Some Facts To Start With
I will be really forward with you: I believe that within the coming decade, Ethereum (ETH) will be the most valuable digital asset in the world. We are seeing now the biggest technical transformation taking place on chain, for a decentralized tech ecosystem. As of now, Ethereum is the world’s largest development platform in the decentralized world.
Just like Microsoft is the most popular computer’s operating system, Android the most popular mobile operating system, the AppStore the most popular app-development center, Ethereum is (and I believe will remain) the go-to-platform for decentralized projects on the blockchain.
There is currently 4.000 developers actively working on Ethereum’s development. On top of this, Ethereum keeps attracting the smartest IT brains with a stunning 1 out of 3 fresh graduates choosing to contribute to blockchain development and web3 infrastructure!
We are however still in the early phases of this technology. To put these numbers into perspective, Amazon employs currently 35.000 developers, Google 27.000.
Ethereum is currently also the most profitable network in the decentralized world, generating circa $10 billion in profit in 2021. This is 10x more than the runner-up, and biggest exchange in the world: The Binance Smart Chain Network.
What Happened After The Ethereum Merge
As explain in my previous article, the Ethereum Network launched a big update, referred to as “The Merge”. Read my previous article for more details over the merge.
A few weeks later, some of the results are already tangible. Other not, like transaction speed and price appreciation. But this is just a matter of time. After all the merge was the stepping stone to unlock a series of further improvements on the network. I believe we will see the network in full power in 2024-2025.
- ETH liquidity dropped and will continue dropping significantly in the months following the merge. With the new proof-of-stake mechanism, less new tokens will have to be issued as rewards for the miners. This makes post-merge ETH a deflationary token. I expect the total liquidity to drop as much as 90% compared to pre-merge levels.
- ETH energy consumption dropped immediately by 99% as a result of the merge.
- ETH-holders can stake their token on the ETH network in return for staking rewards (a small percentage of the reward issued for miners). I expect the staking returns to be anywhere between 4-8%.
Ethereum Valuation Method
As mentioned before, Ethereum in 2021 has generated circa $10 billion in profits (transaction fees).
My approach to valuation is the following. Consider Ethereum as a pure network service in the decentralized world, that generates business through transaction fees. This model is similar to Visa and Mastercard, as the world’s leading payment network in the traditional financial world.
Currently Visa and Mastercard stocks are available on the market at 30x their profits. If we applied the same multiplier to Ethereum’s network, we would get to a valuation of $300 billion.
With the currently circulating supply of 120 million ETH tokens, this would make the fair price as of this writing close to $2.500. This is almost 2x ETH’s current price level!
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Disclosure
These are unqualified opinions, and this newsletter, is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor, and do your own research.
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