Digital oil, a global reserve asset for value storage and the digital economy.

Author: Etherealize

Abstract

The global financial system is on the brink of a transformative revolution, with assets around the world gradually being digitized and transferred to the blockchain. The evolution from semi-digital, independent financial systems to fully digital, composable financial systems requires a secure, neutral, and reliable global settlement layer to support the operation of global assets. Ethereum has already become this foundation.

Institutional adoption of Ethereum is accelerating rapidly, with the U.S. regulatory framework openly supporting blockchain innovation, and digital assets becoming a mainstream component of traditional investment portfolios.

It took Bitcoin 15 years to be widely recognized as digital gold: a scarce monetary asset that transcends sovereign control. Ethereum builds upon Bitcoin: it not only stores value but also facilitates seamless transfer of value, trust establishment, and global collaboration. **ETH is the next generation of asymmetric investment opportunities, poised to become the core *holding* of institutional digital asset portfolios.**

Ethereum has become the default platform for stablecoins, high-value tokenized assets, and institutional blockchain infrastructure. Currently, over 80% of tokenized assets exist on Ethereum. With its robust architecture, Ethereum has earned the trust of leading global asset management firms and infrastructure providers: it is the world's most secure and decentralized blockchain, offering unparalleled reliability and zero downtime.

However, as an asset supporting this transformative system, ETH remains one of the most severely undervalued opportunities in the global market. Despite Ethereum's clear dominance in the market and significant technological upgrades, ETH's current trading price is far below its historical peak in 2021. We believe this price discrepancy will not persist, and understanding ETH's unique value proposition will present one of the largest upside opportunities in today's asset classes.

ETH is not just a token; it is collateral for the on-chain economy, computational fuel, and interest-generating financial infrastructure. It is actively reserved, staked, burned, and utilized. Bitcoin serves as a simple store of value commodity, while Ethereum is also a commodity that can serve as a store of value but possesses immense utility—effectively making it a productive reserve asset: the digital oil powering the digital economy.

| Report Overview

This report aims to elucidate why ETH should be viewed as a core allocation in institutional strategies, particularly those prioritizing long-term value creation, technological exposure, and future-oriented financial infrastructure. The report is divided into three core sections:

Understanding ETH: The Digital Oil Driving the Digital Economy

This section will explore the relationship between Ethereum and ETH, the utility and unique characteristics of ETH, assess the appropriate valuation framework for ETH as an asset, and explain why it is currently undervalued and underweighted in institutional investor portfolios seeking asymmetric opportunities and productive value storage.

Ethereum: The Underlying Infrastructure Driving the Rise of ETH

This section will cover the structural, technological, and economic drivers behind the growing momentum of the Ethereum network. It will articulate the potential position of Ethereum as the foundational layer of the global digital financial system and how this position will support and amplify the economic significance of ETH.

Ethereum and AI: The Economic Engine of the Autonomous Economy

This section will look to the future, assessing the role and potential value of Ethereum—and by extension, ETH—in a financial system driven by autonomous agents.

| Key Points

ETH is Digital Oil: ETH powers the Ethereum economy and accumulates value through its utility, scarcity, and yield.

ETH is Censorship-Resistant Value Storage: ETH serves as the settlement, security, and collateral asset of the digital economy. As the number of externally controlled tokenized assets (stablecoins, real-world assets, and permissioned financial instruments) on Ethereum grows, the demand for a globally neutral, censorship-resistant reserve asset as foundational value storage becomes critical.

ETH is Not a Tech Company: The valuation framework must evolve; ETH cannot be valued like tech stocks based solely on fee revenue—Ethereum is unique digital infrastructure and is encapsulated as a global reserve asset.

Programmatic Issuance + Burn = Predictable Scarcity: The theoretical annual maximum issuance rate of ETH is 1.51%¹, but the commodity burn generated by platform usage typically results in a lower net issuance. Since September 2022, ETH supply inflation has hovered around 0.09%², lower than fiat currencies and Bitcoin.

ETH Provides Native Yield: Validator staking makes staked ETH a productive³, yield-generating digital commodity.

ETH is Already a Reserve Asset: ETH is already the reserve asset of the Ethereum digital economy and will soon become a reserve asset for institutions and sovereign nations.

ETH is Undervalued: The lag of ETH behind BTC is a temporary mispricing rather than a structural weakness, creating a rare asymmetric investment opportunity.

The Role of ETH in the Future AI Economy is Not Yet Priced In: As autonomous agents integrate into the financial world, a new type of economic infrastructure will be needed. Ethereum is the most suitable and likely platform to support this future, serving as the operating layer of a human-machine hybrid economy—with ETH as its native currency and reserve asset.

ETH Has Trillion-Dollar Potential: The short-term target is $8,000; conservatively, as a monetary reserve/commodity asset, ETH could exceed $80,000 in the long term.

ETH: The Digital Oil Driving the Digital Economy

ETH is the native asset of the Ethereum network and the economic engine driving its operation.

It is digital oil—an asset that powers, guarantees, and reserves the new financial system of the internet.

The traditional financial system is at the beginning of a structural transformation from analog infrastructure to digital-native architecture. Ethereum is poised to become the foundational software layer—similar to an operating system like Microsoft Windows—upon which the new global financial system will be built.

When this is realized, ETH will become the foundational asset of a comprehensive global platform that will encompass the future of finance, tokenization, identity, computation, artificial intelligence, and more. This inherent complexity makes it more challenging to define ETH, especially compared to simpler value storage assets like Bitcoin—but it also makes ETH strategically more valuable and implies greater long-term potential.

ETH is not just a cryptocurrency; it is a multifunctional asset with roles including:

Computational Fuel: Every on-chain operation consumes (burns) ETH. It is the foundational asset driving computation, data storage, asset transfer, and value settlement on Ethereum, serving as fuel for:

o Every stablecoin transfer.

o Every issuance of tokenized real-world assets.

o Every transaction executed on Ethereum.

o Every new application—DeFi, gaming, AI, identity—whose operation will burn ETH.

Value Storage Asset with Yield: Beyond simply holding ETH as a store of value, ETH can also earn yield through staking. When someone stakes ETH, they agree to lock it in the system, becoming a validator—a type of network participant akin to a referee, checking and verifying transactions. The validation process is primarily automated, so the person or entity staking their ETH typically does not need to perform any additional work beyond staking their ETH. The network randomly selects validators to propose or confirm new transaction blocks. If validators correctly complete their work, they will receive rewards in the form of ETH.

