Ethereum’s Growth May Redefine Finance
May 22, 2023
Read Time 3 MIN
Please note that VanEck has a position(s) in the Ethereum token described below.
Thanks to improving functionality, lower take-rates and an ethos of inclusivity, we are bullish on decentralized software protocols as an alternative to existing intermediaries. Among the contenders to capture a majority of economic value—as is common in digital platforms—Ethereum stands out to us as one of the most probable long-term disruptors. According to our recent analysis, we believe Ethereum may emerge as a powerhouse among digital assets, with a predicted token price of $11.8k by 2030. Ethereum's unique approach combines a globally distributed infrastructure, smart contract capabilities, and a digital commerce model that enables trustless transactions.
Ethereum: The Digital Mall of the Future
Just as a physical mall is a hub for commercial activity, Ethereum operates as a digital equivalent. It provides a secure platform for internet commerce, with its infrastructure spread across the globe. The network's lifeblood, the ETH token, is used for conducting transactions, rewarding validators, and penalizing dishonest ones.
Ethereum's limited space is managed through fees charged to users for conducting business and value exchange. This software is globally hosted and utilizes a protocol to establish a unified understanding of ownership, commercial activity, and business logic. It enables users to conduct commerce without the need for trust in participants or counterparts. Essentially, Ethereum's core business revolves around selling secure, immutable blockspace that powers internet commerce.
Revenue Generation: Shifting from Currency to Security as a Service
Ethereum's revenue is primarily derived from activities where tokens are used in its core operations, such as transaction fees and Miner Extractable Value (MEV). However, the network's evolution beyond a transactional currency has paved the way for the introduction of "Security as a Service" (SaaS). This innovative concept implies that the ETH token's value can be harnessed both within and outside Ethereum to secure applications, protocols, and ecosystems.
The Road Ahead: Ethereum's Potential for Growth by 2030
The forecasted growth of Ethereum hinges on its capacity to capture the market of smart contract platforms across various sectors like finance, banking, payments, metaverse, social and gaming, and infrastructure. The shift of off-chain businesses to on-chain platforms for cost reduction and new revenue streams could significantly alter the economic dynamics within the Ethereum network.
In the future, Ethereum's blockchain value capture is likely to pivot away from transaction revenue to “blockspace”, the actual product sold by smart contract blockchains. We estimate that a 60% annual decline in ETH and layer 2 “per-transaction” costs will unlock significant demand for decentralized applications. Together with the network's 80% burn rate for transaction fees (akin to a share buyback), we believe the network is poised for a transformative shift in revenue generation.
The potential of MEV is also worth noting. Often referred to as the “bogeyman” of blockchain, MEV, despite being difficult to predict, is expected to play a crucial role in securing blockchains due to its immense value to market makers and other financial actors.
Looking ahead, we believe Ethereum stands on the precipice of significant growth and evolution. With a base case 2030 price target of $11,848 per token, discounted to $5,359.71 in today's dollars, Ethereum is poised to become one of the world's dominant global settlement networks. It is expected to host a considerable amount of commercial activity from sectors that stand to benefit most from public blockchains. As the digital age continues to evolve, Ethereum is poised to be at the forefront, transforming the financial landscape as we know it.
A more in-depth research report and detailed valuation methodology is available here: Ethereum Price Prediction: $11.8k by 2030.
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IMPORTANT DISCLOSURES
Ethereum (ETH) is a decentralized, open-source blockchain with smart contract functionality. Ether is the native cryptocurrency of the platform. Amongst cryptocurrencies, Ether is second only to Bitcoin in market capitalization.
Risk Considerations
This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Information provided by third-party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as of the date of this communication and are subject to change without notice. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
The information, valuation scenarios and price targets presented on Ethereum in this blog are not intended as financial advice, a recommendation to buy or sell Ethereum, or any call to action. There may be risks or other factors not accounted for in these scenarios that may impede the performance of Ethereum; the actual future performance of Ethereum is unknown, and may differ significantly. Any projections, forecasts or forward-looking statements included herein are the results of a simulation based on our research, are valid as of the date of this communication and subject to change without notice, and are for illustrative purposes only. Please conduct your own research and draw your own conclusions.
Past performance is not an indication, or guarantee, of future results. Hypothetical or model performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading, and accordingly, may have undercompensated or overcompensated for the impact, if any, of certain market factors such as market disruptions and lack of liquidity. In addition, hypothetical trading does not involve financial risk and no hypothetical trading record can completely account for the impact of financial risk in actual trading (for example, the ability to adhere to a particular trading program in spite of trading losses). Hypothetical or model performance is designed with benefit of hindsight.
