ethereum’s state capacity will weaken — not because the technology failed, but because the human capital engine was starved.
And this is exactly how states decline in the real world.
The right model for an Open Source State is not a traditional bureaucracy. It should be closer to a market-driven system of public goods production — where talent is allocated efficiently and rewarded proportionally to value created.
That requires three structural innovations.
Meritocracy requires measurement. But in public goods, measurement is hard.
The solution is not to abandon measurement, but to develop progressively better proxies for state value creation:
security improvements,
decentralization progress,
client diversity,
reduced censorship risk,
better developer tooling,
upgrades delivered successfully,
reduction of systemic vulnerabilities,
improved institutional neutrality.
This allows the state to create bounties and procurement contracts for well-defined outcomes rather than relying on permanent salaried roles.
In traditional states, procurement is where large fractions of the budget go — often inefficiently and corruptly. In an Open Source State, procurement can be global, transparent, and competitive.
Instead of hiring a small, centralized team, an Open Source State should enable open competition among contributors:
teams compete to deliver core infrastructure,
funding flows to the best performers,
new entrants can challenge incumbents,
and the system continuously attracts global talent.
This is not just “grants.” It is a structured labor market with:
standardized scopes,
clear evaluation criteria,
transparent deliverables,
and renewal based on performance.
The goal is to align the labor market with public goods production while preventing gatekeeping by insiders.
A key advantage of digital states is that they can align compensation with long-term success — something traditional states struggle to do.
This can take the form of:
long-term token-denominated compensation,
vesting tied to measurable milestones,
retroactive public goods funding (rewarding proven impact),
or protocol-level funding mechanisms that scale with usage.
The objective is simple:
public goods builders should have upside comparable to private sector founders — because they are building the infrastructure of a state.
If compensation is capped at low bureaucratic levels, the state will always lose the talent war.
There is a major danger here: any funding system can be captured.
A meritocratic state must therefore combine:
open competition,
transparent evaluation,
plural funding sources,
and strong exit options (including alternative teams and forkability).
The goal is not perfect fairness. The goal is a system that continuously corrects itself and remains difficult to monopolize.
Ethereum’s future cannot rely on the EF alone as the primary funder of state capacity.
As the protocol becomes the foundation for global economic activity, it needs an institutional evolution:
from centralized funding (EF as the “treasury ministry”)
to a distributed, market-based system of talent coordination and compensation.
If Ethereum fails to build that system, it will face a slow and silent decline:
fewer high-quality contributors,
increasing dependence on a narrow set of organizations,
rising technical and governance risk,
and a deterioration of the very neutrality and credibility that make Ethereum valuable.
In the long run, the most successful digital states will not be those with the best technology — but those that can sustainably coordinate, fund, and reward the best human capital in the world.
Ethereum must design itself to win that competition.
If human capital is the most important input for Ethereum’s long-term success, then the next question is unavoidable:
where does the funding come from?
This is not a minor operational detail. It is a structural question that determines whether Ethereum can sustain state capacity — or whether it slowly decays into a volunteer-driven infrastructure that cannot compete for top talent.
Ethereum is deeply shaped by an open source ethos, and that ethos has produced extraordinary outcomes: permissionless innovation, global collaboration, and a culture of public goods.
But open source contains a persistent and dangerous misconception:
Open source is a development model. It is not a sustainable financing model.
Many open source communities drift toward donation-based funding because it “feels pure,” aligned with decentralization, and morally appealing. But donations are historically:
unfair (they reward visibility more than impact),
unstable (they collapse in bear markets),
and non-scalable (they cannot support industrial-scale infrastructure).
This is not an ideological claim. It is an empirical one.
Donation models systematically fail to fund the full-time, elite talent required to maintain critical infrastructure — especially when that infrastructure becomes a global dependency.
Linux is often presented as the ultimate open source triumph. And it is — as a distribution and adoption story.
But Linux is also a cautionary tale about sustainability.
Linux succeeded because it became the shared base layer of the internet, servers, and modern computing. Yet even as it became indispensable, its funding model did not scale proportionally.
Linux did not evolve into a system employing thousands of elite engineers full-time through a unified, sustainable funding mechanism. Instead, much of its development has historically depended on:
fragmented corporate sponsorship,
a relatively small set of key maintainers,
and a large share of part-time, under-compensated volunteer labor.