Original Settlement Collateral: ETH provides security for billions of stablecoins, RWAs (real-world assets), and financial applications. ETH is censorship-resistant, credibly neutral, and unaffected by devaluation, making it the foundational collateral of the Ethereum ecosystem, with approximately 32.6% of the total supply⁴ currently used in a collateral role, and another 3.5%⁵ exported to other blockchains. As the number of externally controlled tokenized assets (such as stablecoins, RWAs, and permissioned financial instruments) on Ethereum continues to grow, the demand for a neutral reserve asset as foundational value storage becomes critical. Tokenized assets may carry issuer, jurisdiction, and counterparty risks; in contrast, ETH anchors the entire system in a globally accessible, non-sovereign, neutral value storage manner, enabling settlement, collateralization, and liquidity routing without introducing systemic reliance on any single participant.

In a world increasingly filled with tokenized assets reliant on external counterparties, the value of truly neutral, native, and non-sovereign collateral assets significantly increases. ETH is the only original collateral in the smart contract economy—completely independent of external counterparty risk. ETH represents the highest level of trust on Earth, which will increasingly contribute to its future monetary premium.

Deflationary Asset: As network activity increases, ETH becomes deflationary. Approximately 80.4%⁶ of transaction fees are burned, reducing the total supply of ETH. Under a maximum issuance rate of 1.51%⁷ (only reached in extreme cases where 100% of ETH is staked and no transaction fees are burned), when demand for network resources is high, ETH transitions into a deflationary commodity. Unlike traditional commodities, an increase in demand for ETH does not trigger an increase in supply, leading to a dynamic where demand may exceed supply over longer periods.

Reflection of Tokenized Economic Growth: Just as global demand for oil grows with economic expansion, ETH also derives value from the growth of the on-chain economy—but due to its issuance cap, its supply elasticity is much lower compared to oil:

- Total Value Secured (TVS) of Ethereum: Ethereum currently secures over $767 billion⁸ in assets. This represents the highest TVS among all blockchains, solidifying Ethereum's position as the foundation of the tokenized economy.

- Exponential Growth: A paradigm shift is underway towards an increasingly decentralized global economy. As business, trade, and asset ownership move on-chain, Ethereum's economic throughput is expected to achieve exponential growth. This will significantly increase demand for ETH, whether as transaction fuel or as the core monetary reserve supporting the new global financial system.

Reserve Trading Pair: ETH is the primary reserve trading pair in decentralized exchanges, with 70.6% of trading pairs⁹ on Ethereum denominated in ETH. Just as most currencies in traditional finance are traded against the U.S. dollar, to efficiently trade most digital assets, they must be traded against ETH or dollar-pegged stablecoins.

Strategic Reserve Asset: An increasing number of applications, DeFi protocols, and institutional fund managers are accumulating ETH as a strategic reserve asset. This trend is accelerating as more institutions and sovereign entities turn to Ethereum's financial infrastructure¹⁰. Unlike inert reserve assets, ETH is fully programmable, enabling automated treasury management and complex financial management. Reserved ETH can be programmatically staked, deployed as collateral for lending, used for automated market makers (AMMs), or directly integrated into custody protocols, vesting plans, payment systems, bridging mechanisms, and more. While BTC is primarily idled as a treasury asset, ETH actively enhances treasury productivity and operational efficiency. As a neutral reserve asset, ETH stands out in ensuring and driving the global tokenized financial system.

• This is not a theory; the competition to accumulate ETH has already begun. Strategic ETH reserves are rapidly expanding, with publicly disclosed institutional ETH holdings nearing $2 billion. As institutions increasingly recognize the multifaceted value proposition of ETH, the opportunities for early adopters become clear and compelling. ETH is not only becoming a strategic reserve asset but also an indispensable component of institutional fund management.

Source: strategicethreserve.xyz by Fabrice Cheng

Because of all these unique features and characteristics, we cannot evaluate ETH as a tech stock. ETH is a completely new category of asset.

Therefore, ETH cannot be accurately valued using discounted cash flow methods. Instead, ETH must be viewed from the perspective of strategic value storage and utility-driven scarcity. This perspective captures the true upside potential of ETH, which may even surpass Bitcoin's "digital gold" narrative.

Oil is a consumable bulk commodity asset that is stored as a reserve and consumed as fuel. Oil has shaped nations, driven industrial development, and powered global trade. The intrinsic utility, inherent scarcity, and strategic importance of oil make it one of the most valuable commodities in history—shaping nations, driving industry, and powering global trade. Consequently, the total market value of proven global oil reserves is approximately $85 trillion.

Given that ETH is on a similar developmental trajectory but aimed at the digital realm, this serves as a meaningful reference point for ETH:

ETH powers the digital economy.

ETH secures the digital economy.

ETH derives value from the growth of the digital economy.

Due to its supply dynamics and issuance cap, ETH has inherent scarcity.

As the global economy transitions to tokenized infrastructure, ETH will become indispensable, not just as fuel but as the native asset of the monetary and settlement layer of the future financial system.

| The Monetary Design of ETH: Simple, Transparent, Sustainable

The economic principles of ETH are elegant and straightforward, yet their importance is often overlooked. Unlike traditional commodities, the supply and demand dynamics of Ethereum are transparently encoded in its protocol, enabling predictable issuance and sustainable network security. Ethereum has established an optimal issuance plan for ETH, combining robust security (approximately $88 billion¹¹ in staked ETH, compared to about $10 billion¹² in ASIC miners securing Bitcoin) with an extremely low inflation rate of only 0.09%¹³ since the Merge in September 2022 (when the network transitioned from proof-of-work to proof-of-stake consensus). The more ETH is staked to secure the network, the more expensive and impractical it becomes to attack Ethereum, as attackers would need to acquire at least 51% of the existing ETH to successfully disrupt or alter the network. This structure also provides protection against cartel-like, price-manipulating entities that emerge around traditional commodities, such as OPEC.

