Author: Obol Collective
Compiled by: Felix, PANews
Key points:
Ethereum is entering a new decade and stepping into a brand new era. As the world's most secure and decentralized programmable blockchain, it has become the preferred platform for institutions. Just as Bitcoin has earned the title of "digital gold," Ethereum's native asset is gaining recognition as "scarce digital oil."
Institutions are competing to accumulate ETH as their long-term strategic reserves, with a projected increase of over 1.7 million ETH in "strategic ETH reserves" by 2025. As these institutions increase their holdings of ETH, it has become the first digital commodity that can generate yield.
ETH can be viewed as an internet bond, and staking provides institutions with a risk-free way to accumulate yield. As Ethereum's adoption rate continues to increase, ETH is becoming increasingly scarce, and institutions will turn their attention to staking and distributed validators because they offer security advantages.
Institutions recognize that Ethereum will drive the development of the global on-chain economy. This is one of the main catalysts for Ethereum's future to become a trillion-dollar network.
The institutional era of Ethereum has arrived.
Institutions are embracing Ethereum. As major participants on Wall Street discover the potential of innovations like stablecoins, DeFi, and RWA, Ethereum is becoming their preferred decentralized platform. Institutions like BlackRock, JPMorgan, and UBS are building on Ethereum because it dominates in these verticals while also offering significant decentralization and security advantages.
ETH is also gradually becoming a reserve asset. Over the past few years, several large enterprises have included BTC in their reserve assets. However, recently, a wave of publicly listed companies, DAOs, and crypto-native foundations has begun accumulating ETH as a long-term holding asset. Currently, over 1.7 million ETH (worth $5.9 billion) has been locked in reserve assets, with total reserves doubling year-on-year.
Ethereum is the next global financial layer. Institutional investors reserve ETH because they recognize that ETH is the monetary foundation of this layer. ETH is the first digital asset that possesses reliable neutrality, scarcity, utility, and yield. BTC is recognized as the first reserve asset of cryptocurrency, while ETH is the first yield-bearing reserve asset.
This report will focus on the first batch of institutions adopting ETH as a strategic reserve asset. It will also look ahead to explain how these institutions will stake ETH next, the role distributed validators will play in establishing institutional staking standards, and why the race to adopt ETH as a reserve asset will become a trillion-dollar catalyst for Ethereum.
1. Why do institutions prefer "digital oil" over "digital gold"?
Bitcoin rightfully earns the title of the world's first digital gold. Bitcoin is a non-sovereign store of value with unique attributes that are attractive to institutions. However, Ethereum is a more dynamic asset because it drives the global on-chain economy. As the world moves on-chain, the utility and scarcity of Ethereum will rise together. If Bitcoin is digital gold, then Ethereum is digital oil.
Institutions are beginning to favor digital oil over digital gold, a trend expected to continue over the next decade. The reasons are threefold:
1. BTC is idle, ETH is participating in construction. Bitcoin succeeds by acting as a passive store of value. In contrast, Ethereum succeeds because it consistently maintains high-output production. Ethereum is the indispensable fuel for the world's most decentralized and secure smart contract blockchain. Every operation in Ethereum's vast decentralized finance ecosystem, every NFT minting, and every layer-two network settlement requires ETH as a transaction fee. Since the launch of EIP-1559 in August 2021, approximately 4.6 million ETH has been burned, valued at about $15.6 billion at current prices, indicating that this asset plays the role of digital oil in the on-chain economy. Today, Ethereum secures approximately $237 billion in value across L1 and top L2 networks, and as the global economy shifts more on-chain, the demand for ETH will continue to grow. Ethereum holds a 57% share in the RWA market and a 54.2% share in the total supply of stablecoins. In short, Ethereum holds advantages across multiple metrics, and ETH is the driving force of its ecosystem.
