Ethereum also pays dividends in the form of staking rewards.
About 7% today, and most likely going to 10%+ post-merge. That makes the yield on Ethereum significantly higher than the majority of stocks in developed markets.
The analogy would work if Ethereum staking rewards were inflationary. But post-EIP 1559, there's a zero-to-negative net issuance of Ethereum on an ongoing basis. After the merge, the entirety of that (plus MEV bribery) goes to stakers/validators.
In this sense, Ethereum's yields are more like a stock buyback than a stock dividend. To transact on-chain, end-users and traders have to pay ETH to validators. To acquire ETH they have to bid on it using fiat. ETH issuance to stakers isn't inflationary, because its counter-balanced by end-user demand to transact on-chain.
Just the same, as a stock buyback doesn't involve any direct payout of fiat currency to existing shareholders. But it takes the revenue generated by the underlying company, and translates that into a deflationary bid to the stock.
Ok, fair. But that was when again? How is this relevant today, when people hate crypto and think stocks are ok?
Ethereum also pays dividends in the form of staking rewards.
About 7% today, and most likely going to 10%+ post-merge. That makes the yield on Ethereum significantly higher than the majority of stocks in developed markets.
Stocks pay out their dividends in fiat currency, not additional shares.
The analogy would work if Ethereum staking rewards were inflationary. But post-EIP 1559, there's a zero-to-negative net issuance of Ethereum on an ongoing basis. After the merge, the entirety of that (plus MEV bribery) goes to stakers/validators.
In this sense, Ethereum's yields are more like a stock buyback than a stock dividend. To transact on-chain, end-users and traders have to pay ETH to validators. To acquire ETH they have to bid on it using fiat. ETH issuance to stakers isn't inflationary, because its counter-balanced by end-user demand to transact on-chain.
Just the same, as a stock buyback doesn't involve any direct payout of fiat currency to existing shareholders. But it takes the revenue generated by the underlying company, and translates that into a deflationary bid to the stock.