About ETH.
August 26, 2026
Disclaimer: This memo is based on publicly available market information and is intended solely for internal investment decision-making reference. It does not constitute external investment advice. Crypto assets are an extremely high-risk asset class, and all investment decisions should be based on independent judgment and thorough due diligence.
I. What Are We Really Buying? The Value of Ethereum
For Ethereum, just look directly at theEthereumwhitepaper; this article will not explain it.
This article strips away all narratives layer by layer and returns to the most fundamental principles. Ethereum's value rests on three irreducible foundations.
First, Turing completeness at the level of computation theory. Ethereum is the first system in human history to implement a Turing-complete state machine in a decentralized environment. This means anyone can write programs with arbitrary logic on top of it—lending, trading, insurance, voting, identity verification—without needing permission from any intermediary. This is not a feature; it is a mathematical fact: Ethereum's computational expressiveness is equivalent to that of any traditional computer. All financial logic that runs on centralized servers can, in theory, be reproduced on Ethereum in a decentralized manner.
Second, economic security at the level of game theory. Approximately 41.7 million ETH is locked to secure the network, accounting for about 34% of total supply, forming an economic security barrier exceeding $100 billion. Any attempt to tamper with Ethereum's state would incur economic losses exceeding this amount—because the attacker's stake would be slashed. This is a self-reinforcing game-theoretic equilibrium: higher security budget → higher attack cost → more trusted network → more assets flow in → higher security budget.
Third, neutrality at the level of institutional economics. Ethereum has no CEO, no headquarters, and no business development team that can favor any client. Its rules are enforced by code and applied equally to everyone. This institutional neutrality is an extremely scarce public good—traditional financial infrastructure (Visa, SWIFT, the New York Clearing House) are all for-profit enterprises with the right to refuse service, change rules, and favor large clients. Ethereum offers a commitment that no centralized institution can replicate: rules cannot be unilaterally modified by anyone.
In one sentence: Ethereum is the world's only decentralized, Turing-complete financial computing infrastructure—it is not a currency, not an application, but the "operating system of the financial internet."
II. Value Capture: Ethereum's Biggest Structural Tension
This is the issue that most needs to be addressed head-on in the entire investment thesis.
Ethereum has become TCP/IP—the protocol is everywhere, but the protocol itself doesn't make money. The cost for L2s to submit data batches to the mainnet has dropped by about 90% due to EIP-4844. Ethereum provides security for L2s at extremely low cost, but L2s retain the vast majority of fee revenue. Coinbase's Base chain has even surpassed Ethereum L1 in revenue in recent quarters. Ethereum provides the security; L2s earn the money.
The root of this structural problem is that Ethereum actively chose the scaling path of "pushing activity to L2," at the cost of L1's fee burn nearly going to zero. ETH has been in a state of net inflation for about 28 consecutive months, and the "ultrasound money" narrative is over.
But fixes are on the way. The Glamsterdam upgrade in Q4 2026 is the biggest underlying change since the Merge—in-protocol proposer-builder separation (ePBS) will expand the propagation window from 2 seconds to 9 seconds, block-level access lists will pave the way for parallel execution, and the gas limit target will move from 60 million toward 200 million. The Hegotá upgrade in 2027 will introduce FOCIL to enhance censorship resistance and may include native account abstraction. One of the core goals of these upgrades is to pull some revenue back to L1.
Key judgment: Value capture repair is the biggest upside catalyst for ETH, but the timeline is uncertain. If the 2026-2027 upgrades are successfully implemented and effectively pull some revenue back to L1, ETH's valuation logic will undergo a fundamental shift.
III. Network Effects and Moat
Ethereum's moat is not any single technological advantage, but a set of mutually reinforcing structural advantages.
Liquidity network effects (extremely strong): The deepest on-chain liquidity pool in the world, with over $100 billion in stablecoins and over $100 billion in DeFi TVL. Deeper liquidity → lower slippage → attracts more traders → deeper liquidity. Latecomers face a "chicken-and-egg" cold-start problem.
Developer ecosystem lock-in (extremely strong): Ethereum is the most developer-active network among all Layer 1s, with roughly twice the number of active developers as its closest competitor. EVM has become the industry standard—almost all competing chains are building EVM compatibility. Developers choose Ethereum not because it's the fastest, but because the toolchain is the most mature, composability is the strongest, and security audit resources are the most abundant.
