What is Ethereum’s GDP?

Written by:Diario

Compiled by: MetaCat

TraditionalBlockchainThere are often misunderstandings in network valuation methods.BlockchainThe approach is fundamentally flawed, as the Internet is treated as a business and uses formulas designed to calculate fair stock prices based on very narrow considerations.

Blockchain, especiallySmart like EthereumcontractPlatforms are not companies. As I explained in a 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 value storage (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 penetrates and becomes a multiple extended network (L2) that fell within their monetary jurisdiction and even thrived outside of those borders (similar to how the U.S. dollar operates today).

In addition, proof-of-stake blockchains introduce a mechanism similar to bonds, where participants pledge assets to protect the network in exchange for future returns. These dynamics reflect the structure of nation-state economies, with financial instruments supporting their national defense and current and future operational stability.

in other words,像以太坊这样的以智能合约为基础的区块链网络，正在成为新兴的网络国家——数字国家, they manifest themselves not only through technology stacks, but also through monetary jurisdictions and reserve currencies, shared values and beliefs, shared history and culture, and sometimes even foundational myths.

Gross Decentralized Product

To address the need for a more appropriate valuation framework for these emerging digital economies, we proposeDecentralized GDP Gross Decentralized Product (GDP) is a method that not only captures the total amount of money, but also captures the economic activities of the blockchain ecosystem. Unlike the gross domestic product (GDP) of traditional economies, decentralized GDP covers a wider range:It takes into account the economic activity generated within the ecosystem and monetary base, as well as the market capitalization of protocols, decentralized applications, and cultural assets built on a particular blockchain..

The theoretical basis behind this extended framework isThe paradigm shift represented by the blockchain economyWhile these ecosystems have similarities to traditional national economies, they differ fundamentally in that every aspect of the economy becomes liquid and, to some degree, monetary.Output and factors of production are not just components of the economy, they have also become forms of “currency” that can be traded and monetized on-chain.

Therefore, the most effective way to invest in such blockchain economies is through their native currencies. These currencies, with a programmed supply cap, underpin all economic activity on the blockchain. Their value is tied to the growth of the system, as reflected in rising market capitalizations. Over time, the native assets of the most successful blockchain economies will accrue a monetary premium, becoming the most primitive form of collateral in their ecosystems, earning the status of store of value (SoV) reserve assets in the wider crypto space and even in the real world.

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.

1️⃣ Market capitalization: a measure of monetary sovereignty

区块链原生货币的市值可作为其货币基础和经济规模的代表，类似于美国的 M2、M3 和 M4 供应量对美元的作用。如前所述，有时货币基础不仅限于区块链的主网，因为其原生货币成为一系列网络扩展的储备（如 ETH 的 L2s/L3s），甚至在同一货币管辖区之外的其他区块链上，这些资产也可以通过桥接进行转移。需要再次注意的是，由于区块链的货币基础（供应）不能随意增加，我们观察到的现象是：无论是当其原生经济扩张时，还是当其原生货币超越其自身网络边界并殖民外国经济体时，都是其法定价值的增加，以维持和支撑经济增长。这就是为什么我们每次提到货币基础时，都是指市值。

If we use the simplest monetary aggregates (M1/M2) as an indicator, the top blockchain economies are:

• BTC: $1.82 trillion

• ETH: $400 billion

• SOL: $108 billion

• BNB: $90 billion

• TRON: $16 billion

Here we include LST and LRT Token，就好比衡量基于智能合约的区块链经济体的 M3 或 M4 货币供应量。以 ETH 为例，M1/M2 为 4200 亿美元，M3 为 4670 亿美元（LST），M4 为 4810 亿美元（LST + LRT）。

2️⃣ 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 a blockchain.For decentralized economies, this metric is similar to tracking the size of financial intermediation activities in the national economy.Not only that, it also speaks volumes about the reliability andSafetyand its ability to attract investors who want not only to make short-term trades but also to store their wealth for a longer period of time.

Top blockchain economies by TVL:

• ETH: $66.6 billion

• SOL: $9.25 billion

• TRON: $8 billion

• BNB: US$5.5 billion

• BTC: $4.4 billion

3️⃣ L1 transaction fees: income from economic activities

The fees generated by a blockchain reflect how much users value accessing its services. These fees represent “tax revenue” for the blockchain and are directly factored into its GDP. Having a strong and sustainable fee market is fundamental, and it must strike the perfect balance in order to provide global accessibility to users and protocol/application deployers, while maintainingXiaobai NavigationOperational stability and networkSafety, while ideally offsetting money creation. Otherwise, you can end up with a dysfunctional system like we see today in debt-ridden economies.

