Valuing public blockchains has evolved significantly over the years, with many data-driven valuation models now relatively stable. This article aims to explore valuation frameworks for public blockchains and their ecosystems from a fresh perspective.
With the highly anticipated ARB token launch approaching, the market has remained rational. Current valuation models generally converge around a reasonable range of $10–20 billion, supported by metrics like Total Value Locked (TVL), wallet counts, transaction volumes, and active addresses. The market’s valuation of public blockchains has stabilized, though future technological developments could create new growth opportunities—a more challenging form of alpha.
In investing, it's essential to understand what constitutes "normal." Just as one might sense being unwell without knowing the exact illness—frequent bathroom visits or waking up at odd hours—investors should recognize standard valuation patterns. For instance, CEX tokens like BNB typically trade at a Price-to-Earnings (PE) ratio of around 5. Binance’s quarterly reports, along with data from HT and FTX, show this holds true across bull and bear markets, with PE occasionally dipping to 3 or rising to 10.
This consistency stems from "industry认知参数" (cognitive parameters): during early stages of a sector, high growth and uncertainty lead to high valuations. As the industry matures and penetration reaches ~30%, growth slows, valuations stabilize, and earnings drive market cap rather than speculation. Current Layer-2 and zero-knowledge (ZK) projects are in such an early phase.
Valuation Framework for Public Blockchains
Let’s define:
- Public Chain Market Cap (PMC): The market cap of top non-Ethereum smart contract platforms.
- Ethereum Market Cap (EMC): The market cap of Ethereum.
- PE Ratio: PMC / EMC
Current stable market caps (as of recent data):
- ADA: $12B
- MATIC: $11B
- SOL: $8B
- ETH: $210B
Historical PMC/EMC ratios for leading chains:
| Chain | Bull Market PE | Bear Market PE |
|---|---|---|
| ADA | 23% (2017) | 10% (2018) |
| ADA | 17.5% (2021) | 6.4% (2022) |
| EOS | 20% (2018) | 20% (2018) |
| SOL | 16.6% (2021) | 2.8% (2022) |
Current ratios:
- ADA: 5.7%
- MATIC: 5.2%
- SOL: 3.8%
This comparison focuses on the largest non-Ethereum smart contract platform by market cap during each period, leading to:
Valuation Law #1: The optimal non-Ethereum smart contract platform typically has a PE between 6% and 20%.
This law helps evaluate new projects at launch. Using Fully Diluted Valuation (FDV) instead of market cap may be more relevant today due to low initial circulating supplies.
Examples:
- APT launched at FDV $10B, ETH $160B → PE=6.25%. At lows, PE=2.1%. Now at $13B FDV, PE=6.2%.
- OP launched at FDV $6.4B, ETH $210B → PE=3%. At lows, PE=1.5%. Now at $11B, PE=5.2%.
For ARB, at FDVs of $10B, $20B, or $30B, the PE would be 4.7%, 9.5%, or 14.3% respectively (assuming ETH at $210B). Values near the upper end of the 6–20% range may signal overvaluation relative to ETH.
This law applies only to top-tier chains, not lesser projects. It suggests a sell signal when a chain’s PE approaches 20%—not based on absolute price, but relative to ETH’s growth. For example, selling APT at $10 might seem premature if it reaches $100 later, but if ETH also grows, the PE ratio may remain reasonable.
Could this law break long-term? Possibly. In competitive markets, monopolies are rare. Historically, leaders face challengers—whether in geopolitics, tech, or crypto. Bitcoin holds 43% of the crypto market cap, Ethereum 18%. A smart contract platform could someday challenge ETH’s dominance, but achieving 50% of ETH’s market cap would require immense time and effort, especially as ETH itself grows.
Valuation Framework for Ecosystem DEXs
Define:
- DEX Fully Diluted Valuation (DFDV)
- Public Chain Fully Diluted Valuation (PFDV)
- DP Ratio: DFDV / PFDV
DEXs are central to most ecosystems, making their valuation a useful benchmark.
Current DP ratios (FDV basis):
- UNI (ETH): $6.5B / $210B = 3%
- CAKE (BNB): $3B / $68B = 4.4%
- JOE (AVAX): $0.18B / $12B = 1.5%
- ORCA (SOL): $0.08B / $12B = 0.6%
- Quickswap (MATIC): $0.084B / $12B = 0.7%
- Velodrome (OP): $0.15B / $11B = 1.3%
Bull market highs:
- UNI: FDV $40B, ETH $400B → DP=10%
- ORCA: FDV $1.8B, SOL $95B → DP=1.9%
- JOE: FDV $2.2B, AVAX $54B → DP=4%
Despite UNI’s 10% peak—driven by monopoly premiums and early DeFi hype—typical DEXs now rarely exceed 3%. UNI’s price relative to ETH has stabilized in a 0.002–0.006 range, implying a 2–6% market cap ratio. Given UNI’s unique position, we consider 3% a sustainable upper bound for conventional DEXs.
Valuation Law #2: A typical DEX’s DP ratio常态化 ranges from 1% to 3%.
This law helps identify undervalued and overvalued opportunities.
For undervalued cases: Emerging ecosystems like zkSync or StarkNet might host DEXs reaching 1–3% of their chain’s FDV. If such a chain is valued at $8B, its DEX could hit $80M–$240M FDV. Early participation is possible since ecosystem DEXs may launch before the chain’s token.
For overvalued cases: When a DEX’s DP nears or exceeds 3%, it may be overvalued relative to its chain. For example, ZyberSwap on Arbitrum hit $400M FDV. If ARB’s FDV is $10B or $20B, ZyberSwap’s DP would be 4% or 2%. Since conventional DEXs face intense competition and low moats, values near 3% suggest swapping the DEX for the chain token.
Similarly, Camelot on Arbitrum at $430M FDV would have a DP of 4.3% or 2.15% depending on ARB’s valuation—caution is warranted near the upper range.
With this DEX valuation anchor, evaluating other ecosystem sectors—lending, derivatives, NFTs, gaming—becomes more systematic.
Frequently Asked Questions
What is the PE ratio for public blockchains?
It’s the ratio of a non-Ethereum smart contract platform’s market cap to Ethereum’s market cap. Historically, top chains fluctuate between 6% and 20%, providing a benchmark for new launches.
How can I use these valuation laws?
For new chains, compare their FDV to Ethereum’s market cap to gauge if they’re over or undervalued. For ecosystem projects, compare DEX FDV to the chain’s FDV. Values near the upper end of ranges may signal overvaluation.
Do these laws apply to all blockchains?
No, they’re intended for top-tier chains with strong ecosystems and adoption. Lesser chains may not reach these ratios.
Why is 3% a key level for DEX valuations?
Data from major DEXs like UNI, CAKE, and JOE show that during stable markets, their FDV settles near 1–3% of their host chain’s FDV. Bull markets can push this higher, but it often reverts to mean.
How does token circulation affect these models?
Many new projects have low circulating supplies, so FDV may be more useful than market cap for apples-to-apples comparisons, especially at launch.
Can these ratios change over time?
Yes, as technology and competition evolve, these ranges may shift. However, historical data provides a reliable baseline for current decision-making.
This analysis offers a framework for valuing chains and their ecosystems based on historical patterns and relative ratios. While focused on DEXs, the principles can extend to other sectors like lending or NFTs. Further research could refine these models for broader application.
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