Annualized 4-5.5%, breaking down the gold-making method of the Ethereum treasury The Ether Machine.

Author: Zz, ChainCatcher

"The Ether Machine (hereinafter referred to as ETHM) announced on August 4 that it has increased its holdings by 10,605 ETH, bringing its total Ethereum holdings to 345,362 ETH, worth approximately $1.27 billion. This is the company's second major increase in less than half a month since its listing.

As a company focused on Ethereum investment, ETHM announced in July that it would go public on Nasdaq, initially planning to issue 400,000 ETH, with a market value of nearly 1.6 billion USD. By the end of July, the company had already made an additional purchase of 15,000 ETH.

The radical expansion of the Ether Machine comes at a crucial time when several listed companies are competing to acquire ETH. With an increasingly clear regulatory framework, more and more publicly listed companies are incorporating ETH into their asset allocation.

Holding $1.6 billion in ammunition, entering the Ethereum DAT arms race.

The Ethereum treasury track has become a battleground for institutions. The listing of ETHM has completely ignited this competition - in just two weeks, the entire landscape of the track has undergone a dramatic change.

According to official reports, when ETHM was announced for listing on July 21, the ETH reserves of BitMine and SharpLink were only 300,000 and 280,000 respectively, both below the planned initial scale of 400,000 for ETHM. However, by August 5, BitMine's holdings had surged to 833,000 (with a market value of $3 billion), an increase of 177%, securing the top spot; SharpLink also showed impressive performance, with on-chain data from Nansen indicating its reserves had reached 498,000 (with a market value of $1.8 billion), an increase of 78%, ranking second, and it publicly announced its goal to reach 1 million. Even the former Bitcoin miner Bit Digital urgently pivoted, accumulating 120,000 ETH.

Image source: Strategic ETH Reserve (SBET data not yet updated)

This crazy accumulation trend confirms Standard Chartered's prediction: treasury companies have purchased more than 1% of the circulating supply of ETH, and this proportion may soar to 10%. A hundred billion dollar-level "arms race" is fully escalating.

In this intense competition, The Ether Machine has emerged with a dual advantage of "capital + strategy." First, the nearly $1.6 billion initial capital provides strong ammunition—Andrew Keys personally invested $645 million in ETH, and institutions like Pantera Capital have pledged over $800 million in financing. However, this is not enough to allow it to surpass others.

The more critical advantage lies in its differentiated approach. While competitors are still frantically hoarding coins to seize market share, ETHM has enhanced its yield to 4-5.5% through a combination of re-staking and DeFi protocols. In a low interest rate environment, this stable high yield has become a "killer feature" for attracting institutional funds.

Annualized 4-5.5%, the golden method of dissecting ETHM

To understand how The Ether Machine achieves an annualized return of 4-5.5%, it is necessary to understand its core positioning - "Ether Coin Generation Company".

This concept can be likened to the oil economy: traditional crypto investment is like buying crude oil for hoarding in anticipation of price increases; while The Ether Machine chooses to become an "oil company", allowing the asset itself to generate cash flow.

Keys and his team discovered that ETH is not only an asset but also a production tool. Through the EigenLayer protocol, staked ETH achieves "one fish, multiple eats"—it provides security for the Ethereum mainnet while simultaneously serving protocols like oracles and cross-chain bridges, with each service bringing additional revenue.

Just like bank deposits can earn interest while also "working" to earn extra income. The total locked value of EigenLayer at $16.591 billion confirms the attractiveness of this model, and The Ether Machine has become one of the largest institutional participants in this ecosystem.

In addition to re-staking yields, the company also generates returns by participating in DeFi protocols. When the base staking yield for ETH is only about 3%, this combined strategy increases the total yield to 4-5.5%.

At this point, ETH has transformed from a "waiting for appreciation" static asset to a "continuously creating value" productive asset.

ETHM is not the next MicroStrategy.

The market always likes to find a reference point. When The Ether Machine appeared, almost everyone was asking the same question: "Is this the next MicroStrategy?"

"Perhaps people tend to understand today's innovations through the framework of yesterday."

Indeed, on the surface, both companies appear to be doing the same thing — holding a large amount of cryptocurrency assets under the identity of a publicly listed company. However, upon closer examination, you will find that these are two completely different approaches.

MicroStrategy's logic is simple and straightforward. They issue bonds to buy Bitcoin, betting that the price will rise enough to cover the interest. However, the efficiency of this model is sharply declining. In 2021, MicroStrategy could generate one basis point of return for shareholders with every 12.44 BTC. By July 2025, it will require 62.88 BTC to achieve the same result. The scale has increased fivefold, but the efficiency has dropped to one-fifth.

In contrast, The Ether Machine is taking a different path. Through staking and DeFi participation, ETH generates an annual cash flow of about 5% every day. There's no need to wait for the price of coins to rise, nor to pray for a bull market—this is real income, not paper wealth.

The fundamental difference lies in the asset attributes: Bitcoin is digital gold, its value comes from scarcity and consensus. Ethereum, on the other hand, is digital infrastructure, and its value lies in its ability to support the operation of the entire ecosystem.

We can now trace back to the MicroStrategy era in history and find that we are experiencing the third phase of evolution towards a crypto treasury:

Phase One: Pioneer Bonus Period (2020-2023) At that time, MicroStrategy, which was not favored, proved that publicly traded companies could earn a premium by holding crypto assets.

