A recent comprehensive analysis by global investment manager VanEck presents a rigorous valuation model for Ethereum (ETH), projecting its price could reach approximately $11,800 by 2030. This forecast is grounded in a detailed assessment of Ethereum's existing and potential future revenue streams.
The report, compiled by analysts Matthew Sigel and Patrick Bush, applies traditional financial valuation techniques to the world's leading smart contract platform. It evaluates Ethereum not just as a digital asset, but as a robust business model with multiple revenue sources.
Understanding Ethereum's Business Model
To properly understand VanEck's valuation approach, we must first examine what Ethereum is, how it operates, and where its value derives from.
Ethereum as a Digital Marketplace
At its most fundamental level, Ethereum can be conceptualized as a digital marketplace existing on the internet—a secure environment for digital commerce. Users interact within this marketplace through wallets, engaging with smart contract code that defines the platform's structure and rules.
Validators ensure these rules are followed, safeguard the marketplace's security, and maintain a ledger of all economic events occurring within it. Ethereum generates revenue by charging users fees for allocating limited space within this marketplace for commercial activities and value exchange.
The Validator's Role
Computers running Ethereum software, known as validators, receive inflationary rewards plus a portion of the fees paid by users conducting activities on the network. Users must pay these fees to execute value transfers or interact with on-chain applications, with costs correlating to the computational intensity required.
Unlike traditional businesses that incur expenses like rent and utilities, users directly compensate Ethereum—as the host and primary supplier of on-chain services—through their transaction payments. This means users effectively cover the operational costs of both the applications they use and the underlying Ethereum infrastructure.
On-Chain Commerce
Every activity on Ethereum requires using ETH tokens. Additionally, validators must stake ETH as collateral to guarantee their honest participation. Malicious actors risk having their staked ETH confiscated.
This creates a direct link between supply and demand: users purchase ETH to access Ethereum's services, while validators sell ETH (often to cover operational costs) to "supply" those services. Supplying Ethereum essentially means participating in the consensus mechanism, validating value transfers, enabling smart contract deployment, and executing calls to the Ethereum software.
All business logic and asset exchanges are recorded as ledger entries in blocks, which represent Ethereum's "to-do list" executed approximately every twelve seconds. Users pay base fees and priority fees ("tips") to have their operations included in these blocks. During periods of high demand, users can increase their tips to ensure faster transaction processing.
Furthermore, Ethereum has created a market for auctioning transaction ordering rights within each block—a valuable privilege that represents a significant revenue stream. These activities collectively form Ethereum's core business: selling secure, immutable block space and the right to determine transaction ordering within that space.
Ethereum's Revenue Streams: Fees, MEV, and Security Services
VanEck's valuation model identifies three primary revenue categories for Ethereum, each contributing to the network's overall economic value.
Transaction Fees
The analysis defines revenue as activities involving token usage within Ethereum's core business of providing immutable, decentralized computation through block space sales. Accordingly, both base fees (which are burned) and priority fees (tips paid to validators) are considered revenue items.
This approach differs from some analyses that only count base fees since their burning affects all ETH holders. VanEck includes both fee types because they collectively reflect the economic activity associated with Ethereum's block space marketplace. The reduction in total token supply through burning significantly impacts token valuation today.
Maximum Extractable Value (MEV)
The report acknowledges MEV as a legitimate revenue stream for Ethereum. Entities like Flashbots auction block space to builders, with a portion of MEV value ultimately accruing to ETH stakers through validators.
Similar to priority fees paid to validators, block building fees are included in Ethereum's revenue calculation because they represent economic activities tied to block space sales. MEV is considered persistent and plays a crucial role in long-term blockchain security by compensating validators and stakers.
Security-as-a-Service (SaaS)
The model introduces a novel revenue category called "Security-as-a-Service" (SaaS), enabled by Ethereum's smart contract programmability and increasingly sophisticated cross-chain messaging technology.
Through projects like Eigenlayer, ETH can be used to secure applications, protocols, and ecosystems beyond Ethereum itself—including oracles, sequencers, validators, bridges, contract agreements, and potentially new entities not yet discovered. This positions ETH as a Layer 0 asset similar to Bitcoin, Polkadot's DOT, and Cosmos' ATOM, capable of supporting and bootstrapping new blockchain networks.
When ETH is locked as collateral to guarantee honest behavior for external protocols, it functions similarly to a performance bond. If honesty is violated, the value can be slashed to punish malicious actors and/or compensate affected parties. ETH holders participating in SaaS should receive rewards reflecting the opportunity cost and risk of allocating their assets to these external security services.
Valuation Methodology: Cash Flow Projections and FDV Calculation
VanEck's approach evaluates Ethereum's value by estimating cash flows for the year ending April 30, 2030. The methodology involves projecting Ethereum's revenue, then subtracting global tax rates and validators' revenue share to derive a cash flow figure.