Issuance

Issuance Mechanism

The issuance of ETH is programmatic and transparent. Similar to Bitcoin's halving mechanism, newly minted ETH is distributed as rewards to validators (i.e., individuals or groups who have staked ETH to help secure the network and validate transactions; this is the "yield" component of ETH mentioned earlier and will be discussed further below). However, unlike Bitcoin, Ethereum's issuance is dynamically adjusted based on network security needs rather than a fixed schedule. The calculation is straightforward:

**Maximum annual ETH issuance = 166.3 × *staked* ETH**

This formula establishes a natural balance: as more ETH is staked to protect the network, the issuance increases, but the growth rate decreases. This structure incentivizes validators while ensuring that the inflation rate remains capped at a low level.

The key point is that this mechanism sets a clear upper limit on ETH issuance. Even in extreme hypothetical scenarios—where all circulating ETH (currently about 120.8 million¹⁴ ETH) is staked and no ETH is burned through network usage—the maximum possible inflation rate is capped at 1.51%¹⁵. In practice, the issuance of ETH will always be below this theoretical maximum. Currently, only about 28%¹⁶ of ETH is staked, meaning the pre-burn inflation rate is approximately 0.8%¹⁷.

In practice, since Ethereum transitioned to a proof-of-stake consensus mechanism, the issuance of ETH has been far below the theoretical maximum. Since the Merge on September 15, 2022, the annual issuance of ETH has been only 0.09%¹⁸, while the current annualized issuance is about 0.68%¹⁹. As network activity increases—especially driven by institutional adoption and the deployment of tokenized assets—the issuance of ETH may turn into net deflation, further enhancing ETH's monetary dynamics. The impact of the improved issuance dynamics post-Merge has been severely underestimated by mainstream investors.

Over the past decade, the issuance rate of ETH has consistently followed the principle of "minimum viable issuance." Between 2015 and 2017, an average of about 30,000 ETH was issued daily to miners. By 2019, this rate had dropped to about 13,000 ETH per day. Since the Merge in 2022, the daily issuance of ETH to validators now ranges from slightly negative to about 2,500 ETH per day.

How is sustainability achieved? Unlike miners, validators have very low operating expenses—no high electricity costs or significant hardware depreciation—allowing them to maintain network security with significantly lower token issuance. **Due to much higher operating profit margins, validators have a lower marginal propensity to sell their *staked* tokens to cover expenses compared to proof-of-work miners,** further enhancing the price stability and monetary robustness of ETH.

Burning

In addition to predictable issuance, Ethereum has integrated a unique and powerful monetary feature: a programmatic fee-burning mechanism. This mechanism directly links the monetary supply of ETH to network activity, tightly coupling token economics with actual economic demand.

On average, 80.4%²⁰ of all transaction fees paid to validators are permanently burned, creating deflationary pressure on the circulating supply of ETH. As Ethereum's economic activity grows, increased demand will raise total fees, thereby reinforcing this deflationary effect and reducing the net issuance of ETH.

This creates a self-regulating balance:

Issuance adjusts based on the amount of ETH staked to secure the network.

Burning varies according to demand for Ethereum block space and transaction execution.

These forces together create a dynamic monetary framework, allowing the net inflation rate of ETH to fluctuate between slightly positive and fully deflationary, all driven by transparent protocol-level rules. This is a monetary system designed not only for scarcity but also for sustainability, security, and alignment with real-world demand.

Source: dashboard.etherealize.com

Thus, modeling the net issuance of ETH boils down to two core variables:

**The amount of *staked* ETH** determines the foundational issuance for securing the network.

Transaction fees denominated in ETH drive the programmatic burning mechanism.

These two factors together create a dynamic, self-regulating monetary balance. In a theoretical upper limit scenario, if 100% of ETH is staked and no fees are generated, the annual issuance will be capped at 1.51%²¹. However, in practice, activity on Ethereum offsets issuance through fee burning, often pushing net issuance toward zero or even negative values. With the continued acceleration of institutional adoption and demand for Ethereum block space, the issuance dynamics of ETH may structurally shift toward sustained deflation.

Source: dashboard.etherealize.com

The supply and demand dynamics of ETH are simple and sustainable: ETH is digital oil, possessing a predictable, programmatic issuance formula, complemented by a burning mechanism directly linked to Ethereum's actual usage.

Supply

Unlike Bitcoin, ETH does not have a hard supply cap. Instead, Ethereum employs a predictable, formula-based issuance strategy aimed at achieving long-term sustainability and security. The fixed cap of 21 million Bitcoin, while appealing as a narrative, may pose security risks. The entities securing the Bitcoin network—namely miners—are compensated through newly minted Bitcoin and transaction fees. When Bitcoin reaches its supply cap and stops issuing new Bitcoin as rewards, the incentive for miners to secure the network will diminish significantly, potentially leading them to leave the network in search of more profitable activities, thereby making the Bitcoin network less secure. Ethereum will not face this issue.

The current supply of ETH is approximately 120.8 million²², with a theoretical maximum annual issuance cap of 1.51%²³. In practice, as the usage of the Ethereum network increases, it will drive higher transaction fee burning (as mentioned above), and net supply growth is expected to decrease significantly, potentially leading to deflation.

Bitcoin has a supply cap. ETH has an issuance cap.

Yield

As mentioned earlier, **ETH has *staked* yield**. Validators who stake ETH to secure the Ethereum network are compensated with newly issued ETH. This yield directly incentivizes network security, much like Bitcoin miners are rewarded for securing the Bitcoin network through investments in hardware and energy consumption.

The base yield earned by validators is determined by Ethereum's programmatic issuance (as detailed above) and supplemented by a portion of transaction fees generated by network activity. Therefore, as Ethereum's economic activity expands, the yield for validators will also increase. ETH is a unique asset: an increase in economic usage leads to more fees, which simultaneously reduces net issuance below the issuance cap (through fee burning) and increases validator yield. No other asset combines these dynamics, making ETH a structurally attractive, yield-bearing digital asset.

Conclusion

ETH's "digital oil" possesses complementary economic characteristics to BTC's "digital gold," and is more attractive across multiple dimensions: as the blockchain ecosystem flourishes, there will be various institutional-grade digital assets. In a diversified crypto investment portfolio, ETH uniquely provides exposure to the growth of the entire digital economy.

| Why is ETH lagging behind BTC?

