Present value estimation of Eth

There’s a lot of speculation and high level speak about the real value of the crypto and blockchain market. Most of it is near impossible for me to understand so I came to make some simple supply and demand drawings in my notebook to sort the information and how it all come together.

This article is meant to give a general overview of all the main variables affecting the Eth prices and present it through Econ 101 supply and demand curves. A follow up will be to populate a model with the variables so we can get a snapshot of Eth valuation estimated from clearly described inputs.

Model:

The Eth price is estimated from gas prices (GP) (transaction costs). I’ve have chosen this approach since gas is the “income” of Ethereum. The same goes for the L2s in this simplified model.

The number of transactions is set in the unit “average transactions per second”. Ethereum L1 can handle roughly 15 transactions per second[i] today (August 27th, 2023). The total transactions per second (TPS) will increase dramatically with L2s, sharding and other technological developments. I have added “average” since especially the demand for transactions may have huge shift over a day or week while supply will stay stable.

The supply curve has a vertical shape as the capacity of Ethereum will only shift with technological and infrastructure developments. Think of how the capacity increases with building an additional highway. It doesn’t change from hour to hour, it’s either there or it’s not.