Ethereum: A Long-Term Owner's Perspective

Business understandability score: 4/5.

Industry & Moat

Start with the industry. Smart-contract public chains and on-chain financial infrastructure are still in a growth stage, far from mature, and have yet to prove that the end-state profit pool will settle stably with a few winners. The demand is not castles in the air: DefiLlama currently shows Ethereum's stablecoin market cap at about $164.5B, roughly 50.9% of the all-chain total; at the same time, RWA.xyz's reading for the Ethereum network shows a stablecoin market cap of about $170.7B, about 22.8 million stablecoin holders, and roughly $2.16T of stablecoin transfer volume over the trailing 30 days. DefiLlama also shows Ethereum DeFi TVL at about $44.1B–$44.5B. These figures show that Ethereum is already a major carrier layer for on-chain dollars, on-chain collateral, and on-chain settlement, not a "maybe adopted in the future" story.

Institutional adoption is no longer just talk, either. CME launched Ether futures back in 2021; in May 2024 the U.S. SEC approved applications for exchange-listed spot Ether ETFs; and in March 2024 BlackRock issued its first tokenized fund, BUIDL, on Ethereum, later expanding it to more chains in November 2024. This set of facts matters: on one hand it proves Ethereum remains one of the default starting points for institutions entering on-chain finance, and on the other it shows institutional products will trend toward multi-chain, so Ethereum's lead is not unassailable.

Now the competitive landscape. On current data, Ethereum looks more like the "highest capital density, strongest institutional acceptance" settlement layer; Solana looks more like the "high activity, low fee, stronger high-frequency trading" execution layer. DefiLlama currently shows Ethereum's 24-hour on-chain fees at about $391,000 and 24-hour active addresses at about 524,000; Solana's 24-hour on-chain fees at about $432,000, 24-hour active addresses at about 1.94 million, and 24-hour transaction count at about 75.61 million. But on capital depth, Solana's DeFi TVL is only about $6 billion, clearly behind Ethereum's $44.1B–$44.5B; its stablecoin scale is also only about $15.25 billion, far below Ethereum. Meanwhile, Electric Capital's 2024 report shows Ethereum is still the ecosystem with the most total developer activity on every continent, while Solana has become the ecosystem with the most new developers in 2024. My inference: Ethereum is still the industry leader, but it is no longer the "only option"; it is now one of the "strongest incumbents."

Now break the moat apart:

The factual basis for the conclusions above comes from Ethereum's developer and governance docs, L2BEAT, DefiLlama, RWA.xyz, Electric Capital, and materials from BlackRock / CME / SEC.

Is this moat widening, stable, or narrowing? My assessment: the primary moat is intact, but the value-capture moat is being compressed. Network effects, developer density, the institutional brand, and stablecoin/RWA carrying capacity all remain on the strong side; but the scaling roadmap itself actively reduces the direct per-transaction payment to L1, and Dencun's blob mechanism has materially lowered the data-availability cost for rollups. In other words, Ethereum is becoming a better base layer, but not necessarily a higher-fee, higher-margin one in lockstep. The high fees of past NFT/DeFi manias look more like a cyclical dividend than perpetual pricing power.

Industry attractiveness score: 3/5. Moat strength score: 3/5.

Governance & Financial Quality

ETH's "management" is the combination of an open R&D process + client teams + the Ethereum Foundation + social consensus, not a CEO and a board. ethereum.org's governance page states explicitly that upgrades are usually discussed at length in public forums and advanced through EIPs; if disagreements cannot be reconciled, in extreme cases this can lead to a chain split, and after the DAO incident the community has placed even more emphasis on credible neutrality and non-intervention in contract outcomes. At the same time, the Ethereum Foundation itself states plainly that it is a non-profit that supports the ecosystem: it supports Ethereum but does not control Ethereum. This is more open than corporate governance and more in keeping with decentralized values; but from a traditional investor's perspective, the accountability chain is weaker and strategic unity is poorer.

The EF's organizational changes over the past two years illustrate this. In March 2025, the EF set up a new dual-executive-director structure, with Hsiao-Wei Wang and Tomasz Stańczak serving jointly as Co-Executive Directors; in April 2025, the EF further clarified the division of labor between board and management; and by February 2026, Tomasz had decided to step down, with the board appointing Bastian Aue as interim Co-Executive Director. In other words, the governance structure keeps adapting as Ethereum transitions from a "geek project" toward a "global financial/software base layer," rather than staying static. The upside is the capacity to adjust; the downside is that this itself brings organizational friction and uncertainty.