From September 2022 to now, the ETH/BTC ratio has dropped from 0.085 to 0.024—a decline of over 70%. Measured in BTC, ETH's current trading price is close to the lows of 2018—levels that were seen before the emergence of DeFi, the widespread adoption of stablecoins, and the appearance of many validated use cases for Ethereum. At those lows in 2018, many investors had completely given up on Ethereum. However, today, Ethereum is the dominant institutional smart contract blockchain. So, how can this disconnect be explained?

The answer is simple: The narrative of Bitcoin has been accepted by institutions, while the narrative of Ethereum has not.

After 15 years in the market, Bitcoin has firmly established its status as an institutional-grade asset. Its narrative as digital gold, a scarce reserve currency that resists fiat currency devaluation, is now widely understood, mainstreamed, and available for investment. This clarity of narrative has driven a substantial revaluation and widespread adoption of Bitcoin.

In contrast, Ethereum's value proposition is harder to define—not because it is weaker, but because it is broader. Bitcoin is a single-use value storage asset, while Ethereum is a programmable foundation that supports the entire tokenized economy.

Ethereum has expanded on the core innovations of Bitcoin by adding smart contract functionality, thereby unlocking use cases across finance, tokenization, identity, infrastructure, gaming, and artificial intelligence. Over the past decade, Ethereum has grown to become the dominant global ledger, hosting the majority of³¹ tokenized assets, institutional activity, and on-chain value.

As mentioned earlier, this makes ETH inherently more complex than BTC. This multidimensional utility makes it harder to classify ETH clearly, resulting in slower and less accurate market pricing. However, this complexity is a feature, not a flaw. ETH represents a completely new asset class that uniquely combines the monetary premium of gold, the productive yield of bonds, and the strategic utility of oil.

Ethereum has borrowed from Amazon's strategy, undergoing self-disruption through its Layer-2 network (L2) roadmap in 2021-2022. Ethereum L1—the foundational, original Ethereum blockchain—has reached a bottleneck in popularity, with transaction speed limitations leading to network congestion and high fees during peak times. To improve scalability, L2 chains were launched on top of L1 to bundle and process multiple transactions off-chain, then submit summaries of these transactions back to L1 for final settlement. You can think of L1 as the foundational layer of a highway system, while L2 serves as fast lanes or carpool lanes that help to expedite traffic without the need to build an entirely new highway.

L2s have significantly increased Ethereum's throughput and customizability, although the initial cost was liquidity fragmentation and a more complex user experience (these challenges are now being rapidly addressed).

Critics who narrowly assess crypto assets through a discounted cash flow perspective argue that L2s have siphoned off the value of ETH. However, this viewpoint fundamentally misunderstands the true nature of ETH's value proposition.

| ETH: Valuation Framework

Before quantifying potential valuation scenarios for ETH, we must first correct a commonly misapplied valuation method: the discounted cash flow (DCF) model, which fundamentally misinterprets the true nature and value drivers of ETH.

**ETH is not a *tech stock*; it is a multifunctional commodity asset that can rival physical oil, but with less supply elasticity and programmatic control through an issuance cap. The valuations of oil, gold, and Bitcoin are not based on cash flows, so *ETH should not be assessed solely based on revenue multiples*. While DCF models based on future Layer-1 and Layer-2 fees can provide some insights, they overlook the larger picture—these fees are driven by demand for ETH as a commodity. Given that ETH's issuance is designed to have an upper limit, the continuously growing ecosystem usage makes its price highly sensitive to supply and demand dynamics. In other words, *fees alone represent only a small part of ETH's valuation and significantly underestimate its broader commodity and monetary characteristics*.

Viewing Ethereum's fees as traditional "revenue" fundamentally misinterprets their role. Fees denominated in ETH are primarily a basic industrial input—fueling network transactions and incentivizing validators—rather than profit streams denominated in dollars. The true value of ETH stems from its unique productivity, robust value storage economics, and its key position as neutral, primitive collateral within the Ethereum ecosystem.

This is not intended to downplay the decline in Ethereum's fees during 2021-2022—though this decline is significant for another reason. Despite record heights of institutional adoption and tokenization, the drop in revenue was precisely because Ethereum strategically self-disrupted to achieve mass adoption. Just as Amazon, Tesla, and Uber intentionally sacrificed short-term profits for global scale, Ethereum also entered a growth phase transformation, significantly reducing transaction fees through Layer-2 scaling. While this strategy temporarily suppressed fee revenue, it is structurally bullish: it ensures

long-term adoption of Ethereum, massively expands its total potential market, and ultimately amplifies ETH's fee burning and staking yields.

Source: https://l2beat.com/scaling/activity

Since the market peak in 2021, Ethereum's throughput has increased by more than an order of magnitude, while its transaction costs have significantly decreased. The biggest scaling breakthroughs are expected to be achieved within the next year, with certain L2s poised to reach over 100,000 transactions per second.

If ETH were analyzed like a tech stock, these strategic scaling initiatives would translate into orders of magnitude higher expected revenues, leading to significantly higher intrinsic valuations. The adoption of Ethereum (and the broader blockchain) is still in its early stages, historically constrained by regulatory uncertainty, which has limited entry for institutions and the broader consumer base. Today, these barriers are rapidly being removed, paving the way for accelerated global adoption.

However, the value of ETH goes far beyond fees and current and future revenue streams. ETH is digital oil, powering the world ledger for assets, currencies, and transactions. Like Bitcoin, ETH also possesses significant value storage characteristics, with its monetary premium far exceeding revenue-based valuation multiples.

We do not adopt the DCF model; instead, we provide a comparable holistic valuation framework for ETH's long-term potential:

Oil Reserve Benchmark: Oil is a consumable commodity asset stored as a reserve and consumed as fuel. The total market value of proven global oil reserves is approximately $85 trillion³²—considering ETH's scarcity, capped issuance dynamics, and critical utility in the digital economy, this provides a meaningful reference point for ETH.

Asset Tokenization Benchmark: The total global wealth is approximately $500 trillion³³. Even conservatively assuming Ethereum tokenizes only 10% of global assets, Ethereum would host over $50 trillion in assets. In this scenario, as a key asset for network security and settlement, ETH would not remain at a $300 billion valuation.

Neutral, Primitive Collateral: ETH uniquely serves as a neutral, non-sovereign primitive collateral asset, independent of external counterparties. It is essentially the safest and "risk-free" asset in the Ethereum economy, akin to the role of U.S. Treasuries in the U.S. economy—but with significantly greater upside potential.

