Ethereum may be valued as a "world computer."

Written by: Jake Koch-Gallup

Translated by: AididiaoJP, Foresight News

Editor's note: Is Ethereum losing its last moat—liquidity? Blockworks analysts Jake Koch-Gallup and Carlos debate this judgment. The article discusses controversies surrounding Ethereum's liquidity, REV valuation, L2 growth, and stablecoin market share, with the author providing ten reasons to be bullish on Ethereum at the end.

Recently, Blockworks analyst Carlos wrote that Ethereum is losing its last moat—liquidity. We are debating this, as I strongly oppose this view.

Carlos's Three Points of Doubt

Carlos's first example is that tokenized stocks on Ethereum have minimal trading volume, with only $25 million traded in the past 30 days and a turnover rate of about 3%. However, in terms of supply share of tokenized stocks, Ethereum still ranks second. I believe the significance of tokenized stocks is to expand the channel for global investors to enter the U.S. market, rather than for lending and DeFi. He responded on the podcast that tokenized stocks sitting on the chain do not generate income; trading volume generates income.

Next, this might be where I genuinely diverge from readers. I do not believe Ethereum must generate income. Like many L1s, it has already obtained a monetary premium. The actual economic value (REV) alone cannot explain the market capitalization of most L1s—ETH's current trading price is over 1,100 times the REV from the past year. The market is clearly pricing Ethereum partially based on reserves and collateral assets (ETFs, treasuries, DeFi collateral), neglecting this means assuming that ETH and most L1s are forever overvalued by 99%, which is meaningless.

Carlos's second argument is that flagship applications are shifting their growth focus elsewhere. He cites that Robinhood Chain accounts for 43% of Uniswap's trading volume in the past 30 days, while Ethereum accounts for 32%; Ethena is also growing on Base. Both points make sense, but Robinhood Chain and Base are both Ethereum L2s. If we agree that REV is not that important for L1, then the growth of Ethereum L2 is a victory for Ethereum. To be fair, Ethena is also expanding to non-L2 networks such as Solana, TRON, and Avalanche. The share of USDe on Ethereum has dropped from 88% to 56%, but it still holds a majority. This indicates that Ethena is increasing distribution channels, rather than leaving.

However, if we consider REV to be extremely important, let's look at September: Base paid about $15,000 in rent to publish data on Ethereum and paid $711,000 to Optimism Collective in the same month. Imagine that 3 to 5 years later, Ethereum says, "We want the same revenue as Optimism," increasing the minimum fee for publishing data. Base may not be happy, but if L2 scales tenfold by then, that is a significant amount of money. Therefore, market share is important, even if it does not generate much REV now.

Carlos's final argument is that Ethereum's dominance in stablecoins is slowly declining. This is true, but the stablecoin market is not a winner-takes-all. Even if Ethereum's share drops from 51% to 30% in the next ten years, the stablecoin market will continue to grow. If, in ten years, the total market capitalization of stablecoins reaches $3 trillion, Ethereum will still have nearly $1 trillion in stablecoins, nearly six times today's $155 billion.

Now, let's look at why Ethereum is still valuable and will continue to be valuable.

Reasons Why Ethereum is Still Valuable: Ten Reasons

1. The total locked value (TVL) in DeFi still leads with a 65% share, having not dropped below 62% in any week since 2022.
2. It has the deepest liquidity and the most secure network, with the highest institutional participation outside of Bitcoin.
3. It manages the largest scale of on-chain real-world assets (RWA), even though its share has dropped from 99% in 2022 to 45%.
4. Institutions holding ETH treat it as an asset rather than focusing on income. Spot ETFs and treasury companies hold about 13% of the ETH supply combined.
5. Robinhood and Coinbase could build their own L1 but chose to settle on Ethereum.
6. Major tokenized funds like BlackRock BUIDL prefer the Ethereum mainnet.
7. Ethereum has been running for over ten years without any network-wide shutdowns.
8. Ethereum and its L2 have the largest developer community in the crypto industry, with EVM being the default toolkit, even competitors L1 are replicating it.
9. 36% of the ETH supply has been staked and reached an all-time high, providing native yield for holders, which institutions can access through staking ETFs.
10. Ethereum is the "world computer" of the crypto world.

The Dilemma for Fundamental Investors

Ultimately, I am a fundamental investor. Crypto projects should typically have revenue, and value should flow back to token holders. Therefore, believing that ETH can survive on monetary premium and minimal REV may be a form of self-comfort for those who are trapped. But perhaps, just perhaps, Ethereum should be valued as a "world computer."