2. BTC has inflationary tendencies, while ETH is gradually becoming anti-inflationary. The supply schedule of BTC is fixed, with the current issuance rate at approximately 0.85%, which will systematically decrease over time. As block rewards halve every four years, miners will increasingly rely on transaction fee income to maintain operations. Some believe that the security budget of BTC is a potential threat. Ethereum has adopted a different monetary policy, directly linked to economic activity. The total issuance cap of ETH is 1.51%, to incentivize network security, but since about 80% of transaction fees are burned through EIP-1559, the net issuance rate of ETH has averaged only 0.1% per year since the merge. ETH frequently experiences net deflation, and as demand for Ethereum block space grows, the total supply (currently just below 120 million ETH) is expected to decrease. In other words, as Ethereum becomes more widespread, ETH will become increasingly scarce.
3. BTC does not generate any yield, while ETH is an income-generating asset. Bitcoin itself does not generate yield. However, ETH is a high-yield digital commodity. ETH stakers can lock Ethereum as validators and currently receive an approximate real yield of 2.1% (nominal yield - new issuance). Stakers can earn from ETH issuance and part of transaction fees (those that will not be burned), and there is no counterparty risk, which incentivizes long-term holding and active network participation. The difference with ETH compared to all other major crypto assets is that as Ethereum's economic throughput expands, the yield for validators also increases.
ETH as the world's leading reserve asset.
ETH has become the world's leading reserve asset due to its unique properties. ETH meets three core requirements in a way that other assets cannot.
Pure settlement collateral. As the new economy continues to build on tokenized assets that bear issuer and jurisdictional risks, the financial system needs a trusted neutral, non-sovereign collateral asset. This asset is ETH. Apart from BTC, ETH is the only "pure" collateral in the on-chain economy, fully resistant to external counterparty risk. With $237 billion in collateral value, Ethereum makes ETH the cornerstone of the next-generation financial system, offering censorship resistance.
Strong liquidity. ETH is the most liquid and primary asset in DeFi trading pairs. The role of ETH in the on-chain economy is akin to that of the dollar in traditional foreign exchange markets. The deep liquidity and broad utility of ETH prompt DAOs, foundations, and publicly listed companies to compete to accumulate ETH as a strategic asset. "Strategic ETH reserves" are rapidly expanding, and hoarders benefit from its programmability. BTC is idle in treasuries, while ETH can be deployed through staking and collateral lending use cases.
Protocol-native yields. Corporate treasurers seek yield, but obtaining it without incurring significant credit or counterparty risk is not easy. ETH staking offers 2-4% risk-free returns, with yields directly sourced from the returns generated by L1 staking. This means treasurers can obtain an efficient, cash flow-generating tool for reserves, linking their balance sheets directly to the growth and security of the new economic base layer.
"Internet Bonds"
Due to staking generating native protocol yields, ETH has become the world's first "internet bond." Historically, corporate treasurers have typically allocated funds to sovereign bonds (valued at about $80 trillion) and corporate bonds (valued at about $40 trillion). ETH staking creates a new category of bonds, which have a broad understanding of issuance, risks, and yield conditions. Today, this market is several orders of magnitude smaller than the sovereign and corporate bond markets. But unlike corporate and sovereign bonds, ETH has no maturity date, and yields are generated permanently. As yields are generated by the protocol, ETH staking also eliminates counterparty risks; bond issuers have no default risk.
ETH is a global, censorship-resistant commodity, with yields unaffected by traditional interest rate cycles. Currently, the Federal Reserve's fund rate is between 4.25% and 4.5%. Meanwhile, the current real yield for ETH stakers is approximately 2.1%. As borrowing costs decline, capital allocators tend to prefer risk assets over short-term government bonds when interest rates decrease. Institutions still show interest in Ethereum staking even when short-term government bond yields are higher, indicating their strong belief in it. If interest rates decline, these institutions can benefit from higher yields on the underlying assets, and as market risk appetite increases, the underlying assets will also appreciate.
2. Major institutions are competing to accumulate ETH
Cryptocurrency has firmly established its status as a legitimate asset class, with Bitcoin being the gateway for institutions entering the space. But Ethereum is the natural evolution of this trend. Ethereum combines the value storage appeal of Bitcoin while providing native yields and securing the rapidly evolving on-chain economy of stablecoins, RWA, and DeFi. Strategic Ethereum reserves highlight this significant shift: institutions are accumulating ETH as a long-term strategic reserve asset.