This works — until it doesn’t.
It creates fragility. It concentrates responsibility. It exposes critical infrastructure to burnout, maintenance risk, and underinvestment. It also limits the ability to attract and retain the absolute best global talent on a full-time basis, because the upside is structurally capped.
Open source can win adoption and still fail the talent war.
Ethereum cannot afford that outcome.
Ethereum is not merely a software project. If it is a state layer for digital property and economic coordination, then it needs what every state needs:
a tax base.
In a healthy state, funding scales with the economic activity the state enables. Roads, courts, defense, and public infrastructure are not paid through donations. They are paid through mechanisms that capture a fraction of the wealth and activity the state makes possible.
Ethereum should follow the same logic.
The funding of Ethereum’s public goods should not be tied to “compute” in the narrow sense. That framing reduces Ethereum to cloud infrastructure. It makes the network compete on the wrong axis: throughput and cheap execution.
Instead, Ethereum should aim to capture funding proportional to economic activity and value settlement, because that is what it truly provides:
property rights,
enforceable digital agreements,
neutral settlement,
and high-assurance economic coordination.
In other words:
Ethereum’s sustainable funding should come from its role as an economic state layer — not as a commodity compute provider.
There is a fear within parts of the ecosystem that capturing value is inherently “extractive” or morally suspicious. But this is a category error.
A state that cannot fund its institutions cannot maintain credibility.
A protocol that cannot fund its public goods cannot remain secure or neutral.
Ethereum has a premium because it provides the strongest guarantees in the market: security, legitimacy, resilience, credible neutrality, and predictable settlement. That premium is not a bug. It is the foundation of sustainability.
Protecting that premium is rational.
It is similar to how Apple defends its premium not because it hates consumers, but because premium margins finance:
better hardware,
better software,
better supply chain control,
and long-term R&D investment.
Ethereum’s “premium” finances something even more important:
the human capital needed to maintain the world’s most credible digital state layer.
There is no contradiction between open access and sustainable funding. In fact, sustainable funding is what protects open access over time.
Ethereum today faces a serious strategic risk: the gradual normalization of a donation-like model for funding its public goods.
This drift is often justified by open source ideology. It is presented as the “pure” path. But in practice it leads to a predictable outcome:
shrinking budgets,
fewer full-time contributors,
growing dependence on narrow corporate interests,
and deteriorating institutional capacity.
This is how open source becomes fragile.
Ethereum is too important to become a global dependency built on part-time volunteer labor and inconsistent donations.
The reality is simple:
Ethereum needs industrial-scale public goods production,
which requires industrial-scale funding,
and that funding must scale with economic activity.
A state layer that refuses to capture value is not virtuous. It is undercapitalized.
And an undercapitalized state eventually loses its best talent — and with it, its ability to defend neutrality, security, and long-term legitimacy.
Open source should remain the distribution model. Forkability should remain the anti-capture mechanism. Permissionless participation should remain the cultural core.
But financing must evolve.
A sustainable Open Source State must design mechanisms that:
reinvest a share of economic activity into public goods,
fund full-time elite builders,
and preserve the long-run institutional capacity of the state.
Anything else is a slow retreat into fragility — even if adoption remains high.
These metrics measure the equivalent of a state’s GDP and monetary velocity.
What it measures: total economic value settled on Ethereum (L1 + settlement anchored to Ethereum).
Why it matters: this is the closest analog to a state’s economic activity and legitimacy as a settlement layer.
Healthy trend: long-term growth (adjusted for spam and wash).
Red flags: volume growth driven by manipulation, or migration away from Ethereum.
What it measures: how much stablecoin liquidity lives and moves on Ethereum (L1 and L2s anchored to Ethereum).
Why it matters: stablecoins are the “money layer” of the digital state; their presence signals deep economic usage.
Healthy trend: rising supply + rising settlement share.
Red flags: stablecoin activity migrating to other ecosystems.
What it measures: the volume and value of economic activity in rollups that rely on Ethereum for settlement and/or data availability.
Why it matters: Ethereum’s fiscal future is rollup-centric; the state’s tax base increasingly lives in L2 jurisdictions that still depend on Ethereum.
Healthy trend: growth in rollup activity while maintaining Ethereum anchoring.
Red flags: rollups shifting to alternative DA/settlement layers.
