In the ongoing discourse about Ethereum's value and future, community perspectives vary widely. Some proponents staunchly view ETH as superior money—often termed "ultrasound money." Others emphasize its potential as a premier store of value. However, macroeconomist Dr. Tascha introduces a compelling thesis: Ethereum could effectively become the new government bond. More specifically, she argues that ETH staked in Ethereum 2.0, or similar proof-of-stake (PoS) assets, may replace U.S. Treasury bonds as the risk-free asset in diversified investment portfolios.
Understanding Risk-Free Assets
In absolute terms, no asset is entirely without risk. Even residing safely on Earth carries a minuscule chance of an asteroid impact. Thus, the concept of a "risk-free asset" is pragmatic rather than literal.
In practice, investors treat U.S. government bonds as the risk-free benchmark. The United States boasts the world's largest and most robust economy, backed by substantial and stable annual fiscal revenues. This makes the likelihood of a U.S. Treasury default extremely low. By holding these bonds, investors indirectly gain exposure to a share of the U.S. GDP.
Debates around U.S. monetary policy persist. Critics question whether too many bonds have been issued, if yields are artificially suppressed, or if monetary policies are too lenient. Nevertheless, U.S. Treasuries remain lower-risk than other investments, which is why they serve as the foundation for pricing various instruments—from corporate bonds to equities and real estate.
How ETH Challenges the Status Quo
Whenever users transact with ETH or other ERC-20 tokens on the Ethereum network, they pay a fee—known as gas. More complex operations (those generating higher value) incur higher gas costs. Data from sources like GasNow indicate that a simple ETH transfer might cost 21 Gwei, a USDC transfer ( involving a smart contract ) around 46 Gwei, and a decentralized exchange (DEX) trade over 100 Gwei.
These gas fees function similarly to a value-added tax (VAT) on economic activities within the Ethereum ecosystem. More transactions mean more "tax" revenue, reinforcing ETH’s potential as a risk-free asset.
Currently, most crypto economic activity is native to blockchain— confined to a sandboxed environment. DeFi and NFTs are the dominant sectors. However, as public chains begin powering real-world economic activities, on-chain transactions could grow exponentially. This expansion is key to ETH becoming a genuine risk-free asset. Connections to the physical economy are already emerging through on-chain settlements and consumer payments.
The Global Advantage of Ethereum
Unlike national taxation systems, Ethereum imposes fees on a global scale without geographical boundaries. As Ethereum integrates further with real-world economies, its fee revenue will increasingly track worldwide economic activity. In essence, it captures a stable share of global value creation—akin to world GDP growth.
U.S. Treasuries are considered risk-free because they are backed by the taxing power of the world's largest economy. Since Ethereum's gas fees represent a "tax" on the entire global economy, ETH could theoretically outperform U.S. bonds as the premier risk-free asset.
Where Do Ethereum's 'Taxes' Go?
After Ethereum’s transition to proof-of-stake (PoS), a portion of the transaction fees not burned (e.g., priority fees) is distributed to validators— those who stake ETH. While proof-of-work (PoW) mining is capital-intensive, PoS staking is more accessible. Even users without 32 ETH can participate through staking services or pools.
A critical question arises: what is the yield for staking ETH?
Short-term returns can fluctuate due to various factors, so we focus on long-term prospects.
If Ethereum maintains its dominance among smart contract platforms and continues supporting growing real-world economic activity, its yield should eventually track global GDP growth plus global inflation.
Historically, the U.S. 10-year Treasury bond averages a 4.8% yield. This figure varies with inflation, monetary policy, and fiscal conditions, but over the long term, it approximates the U.S. real GDP growth rate plus average inflation.
Over the past decade, global real GDP growth averaged 2.4%, while world inflation averaged 2.8%. Thus, a global risk-free asset would have yielded about 5.2%. This suggests that a worldwide benchmark could offer nominal returns around 5%.
Note that these inflation rates are measured in fiat terms. If ETH's supply growth falls below this level, it could disrupt all assumptions. Currently, ETH's annual inflation is around 4.5%. However, after shifting to PoS and with EIP-1559's burn mechanism, ETH may become deflationary.
While deflation might seem beneficial for asset prices, it is not ideal for a global base currency.
The equation is clear: money supply growth + velocity of money = inflation rate + real GDP growth.
For a global reserve currency, neither excessive nor insufficient money supply growth is desirable. If supply growth lags real GDP growth, systemic deflation occurs. Conversely, too much growth causes inflation. The goal is for money supply to expand in tandem with real GDP.
As ETH strives to become a global base currency, its supply growth must initially outpace GDP growth until it achieves dominance comparable to the U.S. dollar.
Of course, Ethereum itself must evolve— improving scalability and reducing transaction fees are essential steps toward broader adoption.
👉 Explore advanced staking strategies
Frequently Asked Questions
What is a risk-free asset?
A risk-free asset is a theoretical investment with zero risk of financial loss. In practice, U.S. Treasury bonds are commonly used as proxies because of the low probability of default by the U.S. government.
How can ETH become a risk-free asset?
If Ethereum becomes a backbone for global economic activity, its gas fees—functioning like a global tax—could provide stable yield to stakers, similar to how taxes back government bonds.
What is the expected staking yield for ETH in the long term?
If Ethereum supports substantial real-world economic activity, long-term staking yield could approximate global GDP growth plus global inflation, potentially around 5% based on historical data.
Why is deflation problematic for a base currency like ETH?
Deflation encourages hoarding rather than spending or investing, which can stifle economic growth. A stable, moderate inflation rate is healthier for a widely used currency.
How does Ethereum's PoS model improve accessibility?
Proof-of-stake allows users to participate in network validation without expensive hardware. Staking pools enable small holders to contribute ETH and earn rewards.
What challenges does ETH face in becoming a risk-free asset?
Ethereum must achieve greater scalability, lower transaction costs, and deeper integration with real-world economies to truly compete with established assets like U.S. Treasuries.