Investments in digital assets and Web3 companies are highly speculative and involve a high degree of risk. These risks include, but are not limited to: the technology is new and many of its uses may be untested; intense competition; slow adoption rates and the potential for product obsolescence; volatility and limited liquidity, including but not limited to, inability to liquidate a position; loss or destruction of key(s) to access accounts or the blockchain; reliance on digital wallets; reliance on unregulated markets and exchanges; reliance on the internet; cybersecurity risks; and the lack of regulation and the potential for new laws and regulation that may be difficult to predict. Moreover, the extent to which Web3 companies or digital assets utilize blockchain technology may vary, and it is possible that even widespread adoption of blockchain technology may not result in a material increase in the value of such companies or digital assets.
Digital asset prices are highly volatile, and the value of digital assets, and Web3 companies, can rise or fall dramatically and quickly. If their value goes down, there’s no guarantee that it will rise again. As a result, there is a significant risk of loss of your entire principal investment.
Digital assets are not generally backed or supported by any government or central bank and are not covered by FDIC or SIPC insurance. Accounts at digital asset custodians and exchanges are not protected by SPIC and are not FDIC insured. Furthermore, markets and exchanges for digital assets are not regulated with the same controls or customer protections available in traditional equity, option, futures, or foreign exchange investing.
Digital assets include, but are not limited to, cryptocurrencies, tokens, NFTs, assets stored or created using blockchain technology, and other Web3 products.
Web3 companies include but are not limited to, companies that involve the development, innovation, and/or utilization of blockchain, digital assets, or crypto technologies.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.
IMPORTANT DISCLOSURES
Ethereum (ETH) is a decentralized, open-source blockchain with smart contract functionality. Ether is the native cryptocurrency of the platform. Amongst cryptocurrencies, Ether is second only to Bitcoin in market capitalization.
Risk Considerations
This is not an offer to buy or sell, or a solicitation of any offer to buy or sell any of the digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. Information provided by third-party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. Any opinions, projections, forecasts, and forward-looking statements presented herein are valid as of the date of this communication and are subject to change without notice. The information herein represents the opinion of the author(s), but not necessarily those of VanEck.
The information, valuation scenarios and price targets presented on Ethereum in this blog are not intended as financial advice, a recommendation to buy or sell Ethereum, or any call to action. There may be risks or other factors not accounted for in these scenarios that may impede the performance of Ethereum; the actual future performance of Ethereum is unknown, and may differ significantly. Any projections, forecasts or forward-looking statements included herein are the results of a simulation based on our research, are valid as of the date of this communication and subject to change without notice, and are for illustrative purposes only. Please conduct your own research and draw your own conclusions.
Past performance is not an indication, or guarantee, of future results. Hypothetical or model performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading, and accordingly, may have undercompensated or overcompensated for the impact, if any, of certain market factors such as market disruptions and lack of liquidity. In addition, hypothetical trading does not involve financial risk and no hypothetical trading record can completely account for the impact of financial risk in actual trading (for example, the ability to adhere to a particular trading program in spite of trading losses). Hypothetical or model performance is designed with benefit of hindsight.
Investments in digital assets and Web3 companies are highly speculative and involve a high degree of risk. These risks include, but are not limited to: the technology is new and many of its uses may be untested; intense competition; slow adoption rates and the potential for product obsolescence; volatility and limited liquidity, including but not limited to, inability to liquidate a position; loss or destruction of key(s) to access accounts or the blockchain; reliance on digital wallets; reliance on unregulated markets and exchanges; reliance on the internet; cybersecurity risks; and the lack of regulation and the potential for new laws and regulation that may be difficult to predict. Moreover, the extent to which Web3 companies or digital assets utilize blockchain technology may vary, and it is possible that even widespread adoption of blockchain technology may not result in a material increase in the value of such companies or digital assets.
Digital asset prices are highly volatile, and the value of digital assets, and Web3 companies, can rise or fall dramatically and quickly. If their value goes down, there’s no guarantee that it will rise again. As a result, there is a significant risk of loss of your entire principal investment.
Digital assets are not generally backed or supported by any government or central bank and are not covered by FDIC or SIPC insurance. Accounts at digital asset custodians and exchanges are not protected by SPIC and are not FDIC insured. Furthermore, markets and exchanges for digital assets are not regulated with the same controls or customer protections available in traditional equity, option, futures, or foreign exchange investing.
Digital assets include, but are not limited to, cryptocurrencies, tokens, NFTs, assets stored or created using blockchain technology, and other Web3 products.
Web3 companies include but are not limited to, companies that involve the development, innovation, and/or utilization of blockchain, digital assets, or crypto technologies.
All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.
© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.