Ethereum: The Cornerstone of the Digital Economy

The global financial system is undergoing a profound transformation, with assets gradually digitizing and migrating to the blockchain. The evolution from a semi-digital, independent financial system to a fully digital, composable financial system requires a secure, neutral, and reliable global settlement layer to support global asset operations. Ethereum has become this infrastructure.

The adoption of Ethereum by institutions is accelerating, the U.S. regulatory framework supports blockchain innovation, and digital assets are becoming a mainstream component of traditional investment portfolios.

Bitcoin took 15 years to be widely recognized as digital gold: a scarce currency 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 asymmetric investment opportunity, poised to become a core holding in 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 is still one of the most severely underestimated opportunities in the global market. Despite Ethereum's clear dominance in the market and significant technological upgrades, the current trading price of ETH is far below its historical peak in 2021. We believe this price disparity will not last, and understanding ETH's unique value proposition will bring one of the largest upside opportunities in today's asset class.

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

Report Explanation

This report aims to elaborate on why ETH should be regarded as a core allocation in institutional strategies, particularly those that prioritize long-term value creation, technology 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, evaluate an appropriate valuation framework for ETH as an asset, and the reasons why it is currently undervalued and underrepresented in institutional investors' portfolios seeking asymmetrical opportunities and productive value storage.

Ethereum: The Underlying Infrastructure Driving the Rise of ETH

This section will cover the structural, technical, and economic drivers behind the growing momentum of the Ethereum network. It will elucidate 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 Ether.

Ethereum and AI: The Economic Engine of Autonomous Economy

This section will look ahead and assess the role and potential value that Ethereum—and its derivative ETH—may play 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 a censorship-resistant store of value: ETH is 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 increases, the demand for a globally neutral, censorship-resistant reserve asset as a fundamental store of value becomes crucial.

• ETH is not a tech company: the valuation framework must evolve; ETH cannot be valued like tech stocks solely based on fee income - Ethereum is a unique digital infrastructure and is encapsulated as a global reserve asset.

• Programmatic issuance + burn = predictable scarcity: The theoretical maximum annual issuance of ETH is 1.51%, but the product burns generated by platform usage usually result in a lower net issuance. Since September 2022, ETH supply inflation has been hovering around 0.09%, lower than fiat currencies and Bitcoin.

• ETH provides native yields: Validator staking makes staked ETH a productive, income-generating digital commodity.

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

• ETH is undervalued: The underperformance of ETH compared to 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 has yet to be priced: 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; in the long term, conservatively estimated, as a reserve currency/commodity asset, ETH could exceed $80,000.

ETH: The digital oil driving the digital economy

ETH is the native asset of the Ethereum network and also the economic engine that drives its operation.

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

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

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

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

Calculate Fuel

Every on-chain operation consumes (burns) ETH. It is the underlying asset that drives computation, data storage, asset transfers, and value settlements on Ethereum, serving as fuel for the following:

• Each stablecoin transfer.
• Every issuance of tokenized real-world assets.
• Every transaction executed on Ethereum.
• Every new application - DeFi, gaming, AI, identity - their operation will destroy ETH.

Value Storage Assets with Attached Earnings

In addition to simply holding ETH as a store of value, ETH can also earn returns through staking. When someone stakes ETH, they agree to lock it in the system and become a validator—a type of network participant that acts like an arbiter, checking and verifying transactions. The verification process is primarily automated, so individuals or entities that stake their ETH typically do not need to do any additional work beyond staking their ETH. The network randomly selects validators to propose or confirm new transaction blocks. If validators complete their work correctly, they will receive rewards in the form of ETH.

Original Settlement Collateral

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

In a world increasingly filled with tokenized assets that rely on external counterparties, the value of truly neutral, native, and non-sovereign collateral assets has significantly increased. 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 contribute increasingly to its future monetary premium.

Deflationary Assets

As network activity increases, ETH will become deflationary. Approximately 80.4% of transaction fees will be burned, thereby reducing the total supply of ETH. Under an upper issuance rate of 1.51% per year (which would only be reached in extreme cases where 100% of ETH is staked and no transaction fees are burned), ETH will transform into a deflationary commodity when the demand for network resources is strong. Unlike traditional commodities, an increase in demand for ETH does not trigger an increase in production, leading to a dynamic where demand may exceed supply for an extended period.

Manifestation of Tokenized Economic Growth

Just as global demand for oil increases with economic expansion, ETH also gains value from the growth of the on-chain economy—but due to its issuance cap, its supply elasticity is much smaller compared to oil:

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

• Exponential Growth: The paradigm shift is evolving 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 the demand for ETH, whether as transaction fuel or as a core currency reserve supporting the new global financial system.

Reserve Trading Pairs

ETH is the primary reserve trading pair in decentralized exchanges. On Ethereum, 70.6% of trading pairs are denominated in ETH. Similar to how most currencies in traditional finance are traded against the US dollar, to efficiently trade most digital assets, they must be traded against ETH or a US dollar stablecoin.

Strategic Reserve Assets

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 infrastructure. Unlike inert reserve assets, ETH is fully programmable, enabling treasury automation and complex financial management. The reserved ETH can be programmatically staked, deployed as collateral for lending, used for automated market makers (AMM), or directly integrated into custody protocols, vesting schemes, 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 for accumulating Ether has already begun. Strategic reserves of Ether are rapidly expanding, with publicly disclosed institutional holdings of Ether nearing $2 billion. As institutions increasingly recognize the multifaceted value proposition of Ether, the opportunities for pioneers become clear and compelling. Ether is not only becoming a strategic reserve asset but also an indispensable component of institutional asset management.

It is precisely because of all these unique features and characteristics that we cannot evaluate ETH as a technology stock. ETH is a complete