Traditional blockchain network valuation methods often have misunderstandings. They regard blockchain networks as enterprises and use methods designed to calculate fair stock prices. formulas that are based only on very narrow considerations. This approach is fundamentally flawed.

Blockchains, especially smart contract platforms like Ethereum, are not businesses. As I explained in my previous article, they are emerging, sovereign digital economies with their own reserve currencies. These currencies not only serve their native networks, but can also play the role of store of value (SoV), unit of account (UoA) and medium of exchange "overseas" - taking $ETH as an example, its role is not limited to the original main network, but also Penetrate and become a reserve currency in multiple extended networks (L2) that fall under its monetary jurisdiction and even thrive outside those borders (similar to how the US dollar operates today).

In addition, the proof-of-stake blockchain (POS) introduces a mechanism similar to bonds, in which participants pledge assets to protect the network in exchange for future return. These dynamics reflect the structure of the economy, the financial instruments that support its defense and its current and future operational stability.

In other words, smart contract-based blockchain networks like Ethereum are becoming emerging networks-digital. They not only use technology The stack also manifests itself through monetary jurisdictions and reserve currencies, shared values ​​and beliefs, shared history and culture, and sometimes even foundational myths.

Gross Decentralized Product

In order to meet the needs of these emerging digital economies for a more appropriate valuation framework, we proposed Decentralized Gross Decentralized Product (GDP), this method can not only capture the total amount of money, but also the economic activities of the blockchain ecosystem. Unlike the gross product (GDP) of a traditional economy, decentralized GDP covers a wider scope: it takes into account the economic activity generated within the ecosystem and monetary base, as well as the protocols built on a specific blockchain, Market cap of decentralized applications and cultural assets.

The theoretical basis behind this expanded framework lies in the paradigm shift represented by the blockchain economy. Although these ecosystems have similarities to traditional economies, their fundamentalThe difference is that every aspect of the economy becomes liquid and has some degree of currency. In this paradigm, output and production factors are not just components of the economy, they have also become a form of “currency” that can be traded and monetized on the chain.

Therefore, the most effective way to invest in such a blockchain economy is through its native currency. These currencies support all economic activities on the blockchain through programmable supply caps. Their value is tied to the growth of the system, which is reflected in rising market caps. Over time, the native assets of the most successful blockchain economies will generate monetary premiums and become the original form of collateral in their ecosystems, gaining access to a store of value (SoV) in the broader crypto space and even in the real world. ) status of reserve assets.

Below, we outline the key metrics that make up this framework, using Ethereum and other leading blockchain networks as examples.

ℹ️ All data used in this article comes from Token Terminal, DeFiLlama and NFT Price Floor, as of November 26, 2024.

Market value: Measuring monetary sovereignty

The market value of the blockchain’s native currency can be used as a representative of its monetary base and economic scale, similar to the M2, The effect of M3 and M4 supply on the US dollar. As mentioned before, sometimes the monetary base is not limited to the blockchain's mainnet, as its native currency becomes a reserve for a series of network extensions (such as ETH's L2s/L3s), or even other blockchains outside the same monetary jurisdiction. , these assets can also be transferred via bridging. It is important to note again that since the monetary base (supply) of a blockchain cannot be increased at will, what we observe is that both when its native economy expands and when its native currency transcends the boundaries of its own network and colonizes foreign economies At all times, the statutory value is increased to maintain and support economic growth. This is why every time we refer to the monetary base, we are referring to market capitalization.

If we take the simplest monetary aggregate (M1/M2) as an indicator, then the top blockchain economies are:

BTC: $1.82 trillion

ETH: $400 billion

SOL: $108 billion

BNB: $90 billion

TRON: $16 billion< /p>

Including LST and LRT tokens here is like measuring the M3 or M4 money supply of a smart contract-based blockchain economy. Taking ETH as an example, M1/M2 is $420 billion, M3 is $467 billion (LST), and M4 is $481 billion (LST + LRT).

Total Value Locked (TVL): Capital Utilization in DeFi

TVL measures the value of assets locked in decentralized finance (DeFi) protocols. Critics question its utility, but it remains a strong indicator of active economic activity on the blockchain. For decentralized economies, this metric is similar to tracking the scale of financial intermediation activity in the economy. More than that, it speaks to the reliability and security of a currency jurisdiction, as well as its ability to attract investors who not only want to trade short-term, but also store their wealth for longer periods of time.

Top blockchain economies by TVL:

ETH: $66.6 billion

SOL: US$9.25 billion

TRON: US$8 billion

BNB: 55 billion US dollars

BTC: US$4.4 billion

L1 transaction fees: income from economic activities

The fees a blockchain generates reflect how seriously users place access to its services. These fees represent the blockchain’s “tax revenue” and are calculated directly into its GDP. Having a strong and sustainable fee market is fundamental and must strike the perfect balance to provide global accessibility to users and protocol/application deployers, maintain operational stability and network security, while ideally offsetting currency issuance. Otherwise, you could end up with a dysfunctional system like we see today in debt-ridden economies.

