What you are saying is you can invest Ether (i.e., stake it) and then might earn a return in Ether (not USD). Any appreciation of Ether vs USD still needs to come from outside demand for Ether.

This is a subtle point but the fee revenues that the network observes are best understood as priced in fiat currency, even if denominated in ETH. In much the same way the earnings of Microsoft in Europe are to be understood as priced in EUR even if denominated in USD in their financial reports. The reason for it is basically that the network offers a service (transaction settlement layer) that provides some value to its users and has some costs. The cost is set dynamically due to the scarcity of blockspace to include transactions, if the cost is too high it will be outcompeted with all other alternative uses of that money. They may settle in a different chain, they may settle using a centralized provider (e.g. Visa, Paypal), they may not interact at all with the network, etc... This makes it so, at the margin, the network revenues are inherently priced in fiat. Because prices will be set at the point where use of the network is discouraged given the value provided and all other alternative uses of that money.

Additionally, the fees of the network can only be paid in ETH, which means that any use of the network implies ETH demand.

If there were no outside demand for Ether then Ether would we worthless in USD. What you are saying is, that there is demand for the network services from beyond existing Ether holders, thereby creating demand for Ether by USD (or other currency) holders.

Whether people transacting on the network care strongly about the costs vs alternatives to create a proper link with fiat is not so easy to show because there isn't always a direct 1-to-1 correspondence between services (and there are switching costs, too) - so the "inherently priced in fiat" is tough to show, I think. Also, being priced in fiat might still not create demand for Ether from fiat holders - that comes from outside demand as per the above.

> If there were no outside demand for Ether then Ether would we worthless in USD. What you are saying is, that there is demand for the network services from beyond existing Ether holders, thereby creating demand for Ether by USD (or other currency) holders.

Demand to settle a transaction on the network is demand for ETH. Because the base_fee of a transaction is burnt, destroyed, so ETH needs to be acquired to use it as a settlement layer. Much in the same way to how heating your house with a gas boiler is demand for gas. Similarly, when natural gas prices skyrocket (cue Ukraine invasion), alternative forms of heating start to look more attractive, and consumers may change their behaviors lowering the thermostats. In the case of Ethereum, alternative settlement layers will look more attractive or some users may lower their use. The same mechanisms are in place. I agree though that the relationship is not linear, that's not what I implied. Simply that the revenues of the network are priced in fiat, because the price is set by an auction to include your transaction on the scarce blockspace. And given at least some users will be sensitive to the price of the transaction in USD they will, at the margin, set the prices for a transaction in USD and therefore the fee revenues of the network.

By the way I appreciate you engaging rationally on this topic in HN. Not a common sight when discussing anything related to crypto but much appreciated.

Thank you, likewise, needs two to have a rational discussion.

I agree that there can be some link based on the utility of the network and with less of a speculative frenzy it might actually be stronger now. Not dissimilar to (other?) commodities, which have some link to economic activity but are not directly producing the activity themselves (and they can also have speculative phases). And commodities also have conceptual issues around their use in long-term investment for that reason (but at the same time they exist and trade).