Ethereum: The New Oil of the Digital Economy

The global financial system is on the eve of significant transformation, with assets gradually being digitized and transferred 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 the operation of global assets. Ethereum has become this foundation.

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

Bitcoin took 15 years to be widely recognized as digital gold: a scarce monetary asset that transcends sovereign control. Ethereum, on the other hand, supplemented Bitcoin: it not only stores value but also facilitates seamless transfer of value, trust-building, and global collaboration. ETH is the next generation of asymmetric investment opportunities, 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 companies 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 undervalued opportunities in the global market. Despite Ethereum's obvious dominance in the market and significant technological upgrades, the current trading price of ETH is far below its historical high in 2021. We believe this price discrepancy will not last, and understanding ETH's unique value proposition will present 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 with immense utility—this effectively makes it a productive reserve asset: the digital oil powering the digital economy.

Report Explanation

This report explains why ETH should be considered a core allocation in institutional strategies, especially for 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 explores the relationship between Ethereum and ETH, the utility and unique characteristics of ETH, evaluates the appropriate valuation framework for assessing ETH as an asset, and discusses the reasons why it is currently undervalued and underweighted in institutional investor portfolios seeking asymmetrical opportunities and productive value storage.

Ethereum: The underlying infrastructure driving the rise of Ether

This section covers the structural, technical, and economic drivers behind the growing momentum of the Ethereum network. It elaborates on 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 looks 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 serves as a settlement, security, and collateral asset in the digital economy. With the growing number of externally controlled tokenized assets ( stablecoins, real-world assets, and permissioned financial instruments ) on Ethereum, the demand for a globally neutral, censorship-resistant reserve asset as a fundamental store of value is crucial.

ETH is not a tech company: The valuation framework must evolve; ETH cannot be valued merely based on fee revenue like tech stocks ------ 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 destruction of goods generated by platform usage typically results in a lower net issuance. Since September 2022, the inflation of ETH supply has hovered around 0.09%, lower than fiat currency and Bitcoin.

ETH provides native yield: Validator staking turns staked ETH into a productive and revenue-generating digital commodity.

ETH is already a reserve asset: ETH has already become the reserve asset of the Ethereum digital economy and will soon be the 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 required. Ethereum is the most suitable and likely platform to support this future, serving as the operational 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 Driving the Digital Economy

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

It is digital oil------an asset that provides power, guarantees, and reserves for 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 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 ETH harder to define, especially in comparison 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:

Fuel Calculation: Each on-chain operation will consume ( to 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:

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

Value Storage Assets with Yield: In addition to simply holding Ether as a store of value, Ether can also earn yield 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 validation process is primarily automated, so individuals or entities staking their Ether typically do not need to do any additional work beyond staking their Ether. The network randomly selects validators to propose or confirm new transaction blocks. If a validator completes their work correctly, they will receive rewards in the form of Ether.

Original Settlement Collateral: ETH provides secure backing for billions in stablecoins, RWA( real-world assets, and financial applications. ETH is censorship-resistant, trustlessly neutral, and unaffected by depreciation, serving as the foundational collateral of the Ethereum ecosystem, with approximately 32.6% of the total ETH supply currently used as collateral, and another 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 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 store of value, 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 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 upper limit issuance rate of 1.51% per year ) will only be reached under extreme circumstances where 100% of ETH is staked and there are no transaction fees burned. When the demand for network resources is high, ETH will transform into a deflationary commodity. Unlike traditional commodities, the increase in demand for ETH does not trigger an increase in production, 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 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 moving towards an increasingly decentralized global economy. As business, trade, and asset ownership move on-chain, the economic throughput of Ethereum 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 Pair: ETH is the primary reserve trading pair in decentralized exchanges, with 70.6% of trading pairs priced in ETH on Ethereum. 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 stablecoin pegged to the US dollar.

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, affiliation programs, payment systems, bridging mechanisms, and more. While BTC primarily sits 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 a theory; the competition for hoarding Ether has already begun. Strategic Ether reserves are expanding rapidly, with publicly disclosed institutional Ether holdings nearing $2 billion. As institutions increasingly recognize the multifaceted value proposition of Ether, the opportunities for first movers become clear and compelling. Ether is not only becoming a strategic reserve asset but is also an indispensable component of institutional fund management.

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It is precisely because of all this