Is Ether a currency or an asset? (In-depth article)

Key Point: The unique architecture of Ethereum determines that Ether can become a currency. Its flourishing ecosystem determines that Ether is still an asset with reserve value.

Ether is not born for payment, which is different from Bitcoin. In 2009, Bitcoin pioneered the decentralization of digital currency, solving the double-spending problem and allowing distributed ledgers to be implemented on a large scale for the first time. Although its transaction capacity per second is very small, it has already achieved unprecedented innovation in the field of currency payment. The original idea of Ethereum in 2015 was to create a vast decentralized computer that could run programs freely and solve the risk of contract breach. Contracts are essentially agreements on value and interests, and this characteristic is an important definition of assets. It can be said that from the very beginning, Ethereum was closely connected with assets in the shadows. However, the unfamiliar concept of computing and the restless atmosphere of speculation have left these key underlying logics set aside, while the spotlight is on the heated so-called coin speculation, mining, and trading... as if all cryptocurrencies are merely tools for speculation, stocks in the virtual world, or a puff of air in digital wallets...

Ether can become a currency not because it can be bought and sold on exchanges, but because it is a measure of value within the Ethereum network. As mentioned in the introduction, Ethereum is a multi-dimensional blockchain network that not only supports peer-to-peer payments but also can carry smart contracts to complete a series of predefined operations. Once this contract is successfully uploaded, it cannot be deleted, modified, or terminated unless the entire Ethereum code undergoes targeted updates. Smart contracts play the role of judicial authorities and notary institutions in the real world, and they inherently possess the ability to enforce. This series of complex code operations requires a measure of value to encourage the maintainers of the blockchain to upload it to the blockchain network. The concept of Ether thus emerges at this point. Therefore, logically, Ether is a product that is forced to be born under the framework of Ethereum. Thus, the current skepticism regarding the value of Ether is like trying to catch the moon in the water; even if one were to question it, one should question the value of smart contracts and the value of the blockchain.

In Ethereum, Ether is a universal general equivalent, but why can it also transcend the virtual and the real, becoming a currency in the real world? Traditional theory speaks of the five major functions of money: 1. Measure of value, 2. Medium of exchange, 3. Means of payment, 4. Store of value, 5. World currency. Ether clearly meets all these criteria, but the more core issue lies in necessity rather than feasibility. Is it necessary to use cryptocurrency in this era? It is very necessary. Looking back at the history of money development in human society, from shells to copper coins, from gold to paper money. The form of money has gradually become more abstract, which is a requirement of trade development and benefits from technological progress. The attribute of money has also shifted from the physical value endowed by natural resources to the credit value backed by legal endorsement. Payments in tribal areas rely on shells; payments within a country rely on fiat currency; what does global circulation rely on? Ether is capable of this, as long as it is on-chain, it can circulate globally, without any limitations of time and space. This is actually consistent with the historical facts of the evolution of money previously mentioned, as it is a requirement of the era of globalization and digitization, and is supported by the technological foundation of blockchain implementation. At the same time, the basis for the establishment of its attributes can not only include the legal authorization of fiat currency but also stem from the immutable decentralized technology.

In the balance sheet of a company, there is an item for intangible assets. Ancient people might have been reluctant to accept why goodwill can become an important component of a manufacturing company's value. In fact, for modern people, both gold and Ether have little practical value. According to data from the World Gold Council, less than 7% of the actual gold in the world is used in the manufacturing sector, while jewelry accounts for 37%. However, people's intuitive feeling is that gold is heavy and can remain calm amidst chaos when locked in a safe, while cryptocurrencies seem ethereal. The truth is, whoever melts the gold in the safe owns it, whereas the ownership of Ether is recorded on every computer in the world (currently, there are over 1 million full nodes participating in Ethereum globally, and even more computers recording transaction information). Additionally, Ether also has the same scarcity as gold. Since the The Merge upgrade in 2022, the total supply of Ether has achieved a dynamic balance at a level of 120 million coins, and sometimes it may even decrease due to frequent on-chain activities. The value theory of scarcity has two dimensions: one is real scarcity, and the other is real demand. Gold has long completed investor education since the Spring and Autumn Period and the Warring States Period, while even if Ether has achieved scarcity, there is still a significant educational space regarding public demand awareness. This gap will also become a lever for the value of Ether. However, Ether has already become an established fact as a tool for hedging against inflation and credit risk.

In summary, we have fully demonstrated the feasibility, necessity, and rationality of Ether as a real-world currency. When we take out the banknotes from our wallets, currency can only be currency, it can only be cash and cash equivalents on the balance sheet. But Ether is currency, yet it is not just currency; it can even become fixed assets on the balance sheet.

