Ethereum Enters a New Decade: The Era of Institutions Arrives

Ethereum is entering a new stage of development. As the world's most secure and decentralized programmable blockchain, it has become the preferred platform for many institutions. Just as Bitcoin is regarded as "digital gold", Ethereum's native asset ETH is also gaining the status of "scarce digital oil".

Recently, major institutions have been increasing their holdings of ETH as a long-term strategic reserve, with the "strategic ETH reserves" exceeding 1.7 million by 2025. As institutional holdings rise, ETH has become the first digital commodity that can generate returns.

ETH can be seen as an "internet bond", and staking provides institutions with a low-risk way to accumulate yields. As the adoption rate of Ethereum continues to rise, ETH is becoming increasingly scarce, and institutional attention is shifting towards staking and distributed validators due to their security advantages.

Institutions generally recognize that Ethereum will drive the development of the global on-chain economy. This is one of the main driving forces for Ethereum to become a trillion-dollar network in the future.

Institutions Embrace Ethereum

As major players on Wall Street discover the potential of innovations such as stablecoins, DeFi, and RWA, Ethereum is becoming their preferred decentralized platform. Many large financial institutions are conducting business on Ethereum, valuing its leading position in these areas and its significant advantages in decentralization and security.

ETH has also gradually become a reserve asset. In recent years, several large enterprises have included BTC in their reserve assets. Recently, a group of listed companies, DAOs, and crypto-native foundations have begun accumulating ETH as a long-term holding asset. Currently, over 1.7 million ETH( worth $5.9 billion) have been locked as reserve assets, and the total reserves have doubled year-on-year.

Ethereum is becoming the next generation of global financial infrastructure. Institutional investors are reserving ETH because they recognize that ETH is the monetary foundation of this infrastructure. ETH is the first digital asset that combines reliable neutrality, scarcity, utility, and yield. BTC is recognized as the first reserve asset of cryptocurrency, while ETH is the first reserve asset that can generate yield.

Institutions Favor "Digital Oil" Over "Digital Gold"

Bitcoin is undoubtedly the world's first digital gold. As a non-sovereign store of value, Bitcoin has unique attributes that are highly attractive to institutions. However, Ethereum is a more dynamic asset because it powers the global on-chain economy. As the world moves towards on-chain development, the utility and scarcity of Ethereum will increase simultaneously. If Bitcoin is digital gold, then Ethereum is digital oil.

Institutions are beginning to favor digital oil over digital gold, a trend that is expected to continue for the next decade. There are three main reasons for this:

1. BTC is in a dormant state, while ETH is actively participating in development. Bitcoin has succeeded by acting as a passive store of value. In contrast, Ethereum's success comes from its ability to consistently maintain efficient output. Ethereum is the indispensable fuel for the world's most decentralized and secure smart contract blockchain. Every operation in Ethereum's vast decentralized finance ecosystem, every NFT minting, and every layer-two network settlement requires ETH as a transaction fee. Since the launch of EIP-1559 in August 2021, Ethereum has burned approximately 4.6 million ETH, which is valued at around $15.6 billion at current prices, indicating that this asset plays the role of digital oil in the on-chain economy.

2. BTC has an inflation tendency, while ETH is gradually becoming anti-inflationary. The supply schedule for BTC is fixed, with the current issuance rate at about 0.85%, which will programmatically decrease over time. Ethereum adopts a different monetary policy, directly linked to economic activities. The total issuance cap for ETH is 1.51%, to incentivize network security, but due to approximately 80% of transaction fees being burned through EIP-1559, the net issuance rate of ETH has averaged only 0.1% per year since the merge. ETH often experiences net deflation, and as the demand for Ethereum's block space increases, the total supply is expected to decrease.

3. BTC does not generate any income, while ETH is a yield-bearing asset. Bitcoin itself does not generate income. However, ETH is a high-yield digital commodity. ETH stakers can lock Ethereum as validators and receive an actual yield of approximately 2.1% currently. Stakers can obtain the issuance of ETH and a portion of transaction fees, with no counterparty risk, which encourages long-term holding and active network participation.

ETH as a leading reserve asset globally

ETH has become the world's leading reserve asset due to its unique attributes. ETH meets three core requirements in a way that no other asset can.

Pure settlement collateral. As the new economy continues to build upon tokenized assets that bear the risks of issuers and jurisdictions, the financial system requires a credible, neutral, non-sovereign collateral asset. This asset is ETH. Apart from BTC, ETH is the only "pure" collateral in the on-chain economy that can completely resist external counterparty risks.

Strong liquidity. ETH is the most liquid and primary asset among DeFi trading pairs. The role of ETH in the on-chain economy is similar to that of the US dollar in traditional foreign exchange markets. The deep liquidity and wide applicability of ETH drive DAOs, foundations, and listed companies to compete to hoard ETH as a strategic asset.