Value Storage Economics: ETH reflects the core monetary characteristics of gold: low inflation, institutional-grade reserve asset, and non-sovereign currency premium.

| ETH Valuation Comparison: Relative to Other Global Reserve Assets

ETH represents a completely new asset class, with value drivers that far exceed traditional equity cash flows. To accurately reflect ETH's valuation potential as a global reserve asset, we must consider comparable global reserve assets as benchmarks.

Ethereum is the most tested and widely adopted ledger for tokenized assets, stablecoins, and digital economic activity on a global scale. Among digital assets, ETH uniquely offers investors the highest upside opportunity to capture blockchain-driven financial, tokenization, and global business growth.

As ETH is repriced as a global digital commodity and reserve asset, its valuation potential becomes nearly limitless. While reaching a long-term valuation of $85 trillion globally (approximately $706,000 per ETH) is possible, some mid-term valuation targets are as follows:

Short-term Potential: $8,000 per ETH (approximately $1 trillion market cap)

Mid-term Potential: $80,000 per ETH (approximately $10 trillion market cap)

Catalysts Driving ETH Repricing

1. Surge in Demand: Institutions have begun large-scale rapid adoption and deployment of tokenized assets and financial infrastructure on Ethereum.

2. Accelerated Demand for Native Crypto Yields: The upcoming launch of staking ETH ETFs and the emergence of institutional physical subscription/redemption models will significantly enhance institutional interest in ETH staking yields.

3. Strategic Accumulation of ETH: A competition is emerging within the Ethereum ecosystem to accumulate ETH as a monetary premium value storage asset, as evidenced by the growing strategic ETH reserves (publicly disclosed at approximately $2.5 billion).

4. ETH as an Institutional Funding Asset: The unique characteristics of ETH—primitive collateral, neutrality, yield, and global utility—make it the preferred funding reserve asset for institutions and globally.

Ethereum: The Infrastructure Driving ETH Upward

The first part of this report focuses on ETH as a unique digital commodity (combining scarcity, utility, and yield), but its long-term value cannot be fully understood without examining the infrastructure it empowers. Ethereum is not just the backdrop for ETH; it is the foundational platform that makes ETH's utility indispensable and its monetary design structurally sustainable.

Ethereum has become the most important infrastructure layer of the digital economy. It is the home of tokenized assets, the operating ground for decentralized financial applications, and an increasingly common venue for institutional settlements. Ethereum has become the default platform for stablecoins, high-value tokenized assets, and institutional blockchain infrastructure. Today, over 81%³⁸ of tokenized assets exist within the Ethereum ecosystem. Its resilience, trusted neutrality, and programmability make it the only platform capable of supporting the future complex, programmable, and globally scalable financial services and broad economic foundation.

This section explores why Ethereum is uniquely suited to support the next era of finance and the digital economy. We examine its architectural advantages, recent breakthroughs in scalability, improvements in user experience, and the acceleration of institutional migration to its Layer-2 ecosystem. We will also discuss what we believe will be the next major catalyst for the Ethereum network, which, if realized, will make Ethereum not just the foundational layer of future finance: the integration of Ethereum with AI-driven autonomous agents. In such a future, Ethereum will not only be financial infrastructure but also the backbone of a machine-native economy.

In short, the value of ETH is a function of Ethereum's increasingly central position in the digital economy. As Ethereum's adoption grows exponentially, the demand for its native asset and its strategic importance also increase. Therefore, understanding Ethereum's trajectory is crucial for grasping the full scope of ETH's investment potential.

| Why Ethereum is Uniquely Positioned as Financial Infrastructure

Advantages

For the long-term success of ETH, Ethereum must be recognized by institutions as legitimate financial infrastructure and the undisputed leader among institutional-grade blockchains.

As institutional investors increasingly recognize the limitations of existing financial infrastructure, Ethereum's capabilities—its security, stability, scalability, programmability, decentralization, and trusted neutrality—make it the most likely platform to support the future global financial system.

Proven Uptime and Resilience: Since its launch in 2015, Ethereum has never gone offline, even during major protocol upgrades like "The Merge." More than 10 independent clients further enhance its redundancy and robustness. All of this underscores its readiness as institutional-grade infrastructure.

Trusted Neutral Infrastructure: Ethereum is purely governed by transparent, auditable code—unaffected by corporate interests, political pressures, or centralized personalities. This trusted neutrality ensures fairness, predictability, and eliminates counterparty risk.

Massive Decentralization: Ethereum's validators are globally distributed, and anyone with basic hardware and internet access can participate. Its security derives from decentralization and diversity, rather than centralized data centers or privileged stakeholders.

Unmatched Market Share: The Ethereum ecosystem hosts 60%³⁹ of all stablecoins and 82%⁴⁰ of tokenized real-world assets (RWAs), including tokenized government bonds and credit instruments. Most blockchain-based financial activities have taken place on Ethereum⁴¹.

High-Value Settlement Layer: Ethereum currently secures over $767 billion⁴² in total locked value (TVL) within its ecosystem. As global finance increasingly migrates on-chain, this figure is expected to accelerate significantly.

The Safest Developer Tools: The Ethereum Virtual Machine (EVM) enjoys popularity and adoption in the broader crypto ecosystem similar to JavaScript. It is well understood and has been battle-tested through countless high-value financial applications over the past decade.

Transparency: Fully open-source protocols and code, with data publicly auditable.

Scalability: A clearly defined roadmap for performance enhancements and scaling solutions that will enable Ethereum to handle truly global-scale transactions and usage.

Customizable Environment: Modular, isolated solutions designed specifically for institutions—including privacy, KYC compliance, customized gas models, data availability, and specialized execution environments.

Security: A robust Proof-of-Stake consensus mechanism reinforced by economic slashing mechanisms and solidified through validator client diversity.

Neutrality: No centralized foundation or privileged/subsidized validator set. Ethereum is both global and permissionless, eliminating counterparty risk at the infrastructure level.

Programmability: Native, highly composable smart contract functionality supported by the richest and most battle-tested ecosystem of developers and security tools.

Regulatory Maturity: Ethereum is the most widely adopted and legally understood blockchain among global institutional entities and regulators.

Minimal Environmental Footprint: The environmental footprint of ETH is nearly zero (approximately 0.01 kg of CO2 per transaction)⁴³.

