Ethereum: The New Oil of the Digital Age

Summary

The global financial system is on the eve of a revolutionary transformation, with assets around the world gradually becoming digitized and transitioning 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.

The adoption of Ethereum by institutions is accelerating rapidly, with the U.S. regulatory framework openly supporting 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, built on the foundation of Bitcoin, acts as a supplement: it not only stores value but also facilitates seamless value transfer, trust establishment, and global collaboration. ETH is the next-generation asymmetric investment opportunity, expected 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 the asset supporting this transformative system, ETH is still one of the most severely undervalued opportunities in the global market. Despite Ethereum's obvious dominant position in the market and significant technological upgrades, the current trading price of ETH is far below its historical peak in 2021. We believe that this price discrepancy 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 the collateral for on-chain economics, computational fuel, and interest-bearing financial infrastructure. It is actively reserved, staked, burned, and used. 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 it has immense utility—this effectively makes it a productive reserve asset: the digital oil powering the digital economy.

Report Explanation

This report aims to explain why ETH should be regarded as a core allocation in institutional strategies, particularly those that prioritize long-term value creation, technological exposure, and forward-looking 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 assessing the asset value of ETH, and discuss the reasons why it is currently undervalued and underrepresented 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 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 to the future, assessing 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 + destruction = predictable scarcity: The theoretical annual maximum issuance of ETH is 1.51%, but the goods destruction generated by platform usage usually causes the net issuance to be lower. Since September 2022, the supply inflation of ETH has hovered around 0.09%, lower than fiat currencies and Bitcoin.

ETH provides native yield: validator staking makes the staked ETH a productive, yield-generating digital commodity.

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

ETH is undervalued: The fact that ETH is lagging 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 has not yet been priced: as autonomous agents integrate into the financial world, a new type of economic infrastructure will be required. Ethereum is the most suitable and likely platform to support this future, serving as the operating layer of the 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 that Drives the Digital Economy

ETH is the native asset of the Ethereum network and is 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 this is realized, ETH will become the foundational asset of a comprehensive global platform that will encompass future areas such as finance, tokenization, identity, computing, and artificial intelligence. This inherent complexity makes it more difficult to define ETH, especially in relation to simpler value storage assets 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 including:

Calculating fuel: Each on-chain operation will consume ( and destroy ) ETH. It is the underlying asset that drives computation, data storage, asset transfer, and value settlement on Ethereum, serving as fuel for the following items:

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

Value storage assets with additional yields: In addition to simply holding Ether as a value storage, Ether can also earn yields through staking. When someone stakes Ether, they agree to lock it in the system and become a validator—a type of network participant that acts like a referee, checking and verifying transactions. The verification process is largely automated, so the person or entity staking their Ether typically does not need to perform any additional work beyond staking their Ether. 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 Ether.

Original settlement collateral: ETH provides security for billions of stablecoins, RWA( real-world assets ), and financial applications. ETH has censorship resistance, trusted neutrality, and is unaffected by depreciation; it is the foundational collateral of the Ethereum ecosystem, with approximately 32.6% of the total ETH supply currently used in a collateral role, and an additional 3.5% exported for use on other blockchains. As the number of externally controlled tokenized assets on Ethereum, such as stablecoins, RWA, and permissioned financial instruments ( continues to grow, the demand for a neutral reserve asset that serves as a base store of value becomes crucial. Tokenized assets may carry issuance, jurisdiction, and counterparty risks; in contrast, ETH anchors the entire system in a globally accessible, non-sovereign, neutral manner for value storage, facilitating settlement, collateral, 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 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 Asset: As network activity increases, ETH will become deflationary. Approximately 80.4% of transaction fees will be burned, thereby reducing the total supply of ETH. The maximum issuance rate of 1.51% per year ) will only be reached in extreme cases where 100% of ETH is staked and no transaction fees are burned. When the demand for network resources is high, ETH will transform 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 a longer period.

The manifestation of tokenized economic growth: Just as the global demand for oil increases 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 smaller compared to oil:

• Ethereum's Total Value Secured (: Ethereum currently holds assets worth over $767 billion. 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 moving towards an increasingly decentralized global economy. As business, trade, and asset ownership shift onto the chain, Ethereum's economic throughput is expected to achieve exponential growth. This will significantly increase the demand for ETH, both as transaction fuel and as a core currency reserve supporting the new global financial system.

Reserve trading pair: ETH is the main reserve trading pair in decentralized exchanges. On Ethereum, 70.6% of trading pairs are priced 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 USD stablecoin.

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 infrastructure. Unlike inert reserve assets, ETH is fully programmable, enabling vault 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 primarily remains idle as a vault asset, ETH actively enhances vault productivity and operational efficiency. As a neutral reserve asset, ETH stands out in ensuring and driving the global tokenized financial system.

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

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It is precisely because of all these unique features and characteristics that we cannot evaluate ETH as a tech stock. ETH is a whole new category of asset.

Therefore, ETH cannot be folded.