Reflection: Stop using cash flow to value public chains and understand the true explosive power of ETH as a reserve asset in one article! The current market generally regards Ethereum as a traditional enterprise, calculating its price to earnings ratio (P/E) based on the transaction fees it generates, and concludes that 'ETH is overvalued'. However, Tom Dunleavy, the head of venture capital at Varys Capital, proposed an extremely sharp and disruptive underlying framework: using cash flow to value public chains is completely putting the cart before the horse. Ethereum is not a company at all, but a "super vault" that protects billions of dollars in assets, and ETH itself is the lock. By understanding the following four core logics, you will thoroughly reconstruct your understanding of Ethereum's valuation: 1. Transaction fees are not income, but a 'network friction' that must be eliminated Many people think that Ethereum is about to cool down when they see the decrease in transaction fees, which is the biggest misconception. The single transaction fee has decreased from over $50 in 2021 to about $0.20 now, but the trading volume has more than tripled, reaching a historic high. A successful settlement network should have reduced tolls to zero. The handling fee is essentially a tax, and the higher the fee, the less willing people are to use it. Only when more and more people can afford it, will the ecosystem and funds on the chain snowball. The sharp drop in transaction fees precisely indicates the great success of the internet, rather than its decline. 2. ETH is a lock: security is tightly tied to the coin price Farewell to the physical mining machines of the PoW era, under the current PoS mechanism, the only way to attack Ethereum is to buy and control the staked ETH. Controlling one-third can cause network paralysis, while controlling two-thirds can tamper with records. This means that the cost of wrongdoing is entirely denominated in ETH. The security level of Ethereum vaults and the market price of ETH have become completely equivalent, and the two cannot be separated at all. 3. Crazy pricing misalignment: locks are cheaper than money in a safe At present, the Ethereum chain is loaded with a huge asset of about 250 billion US dollars, including stablecoins, RWAs, and L2 cross chain funds. However, the total value of the pledged ETH used to protect these assets is only about $72 billion. This is equivalent to the money in a safe, more than twice as expensive as the lock that protects it! In order for Ethereum to securely protect this 250 billion, the pledged defense funds must be greater than 250 billion. Based on the current 30% staking rate, the reasonable price for ETH should be around $6900 (compared to the current price of only $2070). In the future, when the scale of assets on the chain reaches trillions, the price of ETH must rise to tens of thousands of dollars to fulfill its security responsibility. 4. Breaking the valuation fallacy of "free Linux" and "centralized freeze" There are two seemingly clever rebuttals in the market, but the underlying logic cannot withstand scrutiny at all: The first argument is that 'Circle can freeze USDC, so there is no need for ETH protection'. wrong! The freezing mechanism is based on the operation of Ethereum smart contracts. If the Ethereum consensus is breached, there will be no honest chain, and the freezing mechanism will be directly scrapped. To enjoy the neutrality and liquidity of Ethereum, one must bear the cost of secure binding. The second view is that 'Ethereum is like a free Linux system or a traditional clearing house'. absolutely wrong! The security of Linux and traditional clearing houses relies on external forces such as government legal guarantees, bank mortgages, or open source communities. Ethereum has no external backing and can only pay for the security of each block with ETH on the open market. So, ETH must be extremely valuable, while Linux does not need it. Summary and Final deduction As the scale of stablecoins moves towards trillions and RWA tokenization fully erupts, there will be astronomical amounts of institutional funds settled on Ethereum in the future. Those who only focus on transaction fees and cash flow have completely reversed the causal relationship. There is a massive accumulation of on chain assets first, and then an absolute matching security line is needed. Transaction fees are a stumbling block that you should strive to eliminate, and ETH must be valuable enough to safeguard the absolute security of the entire on chain economy. This is the true explosive power of ETH as a core reserve asset!