On "capital allocation," what's worth watching is treasury management and ecosystem grants, not buybacks, dividends, or M&A. The EF's 2024 report summary shows that as of 2024-10-31, the EF treasury was about $970.2M, of which roughly $788.7M was crypto assets and $181.5M non-crypto investments and assets; about 99.45% of its crypto holdings were ETH, equal to about 0.26% of total ETH supply at the time. The 2025 treasury policy further states that the EF wants to balance above-baseline yield against extending its long-term support of the ecosystem; the EF's conflict-of-interest policy sets out disclosure and recusal requirements for team members in scenarios such as outside investments, side jobs, and co-founded projects. For a decentralized ecosystem, this level of transparency is not bad; but ETH holders must remember: you do not own the EF treasury, and you have no shareholder-style claim.

As of this research date, ETH's key "network-economics" snapshot is as follows. Some ratios in the table are calculated by me from public snapshot data.

If I must do a "financial-quality analysis," I would offer the following judgments. Revenue growth, gross margin, operating margin, net margin, ROE, ROIC, ROA, net debt/EBITDA, interest coverage, inventory, receivables, payables, dividends, buybacks, M&A are not applicable to ETH, because it is not an accounting entity. The substitutes are fees, burn, supply change, staking ratio, staking yield, scale of L2 security outsourcing, and stablecoin/RWA carrying capacity. On "cash authenticity," ETH's advantage is that on-chain data is public, leaving less room for traditional profit manipulation; the drawback is that different providers define fees, revenue, TVL, and active addresses differently, so interpretation risk is high. DefiLlama itself explains its statistical methodology; Ethereum is, after all, just a public database, and it won't hand you a set of IFRS/GAAP statements.

The single most important financial-quality conclusion comes down to one line: usage can grow; value capture may not. Etherscan shows that Ethereum mainnet set an all-time daily high of 3,627,491 transactions on 2026-04-28; yet the recent average transaction fee was only about $0.37, and 24-hour burn only 52.29 ETH. Combined with the earlier daily-burn high and low (71,718 ETH versus 5.69 ETH), this shows ETH's "income statement" is not only volatile but, after L2 scaling, the linear relationship between transaction volume, activity, and holder earnings has weakened. This is one of my biggest reservations about ETH right now.

Management & capital allocation score: 3/5.

Owner Earnings & Intrinsic Value

Doing an Owner Earnings analysis on ETH requires acknowledging one fact first: it has no legally binding shareholder cash-flow claim the way a stock does. The table below can therefore only be an economic analog, not a corporate financial statement.

The current price, supply, fees, staking APR, post-Merge supply change, and 10-year Treasury yield used above come, respectively, from finance, Etherscan, Ethereum.org, ultrasound.money, and FRED; the operating-cost range in net carry is a conservative assumption.

The core meaning behind this table: if you are a passive holder, the closest thing to "buybacks for all shareholders" today is only the portion of ETH that gets burned, and the corresponding burn yield is very low; if you are an active staker, you earn a nominal yield, but a sizable part of it is a redistribution among inflation, fees, and the dilution of non-stakers, not "value the business created." By a strict Buffett-style measure, this hardly qualifies as high-quality, clear, compoundable owner earnings.

Method one: Owner Earnings discount model. This step can only be built as a heuristic model. I take the perspective of a "long-term owner who holds and stakes," treating the net attainable yield (nominal staking yield minus supply growth and operating costs) as dividend-like, then assume improvement over the next decade from rising demand for stablecoins, RWAs, institutional settlement, and L2 data. The results:

These figures are model outputs rather than facts; the most fragile point is that ETH's "cash flow" must first be converted using the ETH price itself, so a degree of circularity is built in. This is precisely why a DCF on ETH is inherently more fragile than a DCF on a company.

Method two: relative valuation. The traditional P/E, P/B, EV/EBITDA, P/FCF, and ROIC are not applicable to ETH, so I use four substitute anchors: market cap / total on-chain fees, market cap / burn, market cap / DeFi TVL, and carry relative to the risk-free rate. The conclusion: relative to Solana, Ethereum has deeper stablecoin, DeFi, and institutional-layer capital pools; relative to SPY, it lacks a legal corporate cash-flow claim; relative to the 10-year Treasury yield of about 4.47%, ETH's current 2.8% nominal staking APR is not advantaged. This means buying ETH today must rely more on future demand and improving value capture than on current carry.