Institutional trust accumulation (strong): BlackRock, JPMorgan, Franklin Templeton, and other top global asset managers have built core products on Ethereum. BlackRock's BUIDL tokenized fund and JPMorgan's MONY tokenized fund both run on Ethereum. Once this trust is established, migration costs are extremely high—not due to technical lock-in, but due to the sunk costs of compliance approvals, legal structures, and operational inertia.
Security track record (extremely strong): It has never stopped producing blocks since 2015 and has never experienced a Layer 1-level security incident. In financial infrastructure managing over $100 billion in assets, this track record itself is a moat.
Smart contract composability (extremely strong): Thousands of protocols are nested and interdependent—Aave's lending depends on Chainlink's oracles, Uniswap's liquidity is accepted as collateral by MakerDAO, and Lido's stETH is borrowed as collateral on Aave and then re-staked on EigenLayer. This deep nesting creates powerful stickiness: migrating any layer requires the entire ecosystem to coordinate simultaneously.
IV. Ecosystem Landscape: Ethereum Is Not a Chain, It's a Galaxy
Many people equate Ethereum with "the Ethereum mainnet," which is a serious cognitive error. Ethereum is a multi-layered galaxy.
Layer 2 ecosystem: Ethereum's scaling strategy is not "make the mainnet faster," but "let the mainnet settle and let L2s execute." Arbitrum, Base, and Optimism form a three-way race. Base's rise is particularly noteworthy—Coinbase has over 110 million registered users, and Base directly connects to Coinbase's user base for near-zero-cost customer acquisition. In June, its monthly stablecoin trading volume reached $565 billion, accounting for about 31.5% of the industry.
DeFi ecosystem: Ethereum (including L2s) remains the absolute core of global DeFi, with leading protocols including Lido, Aave, EigenLayer, and MakerDAO/Sky, collectively locking in over $100 billion.
Stablecoin settlement layer: Ethereum is the world's largest stablecoin settlement network, with over $100 billion in on-chain stablecoins. USDC's annualized turnover on Ethereum is ten times that of USDT. The vast majority of stablecoin settlements ultimately settle through Ethereum.
RWA tokenization: This is the biggest incremental narrative Ethereum is delivering on. The global RWA tokenization market has surpassed $17 billion, with Ethereum hosting the vast majority. Boston Consulting Group predicts the tokenized asset market could reach $18.9 trillion by 2033—Ethereum is becoming the default settlement layer for this market.
AI agent economy: Coinbase's x402 protocol has processed approximately 14 million AI agent transfers in the past 30 days—AI agents autonomously rent compute, purchase APIs, and pay for inference rewards on Ethereum, without needing a bank account, just an Ethereum address. This is an entirely new demand layer emerging.
V. Institutionalization Progress
Ethereum's institutionalization is upgrading from "price exposure" to "yield-bearing asset allocation."
U.S. spot Ethereum ETFs have a total net asset value of approximately $14.3 billion. More milestone-worthy: BlackRock has launched the world's first staking-enabled Ethereum ETF, staking most of the underlying ETH on-chain and returning 82% of staking rewards to investors. Grayscale's staking ETF has already distributed its first staking yield to shareholders. This marks ETH's upgrade from "pure price exposure" to a "yield-bearing asset," opening compliant allocation channels for pension funds, sovereign wealth funds, and family offices.
The CLARITY Act introduces the concept of "network tokens"—digital commodities tied to distributed ledger systems whose value derives from system usage, classified as non-securities. As the most typical network token, ETH would move from SEC jurisdiction to CFTC jurisdiction, eliminating the long-hanging "is it a security" regulatory Sword of Damocles.
VI. Supply Economics: The End of the Deflation Narrative and Recalibration
The EIP-1559 burn mechanism has largely failed—daily fee burn has dropped about 98% from its peak. But this is not a collapse in demand; it is a direct result of successful L2 scaling. Ethereum actively chose the scaling path of "pushing activity to L2," at the cost of L1's fee burn going to zero.
Precisely because the demand-driven burn mechanism has failed, issuance has become the only lever Ethereum still holds over ETH supply. EIP-8363, proposed in August 2026, attempts to tighten supply by dynamically reducing validator rewards based on staking ratio—model simulations show this mechanism would stabilize the system at an equilibrium of 0.3%-0.5% annual inflation.
Key judgment: Ethereum's monetary properties are shifting from "deflationary scarcity" to "low-inflation productive assets." An annual inflation rate of under 1% is still far lower than Bitcoin's, but the narrative premium of "ultrasound money" needs to be repriced.
