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is Ethereum A Commodity?

is Ethereum A Commodity?

Cryptocurrency & Blockchain

Is Ethereum (ETH) a Commodity? Definitely NOT!

It is delusional to think that Ethereum (ETH) is a commodity.

With the approval of spot Ethereum ETFs, many people now argue that Ethereum must be a commodity, similar to the argument made for spot Bitcoin ETFs. Since the SEC approved the spot ETF listing for Bitcoin, the reasoning goes that Bitcoin is definitely not a security and therefore must be a commodity.

However, this could not be more wrong. Ethereum is definitely NOT a commodity. If Ethereum were a commodity, it would be the first in human history to exhibit the following characteristics:

  1. Public and private sale of tokens.
  2. Foundation with pre-mined tokens (as well as many core developers).
  3. A business development roadmap and planning.
  4. Ethereum core developers leading all changes in the protocol.
  5. Venture capitalists and investors supporting the “ecosystem.”

In 2013, Vitalik Buterin secured a multi-million dollar investment from Fenbushi Capital. For the next year, the team traveled around the world marketing their new blockchain. In 2014, Ethereum conducted its ICO via the Swiss Foundation model, wherein the Swiss Foundation issued the cryptocurrency and conducted fundraising.

Clearly, Ethereum is not a commodity. No commodity in history has had the characteristics listed above.

Some might argue that it has commodity-like properties when it is used for paying gas fees. However, the Proof-of-Stake (PoS) hard fork added security-like properties to Ethereum, including:

  1. Staking = voting power.
  2. Yield = dividend payment (paid from transaction fees).
  3. Burning = buybacks (tokens are bought and burned from transaction fees).

The question of whether Ethereum is a commodity or security has little practical meaning outside of U.S. regulation. There is no equivalent to the Howey Test for securities to determine if something is a commodity from a U.S. legal standpoint. Something becomes a commodity when the CFTC (Commodity Futures Trading Commission) says so.

One could argue that Ethereum “was a security” during its early years. However, it later “sufficiently decentralized” itself away from being a “common enterprise,” according to SEC’s William Hinman, and hence is not a security.

In conclusion, Ethereum functions as a payment and utility token. While it may not fit neatly into the category of a security, it is absolutely NOT a commodity.

Lastly, follow 👉 Anton Golub for more awesome insight! Anton was selected to the list of 2023 Top Global Crypto & Blockchain Minds!

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is Ethereum A Commodity?