Assessment Task 2:

Cryptocurrency Valuation

Course Code BAFI3250

Course Name Cryptofinance and cryptocurrencies

Lecuter Name Huy Pham

Student Name Nguyen Thanh Son

Student ID s3803314

Cryptocurrency Ethereum
 I. Introduction
Ethereum (ETH) is a decentralized blockchain network for verifying and recording transactions.
Ethereum describes itself as "the world's programmable blockchain", as It allows its users to
create smart contracts and distributed applications called “dApps”. The platform serves as a
marketplace for financial services, which can be paid for in its native currency that is Ether or
Ethereum. The coin can be used without the risks of fraud, or intermediaries. (Anderson 2021).
According to CoinMarketCap (nd), ETH is currently second in the market value only to Bitcoin.

II. Economic problems and Business model

There are multiple problems in the economic and crypto market that Ethereum can solve. The
fundamental benefits of ETH is that it eliminates the need to rely on centralized middlemen and
allow direct interaction between people. This system is called Decentralized Finance or DeFi
(Ethereum n.d). The interaction is possible because ETH allows the users to program their own
applications, and those applications can function without any central company or servers
(Ethereum 2021). For instance, the interest people earn from banks is extremely small compared
to what banks own through investments or loans to other people. In other words, banks are
middlemen that benefit from loaning people deposit money to others that need it, while paying
almost nothing to the owner of the account. Hence, why rely on banks for those little interest,
when people can make loans and investments directly by themselves. The process is not only
faster, but also extremely secure. Decentralised lending can operate without the need to identify
each party. Instead, the borrower must put up a collateral such as ETH or even non-fungible
tokens that the lender will receive if the loan is not paid on time (Ethereum n.d). Furthermore,
borrowing without collateral might even be widely possible in the future (Hertig 2021). This can
allow people to borrow without a credit check or providing private information. ETH is also
more convenient because it is always open, when the bank cannot open 24/7 (Ethereum n.d).

Another example is the Robinhood lawsuit, when Robinhood suddenly set restrictions at trading
Gamestop GME (Keshner 2021). With ETH, no party is incharge so no new rule can be
implemented without the agreement of all other parties.
Besides, ETH can bring numerous advantages to Central Bank Digital Currency (CBDC). CBDC
is a digital version of a country’s fiat currency that offers it special benefits at the retail and
wholesale levels,for instance increasing financial access for customers and a more efficient
infrastructure for interbank settlements (ConsenSys n.d). Some primary advantages of CBDC is
that it allows cross-borders payment at a faster and cheaper cost, and it also improves security
and convenience for peer-to-peer transactions (Baer 2021). By applying ETH into CDBC, banks
can control the currency while protecting the independence and privacy of consumers.
Additionally, CDBC could benefit from the innovative products and services that are being
created across the blockchain platform. CDBC rules can also be hard-coded in the protocol
through ETH to facilitate compliance (ConsenSys n.d).

ETH also enables the society's ability to expand what is possible. It allows capital to exist and
operate in the digital world without third-party involvement beyond the simple use case of
bitcoin's "digital gold". It allows for the construction of utility in the value domains that deal
with challenges that no one realized we even had. ETH can be used as an investment like Bitcoin
by the cryptocurrency community, or it can also be used to create new applications by developers
or the IT community. Developers have to pay a fee to the ETH platform to create new tokens or
decentralized apps on the system. The transaction can be paid by ETH native coin, the fee is also
known as “gas” (Haar 2021).

III. Financial valuation

Unique Daily Address is Bullish: increase from 42,620 in 2018 to 167,612 in 2021 (Etherscan
n.d).
Daily Transaction Value is Bullish (YCharts n.d)
Network Value to Transaction Ratio is Berish : 28.2>25
Market Value to Realized Value is Neutral: 1,92
Price to Mining Cost Break-Even Ratio is Bullish (Statista n.d)

Due to the fact that ETH unique daily addresses are rising, which means that the more people
stock ETH, the higher the coin value rises. Besides, the average transaction fee is also increasing.
Lastly, the price to mining cost break-even ratio is also bullish, which indicates miners still
benefit from mining ETH and will continue to mine the currency. Therefore, it can be said that
ETH will be a bullish cryptocurrency (Dantes & Yue 2021).

IV. Conclusion
In conclusion, as a transparent and open-source system, Ethereum can solve many economic
problems, for example eliminating intermediaries or improving the Central Bank Digital
Currency, due to its transparency and programmable token. ETH is not just a cryptocurrency but
it is a platform that allows its users to freely use their creativity. For that reason, its user and
value is increasing steadily, and is expected to rise even more in the future.

V. References

Baer, G 2021, 'Central Bank Digital Currencies: Costs, Benefits and Major Implications for the
U.S. Economic System', Bank Policy Institute, 7 April, viewed 28 August 2021,
<https://bpi.com/central-bank-digital-currencies-costs-benefits-and-major-implications-for-the-u-
s-economic-system/#_ftn51>.

CoinMarketCap n.d, 'Today's Cryptocurrency Prices by Market Cap', CoinMarketCap, viewed

28 August 2021, <https://coinmarketcap.com/>.

Dantes, D & Yue, F 2021, 'Market Wrap: Bitcoin and Ether Rise on Bullish Sentiment',
NextAdvisor, 5 August, viewed 28 August 2021,
<https://www.coindesk.com/markets/2021/08/04/market-wrap-bitcoin-and-ether-rise-on-bullish-
sentiment/>.

Ethereum n.d, 'Decentralized finance (DeFi)', Ethereum, viewed 28 August 2021,

<https://ethereum.org/en/defi/#lending>.
Etherscan n.d, 'Ethereum Unique Addresses Chart', Etherscan, viewed 28 August 2021,
<https://etherscan.io/chart/address>.

Ethereum n.d, 'Ethereum Whitepaper', Ethereum, viewed 28 August 2021,

<https://ethereum.org/en/whitepaper/>.

Frankenfield, J 2021, 'What Is Ethereum?', Investopedia, 25 July, viewed 28 August 2021,

<https://www.investopedia.com/terms/e/ethereum.asp>.

Haar, R 2021, 'Ethereum: What You Should Know Before You Invest', NextAdvisor, 12 August,
viewed 28 August 2021, < https://time.com/nextadvisor/investing/cryptocurrency/what-is-
ethereum/>.

Hertig, A 2021, 'What Is a Flash Loan?', CoinDesk, 17 February, viewed 28 August 2021,
<https://www.coindesk.com/tech/2021/02/17/what-is-a-flash-loan/>.

Keshner, A 2021, 'Lawsuits against Robinhood in the GameStop saga are getting their day in
court — but there’s one big snag', MarketWatch, 21 April, viewed 28 August 2021,
<https://www.marketwatch.com/story/lawsuits-against-robinhood-in-the-gamestop-saga-are-
getting-their-day-in-court-but-theres-one-big-snag-11618806321>.

Statista 2021, 'Mining profitability of Ethereum per day from July 2015 to August 22, 2021',
Statista, August, viewed 28 August 2021,
<https://www.statista.com/statistics/1201657/ethereum-mining-profitability/>.

YCharts 2021, 'Ethereum Transactions Per Day', YCharts, 27 August, viewed 28 August 2021,
<https://ycharts.com/indicators/ethereum_transactions_per_day>.