We believe Ethereum is a once-in-a-generation asset that will power the future of finance and the internet (Web3).
In 2018, a group of crypto natives, traditional finance executives and venture capitalists came together to form Ether Capital. Our goal was to create a premium access point to Ethereum through the capital markets.
Since then, Ethereum’s market cap has skyrocketed to a multi-billion-dollar protocol and has the most user activity of any decentralized network. It’s also the dominant smart contract platform and backbone for unparalleled innovation, such as non-fungible tokens (NFTs) and decentralized finance (DeFi).
In late 2020, Ethereum began an upgrade to its infrastructure, which involved a fundamental change to how transactions are validated. The new version of Ethereum, known as Ethereum 2.0, uses a mechanism called “Proof of Stake.” With Proof of Stake, holders of Ether can allocate — or “stake” — their tokens to validate transactions and secure the decentralized, permissionless network. Ether that is “staked,” generates a yield in the form of newly-minted cryptocurrency, which is rewarded to those who help validate the network.
In December 2021, Ether Capital became the first public company in the world to stake a significant amount of Ether to generate an attractive yield. As we continue building out our operating business, we are focused on a lean cost structure, staking more of our Ether balance (approx. 95% of our portfolio) and accruing a strong net yield by helping secure the Ethereum protocol.
Ethereum is a leading smart contract blockchain that settles millions-of-dollars’ in transactions per day. We believe the majority of network activity, applications and tokenization will continue to take place on protocol, which is why Ether Capital is committed to supporting the development of this key financial infrastructure.
Ether Capital’s three-pronged business strategy includes:
- Continue to grow its asset base and be a net accumulator of Ether.
- Turn its Ether into a productive asset by staking it for a strong ROI.
- Increasing staking exposure to a target of more than 95% of its Ether balance and internalizing operations with custom-built intellectual property (IP).
Ether Capital (NEO: ETHC) offers a clear and direct access point to Ethereum through the capital markets. Unlike existing closed funds and ETFs, our corporate structure gives investors exposure to different crypto-native activities that generate yield. Rather than purchase an ETF or hold tokens directly, Ether Capital’s roadmap strives for additional value creation for shareholders through custom-built IP and related business opportunities.
- First and only access point in the capital markets to stake Ether and generate yield.
- One of the largest institutional holders of Ether.
- No management fee (MER), leading to lowest cost exposure to Ether.
- Publicly traded security allows inclusion in tax-efficient accounts (i.e. TFSA, RRSP, etc.)
- Unique self-custody model reduces centralization vectors of hacks and theft.
- Corporate structure enables the company to have more flexibility to participate in on-chain developments.
In December 2021, Ether Capital became the first public company in the world to stake a significant amount of its Ether balance.
Staking is a fundamental part of Ethereum’s upgrade to a more secure, scalable and energy-efficient network. To understand what staking is and why it’s so important, we have to dive into the mechanics:
Public blockchains primarily use two forms of validation: Proof of Work (PoW) and Proof of Stake (PoS).
Ethereum has successfully completed its transition to PoS after operating under a PoW consensus mechanism, like Bitcoin, since its inception.
PoW requires validators, also called “miners,” to invest in expensive and complex computer equipment to approve transactions that get added to the blockchain. Miners across the globe are running these computers called “mining rigs” 24-7 to try and solve the cryptographic puzzle of each block filled with transactions. The first miner to solve the equation is given a “block reward” in the form of the blockchain’s native token. This is how new cryptocurrencies, like Ether and bitcoin, are created.
But PoW has a few problems that are worth noting.
First, miners end up selling their cryptocurrency to finance their mining operations. Over time, miners and holders become two distinct groups of people, sometimes with competing interests.
Secondly, miners often switch their mining rigs to other PoW blockchains to increase their profitability, which could reduce the security of a network.
The third issue is that PoW is very taxing on the environment. The Bitcoin network consumes more than 137 TWh per year, which is more than the electricity consumption of countries like Norway and Ukraine. Considering there are countless mining rigs in operation, this becomes a very energy-intensive process.
PoS is a well-researched solution to this problem. Under this new form of validation, token holders have become validators.
In order to achieve validator status, holders need to “stake” at least 32 Ether or join a staking pool to participate in network validation. They no longer need access to heavy computational equipment, but instead run a validator client while staking their assets, which is 99.95% more energy-efficient than PoW.
As a reward for participating in this new form of validation, token holders are compensated in newly-minted Ether called “staking rewards.” This is comparable to generating yield on an investment. How much yield? It depends on the total value of what is staked.
In the early days of staking, the yield will be much higher because this new system hasn’t been properly stress tested. As time passes and PoS becomes a well-oiled machine, it’s possible it will result in a lower staking yield. The prediction is that after the “Merge,” the staking rewards will be higher as it will also include the transaction fees for the entire network.
Where people refer to bitcoin as “digital gold,” we like to think of Ether as a “digital bond.” It’s a very exciting time to be a holder of Ether now that the Merge has taken place and Ethereum becomes the number one platform of choice for investors and token holders who are incentivized to participate in its evolving ecosystem.