Method three: asset or liquidation value. This method is the least friendly to ETH. ETH holders have no claim on the EF treasury, and no legal liquidation rights over protocol code, brand, or community contributions. Legally, ETH has no net-asset base that can be split, disposed of, and distributed to shareholders the way a company's can; economically, its real "asset value" comes from people still being willing in the future to use it to pay gas, stake, hold, and post as collateral. In short, book liquidation value is very weak, and value is almost entirely living-network value.

Combining the three methods, I give the following inferred ranges:

At the current price of about $2,184.73, ETH is above the fair range I defined and sits inside the optimistic range. This means that if you act strictly by value-investing discipline, ETH today looks more like a name you "can keep researching but need not rush into." Based on yield and margin-of-safety requirements, the ideal buy price range I give is $800–$1,400; the acceptable holding price range is roughly $1,400–$2,200; and if the price runs clearly above $2,600, I would treat it as a range that requires a very strong narrative to deliver to be supportable.

Margin of Safety & The Bear Case

My conclusion is direct: the current margin of safety is insufficient. The most fragile valuation assumption is "can Ethereum turn the boom in users, stablecoins, RWAs, and L2s into economic capture for ETH holders that is high enough, durable enough, and verifiable enough," not "does Ethereum have users." The official Merge issuance note page is clear: under its example parameters, the average gas price has to reach roughly 16 gwei to offset issuance of about 1,700 ETH/day; yet Etherscan's current median gas price is only about 0.575 gwei, and ultrasound.money's snapshot is also around 0.7 gwei. This shows that in today's low-fee environment, ETH is not in a state of "naturally high buyback, strong deflation." Even if future growth continues, as long as the margin (for ETH, that means fee capture) does not rise, investment returns may still be mediocre.

Among the risks, I weigh the following most heavily. Competitive risk is that chains/layers like Solana and Base draw away high-frequency, low-fee, retail flow; technology-substitution risk is that scaling itself improves the experience while diluting mainnet's direct fee-charging power; regulatory risk is that compliance attitudes, ETF rules, and the accessibility of staking and DeFi still affect institutional demand; governance risk is that open governance brings resilience but also makes disagreements harder to resolve quickly; and overvaluation risk is that the current price already depends clearly on optimistic expectations for future adoption and value capture. At a finer level, Ethereum's official client docs emphasize that client diversity is very important to network resilience; and a 2025 academic preprint, analyzing a large sample of more than 41 million contracts and 11 billion interactions, points out that Ethereum's application layer carries significant dependency concentration and mutable-contract dependency risk. This shows that however strong the underlying protocol is, the application layer is not inherently solid.

The strongest bear case carries real force: ETH may, in the end, turn out to be "a very important yet low-fee public-settlement-layer commodity" rather than "a high-quality asset producing strong owner earnings." In that world, stablecoins, RWAs, DeFi, and rollups all keep growing, Ethereum keeps existing, but mainnet fees stay low for the long run, and the bulk of value is taken by L2s, front ends, application-layer protocols, and institutional service providers; ETH holders get only a low-single-digit staking yield and limited burn, and the market eventually reprices ETH from a "growth network asset" into "low-yield infrastructure collateral." If this happens, the permanent capital loss is long-run opportunity cost plus years of low returns after an overvalued entry, not "a zero with no way back."

Which facts would overturn my cautious view on ETH? First, if in the next few years Ethereum genuinely converts the boom in stablecoins, RWAs, and rollups into sustainably higher mainnet/data-availability fees, lifting burn yield and net staking yield materially, I would raise the valuation range. Second, if the opposite happens, with stablecoins and RWAs going clearly multi-chain, Solana and other chains continuing to steal new developers and high-value activity, and Ethereum maintaining low fee capture for the long run, I would lean toward "Avoid" rather than "Watch." Third, if governance, client diversity, or critical-infrastructure dependency deteriorate, I would raise the technology/governance discount.

Comparison, Checklist & Final Verdict

In a side-by-side comparison, my ranking is clear. Versus Solana, ETH is still far stronger in pool depth, stablecoins, DeFi TVL, institutional brand, and as an L2 security base, though it is not invincible in low-fee, high-frequency activity. Versus an S&P 500 index vehicle, ETH lacks a legal corporate cash-flow claim. Versus the 10-year Treasury, ETH's current carry is lower and its volatility and regulatory uncertainty are greater. So, to "is buying ETH clearly better than buying an index?" my answer is: for the vast majority of ordinary long-term investors, no. To "is its expected return enough to compensate for the risk?" my answer is: only if you hold a strong, self-evident, high conviction about Ethereum's adoption and value capture over the next decade. To "if I could hold only five assets, would it qualify?" my answer is: for most portfolios, no; for an investor with a clear crypto-allocation framework, a satellite position at most.

