Given the total addressable market for digital on-chain transactions is far bigger than the current DeFi market size, worth around $200B, Grayscale said DeFi protocols powered by smart contracts are still being undervalued.
The current capital markets alone are 500x more than the DeFi market, Grayscale outlined. In addition, NFT-associated transactions and Metaverse-related applications could critically drive up the value of base chains.
American Cities Analogous to Blockchain Protocols
The report quoted a framework developed by Dragonfly Research, which referred to well-known smart contracts platforms as “digital cities.”
Ethereum is like New York City, the report noted. Though vast, expensive, and congested in certain areas, the network features the most crowded and richest blockchain protocol, “with over 500 apps that command a total value of over $100 billion—more than 10x larger than any other competing network.”
On the other hand, the L2 solution Polygon, built on top of Ethereum, was considered a skyscraper in NYC, which scaled by building upwards. Polygon combines and settles many transactions internally in order to reduce the congestion derived from the base chain.
When it came to Avalanche, the report stated that it is like Chicago because “the network is smaller, transactions are cheaper and less congested, and development is more centralized,” while its ecosystem feels like a “smaller subset of Ethereum’s ecosystem.”
Solana, which operates on a different consensus mechanism and whose speedier L1 chain makes it distinct from Ethereum, is similar to Los Angeles.
Besides, as NFT and the Metaverse continue to gain attention and attract capital, Grayscale believes the combined market cap for DeFi and Metaverse applications is likely larger than the $2 trillion market cap of cryptocurrency. As the operating layers for these applications, smart contract platforms are expected to quickly grow their user bases as well.
Grayscale Put out a New Basket of Altcoins for Investors
Last Tuesday, Grayscale announced the launch of a new diversified crypto fund consisting of major smart contract protocols like SOL, ADA, AVAX, and more.
Grayscale’s other products include its Bitcoin Trust, which comprises the largest Bitcoin fund in the world. It has attempted to convert this fund into a US-based spot ETF but is yet to be approved by the SEC.