The Daily Gwei - Value Accrual - The Daily Gwei #520
Value Accrual - The Daily Gwei #520Searching for the crypto-assets that actually accrue long-term value.There’s been a lot of hot debate over the years around how coins/tokens in crypto can accrue long-term value. Of course, 99% of these assets trend towards being worthless or end up at least 95%+ down from their all time highs but are there crypto-assets that actually trend up over time? Of course there is - you just have to look very closely to find them. I think there's really only 2 ways that a coin/token will be able to accrue long-term value:
- Become a money/SoV (ETH, BTC)
- Become equity-like (share protocol revenue with token holders)
Assets that do both will become the most valuable 🦇🔊 The first way for a coin/token to accrue value long-term is to become a money and a store of value and this is a very difficult thing to accomplish. I think the main reason for this is because a lot of the value that comes from being a money/SoV is born mostly out of collective belief rather than some hard fundamentals. For example, if BTC were valued based solely on the amount of fee revenue that the Bitcoin network generates, then BTC would be considered highly overvalued as it has a price-to-sales ratio of 2800! Obviously BTC is valued on the social belief that it is a pristine money/SoV and people mostly buy it for that purpose. The second way for a coin/token to accrue value long-term is to become equity-like. Obviously many of the projects in crypto have avoided doing this due to securities laws/regulations and this has hampered the growth of many tokens. Instead, the tokens are usually designed to be “valueless governance tokens” and really do stay true to their name - even UNI has performed quite poorly in the face of growing Uniswap dominance (because no revenue is shared with UNI token holders). On top of this, many tokens start their life with a low circulating supply and high fully diluted valuation so even if the token does have a claim on protocol revenue, it still trends down over time because of the real (and assumed) future sell pressure from non-circulating tokens. I think that ETH as an asset is both a money/SoV and has equity-like properties with the pseudo-dividend via EIP-1559. ETH is also used as a staking asset (internet bond), used in DeFi as collateral and is used to pay fees on not just layer 1 Ethereum, but many layer 2 networks as well (this makes ETH the defacto MoE for the Ethereum network). On top of this, ETHs supply will be net deflationary in a post-merge world which strengthens its store of value properties and causes a nice feedback loop when coupled with staking (higher ETH price > higher USD-measured rewards for stakers > more ETH staked to capture those rewards). Obviously there are other mechanisms that have been used in crypto to try and drive value to tokens - from algorithmic stablecoin schemes to recursive liquidity schemes - but these things do not generate long-term value for tokens (they seem to do the exact opposite). This is why I’ve come to my conclusions above and why I’m personally most bullish on assets that fit into the 2 categories - especially assets like ETH that fit into both categories. Have a great day everyone, Enjoyed today’s piece? I send out a fresh one every week day - be sure to subscribe to receive it in your inbox! Join the Daily Gwei EcosystemAll information presented above is for educational purposes only and should not be taken as investment advice. If you liked this post from The Daily Gwei, why not share it? |
Older messages
Social Decentralization - The Daily Gwei #519
Monday, July 25, 2022
It matters more than anything.
The Scaling Wars - The Daily Gwei #518
Wednesday, July 20, 2022
They're just getting started.
The Merge Trade - The Daily Gwei #517
Tuesday, July 19, 2022
Everyone's trying to trade it - few are strong enough to invest in it.
Schelling Point Assets - The Daily Gwei #516
Friday, July 15, 2022
You may not even notice that you're buying them.
Staking at Home - The Daily Gwei #515
Tuesday, July 12, 2022
Ethereum Proof of Stake was built for home users.
You Might Also Like
Trump’s pro-crypto pledge could see day-one executive orders, industry players hope
Tuesday, December 24, 2024
A Bitcoin strategic reserve, access to banking services, and the creation of a crypto council are among the items on the industry's 'wishlist.' ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
State of the Network’s 2024 Year in Review
Tuesday, December 24, 2024
A data-driven overview of events that shaped crypto in 2024 ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
OKExChain: Will the Federal Reserve and Jerome Powell Prevent the U.S. from Creating a National Bitcoin Reserve?
Tuesday, December 24, 2024
In the early hours of today, Federal Reserve Chairman Jerome Powell made it clear during a press conference following the monetary policy meeting that the Fed has no intention of participating in any
Crypto community cheers as Trump names pro-crypto advisors Stephen Miran and Bo Hines for economic and digital ass…
Monday, December 23, 2024
Trump fosters economic expansion and digital innovation with Miran and Hines at the helm of economic and crypto councils. ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
📈 BTC-to-Gold ratio hit a historical peak on 17 Dec; Crypto.com renewed its partnership with Formula 1 until 2030
Monday, December 23, 2024
BTC-to-Gold ratio hit a historical peak on 17 Dec; Crypto.com renewed its partnership with Formula 1 until 2030; Crypto.com and the Philadelphia 76ers unveiled Web3 mobile game 'Spectrum Sprint
Bitcoin Hits A New ATH Once Again After Touching $108K
Monday, December 23, 2024
Monday Dec 23, 2024 Sign Up Your Weekly Update On All Things Crypto TL;DR In this issue, we dive into: Bitcoin Hits A New ATH Once Again After Touching $108K Avery Ching To Become New Aptos Labs CEO As
Yi He on Binance Alpha and Wallet: Most Projects Are Air, Facing Talent Shortage in Web3, and Wallet as an Airdrop…
Monday, December 23, 2024
This article is a summary of a recent AMA hosted on Binance's official Twitter, focused on the relaunch of Binance Wallet. ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
Finish signing in to Crypto.com DeFi Research
Monday, December 23, 2024
Here's a link to sign in to Crypto.com DeFi Research. This link can only be used once and expires in one hour. If expired, please try signing in again here. Sign in now © 2024 Crypto.com 1
Reflections and Rest | Black Flag DAO Weekly Rollup
Sunday, December 22, 2024
Catch Up With What Happened This Week in Black Flag DAO ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
Options traders bet big on Bitcoin reaching $120K despite low odds
Sunday, December 22, 2024
High open interest at $120000 strike price shows the market is betting on a big finish for Bitcoin in 2024. ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