Native protocol yield. Corporate financial executives pursue returns, but obtaining them without incurring significant credit or counterparty risk is not easy. ETH staking provides risk-free returns of 2-4%, with earnings directly sourced from the yield generated by L1 staking. This means that financial executives can obtain an efficient tool that generates cash flow for reserves, directly linking their balance sheets to the growth and security of the new economic foundation.

"Internet Bonds"

Due to staking generating native protocol yields, ETH has become the world's first "Internet bond." Historically, corporate financial officers typically allocated funds to sovereign bonds and corporate bonds. ETH staking has created a new category of bonds, which have a broad understanding of issuance, risk, and yield conditions. Unlike corporate bonds and sovereign bonds, ETH has no maturity date, and the yield is generated permanently. Since the yield is generated by the protocol, ETH staking also eliminates counterparty risk; there is no default risk for bond issuers.

ETH is a global, censorship-resistant commodity whose returns are not affected by traditional interest rate cycles. Currently, the Federal Reserve's fund rate is between 4.25% and 4.5%. Meanwhile, the current real yield for ETH stakers is about 2.1%. Institutions still show interest in Ethereum staking despite higher short-term Treasury yields, indicating their strong belief in it. If interest rates decrease, these institutions could benefit from higher yields on the underlying assets, and as market risk appetite increases, the underlying assets will appreciate.

Institutions Competing to Accumulate Ether

Cryptocurrencies have firmly established their status as a legitimate asset class, with Bitcoin serving as the gateway for institutions entering this space. However, Ethereum is the natural evolution of this trend. Ethereum combines the value storage appeal of Bitcoin while offering native yield and ensuring the security of the evolving on-chain economy, including stablecoins, RWA, and DeFi. The strategic accumulation of Ethereum reserves highlights this significant shift: institutions are hoarding ETH as a long-term strategic reserve asset.

Many publicly listed companies and Ethereum-native organizations have implemented ETH fund management strategies. Most strategies are designed to generate returns, while others treat ETH as the base currency for long-term operations. Many organizations balance both approaches.

Data shows that currently about 1.7 million ETH( worth approximately 5.9 billion USD, accounting for about 1.44% of the supply, are held in strategic reserves.

Since the beginning of the strategic reserve competition in early the second quarter, the amount of ETH accumulated by institutions has far exceeded the amount of ETH issued to validators. As this competition intensifies, ETH is facing increasing deflationary pressure.

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Ether is a yield-bearing asset

Clearly, institutions are adopting the Ethereum network, and ETH has become their preferred supporting asset. Various signs indicate that as government bond yields decline, the demand for ETH staking by institutions will soar, as these institutions seek to achieve actual returns on their capital, with staking providing this return at minimal risk. Distributed validators play a key role in this process, as institutions place great emphasis on security and reducing counterparty risk in their capital allocation strategies.

ETH staking is structurally different from all other ETH yield options. This is because it offers a predictable protocol-level yield linked to security incentives and network adoption.

Among all the yield strategies that Ethereum holders may adopt, staking is the only option that does not incur borrower, counterparty, or credit risk.

Some institutions related to Ethereum have recognized that staking is the best way to earn returns on their held assets. As more and more institutions adopt strategic ETH reserve strategies, staking will in turn attract more institutions, as it provides a low-risk way to earn returns from "internet bonds."

For institutions seeking returns, ETH staking is the best route, as it offers nearly risk-free yields compared to other strategies.

However, although the CFOs recognize that native staking is clearly a strategically wise choice, they have other factors to consider. For these institutions, the question is not only whether they should stake, but how to stake to achieve institutional-level security and resilience. While traditional validators are effective, they can create single points of failure. Distributed validators )DVs( address this issue. Distributed validators have the following characteristics:

• A single Ethereum validator ) stakes more than 32 ETH ( distributed across multiple nodes.
• Use distributed key generation )DKG( to avoid single point private key risk.
• It can maintain normal functionality even if up to half of the nodes are offline.
• Achieve the same or better performance as traditional validators.

Although the decentralized validator )DV( field is still in its early stages, many institutions building strategic Ethereum reserves have now begun to use DV. They can benefit from the following points:

• Institutional-level key security: DV's keys are never stored in a single location, and no single operator can access them, providing users with a higher level of security.
• Fault tolerance: Users do not face the risks associated with a single operator, such as fines or missed rewards.
• Middleware Design: Top-tier staking operators worldwide trust certain middleware infrastructures, which provides them with a way to decentralize their operations without significant modifications.
• No need to hold long-tail assets: The treasury does not need to increase long-tail assets for staking Ether. There is no need to consider collateral assets, margin, or liquidation mechanisms.

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ETH Holds Trillions of Dollars Opportunity

ETH is no longer a misunderstood speculative asset. Following Bitcoin, Ethereum is becoming an institutional asset held by large enterprises, DAOs, and other organizations. But ETH has advantages that BTC does not possess: it is the foundation of the Ethereum network, which is the cornerstone of the next generation financial system. As the first