Thread by @SolBeachBum

The #Solana community needs to get smarter around Sol's economics.

On Monday, myself and @StrategicHash will release our Solana Financial Model - showing forecasted revenue growth and potential valuations.

But in the meantime, how should L1 assets even be valued?

A thread 🧵

L1 assets are completely new, with various unique properties vs tradfi assets

Previous crude attempts have been made to value L1 assets, such as the famous Bitcoin Stock to Flow model

However this only looks at the supply side + ignores revenue accruing assets such as Eth/Sol

Assets can be split up into 3 buckets:

👉Income producing Capital Assets (stocks)

👉Commodities (oil, wheat)

👉 Store of Value Assets (Gold)

Some assets cross between 2 buckets (Gold = commodity + SOV; Stocks = Capital Asset + SOV)

But no assets cross all 3 distinctions...

That is - until Layer 1 assets were created

Thats right. Assets like Eth and Sol are the world's first Triple Point asset

Capital Assets - stakers earn yield ✅
Commodity - burn Sol for blockspace✅
Store of Value / Medium of Exchange - used to collateralise stables/buy NFTs✅

Gold is used in electronics and jewellery - and it's utility value is worth ~10% of its actual value

Therefore its SOV properties must account for the additional 90% of its $13tn market cap

It's valuation is made up of the cumulative worth of its different asset classifications

We should therefore be valuing Sol and Eth in exactly the same way. Trying to derive their value from the cumulative worth of their various asset classifications.

But do all Layer 1 Assets possess all these 3 properties? And is it to the same degree?

The answer is no.

Assets like Cosmos and Avax are only utilised on their own chains for payments. On Avax's subnets, and Cosmos' side chains, other assets are used for fee payments - and other validators accrue MEV revenues.

This will have a big impact on their SOV premium

Eth shouldn't have any issues, right?

Well...

All its Layer 2s (with the exception of Base) use other tokens for fee payments to the L2 sequencers

Plus, MEV at the L2 layer is captured by the L2 sequencers and not the L1 validators

If 98% of Eth users are going to the L2s...

Then what does that mean for Eth's income accrual going forward?

And will this impact their strength as a SOV in the EVM ecosystem.

Because if 1 or 2 L2s begin to dominate, and are responsible for housing over 40% of total Eth volumes - won't their asset also become a SOV?

Now take Solana

It doesn't rely on L2s for scaling

👉So all MEV accrual will flow to Sol validators

👉All fee income will accrue to Sol validators

👉Sol will remain the canonical asset on Solana

Should the Eth and Sol ecosystems achieve the same volumes and fee accruals — Sol would be valued higher as a result of its reduced leakage.

Due to Sol’s monolithic scaling solution - it not only wins out on UX and composability

It also best preserves value accrual to the asset

I have written more fully on this subject at the following blog post
medium.com/@solbeachbum/h…

Watch out for the 🎉Solana Economic Model🎉 being released on Monday!!

As ever - if you enjoyed this, please drop myself and @StrategicHash a follow

And listen to @UnlayeredPod people!