Fixed assets refer to assets used for producing goods and providing services for more than one year, and a factory built with reinforced concrete is a legitimate fixed asset. Coincidentally, Ethereum is also a huge factory, serving as the soil and pillar for nearly 60% of DeFi (approximately 80 billion USD) worldwide. Once Ethereum collapses, at least these 80 billion USD financial products will immediately vanish. However, unlike reinforced concrete factories, which depreciate in value over time, the value of Ethereum increases with the construction of more layers. This is precisely the main route of Ethereum's upgrade: scaling. By enabling Layer 2 to support larger data processing capacities and closely integrating Layer 2 with the Ethereum main chain, it achieves greater capacity and more comprehensive service capabilities in areas such as Web3 applications, decentralized finance, and traditional asset tokenization. Although the current focus of DeFi still lingers on digital native assets, traditional asset tokenization is on the rise, and the future expansion of its territory will ultimately make people realize that the blockchain technology represented by Ethereum, supporting smart contracts, is the reinforced concrete of the digital world.

Many assets in this world are in a state of being valuable but not marketable, but Ether is certainly not a courtyard within the Second Ring Road. Ether has transformed from a niche trend item to an investment target that many international institutions are eager to pursue. As of August 4, 2025, the total market value of global Ether ETFs has exceeded $20 billion. In July alone, the US Ether spot ETF recorded a net inflow of over $5.4 billion, most of which was driven by institutional buying demand. Moreover, numerous listed companies such as Sharplink, BitMine, and Bit Digital have been accumulating Ether, with the total value of Ether held by publicly listed companies worldwide exceeding $5.1 billion. At the same time, the proportion of long-term holders of Ether rose from 59% at the beginning of 2024 to 75% by the end of the year. The demand side has fully confirmed that Ether is becoming a reserve asset that international institutions are scrambling to hoard. However, there is a distinction between bad assets and quality assets. Essentially, the difference lies in returns, volatility, and liquidity. Ether and Bitcoin can be considered among the most liquid assets globally, as they can be traded at any moment worldwide, and have strong order book depth across major exchanges, with high matching efficiency. Additionally, they support off-chain transactions and decentralized exchange trading. However, their volatility is indeed a significant risk widely criticized by investors; in a completely free market, there are no limits on price fluctuations, no circuit breaker mechanisms, and even the risk of exchange crashes. Yet, the price volatility of cryptocurrencies is increasingly showing a rational trend, especially this year in response to changes in interest rate cut expectations, fluctuating tariff policies, and the course of the Israel-Palestine war, fully reflecting the strong correlation between their prices and fundamentals as well as policy aspects, making it difficult to encounter inexplicable abnormal trends. In terms of returns, Ether has a unique staking mechanism that can yield nearly risk-free returns, currently with an annualized yield of about 2.93%. Although this yield has been on a downward trend, it also indicates the ongoing accumulation of participants, leading to dilution of shares; as the market expands, Ether will ultimately become a truly quality asset.

In fact, cryptocurrencies like Ether have long been classified as assets, but most of it is either based on denying their monetary and securities attributes or merely considering them to be similar to gold, possessing only collectible value and not being classified as productive assets. Regarding store of value, it has been sufficiently explained earlier, as it maintains scarcity in the total supply of Ether while supporting the continuous expansion of the Ethereum ecosystem. This means that each unit of Ether will carry a larger share of on-chain assets, and this trend is continuously rising. Thus, some have realized that Ether is not just digital gold, but also digital oil, capable of driving numerous financial tools in the digital world. However, oil cannot reproduce itself, while Ether can. Holding Ether allows participation in Ethereum staking validation directly or indirectly, maintaining blockchain construction and earning rewards. Therefore, on this level, Ether even possesses certain properties of productive assets. But ultimately, for it to be solidified, it still requires the integration of on-chain and off-chain assets. For example, using RWA to bring traditional assets on-chain is not only a process of locking traditional asset value but also a process of locking Ether's value. This has become an inevitable trend.

Through the above discussion, it can be found that Ether or Ethereum is still in an evolutionary stage. The continuous evolution of Ethereum provides lasting growth potential for Ether. From the perspective of builders in the digital world, the value of Ether lies in its role as a pricing tool for every brick and tile in this world, maintaining the normal operation of the entire blockchain. From the perspective of investors outside this world, Ether is a share in this vast digital world. It still provides dividends every year, and the shares will not be diluted.

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