ETH - The Triple Point Asset

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3 asset characteristics of ETH:

1.Capital Asset. Like Apple or Google stocks, holding ETH is based on Ethereum network's revenue, profits, cash flow, dividends...

2.Store Of Value Asset. Like Gold, Bitcoin... ETH is a non-governmental asset with scarcity, can protect against fiat currency inflation, and has high liquidity.

3.Consumable Asset. Like Oil or Real Estate... ETH is a commodity that can be consumed (transaction fees) and will be an essential consumption need in the future.
 

Because this is the first time in history that an asset possesses all these 3 characteristics, no one in the world knows how to properly value ETH.

Reference: https://www.bankless.com/ether-a-new-model-for-money

[Dalal.Holdings]

Love seeing these posts on a value investing forum

[Malmqky]

Why do you think ETH has these three characteristics, and why do you think this is the first time in history an asset possesses these characteristics? 

 

Because I reject both of the above statements.

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1. This is the fee collected by Ethereum last 30 days. Annualized is $2.6B => This make Ethereum a Capital Asset.

 

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2. ETH is non sovereign asset. Its supply has decreased over the last 2 years. This makes the case for ETH Store Of Value Assets.
 

 It

Edited December 30, 2024 by [email protected]

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3. This is a transaction by BlackRock on Ethereum. BlackRock has to pay fee in ETH for this transaction. => This makes the case for ETH the Consumable Asset.
https://etherscan.io/tx/0xba5d34a2a0f57acfc5a923658392dad50ddf0f2e1a64ab3a50b5430702d9b1c2

Note: Bitcoin also has these 3 characteristics but characteristics 1,3 are much worse than characteristic number 2 because the transaction fee revenue on Bitcoin belongs to Miners and is very modest. Transactions on Bitcoin are not suitable for real life because they are very slow and have high fees.

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What is really the Value Investing ?

Buying low PE, low PB, low PS? Closely follow WEB?
 

I used to think so but now I think Value Investing is about "see the real Insights when others don't"

[Dalal.Holdings]

3 minutes ago, [email protected] said:

What is really the Value Investing ?

Buying low PE, low PB, low PS? Closely follow WEB?
 

I used to think so but now I think Value Investing is about "see the real Insights when others don't"

 

Yep. It was the same in Y2K. Value investing is dead.

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46 minutes ago, Dalal.Holdings said:

 

Yep. It was the same in Y2K. Value investing is dead.

No, I did not say that Value Investing is dead. I also think that there is a lot of bubble/stupid in the current Crypto Market.

But I want to say there are also a lot of legitimate projects in the Crypto. The valuation may not attractive right now but we dig into it the understand more.

Just like after Dotcom, a lot of internet companies like Amazon, Google...immerged.

Edited December 30, 2024 by [email protected]

[Dalal.Holdings]

10 hours ago, [email protected] said:

1. This is the fee collected by Ethereum last 30 days. Annualized is $2.6B => This make Ethereum a Capital Asset.

 

 

Please teach me: the fees collected by Eth go to who ???

[alxcii]

3 hours ago, Dalal.Holdings said:

 

Please teach me: the fees collected by Eth go to who ???

 

Base fee is burnt, priority fee to miners.

 

https://eips.ethereum.org/EIPS/eip-1559

[Fly]

What is the use case for ETH? Smart contracts.

 

Follow that use case to its logical end point and you come to a centralized database run by Google. I don't see the need for ETH, or how ETH could survive against better/faster smart contract platforms. 

 

BTC is a different animal with the monetary use case, and ETH is not comparable. 

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11 hours ago, Dalal.Holdings said:

 

Please teach me: the fees collected by Eth go to who ???

Transaction fees (gas fees) on the Ethereum network are split into two main components since the EIP-1559 upgrade:

1. Base Fee: This portion is "burned" (permanently destroyed), removing these ETH from circulation. This was implemented to make ETH deflationary under high network usage.
2. Priority Fee (or "tip"): This goes to the validators who process and validate transactions. You "stake ETH" to become a Validator.

Base Fee is similar to stock buy back and removed from circulation. Priority Fee is similar to dividend for ETH holders who staked.
ETH Stakers also got income from Token Incentive. The current total yield for Staked ETH is around 3% APY.