What it measures: size and growth of tokenized treasuries, credit, and other RWAs on Ethereum.
Why it matters: strong signal of institutional legitimacy and long-term settlement use.
Healthy trend: organic growth without excessive incentives.
Red flags: short-lived, incentive-driven spikes.
These metrics track Ethereum’s ability to convert economic activity into security and public goods funding.
What it measures: total fees paid to the protocol across L1 execution and EIP-4844 blobspace.
Why it matters: this is the closest analog to direct tax revenue — it’s how much economic activity is already “funding the state.”
Healthy trend: stable fee base diversified across use-cases (not only speculative peaks).
Red flags: fees collapse structurally or become too dependent on cyclical speculation.
Even though these fees do not fund the EF directly, they remain the best proxy for sustainable state-level funding capacity.
What it measures: how economic value is currently allocated:
burned (EIP-1559),
paid to validators/stakers (security budget),
and what could be redirected to public goods under future designs.
Why it matters: a state needs a reinvestment channel; burn-only narratives may weaken long-term state capacity.
Healthy trend: security budget remains strong + space opens for sustainable reinvestment mechanisms.
Red flags: value capture exists but no reinvestment into public goods emerges.
What it measures: total MEV extracted from users and how concentrated it is across builders/relays/validators.
Why it matters: MEV functions like an implicit tax on economic activity — often unaccountable and prone to oligopoly.
Healthy trend: MEV becomes less concentrated, more transparent, and increasingly recycled into security/public goods.
Red flags: MEV grows faster than economic activity and becomes dominated by a few entities.
What it measures: total blob fee revenue, utilization rates, number of rollups posting blobs, and fee elasticity.
Why it matters: blobspace may become Ethereum’s primary fiscal base in a rollup-centric world.
Healthy trend: rising blob revenue without pricing out usage.
Red flags: blob revenue collapses when fees rise or rollups migrate to other DA layers.
What it measures: issuance levels, net issuance after burn, validator returns, and total security budget in dollar terms.
Why it matters: defense is the first duty of a state; underfunded security eventually collapses neutrality and credibility.
Healthy trend: sufficient security budget with reasonable dilution.
Red flags: security budget becomes too low to sustain resilience, or excessive issuance undermines monetary credibility.
These metrics measure whether Ethereum is compounding state capacity or starving it.
What it measures: total funding dedicated to core public goods:
client teams,
audits/security,
core research,
infrastructure/tooling,
ecosystem coordination/education.
Breakdown by source:
EF,
Gitcoin / RPGF,
corporate procurement,
DAOs/treasuries,
protocol-aligned mechanisms (if any).
Why it matters: this is the state’s institutional investment budget.
Healthy trend: stable or growing funding with diversified sources.
Red flags: declining funding and rising dependence on a single sponsor.
What it measures: what percentage of public goods funding depends on voluntary donations versus structurally-linked economic capture (fees, automated funding, procurement).
Why it matters: donation reliance is historically unstable and fails to attract elite full-time talent.
Healthy trend: donations are complementary, not foundational.
Red flags: increasing reliance on donations to fund core infrastructure.
Suggested definition:
Donation Drift Index = (Donation-based funding / Total public goods funding)
What it measures: the average runway of critical teams (months of funding secured), plus volatility across market cycles.
Why it matters: public goods cannot depend on bull markets.
Healthy trend: most critical teams have 18–36+ months runway secured.
Red flags: core teams operate with short runways, frequent funding crises, or rely on ad hoc grants.
States win by attracting the best builders; underpaying creates institutional decay.
What it measures: a composite proxy of how competitive Ethereum public goods compensation is relative to:
top tech salaries (FAANG equivalents),
other L1/L2 ecosystems (foundations, labs),
private sector alternatives (security, infra engineering).
Why it matters: if Ethereum cannot pay competitively, it loses the talent war.
Healthy trend: compensation remains competitive for elite full-time contributors.
Red flags: compensation becomes structurally lower than alternatives.
What it measures: estimated FTE working on:
client teams,
protocol research,
security/audits,
critical tooling.
Why it matters: state capacity is ultimately human capacity.
Healthy trend: stable or growing FTE across cycles.
Red flags: gradual reduction of FTE while complexity increases.
What it measures: how much core progress depends on a few individuals or entities.
