Why Blockchain Valuation Models Are Still Up for Debate

Valuing blockchain networks contiguous feels similar déjà vu for anyone who lived done the aboriginal net era. In the 1990s, analysts, investors, and founders struggled to use acquainted fiscal models to a radically unfamiliar technology. Companies with small much than a website and a transportation platform were valued successful the hundreds of millions, sometimes billions, based connected thing arsenic intangible arsenic “eyeballs.”

It didn’t extremity well. And yet, successful hindsight, those chaotic aboriginal years offered invaluable lessons: exertion evolves faster than finance, and valuation models indispensable yet accommodate to the signifier of innovation.

Today, we’re facing a akin dilemma successful the blockchain space. Despite increasing adoption, maturing infrastructure, and undeniable taste and economical momentum, there’s inactive nary wide accepted oregon standardized mode to worth a blockchain network. And the fewer models we have, portion directionally useful, stay flawed oregon incomplete.

To recognize wherever we mightiness go, it’s worthy revisiting however we got here.

The First Internet Valuation Wave: Eyeballs, Not Earnings (mid 1990s-2000)

In the mid-to-late 1990s, the net was a frontier. Investors didn’t cognize what “success” would look similar for integer companies, truthful they leaned connected immoderate they could measure: leafage views, banner advertisement impressions, unsocial visitors, oregon monthly progressive users (MAUs). These crude proxies for attraction became the de facto metrics for value. The logic was simple: if millions of radical were visiting your site, monetization would yet follow.

Valuations soared. Startups similar Pets.com (see image), Webvan, and eToys raised hundreds of millions connected the committedness of dominance. But gross was an afterthought, and profitability was a punchline. When the dot-com bubble burst successful 2000, it became wide that attraction without monetization is simply a mediocre instauration for endeavor value.

The Post-Crash Realignment: Revenues and Margins (2001-2005)

After the archetypal net bubble burst, capitalist sentiment changed dramatically. The marketplace demanded proof, not conscionable vision. From 2001 onward, companies were expected to make meaningful revenue, amusement gross margins, and determination toward profitability.

This play saw a ruthless weeding retired of unsustainable models. Only companies with existent products, existent customers, and realistic financials survived. Amazon, for example, began to displacement capitalist absorption from abstract aboriginal imaginable to existent operational performance. Its quality to amusement accordant top-line maturation and amended borderline subject helped rebuild confidence.

eBay became a paragon of clarity: a profitable, transaction-based concern with a scalable model. These survivors taught investors to measure net companies much similar accepted businesses, with income statements that mattered.

The Rise of SaaS and Unit Economics (2005-2015)

By the mid-2000s, a caller exemplary emerged, Software arsenic a Service (SaaS), and with it came a caller connection of valuation. Rather than relying connected unpredictable advertizing oregon retail margins, SaaS businesses offered predictable recurring-revenue streams, a game-changer for some founders and financiers.

This epoch gave emergence to metrics like:

• Annual Recurring Revenue (ARR) and Monthly Recurring Revenue (MRR)
• Customer Acquisition Cost (CAC) and Lifetime Value (LTV)
• Churn, nett retention, and the Rule of 40 (growth + borderline ≥ 40%)

These portion economics allowed for sharper penetration into a company’s operational wellness and scalability. Investors began to worth maturation ratio and recurring revenue, rewarding companies with sustainable, high-margin models and beardown lawsuit stickiness.

SaaS companies could beryllium unprofitable, but lone if their metrics told a wide story: get customers cheaply, support them for years, and grow wallet stock implicit time. This attack became the backbone of modern tech valuation and remains a ascendant lens today.

The Platform Era: Network Effects and Ecosystem Value (2015-Present)

By the 2010s, companies similar Facebook, Google, Uber, and Airbnb redefined what worth looked similar online. These weren’t conscionable businesses, they were platforms. Their powerfulness laic successful aggregation, information control, and the web effects that made them progressively ascendant the much they grew.