Ethereum is not just a decentralized ledger; it is an institutional-grade public infrastructure. With its trusted neutrality, proven resilience, mature regulatory standing, and long-term roadmap, it is the only blockchain capable of serving as the infrastructure for the global financial system.

| Why Ethereum is Entering Its Renaissance Period

Ethereum's fundamental advantages have long been underestimated, with its architecture, decentralization, and developer ecosystem quietly driving much of the meaningful innovation in the crypto space. Now, after years of quiet cultivation and focused development, this ecosystem is experiencing a series of compounded tailwinds that together have the potential to bring Ethereum into the spotlight and drive its rapid adoption.

For ETH, this renaissance is not just a backdrop—it is a catalyst. The value of ETH is directly related to Ethereum's strength, usage, and institutional trust. As Ethereum becomes more performant, intuitive, and deeply integrated into the global financial system, the demand for ETH as fuel, collateral, and a strategic reserve asset will accelerate.

Next, we will explore the structural improvements and ecosystem transformations that define Ethereum's renaissance—and why they will lead to a dramatic revaluation of ETH in the coming months and years.

1. A More Coordinated and Forward-Looking Ecosystem

Ethereum was born in an environment filled with regulatory uncertainty, where innovation often faced resistance and visibility came with risks. As one of the few truly decentralized blockchains alongside Bitcoin, Ethereum has intentionally prioritized neutrality, security, and censorship resistance over speed or aggressive promotion. Therefore, for many years, the Ethereum Foundation has emphasized research and development over marketing and institutional partnerships.

This approach is now undergoing a significant shift. With increased regulatory clarity, the Ethereum community has adopted a more forward-looking stance. Although no single entity manages Ethereum, the new leadership of the Ethereum Foundation—co-executive directors Tomasz Stanczak and Hsiao-Wei Wang—are clearly and explicitly communicating the technical roadmap of the protocol. Surrounding them is a diverse coalition of experienced builders, well-known funds, and key infrastructure providers coming together to actively elevate Ethereum's visibility and strategic relevance.

2. Ethereum Layer 1 is Scaling—Without Sacrificing Decentralization

Historically, Ethereum's scaling strategy has primarily focused on Layer-2 solutions. As mentioned, L2s are independent chains designed to reduce Ethereum Layer 1 traffic, increase transaction throughput, and help keep fees at reasonable levels.

This approach was adopted because direct scaling of L1 had previously compromised Ethereum's core principles—namely, the trusted neutrality and decentralized security of the foundational layer. However, recent breakthroughs, such as production-grade zero-knowledge virtual machines (zkVMs) and innovative research projects like FOCIL, have opened up new possibilities for Layer-1 to achieve significant performance improvements without compromising decentralization or security.

Ethereum is now scaling in two directions simultaneously: vertical scaling of L1 and horizontal scaling of L2. These advancements have moved beyond the theoretical stage; enhancements to L1 are actively being developed and are expected to be deployed by 2025. The result will be

a significantly higher-performing foundational layer, serving as a central hub for economic activity, complemented by an L2 network that continues to expand Ethereum's scalability and global reach.

3. Ethereum L2 is Faster, Cheaper, and More Interoperable than Competing L1s

The Ethereum L2 ecosystem is expanding at an extraordinary pace, forming a vibrant, modular network of high-performance chains, all anchored to Ethereum's security and economics. This flexible architecture has attracted significant institutional adoption, with major global entities such as Deutsche Bank (via zkSync and Memento), Sony (via Soneium), UBS, Coinbase (via the largest L2 Base), Kraken (via Ink), and World Chain (co-founded by OpenAI's Sam Altman) actively deploying or developing customized L2 solutions.

The initial rapid growth led to fragmentation, as each L2 operated independently, creating friction across the ecosystem. Now, this challenge is being decisively addressed. A new generation of interoperability standards is being rolled out, reconnecting these Layer-2 chains into a cohesive Ethereum experience.

The result will be a unified, seamless ecosystem—it will retain the robust security of Ethereum Layer 1 while providing performance and cost advantages comparable to or exceeding those of competing Layer-1 blockchains (since L2s use Ethereum for security rather than rebuilding from scratch). With the comprehensive deployment of interoperability protocols and abstracted wallet experiences, Ethereum will once again operate and feel like a single, unified chain.

4. Ethereum's User Experience is Entering Its Fintech Phase

One of the most significant transformations in Ethereum's history is not purely technical—it is experiential. For most of the past decade, interacting with Ethereum involved clunky interfaces, lengthy 24-word seed phrases, and uncomfortable trade-offs between friction and risk. That era is rapidly coming to an end.

In May 2025, Ethereum introduced native account abstraction, its most ambitious user experience overhaul to date. Account abstraction unlocks significant enhancements, including biometric-based transactions (e.g., Face ID), seamless integration with secure hardware enclaves (e.g., those built into iPhones) for native key management, and advanced smart wallet features like social recovery. Ethereum is finally beginning to mimic the seamless experiences of the modern internet—intuitive, secure, and almost invisible to end users.

5. Institutional Adoption is No Longer Hypothetical; It is Accelerating

Ethereum's architecture—decentralized at the foundational layer and customizable at the application layer—is purpose-built for institutional adoption. This design has proven to be prescient. Today, Ethereum has become the primary destination for tokenized assets⁴⁴, attracting the vast majority of institutional-grade blockchain deployments built on Ethereum Layer 2.

From asset management companies tokenizing government bonds and credit markets to banks deploying settlement infrastructure, Ethereum has become the de facto standard for these applications. This adoption is not coincidental; it is structural. Ethereum uniquely provides the regulatory neutrality, security assurances, and composability required by institutions operating on a global scale. Leading tokenization initiatives have explicitly chosen Ethereum as their foundational infrastructure. Over $102 billion (approximately 82%) of all non-stablecoin tokenized assets, including government bonds, credit markets, and interest-bearing funds, have been issued on Ethereum by global leaders such as BlackRock, JPMorgan, Franklin Templeton, Fidelity, Apollo, Deutsche Bank, UBS, and Sony. Coinbase and other major exchanges are actively deploying customized Layer-2 blockchains directly integrated into Ethereum's security layer and economy.