Why it matters: concentrated capacity creates fragility and capture risk.
Healthy trend: diversified teams and redundant institutions.
Red flags: a few key individuals becoming single points of failure.
These are “state decay indicators” — signals that the funding model is becoming brittle.
What it measures: how dependent the ecosystem remains on EF as the primary funder.
Why it matters: a mature state cannot depend on one treasury.
Healthy trend: EF share gradually declines as other mechanisms grow.
Red flags: EF remains overwhelmingly dominant or EF funding declines without replacement.
What it measures: whether reliance on donations increases over time.
Why it matters: donation drift is the open source failure mode.
Healthy trend: donation drift declines or stays low.
Red flags: donation drift rises while core needs grow.
What it measures: operational symptoms of underinvestment, such as:
fewer major audits,
declining bug bounty competitiveness,
increasing critical incidents,
delays in key upgrades.
Why it matters: underfunding shows up first as operational degradation.
Healthy trend: stable or improving security posture and delivery velocity.
Red flags: recurring funding crises and increasing operational failures.
The Currency of the Economic Zone: ETH, Monetary Stability, and Demand as State Policy
Every state, physical or digital, faces a foundational monetary question:
What is the currency of its economic zone?
If Ethereum is an Open Source State — a settlement layer for digital property and economic coordination — then ETH is not merely a speculative asset. It is the state’s fiscal backbone. The value of ETH determines the state’s capacity to fund public goods, attract elite human capital, and maintain long-term resilience.
This creates a reality that many in the ecosystem are uncomfortable acknowledging:
ETH’s valuation is not a vanity metric. It is state capacity.
A state whose currency collapses cannot fund institutions, cannot maintain security, and cannot retain elite talent. A digital state is no different.
If a meaningful share of Ethereum’s sustainable funding is meant to come from economic activity — rather than donations — then ETH must sit closer to the center of that activity.
That means increasing demand for ETH in ways that are structurally tied to the state’s “tax base”:
settlement,
capital formation,
collateral,
liquidity and reserve roles,
and the payment rails of the ecosystem.
But this is not trivial.
Modern economies require relatively stable units of account. Most economic agents cannot operate efficiently in a currency whose purchasing power fluctuates wildly. This is why stablecoins have become the dominant medium of exchange in crypto: they are an economic necessity.
Ethereum therefore faces a difficult but solvable dilemma:
ETH must be central to state capacity and sustainable funding,
while stablecoins must be central to day-to-day economic activity.
The state needs both layers to work together.
A practical approach is to treat Ethereum’s monetary system as two-layered:
ETH functions as:
the state’s native asset,
the security asset backing the validator set,
the ultimate settlement collateral,
and the medium through which many forms of value capture are anchored.
ETH is closer to what gold and sovereign bonds represent for nation-states: the reserve foundation of state credibility.
Stablecoins are the medium of exchange. They enable:
wages,
lending,
commerce,
accounting,
risk management,
and predictable economic coordination.
This is not a weakness. It is what mature monetary systems look like: one layer for reserves and credibility, another for transactional stability.
The strategic requirement for Ethereum is to ensure that the transactional layer remains aligned with ETH and contributes to ETH demand — directly or indirectly.
If ETH cannot be adopted directly as the dominant currency of economic activity in the short run — because its volatility makes it difficult as a unit of account — then an alternative is to create a stable monetary layer that remains economically aligned with ETH.
The most obvious mechanism is an ETH-backed stablecoin.
An ETH-backed stablecoin can become the transactional unit of the economic zone, while ensuring that usage creates indirect demand for ETH through collateralization.
In other words:
stablecoin usage increases,
collateral requirements increase,
ETH demand rises indirectly,
and Ethereum’s fiscal base strengthens.
This model does not require forcing ETH into everyday commerce. It creates a bridge: a stable unit of account that reinforces the reserve asset.
It is also consistent with Ethereum’s values: it is open, permissionless, and grounded in transparent collateralization rather than centralized banking.
However, the design matters enormously:
overcollateralization requirements,
liquidation mechanisms,
governance neutrality,
censorship resistance,
and systemic risk management.
This is not a trivial instrument — it is monetary infrastructure.
But if Ethereum is serious about becoming a durable state, it cannot avoid thinking in these terms.