Income based on annual feesTop blockchain economies ranked:

ETH: $2.6 billion

TRON: US$1.87 billion

BTC: US$1.23 billion

SOL: US$590 million

BNB: $191 million

For the purpose of this calculation, we ignore REV because a) it is not a protocol enforced at the mainnet level, and b) while not all forms of MEV are extremely harmful to users, many are, and it's reasonable to assume that they will gradually drift towards 0 and most will be captured by applications that try to return them to Users who offer more favorable rates.

Stablecoins: Foreign investment and currency integration

Stablecoins represent foreign investment in the blockchain economy. Similar to TVL (total value locked), stablecoins are an important indicator of a blockchain’s ability to attract foreign investment, in other words, how a blockchain introduces real-world assets (RWA). Among the major blockchains, Ethereum dominates, with $101 billion hosted on its mainnet and another $10 billion on Layer 2.

Blockchain stablecoin holdings:

ETH: $101 billion ( + L2 USD 10 billion)

TRON: USD 59 billion

BNB: USD 5.8 billion

SOL: $4.65 billion

BTC: approximately $1 billion (Omni)

Although not stablecoins or real-world assets (RWA), wrapped versions of BTC such as WBTC and cbBTC can also serve as interesting indicators of how smart contract-based blockchain economies can attract foreign investment. In this case, Ethereum stands outIt emerged as the most dynamic economy with $15 billion worth of wrapped Bitcoin hosted on its mainnet and Layer 2 ecosystem.

Protocols, Applications, and NFTs: The Infrastructure and Culture of the Economy

In the blockchain economy, protocols, applications, and NFTs play the same role as those in the traditional economy. similar roles in the industrial and cultural sectors. Protocols and applications are the infrastructure and factories that drive value creation, including decentralized finance (DeFi), social finance (SocialFi), decentralized scientific research (DeSci), etc. NFTs, on the other hand, represent the culture, entertainment, and media industries, a key component of the soft power of blockchain networks, because, as we said in our previous article, culture is an integral part of its reach and identity.

Ethereum dominates both areas, with the total value of fungible tokens (excluding stablecoins and liquid staking tokens) approx. is $110 billion, and the total value of NFTs is $4.1 billion. This highlights Ethereum’s leadership on both an economic and cultural level.

ETH: Fungible assets are approximately US$110 billion, and non-fungible assets are approximately US$4.1 billion

SOL: Fungible assets are approximately US$18 billion, and non-fungible assets are approximately US$100 million

BTC: Non-fungible assets are approximately US$500 million< /p>

Data based on CoinGecko’s top 100 market cap cryptocurrencies and NFT Price Floor’s top 50 NFTs.

Protocol and Application Fees: Economic Activities of Enterprises in the Blockchain Economy

To further deepen our understanding of blockchain economic activities, we analyzed each Fees incurred by top protocols and applications hosted on the blockchain. This metric serves as a proxy for the economic output of companies and organizations operating within these ecosystems, similar to the contribution of businesses to a GDP.

Ethereum leads the way, with fees generated by its top protocol reaching $6 billion, reflecting its status as the most mature and diverse blockchain economy status. They are followed by Solana and BNB Chain, which are seeing quite active activity, but on a smaller scale.

Estimated fees for the top 50 protocols and applications in the blockchain economy:

ETH: approximately $6 billion

SOL: approximately US$1.95 billion

BNB: approximately US$300 million

These numbers also take into account the share of fees generated by the top stablecoin issuers operating on each blockchain. Given the high volume of transactions involving stablecoins across various protocols, Tether (USDT) and Circle (USDC) Other stablecoin issuers contribute significantly to the overall fee base

By incorporating this metric into our decentralized total product framework, we can go even deeper. Understand the economic vitality of the blockchain ecosystem and the level of corporate activity it carries.

By combining these indicators, the concept of decentralized gross output provides a more comprehensive way to measure the blockchain economy. It highlights the complexity, complexity, and complexity of the blockchain economy. The breadth and potential of global economic integration.

Determining how to measure and integrate the different indicators that make up the GDP of the blockchain economy is the task of future professional economists. , we can simply aggregate these numbers to compare the two largest smart contract-based blockchain economies:

ETH: 1) USD 400 billion + 2) USD 66.6 billion + 3) USD 2.6 billion + 4) USD 101 billion/USD 110 billion + 5) USD 114 million + 6) 60 billion US dollars = US$700 billion

SOL: 1) US$108 billion + 2) $9.25 billion + 3) $590 million + 4) $4.65 billion + 5) $18 billion + 6) $1.95 billion = $142.5 billion

Ethereum As the largest and most diverse decentralized economy based on smart contracts, in terms of monetary sovereignty, DeFi Strong performance in activity, revenue generation, stablecoin liquidity and cultural impact

The total value of the Ethereum economy (excluding monetary base) is $300 billion, and the ratio of its monetary base to total value is 1.33. Because $ETH has the characteristics of a "triple attribute asset" and can penetrate into the "external ” For blockchain networks, comparison with the U.S. economy requires reference to the ratio of M3/GDP or M4/GDP, which is currently between 1.2 and 1.5.