Phase Two: Mode Replication Period (2024-2025) Successful imitators emerge. The stock price of SharpLink, which was replicated, skyrockets by 4000% before plummeting by 70%. Marathon Digital and Riot Platforms follow suit, but with poor results, exposing the risks of the simple coin hoarding model.

Phase Three: Mode Evolution Period (2025-) The new model represented by The Ether Machine - not hoarding assets, but operating assets to create diversified income sources.

However, achieving this evolution from asset accumulation to operational assets is by no means easy. It requires a deep understanding of the crypto world and the experience to navigate the maze of traditional financial compliance.

Four Key Players Behind the Behemoth

"Ethereum Avengers" - When the chairman of The Ether Machine uses this term to describe the team, it is not a joke. This group of well-connected "Avengers" is attempting to reshape the landscape of institutional cryptocurrency investment.

The story begins with the "forge" of the Ethereum ecosystem, ConsenSys. It was there that Andrew Keys first met David Merin. At that time, they had no idea that they would be deeply tied to top financial institutions around the world.

In 2017, during the "crypto winter" after the ICO bubble burst, the entire industry was filled with despair. It was at this moment when everyone was fleeing that Andrew Keys sought to open the doors of Microsoft and JPMorgan with Ethereum.

"They looked at Andrew Keys as if he were a madman selling a perpetual motion machine."

But he did not give up. Time and again he faced rejection, and time and again he explained, until suspicion gradually turned into curiosity. In the end, he founded the Enterprise Ethereum Alliance (EEA), bringing the word "Ethereum" into the boardrooms of the Fortune 500 for the first time.

Meanwhile, David Merin is driving a commercial transformation within ConsenSys, leading over $700 million in financing and mergers.

The two realized in countless discussions during the deep nights that the divide between traditional finance and the crypto world was not only prejudice but also a real compliance gap.

"Countless institutions are interested in Ethereum, but ultimately they have stopped due to the lack of reliable investment tools."

This pain point prompted them to make a bold decision: no longer to be just "evangelists," but to personally get involved and create a regulated financial vehicle.

The first action of Keys shocked everyone - he used personal ETH worth over $600 million as initial investment. "If I don’t believe in it myself, how can I make others believe?"

His all-in attitude showed everyone his determination. In a later CNBC interview, he further stated: "I would rather have an iPhone than a landline." This metaphor aptly explains why he only bets on Ethereum.

Next, the team gathered and began. They found Darius Przydzial, a "dual-sided" person who had managed traditional risks at Fortress and was a core contributor to the DeFi protocol Synthetix. His task was clear: to strike gold in the wild west of DeFi while staying alive.

For technical security, Tim Lowe, who has twenty years of experience in bank-level systems, joined the team. Finally, the arrival of Jonathan Christodoro, a director at PayPal and former executive at Icahn Enterprises, provided the final endorsement for the company's governance structure.

The internal dynamics of the team are not smooth sailing. The traditional finance faction advocates for conservatism and stability, while the crypto native faction tends towards aggressive innovation. After numerous meetings ended in fruitless debates, keys made a decisive statement: "We are not here to choose a side, but to be the bridge connecting both sides."

This sentence has become the unchanging core concept of The Ether Machine.

Vitalik's Call: We Should Not Pursue Large Institutional Capital at Full Speed

If we say that the idealism represented by the Ethereum Foundation, which is centered on technology and community, formed the first lifeline of ETH, then what we are witnessing today is the natural evolution and transition of this lifeline: as the EF gives way to capital, the second lifeline of ETH has already begun.

This new lifeline may not necessarily deviate from its original intent, but it will undoubtedly lead Ethereum into a more complex deep water zone. The question is, what will Ethereum become in this process? What risks will it face?

The primary concern is technical risk: vulnerabilities in smart contracts and the possibility of staking penalties can lead to a 100% loss of ETH. Coupled with a unlocking period that can last for weeks, liquidity has become a luxury. When a single entity controls a large amount of ETH, are we reinforcing Ethereum, or altering its very nature?

Subsequently, there was a clear division of opinions within the community. A comment from @azuroprotocol accurately captured this anxiety: from "building a decentralized Ethereum" to "selling 400,000 ETH to enterprises," ultimately evolving into "Web3 becoming Wall Street 2.0."

Even Vitalik has issued a warning: "We should not rush to pursue large institutional capital." Now, as 70% of staked ETH is concentrated in a few pools, is his concern becoming a reality?

At the same time, "Who cares about decentralization when prices are rising?" @agentic_t has pointed out the core dilemma of the community. A staking yield of 4%-5.5% seems enticing, but history tells us that all excess returns will eventually be arbitraged away.

Similarly, although Keys believes that Ethereum has become the biggest beneficiary of the GENIUS Act, it seems that the spring of regulation has arrived. But what happens after spring? When the policy winds change, will these institutional efforts instead become targets of regulation?

A sign of maturity, or the end of an ideal?

Perhaps every successful technology will eventually move towards institutionalization. The internet, mobile payments, and social media have all gone through this process.

As Ethereum transitions from an idealistic experiment to an investment product embraced by Wall Street, is this a sign of maturity or a departure from its original intent?

Time will provide the answer.