However, this wave of institutional adoption is still in its early stages. Ethereum's infrastructure has finally matured, the regulatory environment is rapidly evolving, and institutional demand continues to accelerate. Ethereum is approaching its "ChatGPT moment"—where mainstream institutions suddenly recognize that Ethereum is best suited to power the future digital infrastructure.

6. Regulatory Clarity is Coming

For nearly a decade, Ethereum has been under continuous regulatory uncertainty. In the U.S., the reputational, financial, and legal risks associated with developing on Ethereum have stifled innovation and caused institutional capital to retreat. The Ethereum token (ETH) itself has also been in a state of regulatory ambiguity, continuously facing the risk of being classified as a security. Therefore, despite Ethereum's technological advantages, meaningful institutional adoption has been delayed.

However, the regulatory landscape is shifting. The U.S. government confirmed in 2018 that it views Ethereum as a commodity rather than a security, and this decision was reaffirmed in 2024. In May 2024, a spot Ethereum ETF was approved, granting ETH legitimate status in the eyes of traditional financial institutions. In 2025, the U.S. government announced plans to implement a clear legal framework for digital asset treatment, which is likely to further reaffirm Ethereum's approved regulatory status and increase institutional confidence in using blockchain.

The level of institutional confidence has begun to rise rapidly, evidenced by an increasing number of institutions publicly moving their assets on-chain, indicating they are not concerned about being at odds with regulators.

7. Reverse Capital is Flowing In—ETH is a Mispriced Core Asset

Despite Ethereum's adoption metrics reaching new highs, ETH itself remains severely undervalued and underallocated. Over the past two years, despite clear evidence that the Ethereum platform is dominant, institutional trust is rising, and there is substantial economic utility, ETH's performance has lagged behind Bitcoin (BTC). This disconnect presents a rare investment opportunity.

Savvy capital is beginning to take notice. ETH currently offers asymmetric upside potential: it is a highly liquid, yield-bearing, institutional-grade asset that is mispriced due to retail narratives and traditional valuation frameworks. For contrarian investors, ETH represents an attractive, high-certainty value revaluation opportunity—similar to AI in 2022, BTC in 2020, or tech stocks in early 2009.

ETH is the "digital oil" driving the digital economy. As institutional adoption of Ethereum accelerates, the value of ETH will grow accordingly. The market has yet to price in this rapid adoption curve, providing investors with an excellent entry point.

Ethereum and Artificial Intelligence: The Engine of the Autonomous Economy

The market drivers outlined in the previous section have set the stage for Ethereum—and thus ETH—to achieve breakthroughs in the near term. However, if we extend the time horizon, there is a future catalyst that, if realized, could make ETH one of the most sought-after assets globally, if not the most sought-after asset: the integration of artificial intelligence and digital finance.

The amount of capital flowing into artificial intelligence today rivals the grandest infrastructure projects in human history. In today's dollars, the Apollo moon landing program cost approximately $200 billion, and the U.S. interstate highway system cost about $600 billion. In contrast, private sector investment in artificial intelligence has already reached trillions and is accelerating.

In just 2024, NVIDIA generated $130 billion in revenue.

Meta allocated $65 billion for its Llama model in 2025.

Microsoft is investing $80 billion in AI infrastructure, training, and deployment.

Apple announced an unprecedented investment of $500 billion over four years related to artificial intelligence.

This influx of capital is reshaping the capabilities of the grid, computing infrastructure, and software itself. At the core of this evolution is a new paradigm: the rise of autonomous AI agents—intelligent, self-directed software entities capable of interacting with the world, executing complex tasks, and coordinating with other agents.

As AI agents become increasingly sophisticated, they will require programmable money, embedded financial services, and native digital ownership frameworks. They will need to transact, settle payments, and execute contracts instantaneously on a global scale without relying on traditional human intermediaries.

| Ethereum: The Infrastructure Built for Autonomous Agents

Ethereum has a unique advantage in supporting the emerging autonomous digital economy, providing capabilities that traditional finance and even other blockchains cannot replicate:

Finality and Execution Guarantees: Ethereum's atomic, composable transaction structure allows AI agents to seamlessly execute complex financial interactions that traditional settlement systems cannot support.

Global Property Rights, Not Jurisdictional Claims: Ethereum's smart contracts enforce property rights through code rather than courts. AI agents can transact securely across borders without jurisdictional friction and complexity.

Permissionless Finance: Ethereum provides native access to stablecoins, tokenized assets, DeFi protocols, oracle services, identity systems, and more, all with institutional-grade liquidity and security.

Programmability and Speed: AI agents interacting with Ethereum can deploy, upgrade, and trigger complex financial logic instantaneously, mimicking human decision-making processes but operating at computational speed.

| Ethereum's Toolchain: A Platform for Agent Development and Collaboration

Beyond its financial functionalities, Ethereum also offers a powerful and mature toolchain perfectly designed for the creation, deployment, and coordination of autonomous AI agents:

Decentralized Data Curation and Governance: Transparent, protocol-based systems for managing datasets, governance, and agent evolution.

Tokenization Framework: Built-in mechanisms for defining ownership, allocating royalties, and raising funds through tokenization models and asset definitions.

Model Training Market: A market-driven platform that transforms domain-specific data into high-quality, finely-tuned AI models.

Agent Hosting Market: An infrastructure market that simplifies agent deployment and operation without the need for private infrastructure.

Crucially, Ethereum-based agents are not isolated. Once deployed, these autonomous agents can discover, communicate, and compensate each other natively, forming a decentralized network of agents capable of complex real-time collaboration. This autonomous agent mesh will enable a variety of applications, from autonomous logistics and trading to personalized healthcare and education—while ETH will serve as a universal medium of exchange and coordination.

Reasons to be Bullish on ETH

Ethereum is poised to become the infrastructure supporting the global economy. If this comes to fruition, trillions or even tens of trillions of dollars in assets will ultimately be tokenized on Ethereum's Layer-1 and Layer-2 networks, unleashing unprecedented utility, innovation, and financial accessibility on a global scale.

Ethereum is already in a leading position, and as its role as the global ledger solidifies, its competitive advantage will continue to expand. Ethereum's strategic emphasis on decentralization, security, reliability, and uptime enables it to steadily gain global adoption, deliberately avoiding the pitfalls of a "move fast and break things" mentality.

