Ethereum's chain is profitable. The networks fees outweights the supply given to validators to secure the chain.
The fees are larger than the amount staked?
The fees, when realized into gains, are worth more than the cost to run the validation? Are the validators converting back to pay for their costs? Or paying for them some other way?
Does it stay profitable if ethereum drops to 1% of its current trading value?
Blocks have a fixed amount of rewards given to the validator that created them and the validators that attest it is valid.
When more fees are being burnt than Ethereum issued in blocks it is deflationary. It is deflationary at ~16 Gwei and fees have been higher than this for a while now.
Validators cost very little to run, they're usually NUCs that use 20w, the main cost is the Ethereum you have to stake.
The cost of running the validators is irrelevant to Ethereum (though it is tiny), it'd be like saying you have to calculate employees lifestyle costs to figure out the "real" cost to a company. The cost is the wages you pay the employees (the rewards given to validators) not how much the validators spend.
“Employees” are part of a company, they run the company, don’t they? Yet the cost of having employees is not “therefore revenue” from the standpoint of the company.
“Drivers” are a part of Uber, they deliver the service, don’t they? Yet the money paid to drivers reduce Uber’s profits.
I think where your argument runs into trouble is “from the standpoint of the network”. If you want to equate the network and its validators, to say they are the same thing, then your sentence becomes, “The money [the validators] get paid [by the validators] is therefore revenue, from the standpoint of [the validators]”. That’s non-sensical. You can’t give yourself money and say it’s revenue. Either these two things are in fact not the same thing and we can analyse the cashflow of “Ethereum the network” separately from “the validation service providers”, in which case Ethereum is paying out less than it’s taking in, so it is profitable. Or they are the same thing, in which case the “profit”, to the extent you can say a virtual entity like a network can have such a thing, is even higher.
This is because whatever costs the validators bear are less than the ETH they receive is worth. This is true if we assume validators are rational actors (they wouldn’t validate if they were losing money doing so). And even if we take away the assumption that they are profit motivated (maybe they’re all doing it as charity work for some higher purpose), the cost of running an Ethereum validator is tiny, so we end up in the same place: outgoings are smaller than receipts when considering the whole.
(The fact that Ethereum the network “burns” its receipts and then “mints” its outgoings to the validators does not affect this calculation since it’d work out the same if Ethereum paid validators from fees directly.)
You seem to think that is the end all be all to measure the profitability of the network. And you aren't entirely wrong. If it requires too much hardware, too much internet bandwidth, too much in the way of skilled node operators relative to the value the folks running the nodes would gain, the number of particpants would dwindle and the physical network would suffer.
So there are boundaries that real world costs impose on the operation of the network. But at what level do those boundaries kick in? Well, that is why it's been an important value to the developers that a node can be run on 'commodity hardware and internet'. You can run a full node on a standard Pc from the last 5 years with 16gb of ram (less in some configurations), a 2 tb ssd (or 1tb if you don't mind some downtime every few months), a modest internet connection and can be done so by anyone with some basic command line skills.
Because of those modest demands, I can and do run a non-validating node on old hardware I already owned on an internet connection I would be paying for anyway. I make $0 from doing so, but it interests me as a hobby because I want non-intermediated access to the the network. In contrast some large node service providers have immense costs because they host on a cloud services and they hire expensive SRE's to keep it running at a high reliability level. But they woudn't be spending that money if they didn't seem some kind of profit or value in it. Because of that variability and the low baseline to get started, whether it is real-world profitable to any particular participant is irrelevant to "ethereum" as a whole.
So, from my view, it becomes reasonable to look at it as "how much ether is created vs how much is burned" to see if "ethereum" as a whole is profitable.
How could validators possibly be revenue? Maybe it helps if you visualize them as contractors who do a job for the Ethereum network, and get paid for that. How the contractor manages their own budget is irrelevant to Ethereum.
For all practical purposes, you could exchange the currency for something else. But that's outside the scope of the staking system as defined.
I'm not making any negative or positive judgement on the system, Ponzi scheme is just a description of how it operates. Similarly, any stocks that does not pay out dividend is also a Ponzi scheme.
> any stocks that does not pay out dividend is [sic] also a Ponzi scheme
Neither of these things are "Ponzi schemes." Read about Charles Ponzi's role in his investment scheme to understand why.
This is very different from a stock that doesn’t pay a dividend. While you’d never get money out of it if no one was willing to buy it, what stocks generally promise is some amount of ownership and voting rights in a company (which theoretically could result in dividends, if enough stock holders agreed). That said ownership ended up not being valued by other people does not make it fraud. You can certainly feel free to believe that stocks that don’t give dividends are worthless though, that’s a separate question really.
I generally come down on the side that the major cryptocurrencies aren’t ponzi schemes, or fraud in general. (Plenty of fraud in the shitcoins, of course). Ultimately you decided to buy a data point on a ledger in a distributed system, and that’s what you get. But…well, mining sometimes confuses that. Without enough people coming into the system to buy new coins, the miners would start shutting down until none were left. Much like a ponzi scheme, crypto currencies seem reliant on new blood to keep functioning to me. Don’t know if that makes them a scheme necessarily, but they’re more adjacent to it.