Grayscale Research presented an approach to valuing crypto assets and ranked 10 crypto protocols using two yield metrics. The firm said the methodology can help assess projects by their economic characteristics rather than relying only on popularity or market expectations.

The analysis examines how protocols’ economic activity and changes in token supply affect asset holders. It uses Tokenholder Yield and Adjusted Earnings Yield to compare protocols’ value-distribution mechanisms and inflation-adjusted earnings with their market valuations.

Grayscale’s approach to crypto asset valuation

Grayscale distinguishes between the valuation of bitcoin and that of other crypto assets. The firm views bitcoin as a digital commodity and a decentralized alternative to traditional money, often comparing it with digital gold. Its valuation is therefore primarily tied to its properties, limited supply and role in the global financial system.

For other crypto assets, including blockchain protocol tokens, Grayscale Research proposes considering the economic activity generated by networks and applications. Onchain platforms collect fees from trading, lending and other financial operations. Revenue remaining after protocol operating costs can be analyzed as an economic basis for valuing a token.

The distribution of that value among ecosystem participants is also central to the analysis. Protocols can direct part of their revenue to token buybacks, token burns or rewards for asset holders, including staking rewards.

However, increases in token supply and token unlocks can dilute holders’ stakes and offset some of the benefits from those mechanisms.

Two protocol yield metrics

Tokenholder Yield measures payouts to tokenholders against changes in supply, including inflationary issuance. Grayscale Research uses it to assess whether holders receive a net yield from a protocol’s value-distribution mechanisms.

Adjusted Earnings Yield measures a protocol’s inflation-adjusted earnings yield relative to its market capitalization while accounting for token supply inflation. The metric allows the economic performance of different projects to be compared with their market valuations.

Protocol yield rankings

Grayscale Research applied the two metrics to 10 crypto protocols. HYPE ranked first for Tokenholder Yield at 8%, narrowly ahead of LIT at 7.9%. CAKE placed third on that measure.

CAKE led the Adjusted Earnings Yield ranking at 14.4%, followed by LIT at 14.1%. HYPE placed third with 9.8%.

The results show that leadership on one measure does not necessarily translate into the top position on the other. HYPE had the highest Tokenholder Yield but ranked third for Adjusted Earnings Yield, while CAKE led on Adjusted Earnings Yield and placed third for Tokenholder Yield. LIT ranked among the leaders on both measures.

Source: Incrypted