The analysts apply a multiple to this cash flow based on the difference between long-term projected cash flow yield (7%) and long-term cryptocurrency growth rate (4%). This produces a fully diluted valuation (FDV) for 2030, which is divided by the expected circulating token supply. The result is then discounted back to April 2023 using a 12% discount rate.
👉 Explore more valuation strategies
The discount rate reflects the time value of money and risk associated with future cash flows. While the Capital Asset Pricing Model (CAPM) suggested a discount rate of 8.74%, VanEck used a higher 12% rate to account for increased uncertainty surrounding Ethereum's future development.
Market Share Assumptions and Economic Distribution
The valuation model assumes Ethereum will capture approximately 70% market share among smart contract platforms. This dominance is expected because Ethereum is positioned to become the leading open-source global settlement network, hosting commercial sectors that stand to benefit most from migrating business functions to public blockchains.
Regarding economic distribution between applications and the underlying platform, the analysis suggests that currently, applications retain the vast majority of value generated on Ethereum. Based on historical data from protocols like AAVE, approximately 93% of user fees go to the application and its lenders, while only 7% goes to the platform (Ethereum).
VanEck projects this relationship will evolve over time as off-chain businesses deploy on-chain to reduce costs and seek new revenue streams. The model assumes application fee shares will range between 90-97% depending on the end market, with Ethereum capturing 3-10% across various business categories.
Layer 2 Settlement Dynamics
Layer 2 (L2) solutions represent Ethereum's primary scaling approach and are considered its most important future business line. L2 settlement involves batching transactions before submitting them to Ethereum mainnet.
VanEck projects settlement revenue as a function of the profit relationship between L2 revenue and the security cost of sending batches to Ethereum. The analysis assumes L2 revenue consists of MEV and transaction fees, both estimated using Ethereum's framework.
The model further assumes L2s will pay a portion of their revenue to Ethereum as security fees. L2 "profit margins" are projected to fluctuate between 15-40% depending on Ethereum's gas costs, but competition is expected to drive long-term margins down to approximately 10%.
Regarding value distribution, the analysis assumes 98% of transactions will execute on L2s, while 50% of total asset value will remain stored on Ethereum mainnet. This reflects the expectation that certain assets and transactions will require Ethereum's highest security levels, composability, and atomicity guarantees.
Frequently Asked Questions
What is VanEck's price prediction for Ethereum in 2030?
VanEck projects Ethereum could reach $11,800 by 2030 based on their baseline scenario. This estimate applies a discounted cash flow model to Ethereum's projected revenues from transaction fees, MEV, and security services, assuming Ethereum maintains approximately 70% market share among smart contract platforms.
How does Ethereum generate revenue?
Ethereum primarily generates revenue through transaction fees (including base fees that are burned and priority fees paid to validators), Maximum Extractable Value (MEV) from transaction ordering, and emerging Security-as-a-Service offerings where ETH is used to secure external protocols and applications.
What is Security-as-a-Service in Ethereum's context?
Security-as-a-Service refers to using ETH as collateral to secure external ecosystems, applications, and protocols beyond Ethereum itself. Through restaking mechanisms, ETH holders can earn additional yield by providing security services to other networks while their assets help guarantee honest behavior across multiple platforms.
How do Layer 2 solutions affect Ethereum's value?
Layer 2 solutions enhance Ethereum's value by enabling scalability while maintaining Ethereum's security guarantees. L2s batch transactions before settling them on Ethereum mainnet, paying fees for security services. This creates a sustainable economic relationship where Ethereum captures value from scaled transaction processing without compromising decentralization.
Why does VanEck use a 12% discount rate?
Although the Capital Asset Pricing Model suggested a discount rate of 8.74%, VanEck applied a higher 12% rate to account for additional uncertainty regarding Ethereum's regulatory environment, technological evolution, and competitive landscape. This conservative approach reflects the inherent risks in projecting cryptocurrency valuations over extended periods.
What percentage of transactions will occur on Layer 2s by 2030?
VanEck's model assumes 98% of transactions will execute on Layer 2 solutions by 2030, with Ethereum mainnet serving primarily as a settlement layer. However, the analysis projects that 50% of total asset value will remain stored on Ethereum due to its superior security properties for high-value transactions and assets.
Projected Scenarios and Current Valuation
VanEck's baseline scenario assumes Ethereum will achieve $51 billion in annual revenue by 2030. After deducting 1% validator fees and applying a 15% global tax rate, the projected cash flow reaches $42.9 billion.
Applying a free cash flow multiple of 33x to a total supply of 120.7 million tokens yields a baseline price target of $11,848 per token in 2030. Discounted back to present value at 12%, this translates to a current valuation of approximately $5,360 per ETH.
The report also contemplates bear and bull scenarios with different assumptions about market share capture, revenue growth, and economic conditions. These estimates reflect VanEck's view that Ethereum will become the dominant global settlement network for commercial activities most suited to blockchain migration.
The analysis presents a methodical approach to cryptocurrency valuation, applying traditional financial methodologies to emerging digital asset classes while acknowledging the unique characteristics and uncertainties of blockchain-based economies.