Top blockchain economies by annual fee revenue:

• ETH: $2.6 billion

• TRON: $1.87 billion

• BTC: $1.23 billion

• SOL: US$590 million

• BNB: $191 million

For the purposes 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 stands to reason that they will gradually trend toward 0 and be mostly captured by applications that attempt to give it back to users offering better rates.

4️⃣ Stablecoins: Foreign capital and currency integration

Stablecoins represent foreign investment in the blockchain economy. Similar to TVL (total locked value), stablecoins are an important indicator of blockchain's ability to attract foreign investment, in other words, how 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.

Stablecoin holdings of blockchain:

• ETH： 1010 亿美元（+ L2 100 亿美元）

• TRON: US$59 billion

• BNB: US$5.8 billion

• SOL: $4.65 billion

• BTC: Approximately US$1 billion (Omni)

While not stablecoins or real-world assets (RWAs), wrapped versions of BTC such as WBTC and cbBTC can also serve as interesting indicators of how smart contract-based blockchain economies are attracting foreign capital. In this case, Ethereum stands out as the most vibrant economy, hosting $15 billion worth of wrapped Bitcoin in its mainnet and layer 2 ecosystem.

5️⃣ Protocols, Applications, and NFTs: Economic Infrastructure and Culture

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

以太坊在这两个领域都占据主导地位，同质化代币（不包括稳定币和流动性质押代币）的总价值约为 1100 亿美元，NFT 的总价值为 41 亿美元。这凸显了以太坊在经济和文化层面的领导地位。

• ETH: Homogenized assets are approximately US$110 billion, and non-homogenized assets are approximately US$4.1 billion

• SOL: Replaceable assets are approximately $18 billion, and non-replaceable assets are approximately $100 million

• BTC：Non-fungible assets of approximately US$500 million

Data based on the top 100 market caps from Coingeckocryptocurrencyand NFT Price Floor’s top 50 NFTs.

6️⃣ Protocol and application fees: economic activities of enterprises in the blockchain economy

To further deepen our understanding of blockchain economic activity, we analyzed the fees generated by the top protocols and applications hosted on each blockchain. This metric serves as a proxy for the economic output of companies and organizations operating in these ecosystems, similar to the contribution of businesses to a country’s GDP.

Ethereum leads the pack with $6 billion in fees generated by its top protocol, reflecting its position as the most mature and diverse blockchain economy. It is followed by Solana and BNB Chain, which have fairly active but smaller activities.

Fee estimates for the top 50 protocols and applications in the blockchain economy:

• ETH: Approximately US$6 billion

• SOL: Approximately US$1.95 billion

• BNB: Approximately US$300 million

These figures 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, TethStablecoin issuers such as Ethereum (USDT) and Circle (USDC) contribute significantly to the overall fee base.

By incorporating this metric into our decentralized total product framework, we gain deeper insight into the economic vitality of blockchain ecosystems and the level of enterprise activity they host.

By combining these indicators, the concept of decentralized total output provides a more comprehensive way to measure the blockchain economy. It highlights the complexity, breadth and potential of the blockchain economy to integrate into the global economy.

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

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

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

As the largest and most diverse smart contract-based decentralized economy, Ethereum performs strongly in monetary sovereignty, DeFi activity, revenue generation, stablecoin liquidity, and cultural influence.

The total value of the Ethereum economy (excluding the monetary base) is $300 billion, the ratio of its monetary base to total value is 1.33Since $ETH has the characteristics of a "triple attribute asset" and can penetrate into the "external" blockchain network, the comparison with the US economy needs to be referenced. M3/GDPorM4/GDPThe ratio is currently 1.2 to 1.5between.

As blockchain networks continue to grow, a GDP-like framework will help investors, policymakers, and developers better understand their true value as digital sovereign economies. At the same time, indicators such as the Gini coefficient and the economic diversity index may also be of great value in assessing the economic health and future potential of these ecosystems. It is important to emphasize that this is not about determining the fair value of a company's shares, but about how to fully participate in the entire blockchain economy.

Let's take the 1940sTake the US economy at that time as an example. It was during the economic boom. How could investors at that time have extensive exposure to the "US market"?

These options may include:

1. USD: To gain liquidity and reserve currency exposure.

2. National Debt:Before the emergence of the petrodollar in 1971, government bonds were merely debt instruments and had not yet become a global store of value.