Today, many decisions in the Ethereum ecosystem explicitly avoid discussing ETH price. The prevailing cultural norm is that “we don’t optimize for price.”
That ethos may feel intellectually pure, but it creates a strategic blind spot.
A mature state does not ignore the consequences of monetary policy just because it does not want to appear political. It is perfectly possible to avoid short-term price manipulation while still doing something essential:
systematically evaluating how each major decision affects long-term supply and demand for the currency.
Ethereum already has a relatively predictable supply system:
issuance policy is known and constrained,
burn dynamics are transparent,
and there is high certainty around monetary mechanics.
That means the most important strategic variable is demand.
If demand for ETH weakens structurally, the entire state weakens:
the security budget becomes fragile,
public goods funding becomes constrained,
and the ability to attract elite full-time contributors erodes.
Ignoring demand is not neutrality. It is negligence.
Ethereum’s economic model also faces a second-order problem:
How do you grow blockspace demand without collapsing blockspace value?
Over the last few years, Ethereum has dramatically expanded blockspace supply — first through efficiency improvements, and then through the rollup-centric roadmap (blobs and abundant data availability). In principle, this is necessary: a state must expand capacity to serve more economic activity.
But there is a hidden risk:
If supply grows so aggressively that blockspace becomes marginal and underpriced,
the system can collapse its own fiscal base.
This is a digital version of the Laffer Curve problem: the relationship between extraction and the health of the tax base is non-linear.
Too much extraction drives users away.
But too little extraction — especially via subsidized or near-zero pricing — can also be destructive, because it underfunds institutions and eliminates the economic signal that a scarce resource should produce.
A state needs not only demand, but sustainable pricing power over its public infrastructure.
If Ethereum treats blockspace as a free commodity rather than a scarce resource with economic value, it risks turning its most valuable fiscal lever into a low-margin utility. And low-margin utilities cannot fund world-class institutional capacity.
This does not mean Ethereum should maximize fees in the short term. It means Ethereum should maintain strategic awareness of:
price elasticity,
minimum viable fee floors,
and the relationship between supply expansion and long-term demand for ETH as the reserve asset.
Ethereum should not fear defending its premium.
Premium is not greed. Premium is reinvestment capacity.
To evaluate whether Ethereum is strengthening or weakening its monetary backbone, we can track a set of demand-centric metrics.
ETH used as collateral (total ETH collateral in DeFi, stablecoins, lending)
ETH locked in staking (and concentration of staking providers)
ETH-denominated economic activity (fees paid in ETH, ETH settlement flows)
ETH velocity (how often ETH changes hands relative to supply)
Share of stablecoin supply backed by ETH (directly or indirectly)
Growth of ETH-backed stablecoins vs fiat-backed stablecoins
Stablecoin settlement volume anchored to Ethereum (L1 + L2s)
Fee floor stability (minimum fee levels over time, avoiding long-term zero pricing)
Blob fee revenue trend (as rollup tax base)
Price elasticity of usage (does demand collapse when fees rise?)
Subsidy dependence (how much usage is driven by incentives and near-free blockspace)
Security budget in $ terms (issuance + priority fees + MEV distribution)
Public goods reinvestment rate (how much of economic activity is reinvested into core infrastructure)
In traditional states, one of the most important lessons of economic history is that fiscal policy is not linear.
Governments tend to assume that higher taxation always leads to higher revenue. But beyond a certain point, higher taxes shrink the economic base: people work less, invest less, evade more, or move capital elsewhere. Revenue eventually declines.
This dynamic is often summarized by the Laffer Curve: the relationship between tax rates and tax revenue is not a straight line — it is an inverted U-shape.
Ethereum, as an emerging Open Source State, faces an analogous problem.
Before discussing funding models, human capital, and fiscal sustainability, we must start with the foundational question:
Does Ethereum still provide the three core services that define a state?
Every successful state, physical or digital, rests on three primary pillars:
Property rights (who owns what)
Enforcement of rules and contracts (how agreements and constraints are enforced)
Security and credible force (how the system resists attack, coercion, and capture)
Without these pillars, everything else becomes irrelevant. No monetary system, no public goods funding, no human capital coordination matters if ownership is insecure, rules are unreliable, or security collapses.
Ethereum’s advantage has historically been that these pillars are exceptionally strong — and that they are defended through technology and decentralization rather than through political authority. But that strength must be monitored with real metrics.