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7 hours ago, Fly said:

What is the use case for ETH? Smart contracts.

 

Follow that use case to its logical end point and you come to a centralized database run by Google. I don't see the need for ETH, or how ETH could survive against better/faster smart contract platforms. 

 

BTC is a different animal with the monetary use case, and ETH is not comparable. 

 

Since Ethereum is a Turing-complete computer, there are many applications on Ethereum: tokenization, finance, social, prediction market, identity, gaming...

Let's start with dollar which is the first tokenized asset through Stablecoin. Ethereum holds 60% market share in the Stablecoin.

Larry Fink from Blackrock(who popularized the MBS and ETF) predicted that almost every assets(bond, equity, real estate...) will be tokenized and trade on the public Blockchain.  Think like $100T of assets will be tokenized and trade on Ethereum(Layer 1 + Layer 2). How much transaction fee Ethereum can collect in that scenario?

[nsx5200]

So here are my skeptical questions:

 

Why would you tokenize equity when there's already pretty dynamic and low friction system in-place?  What about all the support services, like customer service, account maintenance, tax reporting, etc., that already exist?  How will tokenization compete against the existing non-token system?

 

Even if we do some first principle analysis and take USDC, essentially a tokenized dollar, IMHO, there doesn't seem to be that big of a compelling reason to hold USDC vs dollar, based on the various reasons given here.  Let me know if I missed something.

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40 minutes ago, nsx5200 said:

So here are my skeptical questions:

 

Why would you tokenize equity when there's already pretty dynamic and low friction system in-place?  What about all the support services, like customer service, account maintenance, tax reporting, etc., that already exist?  How will tokenization compete against the existing non-token system?

 

Even if we do some first principle analysis and take USDC, essentially a tokenized dollar, IMHO, there doesn't seem to be that big of a compelling reason to hold USDC vs dollar, based on the various reasons given here.  Let me know if I missed something.

 

First, we have to admit the fact: Stablecoin has growth 200x in the last 5 years. Second, what are the reasons for this growth? Why there are so much demand for Stablecoin? I can think of a few reasons:

1. People in high inflation economies like Turkey or Argentina want to hold dollar. Stablecoin gives them that.

2. People want to buy crypto assets. They have to exchange dollar in banks to Stablecoin first. Then many people take profit from crypto but hold their money in Stablecoin so they can come to market quickly.

3. People can earn high yield with Stablecoin. Like really high yield. 50%, 100%... You must understand DeFi and Airdrop to understand the high yield...

4. Stablecoin is a really good international payment. For example, if you work in US, you can send USDC, USDT back to your family in India, Philipine... for basically FREE.

 

Now, why do you want to tokenize Equity? I agree this is a tough case now. Mainly because of liquidity. US Stock Market has a huge liquidity now. I think TBill and TBond will come Onchain first. It naturally happen because Stablecoin holders want to access the Gov Bonds. Slowly then, Crypto will become the real Global Capital Market with deeper liquidity than many developing markets.  Companies in those small markets will want to list their Equity on Crypto Capital Market. As Liquidity begets liquidity, it will come to a time all companies want to list their equity on Crypto. Maybe in the next 10Y. 

 

In 2000, you may ask why would you put every information on the Internet? 

In 2024, now you ask why would you put every assets on the Blockchain?

 

[nsx5200]

 

Thank you for those detail answers, and I'm going to poke at your responses a bit more:

 

9 hours ago, [email protected] said:

First, we have to admit the fact: Stablecoin has growth 200x in the last 5 years. Second, what are the reasons for this growth? Why there are so much demand for Stablecoin? I can think of a few reasons:

[...]

3. People can earn high yield with Stablecoin. Like really high yield. 50%, 100%... You must understand DeFi and Airdrop to understand the high yield...

4. Stablecoin is a really good international payment. For example, if you work in US, you can send USDC, USDT back to your family in India, Philipine... for basically FREE.

The growth in stablecoin is immaterial to valuation.  In fact, knowing that stablecoin's not as well adopted to the traditional system is a negative for stablecoin in my book.  The cost to send and receive stablecoin seems to be more than wire-transfer.  In fact, I would claim that if you have enough asset, you can get wire transfer fee down to zero.  The only places that I can see where tokenized dollar has advantage is where the banking infrastructure for processing the dollar is inefficient for various reasons.

