The Ethereum network since its launch has equally captured investor and developer interest due to its secure and superior functions and perceived growth potential. The network’s native currency, Ether is the second-largest in terms of market capitalization, second only to the king coin. It was valued at $1,862 at the time of writing, less than half of its $4,356 ATH in May. However, analysts believe that its current price doesn’t do it justice.
In a recent video, analyst Lark Davis highlighted certain aspects of the blockchain and compared them to the top online payments system Paypal to emphasize the severe undervaluation of the asset. Paypal’s market cap was $340.20 billion at press time, over $100 billion more than Ethereum’s $217.41 billion.
1. Settlement of transactions
However, this criteria of evaluation seems unfair when the volume and value of transactions for both payment platforms are considered. In just the first quarter of 2021, the network settled transactions worth $1.5 trillion, while Paypal’s total for all of 2020 was $936 billion. At the current rate, Ethereum transacts as much in a month as Paypal does in a whole year.
The chart below showed the quarter-over-quarter growth of daily transaction volume on the network, underlining its huge growth potential in the future.
Even the Bitcoin blockchain falls far behind when compared to the daily settlement volume on Ethereum. According to Money Movers, the former settles around $9.93 billion dollars a day, while Ethereum settles over thrice that figure .
When it comes to the total amount of users on each platform, Paypal has a clear win. In Q1 2021, it had 392 million active user accounts. While the total number of unique addresses on Ethereum was 160 million, most users have multiple accounts so the actual number of human users could be a third of that.
However, the daily increase in users stood at 225,969. It should also be noted that Paypal has accumulated these users since its inception in 1998, as compared to the 6-year old Ethereum network. The chart below showed the growth in users that the network has experienced.
Source: Etherscan.io3. Transaction fee
In terms of the transaction fee, Paypal has a number of different fees for different users that can range from anywhere between 2.9% to over 4% of the transaction value. Ethereum gas fee at the time of writing was 18.76 Gwei. Even at its 2021 peak, it only amounted to $0.00069.
While there is speculation that this might go up with the network demand, the analyst pointed out important developments like its move to the proof of stake consensus, layer two solutions like Polygon allowing asset transaction for a fraction of a penny, and the expected introduction of network sharding by 2022, which will reportedly keep the gas fee down.
Moreover, Paypal as an asset class provides provide zero percent dividends and their introduction in the future would be in the form of dollars, not Paypal stocks. However, with the launch of Ethereum staking in December last year, stakers can receive an average of 8% annual returns in ETH.
This is speculated to go up to 25% once the Ethereum and Ethereum 2.0 get merged. Additionally, it has a higher value proposition as ETH rewards can be re-staked to increase their yield over the years. Even DeFi apps running on the Ethereum network offer lucrative staking rewards of over 5-10% on USDC or other assets. The analyst added:
“The Ethereum blockchain goes so far beyond just being a simple means for payments. It’s an entire ecosystem of financial products.”
The adoption of Ethereum by large financial institutions is just an added indicator of its future potential. For instance, The European Investment Bank issued $121 million worth of digital notes using Ethereum in April. More recently, Bank of Israel has chosen the network to issue tokens that represent digital Shekels.
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