If tech keeps chipping away at physical scarcity, ETH’s rule-based scarcity matters more

I think the biggest mistake in the "gold vs crypto" debate is assuming physical scarcity is fixed. It is not.

Physical scarcity is a temporary condition set by current 1. extraction limits, 2. synthesis costs, and 3. substitutes. Over long time horizons, technology systematically reduces all three.

That matters because stores of value only work if scarcity remains hard to erode.

My view is simple:
If material abundance keeps compounding, enforced digital scarcity will dominate physical scarcity.

Why physical scarcity is not a stable foundation

People talk about gold, diamonds, and rare metals as if Earth's geology is the final word on their scarcity.

It is not. Technology is.

Extraction vs enforced limits

Physical scarcity relies on difficulty of access.

That difficulty is conditional.

• Better surveying
• Better automation
• Better processing
• Entirely new frontiers becoming viable, like m-class asteroids

Each step makes "rare" materials less rare in economic terms, even if they remain finite in theory.

Finite does not mean scarce enough to anchor value.

Gems already show the failure mode

Diamonds are the best example because they have already experienced technology-induced abundance.

Once manufacturing produced indistinguishable diamond substitutes at scale, the scarcity premium collapsed. What remained is branding, signaling, and narrative.

That is not a monetary anchor, and this is proven by natural diamonds seeing their price decline 25-30% since 2022.

Utility does not equal monetary premium

Another common argument is "industrial use guarantees value".

That is wrong.

Utility supports floor demand, not monetary premium. If substitutes appear or usage shifts, the premium evaporates.

History is full of materials that were once strategic, rare, and hoarded – until they were not. For instance aluminum, which before industrialized methods of processing, was more precious than gold.

Once supply increases, the asset drifts toward use-value pricing instead of monetary premium pricing.

That does not mean the thing becomes worthless.
It means it becomes bad at storing value over long horizons.

Rule-based scarcity beats physics

If material abundance keeps rising, scarcity shifts away from physics and toward rule systems.

This is the key transition people are missing.

Scarcity enforced by protocol rules is fundamentally different from scarcity enforced by geology, because it is completely immune to technology-induced abundance. Fiat shares this property with crypto, but it is instead vulnerable to political maneuvering, like leaders inflating their money supply to earn seigniorage.

In other words, crypto matters because it creates enforced scarcity without relying on physical limits or political issuers.

Not all crypto systems do this equally.

The spectrum

• Bitcoin: fixed issuance enforced by consensus rules.
• Ethereum: dynamic issuance with fixed inflation rate cap enforced by consensus, plus fee burning tied to real usage.
• Other L1s: inflationary security models that dilute holders.
• Traditional assets: scarcity enforced by law, courts, and governments.

These are not equivalent systems. The tradeoffs matter.

Why ETH is structurally different

Ethereum is not just an asset network. It is an economy.

And every economy has a settlement asset.

Inside Ethereum:
– ETH pays for execution.
– ETH secures consensus.
– ETH anchors liquidity and collateral.

This creates a monetary hierarchy where ETH sits at the base.

Other assets exist on top of it.

That hierarchy is mechanical, so more durable than meme/culture based hierarchies.

Settlement layers decide long-run value

I think this is the most important frame.

Value accrues to the layer where final balances reconcile.

Ethereum is increasingly that layer for:
– Stablecoins
– DeFi
– Tokenized assets
– Rollups

Layer 2 blockchains do not weaken this role. They reinforce it.

They push execution outward while pulling settlement inward.

That is exactly how financial systems scale.

Why ETH and not BTC?

This is more speculative, but I'm of the opinion that the fundamentals make ETH far more likely to be a durable store of value.

BTC has a built-in security budget cliff. Bitcoin's issuance declines geometrically every four years, and fees have consistently remained a small fraction of miner revenue. That means the system is still overwhelmingly subsidy-funded. Over time, that subsidy mathematically goes to zero. Unless fees rise enough to replace it, security necessarily compresses. There is no alternative path in the design.

ETH is explicitly built to avoid shrinking security over time. Ethereum put a floor under its security model by ensuring issuance never goes to zero. Instead, supply growth adjusts upward slowly and predictably as staking participation rises, with a maximum theoretical inflation rate of about 1.5% under extreme assumptions. In practice, issuance is often far lower and sometimes negative, but the key point is structural: Ethereum can always pay for security without relying on a future fee-market miracle.

At the same time, Ethereum is scaling in a way that makes sustained fee demand more plausible. L1 throughput has been increasing via gas limit growth, and the roadmap continues to push execution efficiency and statelessness. On top of that, activity on L2 blockchains has exploded as rollups post data back to Ethereum via blobs. That means Ethereum is not a passive asset waiting to be hoarded. It is the settlement layer of a growing economic system, and its security funding is aligned with that role.

The bet I'm making is simple: the asset whose security does not mathematically decay to zero, and whose relevance increases as the system scales, is the one more likely to retain a long-run monetary premium.

Bottom line

If technology keeps turning matter into abundance, scarcity will migrate upward into systems that can enforce it.

That favors:
– Rules over rocks
– Protocols over physics
– Settlement layers over commodities

Among digital assets, ETH has properties that make it the most likely to be the civilizational store of value. That does not guarantee victory. But structurally, it dominates the alternatives at the moment.