 

The part about earning high yield is interesting.  If the promise of those high yield means loaning out the stablecoin, then it's a different beast.  Then you're looking at debt valuation, and the default rate becomes a concern.  Even with the dollar, you used to be able to make individual loans through proper.com, and get higher yield at the cost of higher default rates.  I did a quick search and found that you pretty get close to the t-bill rates on the USDC without the t-bill default rate, which is not a win in my book for USDC.  I didn't DD on airdrop, but my quick search seems to indicate some form of lottery or at some form of promotion for holding other assets.  If we're going to label/bin lottery or promotion as high yield, then dollar can, in a really stretched way, have infinite yield as well.  Let me know if this is not the case, and high yield can obtained reliably, safely(low default rate) and can be scaled.

 

So a real quick summary of the stuff you listed is that tokenized whatever just provides liquidity in the virtual space to whatever asset it backs, but to cross into the physical, there still requires infrastructure in place to bridge the two.  This is, IMHO, not that different than me loading money into a google or apple wallet and sending it to other people fee free.  Other type of services/functions that ETH provide seem to exist already, albeit with different fee structure.  Maybe there's a real killer app for ETH, but I don't see it.

 

Let me know if I missed anything, if not, this would be my last post on this topic.

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19 hours ago, nsx5200 said:

 

Thank you for those detail answers, and I'm going to poke at your responses a bit more:

 

The growth in stablecoin is immaterial to valuation.  In fact, knowing that stablecoin's not as well adopted to the traditional system is a negative for stablecoin in my book.  The cost to send and receive stablecoin seems to be more than wire-transfer.  In fact, I would claim that if you have enough asset, you can get wire transfer fee down to zero.  The only places that I can see where tokenized dollar has advantage is where the banking infrastructure for processing the dollar is inefficient for various reasons.

 

The part about earning high yield is interesting.  If the promise of those high yield means loaning out the stablecoin, then it's a different beast.  Then you're looking at debt valuation, and the default rate becomes a concern.  Even with the dollar, you used to be able to make individual loans through proper.com, and get higher yield at the cost of higher default rates.  I did a quick search and found that you pretty get close to the t-bill rates on the USDC without the t-bill default rate, which is not a win in my book for USDC.  I didn't DD on airdrop, but my quick search seems to indicate some form of lottery or at some form of promotion for holding other assets.  If we're going to label/bin lottery or promotion as high yield, then dollar can, in a really stretched way, have infinite yield as well.  Let me know if this is not the case, and high yield can obtained reliably, safely(low default rate) and can be scaled.

 

So a real quick summary of the stuff you listed is that tokenized whatever just provides liquidity in the virtual space to whatever asset it backs, but to cross into the physical, there still requires infrastructure in place to bridge the two.  This is, IMHO, not that different than me loading money into a google or apple wallet and sending it to other people fee free.  Other type of services/functions that ETH provide seem to exist already, albeit with different fee structure.  Maybe there's a real killer app for ETH, but I don't see it.

 

Let me know if I missed anything, if not, this would be my last post on this topic.

 

Hi. Here are my answers for your questions.
1. The txs fee on Ethereum Layer 1 is expensive and is not designed for retail with small amount. Retail can transfer USDC on Ethereum Layer 2 like Base(from Coinbase) for FREE. Stablecoin is superior for International Transfer. For domestic transfer, it will not make much different.

 

2.  About high yield, let start with a real life example. Tether - the issuer of USDT stablecoin - is projected to earn at least $5B in profit in 2024. With PE = 20x, Tether Equity will be valued at $100B. Now, "Usual Protocol" is a new competitor with Tether. Usual issues USD0 and holders of USD0 will also receive Usual Token Incentive(similar to ESOP). The current APY right now is 38%: https://app.usual.money/.

 

I really admired your curiosity. Most Value Investor just auto write off Crypto because Warren Buffett and Charlie Munger don't like Bitcoin. I am not a fan of Bitcoin myself but I think crypto is much more than Bitcoin now.