Ethereum to Redefine Finance on the Way to $11.8K
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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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.
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