Where Will iShares Ethereum Trust ETF Be in 5 Years?

You know what Yoda would say if you asked him what Ethereum (CRYPTO: ETH) will do in the next five years: "Difficult to see. Always in motion, the crypto market is." As always, the Jedi master would be absolutely right.

And if you changed your focus to an exchange-traded fund (ETF), like the sector-leading iShares Ethereum Trust ETF (NASDAQ: ETHA), he'd just shake his head and take a nap. Whatever Ethereum might do, the iShares fund will copy in detail. It doesn't make sense to analyze the cryptocurrency and the ETF separately. Right?

Then again, Yoda couldn't have foreseen cryptocurrencies -- and the first ETF was launched years after his passing. I still agree that nobody knows everything that will happen to these assets by the year 2030, but I do have some clues to Ethereum's general direction, and the ETF deserves another layer of analysis.

What Vitalik Buterin wants to build by 2030

At an Ethereum developers conference in September, the keynote from founder Vitalik Buterin provided a helpful overview of what's happening in this cryptocurrency over the next few years.

Users and app developers will see lower usage fees and faster execution of Ethereum's smart contracts. More to the point, the underlying global computer network will continue to grow more scalable, ultimately able to handle massive workloads without blinking.

The scaling effort isn't limited to pure Ethereum upgrades. It also involves several Layer-2 (L2) blockchains that accelerate the central Ethereum network's performance. Importantly, it should eventually be easy to move data and app links from one L2 platform to another. Today, leading L2 systems like Arbitrum and Optimism are fast on their own, but difficult to use together. That separation is up for change.

As a result, the overall user experience should grow smoother. The end goal is to make Ethereum-based apps just as common and natural as the Java, Python, and C# apps you're using today. If none of those programming language names meant anything to you, that proves my point about the user-friendly experience. That's what the Ethereum community wants to build someday: a platform you're using all the time without knowing or caring about it.

And for those who do care about the technical guts, Buterin envisions a more decentralized Ethereum network with lower hardware requirements for running a node. This goal only matters to Ethereum's insiders -- except that more decentralization will ultimately support a better user experience. When your next Ethereum transaction can be verified by laptops and smartphones, you're looking at a pretty slick Ethereum experience.

Image source: Getty Images.

Transaction fees are where the money is

I can boil the user-oriented improvements down to an investment thesis. Five years from now, Ethereum will be much more powerful and easier to use, to the point where most people might interact with it every day, and it's no big deal. The actual large-scale adoption may take longer, but the technical platform will be there by 2030.

And that's where Ethereum starts to build real value for its investors -- more usage equals higher prices.

Remember, this cryptocurrency isn't designed to preserve wealth in a secure asset with strictly limited supply. That would be Bitcoin. Instead, its blockchain ledger holds transactions used in real-world apps. Its ledger and smart contracts can manage financial accounts, hold ownership records for virtual or physical assets, and generally provide the digital data connections needed to run a modern application on a global scale.

Each transaction generates a tiny fee, adding value to the Ethereum coin. Widespread adoption of Ethereum's tools should generate massive growth in the generation of these fees.

That's exactly what the user-focused platform upgrades are meant to do over time.

So I won't put a firm price target on Ethereum in 2030, but I do expect it to gain value. Anything less would be a massive failure of the Ethereum vision, the Web3 concept, and modern data management in general.

Why the ETF wrapper actually matters

And the ETF structure really can change how investors approach Ethereum:

• The iShares Ethereum Trust ETF behaves much like any other stock or ETF. You can buy it through your stock brokerage and hold it in your regular portfolio, even if it's a tax-advantaged retirement account like an IRA. You can't do that with a raw Ethereum coin (yet, anyway).

• The ETF structure is wrapped in extra layers of regulation, making institutional investors and billionaires more comfortable with the cryptocurrency.

• Just like Ethereum itself, the ETFs can add new features over time. For example, the Grayscale Ethereum Trust (NYSEMKT: ETHE) just enabled staking of its Ethereum holdings. That's a dividend-like 3% annual return that didn't exist last week. These innovations can help one ETF steal market share from its peers.

Five years from now, I expect a juicier price tag on Ethereum coins as the underlying technology slowly becomes a normal (and often ignored) part of everyday life. The iShares Ethereum Trust ETF will largely follow along, providing a more convenient buying system for traditional investors -- and perhaps a couple of new features along the way. How long will it take before all the Ethereum ETFs come with dividend-style staking enabled?

Crypto is "always in motion," but now you can tell Yoda where Ethereum and its ETFs are going in five years. The destination is more real-world usage and higher value, all wrapped in a handy ETF if you prefer.

Anders Bylund has positions in Bitcoin, Ethereum, and iShares Ethereum Trust - iShares Ethereum Trust ETF. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.