Cryptocurrency Ethereum (CRYPTO: ETH) and the smart contract ecosystem were sized up by Canaccord Genuity in a new note. Here’s a look at where analysts Michael Graham and Joseph Vafi see future value in them.
Fifth Wave Of Computing: Web1 offered the ability to consumer data with companies like Google and Yahoo, according to the report, while Web2 offered the ability to produce content.
“Web3 is immutable individual ownership of content, data and assets, enabled by trust becoming a computing primitive that is built into networks using blockchain technology,” the analysts said.
Graham and Vafi focused on Ethereum, the second-largest cryptocurrency by market capitalization and the leader in the non-fungible token (NFT) space.
“Ethereum has established itself as the blue-chip blockchain network powering this trust dynamic ... the broader internet is likely to pay Ethereum handsomely for this service.”
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The analysts said blockchain is the fifth wave of computing, following mainframes (1957 to 1964), personal computers (1975 to 1984), the internet (1989 to 1993), Bitcoin and Ethereum (2009 to 2015).
Smart contracts, a term created in 1994 by computer scientist Nick Szabo, are referenced as the building blocks of the blockchain.
“Ethereum is the first-mover and scaled incumbent in the world of smart contract blockchains," the analysts said.
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Areas for Growth: The report debunked the belief that Web3's momentum is “past critical mass”.
“Ethereum is likely to continue evolving into a foundational technology powering this movement, and that ETH tokens, therefore, have strong potential to experience significant value,” according to Graham and Vafi.
Key areas for growth for Ethereum include building a better internet, DeFi, DAOS, NFTs and the Metaverse.
A large section of the report highlights NFTs, which have risen in popularity over the last two years and whose space is currently dominated by Ethereum, as a breakdown shows:
- Ethereum: $29.6 billion
- Ronin: $4.1 billion
- Solana: $2.6 billion
- Flow: $1.1 billion
- Polygon: $789.7 million
While Axie Infinity, which uses the Ronin Network, has the lead for all-time NFT sales volume at $4.25 billion, Ethereum ranks second, third, fourth, fifth and seventh for projects based on sales volume.
Ethereum NFTs also are among the top NFTs by market cap, with CryptoPunks notching the most value at $2.25 billion and 10% of the overall market size. The other top ETH-based NFTs by market capitalization include:
- Bored Ape Yacht Club: 6%
- Art Blocks: 4%
- Otherdeed for Otherside: 4%
- Mutant Ape Yacht Club: 3%
- Meebits: 3%
- CloneX: 2%
- The Sandbox: 2%
- Moonbirds: 2%
Merge After-Effects: The Ethereum Merge taking place between Sept. 10 and Sept. 15 is seen as a move that could make the cryptocurrency “more efficient and more broadly accessible," according to the note.
The use of smart contracts can help power microtransactions and new areas in smart and efficient ways, the analysts said.
“A smart contract can do anything a computer can do, powering everything from simple gaming apps to creating and tokenizing stocks, bonds and other real-world assets, forming complex banks or casinos, depending on your perspective.”
The report likened this to Amazon.com Inc's (NASDAQ: AMZN) cloud service offering, Amazon Web Services (AWS).
“AWS sells computing power, often in microamounts, to other end-user types of applications. AWS prospers whether demand for cloud computing comes from streaming media or AI-powered business software.”
Graham and Vafi did not give a price target for Ethereum but used several models to calculate potential values — including a discounted cash flow model (often used for analyzing a public company) that sees a value of $11,953 for ETH.
ETH Price Action: Ethereum was trading 0.47% up at $1642.88 at the time of writing, according to data from Benzinga Pro.
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