Many publicly listed companies and Ethereum-native organizations have implemented ETH fund management strategies. Most strategies aim to generate yield, while others see ETH as a base currency for long-term operations. Many organizations combine both.
Data shows that currently, approximately 1.7 million ETH (valued at about $5.9 billion, around 1.44% of the supply) is held in strategic reserves.
Since the strategic reserve competition began heating up in the second quarter, the amount of ETH accumulated by institutions has far exceeded the amount of ETH issued to validators. As this competition intensifies, ETH is under increasing deflationary pressure.
3. ETH is an income-generating asset.
Clearly, institutions are adopting the Ethereum network, and ETH has become their preferred complementary asset. Various signs indicate that as government bond yields decline, the demand for ETH staking among institutions will surge, as these institutions seek real yields on their capital, and staking provides this yield with minimal risk. Distributed validators play a crucial role in this process, as institutions prioritize security and reduced counterparty risk in their capital allocation strategies.
Why staking wins (and how distributed validators fit in)?
ETH staking is structurally different from all other ETH yield options. This is because it provides a predictable protocol-level yield linked to security incentives and network adoption.
Among all yield strategies that Ethereum holders might adopt, staking is the only option that does not generate borrower, counterparty, or credit risk.
Institutions related to Ethereum, like Bit Digital, have recognized that staking is the best way for their held assets to generate yield. As more institutions adopt strategic ETH reserve strategies, staking will also attract more institutions because it provides a low-risk way to earn from "internet bonds."
For institutions seeking yield, ETH staking is the best approach, as it offers near risk-free returns compared to other strategies.
However, while treasurers recognize that native staking is clearly a strategically wise choice, they have other factors to consider. For these institutions, the question is not just whether they should stake, but how to stake to achieve institutional-level security and resilience. While traditional validators are effective, they create a single point of failure. Distributed Validators (DVs) address this issue. Distributed validators feature the following characteristics:
Individual Ethereum validators (staking more than 32 ETH) are distributed across multiple nodes.
Use distributed key generation (DKG) to avoid single point private key risks.
Can maintain functionality even if up to half of the nodes are offline.
Achieve performance equal to or better than traditional validators.
Although the field of decentralized validators (DVs) is still in its infancy, many institutions building strategic Ethereum reserves have begun using DVs. They can benefit from the following points:
Institutional-grade key security: The keys of DVs are never stored in a single location, and no single operator can access them, providing users with a higher level of security.
Fault tolerance: Users do not face the risks posed by a single operator, such as penalties or missed rewards.
Middleware design: Top-tier staking operators around the world trust middleware infrastructures like Obol's Charon, which provides them with a way to decentralize their operations without major modifications.
No need to hold long-tail assets: The treasury does not need to accumulate long-tail assets to stake Ethereum. No need to consider collateral assets, margin, or liquidation mechanisms.
4. Why does ETH hold a trillion-dollar opportunity?
ETH is no longer a misunderstood speculative asset. Following Bitcoin, Ethereum is becoming an institutional asset held by large enterprises, DAOs, and other institutions. But ETH has advantages that BTC does not possess: it is the foundation of the Ethereum network, which is the cornerstone of the next-generation financial system. As the first reserve asset with "productivity," ETH serves as a trusted neutral store of value, settlement collateral, and interest-generating reserve asset.
Ethereum lays the foundation for the next generation of financial systems. Today, institutions have also recognized this.
As adoption increases, ETH's unique status makes it likely to become scarcer. As the base currency of Ethereum, ETH has a deflationary mechanism, and its supply will decrease as the network develops. No other asset can simultaneously possess these characteristics and provide credible neutrality.
In the first decade of Ethereum, it laid the foundational layer for transformative innovations like DeFi, stablecoins, NFTs, and ICOs.
With the start of the second decade, Ethereum is entering its institutional era. Major companies view ETH as a primary "productive" asset, and the accumulation race is accelerating. In this new era, the path for Ethereum to become a trillion-dollar network has never been clearer.
