Valuing ETH Based on Validator Fee Rewards

I was inspired by the recent When is $10,000 per ETH realistic? thread and thought valuing ETH based on the suspected validator fee rewards (after PoS and Sharding will be implemented) was more interesting than fairly wishy-washy equation-of-exchange models.

This model is quick-and-dirty but it gives you a basic framework and general idea of what is possible.

Current situation with fee rewards:

  • Daily Fees (ETH): 624 (took yesterday as a sample from
  • Yearly Fees (ETH): 227,760 (extrapolated from the daily fees)
  • ETH/USD: $850 (approx)
  • Yearly Fees (USD): $193,596,000

  • Transactions Per Day (TPD): 740,191 (took yesterday as a sample from

  • Transactions Per Second (TPS): 8.57

  • Avg Transaction Cost (ETH): 0.00084

  • Avg Transaction Cost (USD): $0.72

  • Total Gas Used: 36,737,232,640

  • Avg Gas Price (Gwei): 16.99 (wow, this is still pretty high considering says you can get away with 2 Gwei)

I like using yesterday as a simple snapshot since we aren't maxing out our blocks right now and you can get away with gas prices of 1-2 Gwei. I didn't want to average the fees people were paying from the last month or two where we were hitting the limits of Ethereum and gas prices were quite high.

Now let's just scale that linearly out to some lofty-but-possible numbers:

  • ETH Staked: 50,000,000 (about half of the total supply)
  • Aspirational TPS: 50,000
  • Aspirational TPD: 4,320,000,000
  • Average Transaction Cost: $0.01 (fixed assumption, lowered to allow for more dapps to be feasible)
  • Daily Fees: $43,200,000
  • Yearly Fees: $15,768,000,000
  • Yearly Fees Per ETH Staked: $315.36
  • P/E Multiple: 35
  • ETH Price (USD): $11,037.60

This assumes an inflation rate of 0, we're only rewarding validators with the gas fees from processing transactions in a block. Again this is just to keep things simple and show the basic parameters here.

I picked 50,000 TPS as Vitalik has been quoted as saying that sharding aims to let Ethereum scale to "tens of thousands of transactions per second", and it helps us get to a valuation of around $10,000. I lowered the average transaction cost to a penny since I expect many dapps require much lower transaction fees to become feasible which helps us get to 50k TPS to start with. That lowers the transaction cost by a factor of around 100 – and that may still be too high.. I'm not really sure and would appreciate any comments about this.

I set the P/E multiple to something like a high-growth stock, and it essentially means a yearly return of about 3% for validators. I believe Vitalik said he expects something along the lines of 1-3% in the recent Unchained podcast, so this lines up fairly well.

In my view the key relationship here is that we scale up the number of TPS larger than the corresponding decrease in gas price users are willing to pay for transactions.

Now of course the big question is when/if will we get to these lofty goals? You can always take a guess and apply a discount rate/DCF analysis to the present day and see if investing in Ether is right for you.

Let me know what you guys think! I'm not a professional in this space, just a fan of Ethereum and hodler.