From Misunderstood to Rising: How ETH Became the Reserve Asset of the On-Chain Economy

Recently, Ethereum has attracted attention once again, especially after the concept of ETH reserve assets has emerged. This article will delve into the valuation framework of ETH and analyze its long-term prospects.

Key Points

• Ethereum ( ETH ) is transitioning from a misunderstood asset to a scarce programmable reserve asset in the on-chain ecosystem.

• The adaptive monetary policy of ETH has led to a continuous decline in its inflation rate. Even with 100% staking, the inflation rate will only be about 0.89% by 2125, far lower than the growth rate of the US dollar M2, and can even compete with gold.

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

• The growth of on-chain assets is highly correlated with ETH staking volume, showing strong economic consistency.

• The SEC's clarification on staking policies has reduced regulatory uncertainty. ETF application documents now include staking provisions, enhancing returns and increasing institutional recognition.

• The composability of ETH makes it a productive asset, suitable for various uses such as staking, DeFi collateral, AMM liquidity, and more.

• Although Solana is gaining attention in the Memecoin space, Ethereum's stronger decentralization and security make it dominate the issuance of high-value assets, which represents a larger long-term market.

• The emergence of Ethereum reserve asset trading has led to listed companies holding over 730,000 ETH. This new trend has driven ETH to outperform BTC recently.

ETH's Monetary Policy: Scarce but Highly Adaptable

The issuance of ETH is dynamically related to the amount staked. Although the issuance will increase with higher staking participation, this relationship is sublinear. This mechanism introduces an inflation soft cap, meaning that even as staking participation increases, the inflation rate will gradually decline over time.

Even under a conservative assumption of 100% staking, the inflation curve of ETH reveals inherent monetary patterns that enhance its credibility as a long-term store of value. Considering the burn mechanism introduced by EIP-1559, the actual net inflation rate may be far lower than the total issuance, and sometimes even negative.

Compared to fiat currencies, Ethereum's structural constraints enhance its appeal as a reserve asset. Notably, the maximum supply growth rate of ETH has become comparable to that of gold, and is even slightly lower, further solidifying its position as a robust monetary asset.

Institutional Adoption and Trust

Major financial institutions are directly building on Ethereum: Robinhood is developing a tokenized stock platform, JPMorgan is launching deposit tokens on Layer 2, and BlackRock is using BUIDL to tokenize money market funds.

This trend is driven by strong value propositions, including:

• Efficiency and cost reduction
• Liquidity and partial ownership
• Transparency and Compliance
• Innovation and market access

ETH Staking as a Security Guarantee and Economic Coordination

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

In the long run, many institutions may go beyond passive staking and start operating their own validators. This is particularly valuable for stablecoin and RWA issuers, enabling them to capture MEV, ensure reliable transaction inclusion, and leverage privacy execution.

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

Analysis shows that among the main 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 the price dynamics of ETH, with an annual correlation reaching 90.9%.

Composability and ETH as a Productive Asset

The composability of ETH drives its demand. It plays an active role in the Ethereum ecosystem, supporting DeFi, stablecoins, and Layer 2 networks. ETH is currently used for various key functions:

• Staking and Re-staking
• Collateral in lending and stablecoins
• Liquidity in AMM
• Cross-chain Gas
• Interoperability

This deep integration makes ETH a scarce yet efficient reserve asset. As ETH becomes integrated into the ecosystem, the conversion costs increase, and the network effects strengthen.

Ethereum vs Solana: Layer-1 Discrepancies

Solana is active in the memecoin ecosystem, but its level of decentralization is still not as high as that of Ethereum. In the long run, Ethereum may occupy a larger share of asset value, while Solana may have a higher transaction frequency.

As more high-value assets go on-chain, Ethereum's role as the underlying settlement layer will become increasingly important.

Reserve Asset Momentum: ETH's Micro-Strategy Moment

The asset management strategies of Ethereum may become a continuous catalyst for the value of ETH assets. Since the emergence of such strategies, related companies have accumulated over 730,000 ETH, and the performance of ETH has begun to surpass that of Bitcoin.

This may mark the beginning of a broader trend for Ethereum-centric asset management applications.

Conclusion

The evolution of Ethereum reflects a paradigm shift in the concept of monetary assets within the digital economy. ETH is developing into a more versatile and fundamental asset. It represents a scarce, programmable, and economically essential reserve asset that underpins an increasingly institutionalized on-chain financial ecosystem.