Burning ETH is great for the price, but may be a risk to decentralization (A critique of the ETH burn model and a recommendation for new economics)

Everyone loves a good ETH burn right? Oh yeah, it’s awesome to see the price go parabolic as the supply slowly goes deflationary. However, I think long term, burning ETH isn’t the best way to go.

Something to think about is this; while anyone can spin up an Ethereum node so long as they have 32 ETH but there is no real practical way to actually earn more ETH. Most people don’t have 32 ETH, nor the technical ability to sufficiently run an Ethereum validator. So unfortunately, this leads to a world where Coinbase, LIDO and a few others earn a majority of the newly minted ETH.

On the surface, this doesn’t seem like too big of an issue, however, to me this mixed with deflationary burning of ETH seems to mean that the average Joe, using the network, is consistently burning a portion of their fees, while never earning any more back in any meaningful fashion without actively LPing (IL risk) or trading.

These types of economics and how validating works in practice, means that there are a few entities with the honor of earning new ETH, and the people using the network are simply burning ETH.

I believe better economic modeling exists. Rather than burning ETH fees, it would be great to implement a fee structure that rewards the actual smart contracts being used. Then a new use case could be that LP positions on Uniswap could earn UNI and the equivalent ETH usage fees that were directed back to the contract itself.

Do you prefer the ETH burn or would a model rewarding smart contract usage be a better way to distribute ETH back to the community? I prefer the latter, as it promotes decentralization of the network and promotes usage, much more than a burn mechanism.