Topic Summary:@lmf and I disagree about whether ETH is a commodity. We’re going to discuss it and use CF techniques to reach agreement.
Goal: Figure out if ETH is a commodity or not, and why, and agree on that. @lmf thinks it is not a commodity. I think it might be and will argue that it is.
CF relevance: Mises/TMC, succeeding at discussion, building and using idea/discussion trees
Do you want unbounded criticism? Yes
Here is a first-draft idea tree of why ETH is a commodity (I think we can use this to seed a discussion tree). There’s some assumed background knowledge regarding blockchains at least.
ETH is a commodity
A commodity is a good that people buy to use/consume for some non-economic purpose. (People could buy it for economic purposes, too, though.)
ETH is a good, called a "token" (or "coin") wherein the units are fungible and of limited supply.
There's a market price and you have to buy it (or mine it).
One reason ppl buy ETH is to make Ethereum transactions that aren't for an economic purpose.
All Ethereum transactions require a fee
ETH is integrated with the Ethereum blockchain by design
Ethereum transactions consume "gas" (a unit created to measure and price transactions)
Ethereum transactions require a fee: which is the gas consumed multiplied by the "gas price" (measured in ETH)
Users consume/spend ETH to pay for the transaction fee
Ethereum transactions can mutate the state of the Ethereum blockchain, which is useful for some non-economic purposes.
I want to mention upfront: I am not 100% sure about this. There are a few reasons:
Ppl had started talking about whether ICOs / presales violated securities laws, and blockchain projects sometimes/often bend a design to fit laws (related terms: “utility token”, “tokenomics”)
I have a vague memory (or suspicion) that the initial Ethereum design took into account securities laws in some jurisdictions – Ethereum ICO was run out of Switzerland from memory.
Bending the design of something so that you’re deliberately outside a technical definition of money or a security seems dishonest
Bending a design like this could be a way to hide that a token is actually just an economic good, but also, words like “pay” and “fee” might just be for convenience
There are questions we could ask, too, that might help figure out what is/isn’t a commodity:
Are tickets to theme park rides commodities?
Are custom tokens used at video-game arcades (or similar) commodities?
I’m actually worried that the answer to this question might hinge on some unimportant technical details of how we define “commodity” or how we define “consume.”
To make sure we’re not wasting time, let’s start with the question:
Why do you care whether or not ETH is a commodity?
My answer to that question is that I’m interested in knowing whether or not the reasoning from our earlier thread applies to ETH, i.e. are there any features of ETH that act as natural barriers to prevent its value from going to ~0? I think that the answer to the italicized question is still “no,” whereas the answer to such a question would be “yes” if we were to replace “ETH” with a traditional commodity like wheat or crude oil.
This is a good question to ask. I am generally interested in whether blockchain tech can produce anything that isn’t an economic good.
Related to this, last week I convinced myself that ETH was an economic-good – basically a way to move value that’s abstracted from underlying utility (if that utility exists at all). I’m not so sure about “Gas” itself – but you can’t hold gas, only buy it at the current market rate via tx fees paid in ETH.
So I now disagree with my OP. WRT the other questions I pose in OP, tickets to theme park rides and custom tokens used at video-game arcades are both economic goods, even if there is some underlying consumption good that people buy them for. (AFAIK according to TMC, a commodity must be either a consumption good or a production good, but it won’t ever be an economic good – though economic goods might be backed by commodities.)
I agree with your answer and conclusion re traditional commodities.
A significant/primary factor seems to be network effect. Like the utility of the Ethereum network is dependent on its security, which is dependent on ETH minting (block rewards), the value of which is dependent on market price.
Is it possible for a blockchain network to have meaningful utility without the market price part?
ATM I think “no”, b/c the utility of a network depends on its security which depends on the consensus mechanism which depends on the market price of the coin. I don’t see how a blockchain can get around that (without resorting to centralization e.g., PoA – which introduces vulnerabilities that blockchains are designed to prevent).
