What is the investment case for Ethereum, and what are the risks? A straightforward review of what ether and Ethereum are, how they work, and what it will take for the Ethereum blockchain to be successful.
Topics covered include:
- Who launched Ethereum ETFs and what are the fees
- How Ethereum differs from Bitcoin
- Examples of applications built on the Ethereum blockchain including NFTs, stablecoins, DAOs, and tokenized real-world assets
- How Ethereum has evolved to lower fees, reduce supply, cut its energy use, and increase capacity
- What is Ethereum staking and how much can investors earn doing so
- What will cause ether to go up in price
Show Notes
Spot Ethereum ETFs begin trading today: Here’s what you need to know by Jason Shubnell—The Block
The spot Ethereum ETFs’ first week by the numbers by James Hunt—The Block
Read Write Own by Chris Dixon—readwriteown.com
Ethereum is the Only Institution-Friendly Smart Contract Chain by Qiao Wang—Medium
5 Ways to Stake Your Crypto Assets—Staking Rewards
Ethereum’s Dencun Upgrade: Unleashing Scalability and Efficiency—bitpay
Solana vs. Ethereum: Which Is Better in 2024? —KuCoin
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335: Are Non-Fungible Tokens (NFTs) Good Investments?
Transcript
Welcome to Money for the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host, David Stein. Today is episode 488. It’s titled, “Should You Invest in an Ethereum ETF?”
Nine New Ethereum Spot ETFs
Last week nine new spot Ethereum ETFs launched in the U.S, after approval by the Securities and Exchange Commission. These Ethereum ETFs own Ether. Ether is the native coin that resides on the Ethereum blockchain. Leading providers of these ETFs include iShares by BlackRock, Fidelity, VanEck, Franklin.
Collectively, they brought in over a billion dollars in assets in the first four trading days. But, if we include Grayscale’s Ethereum Trust, which existed previously but converted into an ETF, had a very high expense 2.5%. There was about a billion and a half dollars of outflow from that ETF. So collectively, with that trust, which is now an ETF, and the other eight ETFs, there was a net outflow of $340 billion.
The other ETFs, the expense ratios range from 15 basis points to 25 basis points, or 0.25%. In this episode, we’re going to look at “Should we speculate by buying an Ethereum ETF?” Ethereum launched July 2015. It was based on a white paper and concept developed by Vitalik Buterin in 2013.
What Is the Ethereum Blockchain?
I first discussed Ethereum on Money for the Rest of Us in Plus episode 160 that was released June 2017. I didn’t know much about Ethereum. What brought it to my attention is it had gone from $10 per Ether in early 2017 to $250 by mid-year. And we looked at what it was, that it differs from Bitcoin, Bitcoin being primarily designed for peer-to-peer payments. Although Bitcoin has evolved into more digital gold, and there’s definitely payment activity on the Bitcoin network, but many just hold it as a store of value as fiat currencies are debased over time.
Ether is different. It was structured as a network to allow applications to run on, called dApps. These decentralized applications run because the Ether, the native token, allows for smart contracts, basically, metadata that’s attached to the specific token. And so we can simplify by thinking of Ethereum as a network, and Ether being the coin that’s tied to that network, that facilitates these decentralized applications that run on the Ethereum network, in the same way, there are many different web applications that run on the internet.
Ether is used to pay fees, transaction fees, known as gas, to deploy these smart contracts, to interact with these decentralized applications. Now, Ether is a coin, because it’s native to the Ethereum blockchain. Many of these decentralized applications have tokens, because tokens are often associated with these smart contracts, and they’ll use one of the—they could use for example the ERC20 token standard that runs on the Ethereum blockchain.
NFTs
An example of the tokens that are associated with the Ethereum blockchain are NFTs, a non-fungible token. We discussed that back in March 2021, episode 335. But NFTs are a good example of something that runs on the Ethereum blockchain. They are a digital asset that represents ownership, proof that they own a piece of content. It could be art, music, videos. The NFTs are governed by a smart contract, and they run on the Ethereum blockchain. One can trade these NFTs. I own a few, it’s called Idles NFT, but they’re an example of an asset that runs on the Ethereum blockchain.
Now, back in 2017 I knew little about Ethereum, but I invested in it, just like I had invested in Bitcoin back then, just to see how it would work out. A complete speculation.
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