In the U.S., the post-Sam Bankman Fried era of regulatory hostility has ended as the fall elections loom and Democrats and Republicans alike realize that many of their constituents — more than 50 million by last count — are crypto investors. And recent polls show that voters want their country to take a global lead in blockchain technology on which cryptocurrency and other emerging applications are based.

After years of denials, for instance, the SEC earlier this year approved ETFs pegged to the bitcoin spot market. The financial industry has since experienced one of the most successful launches in ETF history with nearly $16 billion in net inflows as of the beginning of July. Clearly, bitcoin’s digital-gold narrative—due to its limited supply—resonated with investors, who can now trade these spot ETFs just like any other security, directly from their brokerage account.

The same holds true for ether, the native cryptocurrency for the Ethereum blockchain, which the SEC is expected to approve for spot ETFs any day now. With nearly $400 billion in market capitalization and approximately $1billion in annual income, ether’s narrative is more difficult to define than Bitcoin’s simple and accessible digital gold story.

Pundits have variously described Ethereum as “ultrasound money,” “digital oil,” the “digital app store” or even the “internet bond.” But what they all agree on is that ether is a token—a blockchain digital asset—with a stable supply, utility and, for many, a compelling yield. On the surface, these are very attractive characteristics for investors who are asking “What’s next?” when it comes to cryptocurrency ETF investments after Bitcoin.

Like Bitcoin, Ethereum has a stable native token supply. But Ethereum is more than digital gold 2.0. Across the Ethereum ecosystem, countless decentralized applications use so-called smart contracts—computer code that automatically executes if certain conditions are met.

Today, those applications and their smart contracts are used to swap tokens, make payments, tokenize real-world assets—including Treasury bonds—or execute a myriad other programmable activities. To register these transactions on the Ethereum blockchain, market participants need ether to pay fees called “gas.” This dynamic drives demand for the ether token.

For investors, another exciting and differentiating characteristic of ether is its yield, currently trending between 3 and 4%. Unlike Bitcoin, which relies on “miners'' to solve energy-intensive computations to secure its network, Ethereum depends on “stakers” to pledge their tokens to secure the value of the network. For their efforts, those who “stake” their tokens earn the network’s yield. And when adjusted for inflation, Ethereum’s real yield is quite competitive with the current yield of U.S. government securities.

Unfortunately, investors will have to forgo Ethereum’s staking yield when the spot ETF launches. While the exact reasons are not entirely clear, it seems that U.S. regulators simply will not allow it.

To be sure, earning yield is not without risk. Ethereum’s computer code sanctions and burns the assets of negligent or dishonest staking participants through a process called “slashing”. Also, staked ether is not always readily available to ETF issuers who need it to honor redemptions—another known risk.

But, enterprise infrastructure, insurance offerings, benchmarks, and liquidity solutions—all designed to reduce potential risks and support institutional yield for Ethereum—are already available or quickly coming online.

All financial products have risks, of course. The important thing for investors is that these risks are adequately disclosed. With disclosures in place and risks addressed, U.S. investors should have the choice of investing in a yield-bearing version of the spot ETF.

Time will tell if the ether spot ETF in the U.S. will begin trading with a whimper or a bang. Yield or not, though, the initial launch of the spot ether ETF serves an important purpose. As traditional investors familiarize themselves with the asset behind the ETF, it promises to bring a new generation “on chain”—perhaps in search of that elusive yield, or perhaps to unlock the power of the decentralized, blockchain-enabled economy that awaits.

Christopher Perkins is Managing Partner and President of CoinFund. He is also the inventor of CESR™, the composite ether staking rate.

CoinDesk Indices Op-ed

Christopher R. Perkins

Christopher R. Perkins serves as managing partner and president of CoinFund, a registered investment adviser with venture and liquid strategies. In this role, he actively participates in the investment process and bridges the gap between Web3 and traditional finance. Perkins serves on the U.S. Commodity Futures Trading Commission’s Global Markets Advisory Committee (GMAC). Before joining CoinFund, he served as global co-head of futures, clearing and foreign exchange prime brokerage (FXPB) businesses at Citi. He also worked at Lehman Brothers and served in the U.S. Marine Corps. He has a bachelor of science degree from the U.S. Naval Academy, with distinction, and a master of arts degree in national security studies from Georgetown University.