As blockchain networks continue to develop, a GDP-like framework will help investors, framers, and developers better understand it as a digital sovereign economy the true value of the body. At the same time, indicators such as the Gini coefficient and the economic diversity index may also be valuable in assessing the economic health and future potential of these ecosystems. It’s important to stress that this is not about determining the fair value of a company’s shares, but about how to fully participate in the blockchain economy as a whole.

Let’s take the U.S. economy in the 1940s, a time of great economic prosperity. How could investors at that time gain broad access to the "U.S. market"?

These options may include:

USD: For liquidity and reserve currency exposure mouth.

Treasury bonds: Before the emergence of the petrodollar in 1971, Treasury bonds were only debt instruments and had not yet become a global store of value.

Stocks: For growth returns.

Art: New York has gradually become the center of world art.

As we have seen, exposure to traditional economies involves investing in a variety of assets that ultimately perform differently depending on macroeconomic conditions: the U.S. dollar may perform better in uncertain times Stronger, bonds provide safety during downturns and stocks thrive during expansionary times.

Get exposure to the blockchain economy

In an economy based on smart contracts (take Ethereum as an example), the native currency provides a unique Advantages: It acts as a reserve currency, a store of value, and a bond (when pledged) at the same time. Rather than needing to own a carefully configured portfolio of assets with different characteristics, a single asset such as $ETH can provide integrated exposure to the entire blockchain economy.

This streamlined approachSimplifying investment decisions while aligning incentives with the growth and security of the network. You can also add a basket of blue-chip NFTs native to DeFi protocols and blockchain economies, and you’re all set!

Applying the GDP model to estimate the future value of the blockchain economy

As we emphasize throughout this article, valuation should not be done using a framework designed for joint-stock companies Value blockchain native currency. Blockchain economies are easier to understand and evaluate as their traditional digital counterparts, which emerged after the Treaty of Westphalia – a period when joint-stock companies began to emerge. Similar to traditional ones, blockchain economies are in a constant state of competition for capital, security, and human resources (i.e., developers, users, and settlers in general). This is exactly what is instinctively identifiable with the crypto-Twitter mentality—hence the tribalism and maximalism that emerges. It’s human nature: when a community feels threatened, its immune system kicks in to protect an idea, technology, or set of values ​​deemed valuable.

It should be noted that although blockchain economies have some similarities with traditional economies, they represent a completely new paradigm. In these ecosystems, the boundaries between finance and other economic sectors become blurred to the point where everything: even art, entertainment, and attention, reaches some degree of monetization. This fluid nature makes it difficult to distinguish the monetary base from the gross product it represents. However, the traditional economy remains our closest reference point and provides the benchmark for predicting the growth of blockchain economies.

Now, as a thought experiment, let’s imagine if Ethereum’s growth story rivaled some of the most extraordinary rises of the past century. What would this do to the price of ETH? means nothing. Ethereum's current total economic volume (excluding the monetary base) is $300 billion, which is comparable to the size of the economy in 1986. It took about 30 years to grow GDP to $18 trillion, a figure equivalent to the current market value of gold. 's economic growth has been extraordinary, a rare feat for an economy of its size. But what’s interesting is that we can imagine a world in which a network like Ethereum is able to replicate this unprecedented rate of economic growth.

While this comparison may have surprised you, in my opinion, the leading blockchain economies do have a case to be made to rival modern performance ：

Digitalization and openness

Global accessibility

No capital controls

Suitable for an AI-led economy Financial infrastructure

Assuming the network flourishes, Ethereum consolidates its dominance in the extremely expanding DeFi and AI fields, and the final bull market situation occurs, by 2054 By the year, the total economic value of the Ethereum network will reach 18 Trillions of dollars, matching the development trajectory of the past 30 years! Under this assumption, how would we apply the GDP model to calculate the price of ETH?

If Using a conservative monetary base/economic aggregate ratio of 1.2 (similar to the current US M3/GDP ratio), Ethereum's market cap would reach $21.6 trillion, resulting in an ETH price of 18 million (not accounting for potential currency base deflation due to fee burning) However, if we consider the possibility of Ethereum transcending its native ecosystem, similar to how the U.S. dollar became ubiquitous through the Eurodollar system, it could achieve 1.5. The monetary base / total value ratio (comparable to the US M4 / GDP ratio). In this case, the market value of Ethereum will reach 27 trillion US dollars, which is equivalent to an ETH price of 225,000 US dollars.

Now, this is not an ETH price prediction or financial advice of any kind, but thinking about how the GDP framework can provide a powerful lens into understanding blockchain economies, revealing what they really look like as emerging digital or economic entities, indeed Interesting. This framework also highlights that, as in traditional economics, multiple dimensions must be evaluated before making investment decisions.

In this framework, the reason for investing in Ethereum lies in its status as the most dynamic and diversified blockchain economy. Its ecosystem covers a wide range of fields from financial services to cultural products, which not only empowers Along with its strong hard power, this is further evidenced by Ethereum's ability to attract and retain "sticky capital," a signal that investors are investing in it despite short-term price fluctuations. Considered the safest and most promising smart contract-based economy for long-term wealth preservation.