Here are my checklist conclusions:

【Final Rating】 Watch

【One-Line Investment Thesis】 ETH is one of the most important pieces of crypto-finance infrastructure, but at today's price it looks more like "a fair-to-rich price for a high-quality network asset" than "a value-investing opportunity with sufficient margin of safety."

【Core Bull Case】

• Ethereum remains an important base for stablecoins, DeFi, RWAs, and the rollup security layer, with stablecoin and DeFi pool depth clearly ahead of most competitors.

• Developer and institutional adoption remain strong; Electric Capital ranks it first in total developer activity on every continent, and CME Ether futures and U.S. spot ETH ETFs have already opened the traditional-finance on-ramp.

• EIP-1559's fee burn and PoS staking give ETH at least some economic structure resembling "automatic buyback + conditional dividend."

• The EF has a public treasury policy, conflict-of-interest policy, and reserve disclosures, with governance transparency above that of many grassroots token projects.

【Core Bear Case】

• ETH is not equity; it lacks a legally claimable cash flow and asset base, and under a strict Buffett framework is inherently inferior to corporate equity.

• Recent mainnet fee/burn is very low, and ETH supply has still grown net since The Merge, indicating weak current holder value capture.

• L2s make Ethereum more usable but may also dilute mainnet's direct fee-charging power; rivals like Solana compete clearly in high-activity, low-fee scenarios.

• The nominal staking yield is below the 10-year Treasury yield, meaning a large part of buying ETH today is a bet on a future narrative delivering.

【Key Assumptions】

• Ethereum will keep its central role in stablecoins, DeFi, RWAs, and institutional settlement.

• L2 growth will ultimately feed back to ETH rather than permanently trapping value at the application layer.

• Open governance and continuous upgrades will not damage credible neutrality and security.

• Within the next 10 years, ETH's net owner yield can rise materially above current levels.

【Fair Buy Price】 $800–$1,400 per ETH. The basis is a conservative requirement that "the yield at least gets closer to, or above, the risk-free rate, and leaves a margin of safety of 30%–50% or more," not short-term chart patterns.

【Target Holding Period】 10 years or more. But only if you are willing to treat it as a network asset that requires ongoing tracking and is stakeable but not easy, not as a buy-and-forget consumer-products company.

【Expected Annualized Return】

• Conservative scenario: -8% to -5%.

• Neutral scenario: 0% to 4%.

• Optimistic scenario: 10% to 14%.

【Maximum Loss Risk】 My worst case is that the protocol stays important while fee capture stays very low, and the market reprices ETH as low-yield infrastructure collateral, not that the protocol disappears. In that case, the long-run drawdown and opportunity cost could both be large, and a permanent loss on the order of 70%–90% is not unimaginable.

【Tracking Metrics】 All of the following can be tracked continuously from Etherscan, ethereum.org, the EF's official blog, L2BEAT, DefiLlama, RWA.xyz, and FRED.

• ETH 7-day and 30-day total fees

• ETH 7-day and 30-day burn

• Net supply change and post-Merge annualized inflation/deflation status

• Total staked, APR, and entry/exit trends

• Total stablecoins on Ethereum and 30-day transfer volume

• Ethereum DeFi TVL and market share

• Rollup secured value and blob usage

• Developer activity and where new developers go

• EF governance, treasury, and organizational changes

• Regulatory and institutional on-ramp changes

【Signals That Trigger a Reassessment】

• Ethereum's stablecoin, DeFi, or RWA share declines clearly for several consecutive quarters.

• L2s keep booming, but ETH's burn yield and net staking yield do not improve.

• Client diversity, critical dependencies, or governance coordination capability deteriorate clearly.

• The regulatory environment materially restricts staking, DeFi, or institutional holding.

• The price diverges sharply from the optimistic valuation range I gave.

【Final Recommendation】 To put it coolly, ETH deserves respect but not necessarily a heavy position right now. If you are a strict long-term value investor, I lean toward placing it on a "keep watching, wait for a better price" list rather than committing large capital immediately. If you already hold it and genuinely understand the protocol and staking logic, you can treat it as a satellite position with upside elasticity that requires discipline and tracking; if you are a conservative investor, broad-based index funds and high-grade bonds are still the easier choice to sleep on today.

This report is based on public information and does not constitute investment advice. Markets carry risk; invest with caution.