In a traditional state, property rights rely on courts, police, and legal interpretation. In Ethereum, they rely on:
the protocol’s state transition rules,
the consensus mechanism,
and the legitimacy of finality.
Ethereum’s “property rights guarantee” is the ability to own and transfer digital assets with the highest known assurance in the world — not because laws say so, but because the state is extremely difficult to rewrite.
A) Finality reliability
Finality time distribution (how stable finality is over time)
frequency of missed finality events
reorg frequency and depth (ideally near-zero)
Why it matters:
Property rights are only as strong as the reliability of final settlement.
B) Censorship resistance indicators
percentage of blocks that exclude certain transactions (censorship proxies)
OFAC-related compliance patterns (as a proxy for external pressure)
inclusion delay distribution for “sensitive” transactions
Why it matters:
If property transfers can be censored, property rights are not universal.
C) State access neutrality
ability of any user to hold and transfer assets without permission
wallet-level neutrality (no systemic blacklisting at protocol level)
neutrality of core infrastructure providers (RPC, relays, builders)
Why it matters:
Property rights require universal access, not conditional inclusion.
daily transaction counts
“number of NFTs minted”
gas used as a proxy for property rights
These measure activity, not the quality of ownership guarantees.
A state is not only about owning assets — it is about making agreements enforceable. Ethereum’s smart contracts are its legal machinery: automated rules that execute without courts and without discretion.
But contract enforcement is only as good as:
the consistency of the execution environment,
the predictability of protocol changes,
and the ability to preserve invariant rules over time.
A) Execution reliability
client correctness metrics (consensus failures, critical bugs)
incident rate affecting contract execution
MEV-related execution integrity (front-running, sandwiching prevalence)
Why it matters:
Contracts must execute predictably under real adversarial conditions.
B) Governance predictability / protocol stability
frequency of breaking changes
compatibility stability for core primitives
“social layer intervention rate” (how often social coordination overrides protocol expectations)
Why it matters:
Rule stability is the rule of law of a digital state.
C) Economic integrity of execution
rate of failed transactions due to congestion
execution cost volatility (gas volatility distribution)
average execution latency under stress events
Why it matters:
Enforcement is not only correctness — it’s reliability under load.
raw TPS
total gas throughput
“number of contracts deployed”
These are volume metrics, not enforcement quality metrics.
A state’s most basic duty is security: the ability to prevent coercion, maintain continuity, and resist capture.
Ethereum achieves this not through a monopoly of physical violence, but through:
economic security (stake),
decentralized validator distribution,
client diversity,
and the cost to attack.
If property rights and contract enforcement are the “law,” security is the “military and police” of the system.
A) Validator decentralization
distribution of validators across entities
staking concentration (top 5, top 10)
geographic distribution (where available)
concentration of block proposal rights
Why it matters:
A state cannot be neutral if defense is controlled by a few.
B) Staking and LST concentration risk
LST market share (liquid staking dominance)
correlation between staking providers and governance influence
dominance of a single operator (centralization risk)
Why it matters:
This is the “oligarchy risk” for Ethereum’s security apparatus.
C) Client diversity
execution client diversity (avoid monoculture)
consensus client diversity
correlation of major client failures with systemic risk
Why it matters:
A monoculture is a national security threat. Diversity is redundancy.
D) Security budget in $ terms
total rewards to validators (issuance + fees)
MEV share of total block value
cost to acquire or corrupt majority stake
Why it matters:
If the state cannot fund defense, it cannot remain sovereign.
E) Censorship and coercion resistance
relay and builder concentration (MEV supply chain centralization)
rate of censored transactions
diversity of block-building pipeline
Why it matters:
A captured block-building market becomes a captured state.
price of ETH as a standalone indicator
“number of nodes” without quality weighting
“hashrate-style analogies” without staking structure context
These can be noisy or manipulated.
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Jesus Perez Crypto Plaza / DragonStake
Jesus Perez Crypto Plaza / DragonStake
3 comments
@ethereum https://paragraph.com/@cryptoplaza/ethereum-as-an-open-source-state?referrer=0x3e0cf03f718520F30300266dcF4DB50bA12d3331 Ethereum’s long-term value depends on behaving like a state: neutral, sovereign, and sustainably funded to defend digital property rights.
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