Valuation models evolved accordingly. Analysts began measuring:

• Network effects (value increasing with each caller user)
• Ecosystem extent (third-party developer activity, marketplaces, plug-ins)
• User engagement and information lock-in

Companies were present rewarded not conscionable for revenues, but for gathering infrastructure others depended on. This was a qualitative shift, valuing strategic position, not conscionable currency flow.

Today’s Internet Giants: Profit, Efficiency, and AI Moats

In the 2020s, tech valuation matured. Public investors present absorption connected operational efficiency, profitability, and escaped currency flow. Growth astatine each costs is out; the “Rule of 40” is in. (It says that a company’s maturation complaint positive escaped currency complaint should adjacent oregon exceed 40%).

Companies are valued based connected sector-specific performance: SaaS has its ain yardsticks, e-commerce others, fintech inactive others. Meanwhile, intangibles similar proprietary AI models, information ownership, and infrastructure moats are progressively cardinal to however tech leaders are priced.

In short, valuation became some much specialized and much rational, tailored to what really drives worth successful each integer sector.

What This Means for Blockchain

Despite each this progress, blockchains stay successful valuation limbo. We spot attempts to use accepted metrics, similar DCF (discounted currency flow), validator revenue, oregon protocol fees, but these often miss the point. This is the equivalent of valuing Amazon successful 1998 by its shipping costs.

Blockchains are nationalist infrastructure, not backstage companies. Many trust connected subsidies oregon token emissions that inflate revenues but don’t bespeak existent demand. Moreover, arsenic decentralized systems, they aren’t designed to extract profits, but to alteration permissionless coordination and trustless economical activity.

Other valuation methods person emerged—each offering portion of the puzzle:

• MSOV (Monetary Store of Value) models worth a concatenation by however its token is staked oregon deposited successful DeFi. Helpful, but static.
• Onchain GDP aims to measurement economical output crossed apps and chains. Smart successful theory, but hard to normalize and casual to distort.

None of these models has emerged arsenic dominant, comprehensive, oregon wide accepted. And the information furniture facet of blockchains is inactive missing from immoderate valuation framework.

A New Lens: Valuing Velocity and Flow

To determination forward, we request models that bespeak what blockchains really do. That’s wherefore I’ve projected a valuation model based connected velocity and flow, a measurement of however wealth and assets determination done a blockchain economy. It focuses connected usage patterns, transaction loops, and superior reuse, much akin to economical circulation than static metrics, and it has parallels with the internet’s much mature level era, the past frontier of integer system valuations.

This exemplary examines:

• Stablecoin turnover and velocity
• DeFi lending, trading, collateral
• NFT trading dynamics (purchases, royalties)
• Layer-to-layer bidirectional plus flows
• Real World Assets tokenization volumes (purchases, royalties, appreciations)
• Real superior enactment and reusability crossed apps
• Medium of speech fees for collateralizing, settling, oregon bridging assets and transactions

This attack offers a autochthonal and resilient mode to measurement blockchain value. It focuses not conscionable connected what sits successful the system, but what moves, and question is the clearest motion of trust, utility, and relevance, conscionable arsenic existent money’s velocity is simply a commonly accepted measurement of an economy’s vitality.

Conclusion: Build the Model the Future Deserves

The net taught america that each technological displacement demands a caller fiscal lens. Early models volition ever beryllium clumsy, but the worst mistake is sticking with frameworks that nary longer fit.

Blockchains are inactive searching for their rightful valuation narrative.

The valuation frameworks of the aboriginal volition beryllium built, not inherited. And conscionable arsenic aboriginal net investors had to invent caller tools to recognize what they were seeing, the blockchain satellite indispensable present bash the same.

If we get this right, we won’t conscionable worth blockchains much accurately, we’ll unlock a deeper knowing of their economical and societal potential.