The most erroneous bias against the blockchain industry is the assertion that “all virtual assets have no intrinsic value, so their price will converge to zero.” There are many reasons why virtual asset skeptics have come to this idea.
Due to the nature of the virtual asset market, which operates 24 hours a day, 365 days a year, where global liquidity and financial energy are condensed, it has shown rough price fluctuations based on various external factors. The behavior spread negative perceptions.
In addition, even though virtual assets have a completely new technological base and economic model compared to traditional assets, many people fall into the confirmation bias that ‘virtual assets are fraud’ without fully understanding how individual projects work.
Bitcoin's intrinsic value, digital gold
Bitcoin is the world's first currency designed to be free from governments and financial cartels, and can be quickly transferred anywhere in the world without going through the expensive fees of banks and financial institutions. It is also a hard asset that has stronger security than any traditional financial network and can be hedged against excessive inflation of central banks in each country.
Bitcoin proponents believe that each of these advantages creates strong intrinsic value. Even if you do not agree with this philosophy and value, even the Federal Reserve Chairman Jerome Powell acknowledged that “Bitcoin is an investment asset like gold”. is spreading Currently, the market capitalization of Bitcoin is about 6% of that of gold, and it has advantages over gold such as transparency, transaction efficiency, and ease of storage, so it is likely to account for or even overtake a significant proportion of gold's market capitalization in the long term. Many US institutional investors have already adopted the argument that the price of the company will rise significantly.
As we enter 2021, a new change is taking place in which not only institutions but also countries participate in the Bitcoin network. In February of this year, Kenya's central bank governor Patrick Zorozy announced that he had started using bitcoin as a reserve currency, saying, "Bitcoin can solve the currency devaluation problem triggered by the International Monetary Fund (IMF)." El Salvador became the first country in the world to recognize Bitcoin as a legal currency in June.
El Salvador expects a number of innovations with Bitcoin, including saving huge remittance fees and reducing reliance on the dollar while significantly increasing access to financial services in the country. If Latin American countries, which used unstable fiat currencies following El Salvador, additionally participate in the Bitcoin network, the intrinsic value of Bitcoin as a means of exchange and storage of value is expected to increase.
Although Bitcoin is acknowledged, there are opinions that all other tokens will lose their value, but in fact, the intrinsic value of Ethereum, which aims to be a decentralized world computer, can be explained more clearly. Suddenly, many DeFi (decentralized finance), metaverse games, and non fungible token (NFT) services have been developed in Ethereum just like the App Store, and more and more data transmission and remittance (transactions) are occurring. In May 2021, an all-time high of 45 million transactions were sent to Ethereum, and there were more than 20 million monthly active user accounts. This thriving decentralized network is generating huge commission sales just like Amazon Web Services (AWS).
The intrinsic value of the DeFi token
The estimation of the intrinsic value of DeFi tokens is clearer than that of Bitcoin or Ethereum. This is because the valuation can be approached similarly to those of financial companies with similar business objectives. For example, the decentralized exchange Uniswap generated about 420 billion won in transaction fee sales as of May 2021 and 150 billion won as of June. Interestingly, Uniswap has only 10 developers effectively operating a network that is larger than most large exchanges.
Compared to a centralized exchange that supplies liquidity, reviews listings, and conducts marketing with the capabilities of a huge business organization, Uniswap has many participants in the community voluntarily supply liquidity, lead an open listing, and share the resulting fee and share the protocol together. Many investors say that the potential should be evaluated higher than the traditional business model because it is leading the way.
Valuing the intrinsic value of virtual assets is becoming a hot topic in the blockchain industry with the growth of various on chain data analysis tools. Data of decentralized projects whose main activities are implemented on the blockchain can be viewed by anyone on the blockchain, so it can be inspected more easily and reliably than traditional financial companies. Crypto Quant and Glassnode can analyze Bitcoin on-chain data, and Dune Analytics and Nansen are representative platforms that provide on-chain data of altcoins.
It is based on the structural maturity of the market that a16z, one of the top venture capital firms in the US, was able to launch a third crypto fund worth a whopping 2.5 trillion won on June 24. Just as companies representing the information technology (IT) industry, such as Amazon and Google, have grown in the midst of the dotcom bubble, there are many virtual asset projects that are growing solidly based on a clear business model backed by data in the blockchain industry, which is still an early market. exist. It is expected that discussions on the valuation of virtual assets will become more active in Korea as well.