3. stock:To achieve growth returns.

4. Art:New York gradually became the center of world art.

正如我们所见，接触传统经济体涉及投资多种资产，这些资产最终会根据宏观经济条件而表现不同：美元可能在不确定时期走强，债券在经济低迷时期提供安全保障，股票在扩张时期蓬勃发展。

Gain exposure to the blockchain economy

In an economy based on smart contracts (such as Ethereum), the native currency offers unique advantages as a triple-attribute asset: it acts as bothReserve currencies, stores of value, and bonds(When staked). Rather than having a carefully configured portfolio of assets with different characteristics, a single asset (such as $ETH) can provide integrated exposure to the entire blockchain economy.

这种精简的方法简化了投资决策，同时将激励措施与网络的增长和安全性相结合。你还可以添加一篮子原生 DeFi 协议和区块链经济的蓝筹 NFT，一切就绪了！

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

As we have emphasized throughout this article, blockchain-native currencies should not be valued using frameworks designed for joint-stock companies.Blockchain economies are more easily understood and assessed as digital counterparts of traditional nation-states，后者出现在威斯特伐利亚条约后——也正是股份公司开始出现的时期。与传统民族国家类似，区块链经济体也处于持续争夺资本、安全和人力资源（即开发者、用户以及一般意义上的定居者）的竞争状态。这正是加密推特心态本能识别的原因——因此才会出现部落主义和最大化主义。这是人类的天性：当一个CommunityWhen a person feels threatened, his or her immune system activates to protect an idea, technology, or set of values that is deemed valuable.

It is important to note that while blockchain economies have some similarities to traditional nation-states, they represent an entirely new paradigm.The boundaries between finance and other economic sectors are blurring, to the point where everything: even art, entertainment, and attention, is monetized to some degree. This fluid nature makes it difficult to distinguish the monetary base from the GDP it represents. However, the traditional economy remains our closest reference point and provides a benchmark for predicting the growth of the blockchain economy.

Now, as a thought experiment, let’s imagine what this would mean for the price of ETH if Ethereum’s growth story could rival the most extraordinary rise of nation states in the past century. Ethereum’s current economic volume (excluding monetary base) is $300 billion, which is consistent withChina's Economy in 1986It took China about 30 years to grow its GDP to $18 trillion, a figure equivalent to the current market value of gold. China’s economic growth is extremely extraordinary, a rare feat for an economy of its size. But it is interesting to imagine a world in which a cyber nation like Ethereum is able to replicate this unprecedented rate of economic growth.

While this comparison may have surprised you, in my opinion, there are real reasons why leading blockchain economies can rival the performance of modern nation-states:

• Digitalization and openness

• Global accessibility

• No capital controls

• Suitable as AI The financial infrastructure that dominates the economy

Assuming the cyber state thrives, Ethereum will be in the midst of extremely expansive DeFi and AI As the sector solidifies its dominance, the final bull case scenario emerges, with the total economic value of the Ethereum network reaching $18 trillion by 2054, matching China’s trajectory over the past 30 years!Under this assumption, how would we apply the GDP model to calculate the price of ETH?

If we adopt a conservative Monetary Base/Total Value ratio of 1.2 (similar to the current US M3/GDP ratio), Ethereum’s market cap would be $21.6 trillion, resulting in an ETH price of $180,000 (not accounting for potential monetary base deflation due to fee burning). However, if we consider the possibility of Ethereum transcending its native ecosystem, similar to the dollar becoming ubiquitous through the Eurodollar system, it could achieve a Monetary Base/Total Value ratio of 1.5 (comparable to the US M4/GDP ratio). In this case, Ethereum’s market cap would be $27 trillion, equivalent to an ETH price of $225,000.

Now, this is not an ETH price prediction or financial advice of any kind, but it is interesting to think about how the GDP framework can provide a powerful lens through which to understand blockchain economies, revealing what they really look like as emerging digital nations or economies. This framework also highlights that, just like traditional national economies, multiple dimensions must be evaluated before making investment decisions.

In this framework, the case for investing in Ethereum lies in its position as the most dynamic and diversified blockchain economy, with an ecosystem covering a wide range of areas from financial services to cultural products, which not only gives it strong hard power, but also establishes significant soft power. This is further demonstrated by Ethereum's ability to attract and retain "sticky capital", a signal that despite short-term price fluctuations, investors still regard it as the safest and most promising smart contract-based economy for long-term wealth preservation.

The article comes from the Internet:What is Ethereum’s GDP?

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