Biancotti describes Ethereum as a voluntary network where validators participate for profit, not by legal mandate. Validators collect rewards in ETH, while they pay many operating expenses in fiat, including hardware, connectivity, and cybersecurity.
Ethereum also pays validators via fees and maximum extractable value (MEV), and these revenues also come in ETH, which links validator economics to ETH’s dollar price.
The paper outlines a ‘downward price spiral’ in which negative expectations drive selling pressure and encourage validators to exit. Exiting can require unstaking, which deactivates validators.
If enough validators stop operating, the network can keep receiving transactions, but it may stop finalizing them, which leaves assets on-chain but immovable. The author also notes Ethereum’s shift to proof-of-stake in September 2022, which makes staked ETH central to both participation and security.