ETH itself represents a new asset class. While oil provides the closest classic analogy due to its global economic utility and strategic importance, even this comparison fails to fully capture ETH's potential.

The supply of ETH is programmatically controlled through issuance caps and protected by a global decentralized network. ETH is an ideal productive store of value asset. These attributes will inevitably lead to a significant tightening of supply as institutions compete to hoard ETH as a treasury-level reserve asset.

Ethereum currently dominates institutional blockchain adoption, but ETH remains a contrarian investment. As the financial industry recognizes Ethereum's unparalleled institutional appeal, ETH will rapidly be repriced to its true valuation.

ETH is digital oil, powering the global financial system and the broader digital economy. Ethereum and its native asset ETH are entering their renaissance period, creating an enticing opportunity for forward-thinking investors.

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Introduction

1 This maximum inflation rate is relative to the current supply; since inflation is a function of supply, this value will fluctuate inversely as the supply increases or decreases.

2 Data source ultrasound.money (change the time range to start from the merge).

3 Although staking ETH combined with active validator services can generate yield—sometimes described as making ETH a "productive" store of value—this dynamic is similar to how gold earns yield when lent out or used as collateral; in both cases, it is not the underlying commodity itself that has inherent productivity, but rather the external service activities built around that commodity. The core valuation of ETH remains driven by its role as a scarce monetary commodity, rather than through discounted cash flow models.

4 Data from (ETH in DeFi) and validatorqueue.com (total ETH in chains and bridging contracts / total ETH supply) ; Breakdown graphic + script

5 Data from api.llama.fi/tokenProtocols/ETH ((total ETH in chains and bridging contracts / total ETH supply) ; Breakdown graphic + script

6 Data from defillama.com/fees/ethereum (Total burn amount [$12.388 billion$] divided by total fees [$15.401 billion$] from August 6, 2021, to May 9, 2025, during the burn mechanism implementation period)

7 This maximum inflation rate is relative to the current supply; since inflation is a function of supply, this value will fluctuate inversely as the supply increases or decreases.

8 L1 Total Value Locked (TVL) from defillama.com/bridged/ethereum; L2 Total Value Locked (TVL) from growthepie.xyz/fundamentals/total—value—secured (select all L2); L2 Real World Assets (RWA) from app.rwa.xyz/networks (not included in other values), ETH market cap.

9 Data from defillama.com/yields (Total trading pairs using ETH or ETH derivatives on Ethereum L1 and the top 9 L2s)

10 Strategic ETH reserve https://www.strategicethreserve.xyz/ BTCS Inc https://www.btcs.com/wp—content/uploads/2025/05/Convertible—Note—May—14—2025—vF.pdf

Source: strategicethreserve.xyz by Fabrice Cheng

11 Data from validatorqueue.com, calculated at an ETH spot value of $2,600.

12 860,000,000 TH/s/500 TH/s = 1,720,000 units * $4,791/unit = $824 million

13 Data from ultrasound.money (change the time range to start from the merge)

14 Data from etherscan.io/chart/ethersupplygrowth

15 This maximum inflation rate is relative to the current supply; since inflation is a function of supply, this value will fluctuate inversely as the supply increases or decreases.

16 Data from validatorqueue.com

17 Data from ultrasound.money

18 Data from ultrasound.money (change the time range to start from the merge)

19 Data from ultrasound.money (30-day time range)

20 Data from defillama.com/fees/ethereum (Total burn amount [$12.388B$] divided by total fees [$15.401B$] from August 6, 2021, to May 9, 2025, during the burn mechanism implementation period)

21 This maximum inflation rate is relative to the current supply; since inflation is a function of supply, this value will fluctuate inversely as the supply increases or decreases.

22 Data from etherscan.io/chart/ethersupplygrowth

23 This maximum inflation rate is relative to the current supply; since inflation is a function of supply, this value will fluctuate inversely as the supply increases or decreases.

24 Data from ultrasound.money (30-day time range)

25 Data from charts.bitbo.io/inflation

26 ETH vs. BTC: Ethereum's Superior Monetary Characteristics youtube.com/v/skcZbXitZxQ

27 Data from defillama.com/fees/ethereum (Total burn amount [$12.388 billion$] divided by total fees [$15.401 billion$] from August 6, 2021, to May 9, 2025, during the burn mechanism implementation period)

28 It is necessary to run a validator node with ETH as collateral; providing validation services to the network can be likened to oil companies servicing the oil industry.

29 Ethereum data from digiconomist.net/ethereum—energy—consumption

30 Bitcoin data from digiconomist.net/bitcoin—energy—consumption

31 Tokenized assets primarily exist within the Ethereum ecosystem (accounting for 82%) rwa.xyz/networks

32 Reserve data from worldometers.info/oil, barrel price from marketwatch.com/investing/future/cl.1

33 Data from McKinsey

34 Reserve data from worldometers.info/oil, barrel price from marketwatch.com/investing/future/cl.1

35 Data from companiesmarketcap.com/gold/marketcap

36 Data from techsciresearch.com/report/bond—market/27048.html

37 Data from streetstats.finance/liquidity/money

38 Data from app.rwa.xyz/networks (Ethereum L1 + L2s)

39 The total amount of stablecoins in the Ethereum system data comes from growthepie.xyz (select "Total Ecosystem," select "All Networks," and select "Stacked Chart"), and the total amount of stablecoins data comes from app.rwa.xyz/stablecoins.

40 Data from app.rwa.xyz/networks (Ethereum L1 + L2s).

41 High-profile entities using Ethereum ethereumadoption.com/built—on—ethereum/.

42 L1 TVS (Total Value Locked) from defillama.com/bridged/ethereum; L2 TVS from growthepie.xyz/fundamentals/total—value—secured (select all L2s); L2 RWA data from app.rwa.xyz/networks (not included in other values).

43 Data from https://digiconomist.net/ethereum—energy—consumption.

44 Assets can be found at app.rwa.xyz/networks/ethereum.

45 app.rwa.xyz/networks.

46 Data from app.rwa.xyz/networks (Ethereum L1 + L2s).

47 Major entities are building on Ethereum, from ethereumadoption.com.

48 SEC.gov | Digital Asset Transactions: When Howey Met Gary (Plastic).

49 Federal Court Finds Ether Is a Commodity in CFTC Fraud Case | PracticalLaw.

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