Ethereum Evolution: From Misunderstanding to On-Chain Economic Reserve Asset

Recently, Ethereum and its native token ETH have attracted market attention again, especially after the emergence of the ETH reserve asset strategy. This article will explore the potential of ETH as a valuation framework and a long-term investment target.

Key Points

• ETH is transforming from a misunderstood asset into a scarce programmable reserve asset that supports a rapidly compliant on-chain ecosystem.

• The adaptive monetary policy of ETH leads to a long-term decline in its inflation rate. Even with 100% staking, the inflation rate in the 100th year is only about 0.89%, which is far below the average annual growth rate of 6.36% of the USD M2 supply.

• Institutions are adopting acceleration, with JPMorgan, BlackRock and others building on Ethereum, driving sustained demand for ETH.

• The growth of on-chain assets is highly correlated with the amount of ETH staked at 188% or more, demonstrating strong economic consistency.

• The U.S. SEC's policy statement on staking has reduced regulatory uncertainty. The ETH ETF applications have included staking provisions, which increase returns and enhance institutional acceptance.

• The deep composability of Ether makes it a productive asset, suitable for staking/re-staking, DeFi collateral, AMM liquidity, and L2 native Gas tokens.

• Ethereum's stronger decentralization and security enable it to dominate the issuance of high-value assets, creating a larger and more enduring market.

• The Ethereum reserve asset strategy that started in May 2025 has led to publicly traded companies holding over 730,000 ETH. This new demand trend has driven ETH to outperform BTC recently.

The Monetary Policy of ETH: Scarce but Highly Adaptable

The issuance and staking volume of ETH are dynamically related, but show a sub-linear relationship. Even with 100% staking, the annual inflation rate will not exceed 1.52%, and will gradually decline over time. Considering the burning mechanism introduced by EIP-1559, the net inflation rate may be far lower than the issuance volume, and deflation may even occur.

Compared to fiat currencies like the US dollar, the structural constraints of ETH have enhanced its appeal as a reserve asset. The maximum supply growth rate of ETH has now become comparable to that of gold, solidifying its position as a robust monetary asset.

Institutional Adoption and Trust

Financial institutions are directly building on Ethereum: Robinhood is developing a tokenized stock platform, JPMorgan has launched the deposit token JPMD on Base, and BlackRock is using BUIDL to tokenize money market funds.

These applications are driven by clear value propositions:

• Efficiency and cost reduction
• Liquidity and fractional ownership
• Transparency and Compliance
• Innovation and Market Access

ETH Staking as Security and Economic Coordination

As on-chain value grows, the consistency between the security and economic value of Ethereum becomes increasingly important. Institutions may need to purchase and stake ETH to ensure the security of the infrastructure they rely on.

From 2020 to 2025, the growth of on-chain assets is highly correlated with the growth of staked ETH. As of June 2025, the supply of stablecoins on Ethereum reached $116.06 billion, tokenized RWA reached $6.89 billion, and staked ETH reached 35.53 million.

Quantitative analysis shows that among major asset classes, the growth of on-chain assets maintains an annual correlation of over 88% with the native ETH staking volume. The increase in staking volume also affects ETH price dynamics, with an annual correlation of 90.9% between the two.

The policy clarification by the US SEC in May 2025 alleviated regulatory uncertainty around ETH staking, encouraging institutions to participate more actively. ETH ETF applications began to incorporate staking provisions, enhancing returns and bolstering institutional trust.

Composability and ETH as a Productive Asset

The composability of Ether makes it a productive asset that plays an active role in the Ethereum ecosystem:

• Staking and Re-staking
• Lending and stablecoin collateral
• AMM liquidity
• Cross-chain Gas
• Interoperability

This deep integration makes Ether a scarce yet efficient reserve asset that appreciates in value as the ecosystem develops.

Ethereum vs. Solana: Layer-1 Divergence

Solana has an advantage in the memecoin ecosystem, but its level of decentralization is not as high as Ethereum. In the long run, Ethereum may hold a larger share of asset value, while Solana may have a higher trading frequency.

The market size for assets that pursue stability and security is much larger than that of markets that focus solely on execution speed. As high-value assets go on-chain, Ethereum's role as a foundational settlement layer will become increasingly important.

Reserve Asset Momentum: ETH's Microstrategy Moment

Ethereum asset management strategies may become a sustained catalyst for ETH value. Since Sharplink Gaming ($SBET) announced the ETH asset management strategy, these companies have accumulated over 730,000 ETH. The performance of ETH has begun to surpass that of Bitcoin, signaling the start of a trend in Ethereum-centric asset management applications.

Conclusion

ETH is evolving into a scarce, programmable, and economically essential reserve asset that underpins the security, settlement, and functionality of an increasingly institutionalized on-chain financial ecosystem. This evolution reflects a broader paradigm shift in the concept of monetary assets within the digital economy.