According to a discount cash-flow valuation model, Ethereum ($ETH) could be valued at over $6000 within the next few years, as Ethereum’s upcoming major upgrade is slated to convert the cryptocurrency into an “equity-like instrument.”

Proof-of-stake goes viral

According to a report by Bloomberg Intelligence, Ethereum’s upcoming “Merge” upgrade that will move the network from a Proof-of-Work consensus algorithm to a Proof-of-Stake one where network validators can stake their assets to verify transactions allows for the use of traditional financial ratios, considering blockchains having no direct costs and revenue represents profits.

It is anticipated that the Ethereum mainnet will merge with the Beacon Chain in a move that will “mark the end of proof-of-work for Ethereum, and the full transition to proof-of-stake.” The merger is “planned to come before the release of shard chains.”

Network stakers role

The network’s stakers are entitled to a portion of the revenue – fees generated on the network- for helping secure it, in a role similar to the one Bitcoin miners play on the BTC network. Bloomberg’s report noted:

If demand for blockspace and total fees paid increases, stakers will enjoy both higher payouts and reduced issuance, with the opposite also true.

According to the report, Ethereum’s transaction fees topped $9.8 billion last year, 16 times what they were in 2020. Markets for decentralized finance and non-fungible tokens (NFTs) exploded, with most of their volume centered on Ethereum.

According to the report, Ethereum is expected to generate $12.7 billion this year, up around 30% from last year. Cash flow is also projected to rise 30% annually over the next three years, reaching a terminal growth rate in 2035.

Intrisic value of Ethereum

Using the discounted cash flow models, Bloomberg Intelligence calculated ETH values of $6,120, $5,539, and $9,328. CryptoCompare data shows ETH is currently trading at $3,300.

The leading cryptocurrency exchange Coinbase estimates that Ethereum staking yields could double after the network merge. Coinbase, in a message sent to clients, noted that when Ethereum’s mainnet merges with the Beacon Chain – a move it says is “expected around June” – ETH staking yields are likely to rise because “net transaction (ex-base) fees currently paid by miners will be included in rewards.”

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