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Key takeaways

  1. We will explain Ethereum’s business and financial model, lay out why we believe Ethereum is well positioned for future growth and describe why investing in ETH is a way to capture value created by the network.
  2. Ethereum’s robust financial and business model and significant historical growth have informed our view that its native token Ether (ETH) will continue to be an attractive asset to include in a modern portfolio.
  3. ETH is a meaningfully different investment from the traditional asset classes that investors typically have exposure to.

Read the full paper to explore:

  • Ethereum’s business and financial model
  • The investment case for owning ETH
  • Analysis of ETH’s historical performance

Ethereum is a general-purpose blockchain. Its programming language, along with the introduction of self-executing smart contracts, allows for more complex “if-then” activities. This innovation transformed blockchains from mere distributed ledgers into powerful, global virtual computers, enabling the creation of comprehensive applications across various domains securely and autonomously, from marketplaces and financial tools to social networks and even other blockchains. Ethereum, in effect, became the “Android of the cryptocurrency world,” with tens of thousands of developers using Ethereum’s programming language and developer toolkit to build applications and transact via Ethereum’s network.

Holding Ethereum’s native token—Ether (ETH)—signifies more than transactional utility; it represents an ownership stake in Ethereum’s network, offering both participatory and economic benefits aligned with the ecosystem’s growth. In this article, we will explain Ethereum’s business and financial model, lay out why we believe Ethereum is well positioned for future growth and describe why investing in ETH is a way to capture value created by the network. We will also review the historical performance of ETH.

WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal.

Blockchain and cryptocurrency investments are subject to various risks, including inability to develop digital asset applications or to capitalize on those applications, theft, loss, or destruction of cryptographic keys, the possibility that digital asset technologies may never be fully implemented, cybersecurity risk, conflicting intellectual property claims, and inconsistent and changing regulations. Speculative trading in bitcoins and other forms of cryptocurrencies, many of which have exhibited extreme price volatility, carries significant risk; an investor can lose the entire amount of their investment. Blockchain technology is a new and relatively untested technology and may never be implemented to a scale that provides identifiable benefits. If a cryptocurrency is deemed a security, it may be deemed to violate federal securities laws. There may be a limited or no secondary market for cryptocurrencies.

Digital assets are subject to risks relating to immature and rapidly developing technology, security vulnerabilities of this technology, (such as theft, loss, or destruction of cryptographic keys), conflicting intellectual property claims, credit risk of digital asset exchanges, regulatory uncertainty, high volatility in their value/price, unclear acceptance by users and global marketplaces, and manipulation or fraud. Portfolio managers, service providers to the portfolios and other market participants increasingly depend on complex information technology and communications systems to conduct business functions. These systems are subject to a number of different threats or risks that could adversely affect the portfolio and their investors, despite the efforts of the portfolio managers and service providers to adopt technologies, processes and practices intended to mitigate these risks and protect the security of their computer systems, software, networks and other technology assets, as well as the confidentiality, integrity and availability of information belonging to the portfolios and their investors.

Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.

IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. All investments involve risks, including possible loss of principal. There is no guarantee that a strategy will meet its objective. Performance may also be affected by currency fluctuations. Reduced liquidity may have a negative impact on the price of the assets. Currency fluctuations may affect the value of overseas investments. Where a strategy invests in emerging markets, the risks can be greater than in developed markets. Where a strategy invests in derivative instruments, this entails specific risks that may increase the risk profile of the strategy. Where a strategy invests in a specific sector or geographical area, the returns may be more volatile than a more diversified strategy.

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