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The Investment Case for Ethereum: A Primer

Ethereum represents a significant evolutionary step in the internet's development, transitioning from Web1 and Web2 to Web3 or the “Internet of Value.” Since its inception in 2015, Ethereum has developed a diverse ecosystem of decentralized applications (dApps), notably in Decentralized Finance (DeFi). Unique to Ethereum is the ability for investors to own a part of its value layer, akin to owning shares in the foundational internet protocol TCP/IP.

The Investment Case for Ethereum: A Primer
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The Investment Case for Ethereum: A Primer
Note: This report has been specifically produced for professional investors only, such as asset managers, private banks, private wealth organisations, registered investment advisors, registered securities firms, fund service platforms, family offices, insurance companies, hedge funds, sovereign and pension funds.

About the Report

Insights

  1. 1
    Ethereum’s Role in the Digital Economy
    Ethereum is more than a technology platform; it’s the basis of a digital economy, providing infrastructure and security for online businesses and collecting transaction fees, similar to taxes in a conventional economy or the Apple / Android app store. Its growing adoption is evident in its transaction volume, now comparable to traditional financial payment providers like Visa.
  2. 2
    Distinguishing Ethereum from Bitcoin
    Ethereum differs significantly from Bitcoin, not just in purpose but also in its consensus mechanisms, scalability, energy consumption, carbon footprint, and yield opportunities. Ethereum offers staking yields and a deflationary aspect through its built-in burn mechanism, making its economics similar to dividends and buybacks in traditional equities.
  3. 3
    Future Prospects and Tokenization
    Ethereum is poised to lead in the tokenization of assets, a process of digitizing asset value and ownership on the blockchain. Its potential market is vast, with a potential Total Addressable Market Value of $ 1 Quadrillion.
  4. 4
    Valuing Ethereum
    Valuation approaches include network utility, intrinsic value, and cash flow analysis. Ethereum’s intrinsic value and cash flow become more significant post its transition to proof-of-stake in September 2022, making it a cash flow generating asset. Ethereum’s utility and valuation are also driven by its user base and transaction volumes, aligning with Metcalfe’s Law.
  5. 5
    Ethereum’s Revenue and Yield Model
    Ethereum generates revenue from transaction fees paid by users, with validators receiving these fees. Investors in Ethereum can earn through transaction fee revenues and the deflationary nature of Ethereum’s supply, due to the burning mechanism introduced in EIP-1559.
  6. 6
    Comparative Performance and Investment Potential
    Ethereum has outperformed major indices s like the Nasdaq 100, showing rapid global adoption and potential for continued growth. Predictions suggest that Ethereum could reach $ 14,000 by 2030 and $ 82,000 by 2050 based on a global mobile phone adoption model. Ethereum exhibits a low correlation to traditional assets like equities makes it a perfect addition to multiasset portfolios thereby significantly enhancing risk-adjusted returns.

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