VII. Competitive Landscape: Ethereum vs. Solana
The two are not a zero-sum game—they are serving different market needs.
Ethereum's advantages: TVL is more than ten times Solana's, stablecoin scale far exceeds Solana's, developer activity is about twice Solana's, it has never gone down (since 2015), holds about 65% market share in RWA tokenization, and its validator decentralization far surpasses Solana's.
Solana's advantages: Daily active addresses are nearly 7 times Ethereum mainnet's, DEX trading volume has surpassed Ethereum plus all L2s combined, fees are extremely low, finality is sub-second, and all fees and MEV go directly to L1 without L2 diversion issues.
Core judgment: Money piles up on Ethereum; people and transactions are on Solana. Ethereum is the home of institutional settlement and deep liquidity; Solana is the battleground for high-frequency consumer apps and retail trading. For investors, buying Ethereum is a bet on "neutrality + institutionalization + value capture repair," while buying Solana is a bet on "execution + user growth + single-chain value capture."
VIII. Risk Matrix
Continued deterioration of value capture (Probability: Medium-High | Impact: Extremely High): L2s continue to siphon mainnet revenue, upgrades are delayed or underperform, and ETH becomes a "free security provider." This is the biggest structural risk today.
Solana continues to erode share in high-frequency scenarios (Probability: High | Impact: Medium-High): If memecoin and payment traffic continues to solidify into more durable financial applications, Solana could upgrade from "a complement to Ethereum" to "a substitute for Ethereum."
Valuation repricing after the deflation narrative collapses (Probability: Already Happened | Impact: Medium): The "ultrasound money" narrative is over, and the market needs time to digest the shift from "scarcity premium" to "low-inflation productive asset" valuation framework.
Regulatory uncertainty (Probability: Medium | Impact: High): Although the CLARITY Act direction is positive, final legislation still carries uncertainty.
L2 fragmentation (Probability: Medium-High | Impact: Medium): Multiple L2s developing in parallel, with fragmented liquidity and fractured user experience, could weaken the overall network effects of the Ethereum ecosystem in the medium term.
IX. Valuation Framework and Final Judgment
Ethereum is not a company; it has no income statement. Its "revenue" is distributed to validators rather than a protocol treasury. Therefore, a valuation framework better suited to infrastructure assets is needed—Metcalfe's Law (network value proportional to the square of active users), Stock-to-Flow (stock-to-flow ratio of about 113, far higher than gold), Fee-based DCF (treating Ethereum as a "fee-charging network"), and staking yield anchoring (staking APR of about 2.2%-3.3%, compared to the 10-year U.S. Treasury yield of about 4.35%).
At the current price of about $2,460, corresponding to a circulating market cap of about $300 billion, the market has already priced in Ethereum's basic status as a "global settlement layer," but has not fully priced in the upside potential of RWA tokenization and value capture repair.
If the RWA market reaches $18.9 trillion by 2033 as predicted and Ethereum maintains its dominant position, RWA alone could bring hundreds of billions in new TVL and substantial fee revenue to Ethereum. If Glamsterdam and Hegotá are successfully implemented and effectively pull some revenue back to L1, ETH's valuation logic will be repriced from "public utility" to "financial infrastructure."
Is this a good business? Yes—but not a "good business" in the traditional sense. Ethereum is more like public infrastructure: it creates enormous economic value, but its value capture mechanism is not yet perfected. Its moat—liquidity depth, developer ecosystem, institutional trust, security track record—is the widest of any blockchain globally, and it is still widening.
Is it a good price? If your time horizon is 3-5 years, the following catalysts could trigger a major valuation repricing: successful implementation of Glamsterdam and Hegotá upgrades, RWA tokenization market growing from $17 billion to hundreds of billions, staking ETFs scaling up to attract pension and sovereign wealth fund allocations, and final passage of the CLARITY Act eliminating regulatory uncertainty.
It is recommended to gradually build a position in the $2,200-2,500 range as a core allocation in the crypto infrastructure sector. Key focus: the implementation results of the Q4 2026 Glamsterdam upgrade and whether L1 fee revenue shows an inflection point—this is the key observation window for validating the value capture repair thesis.
Disclaimer: This memo is based on publicly available market information and is intended solely for internal investment decision-making reference. It does not constitute external investment advice. Crypto assets are an extremely high-risk asset class, and all investment decisions should be based on independent judgment and thorough due diligence.