Author: Alana Levin, Variant

Translation: Hu Tao, ChainCatcher

At Variant, the core of our investment philosophy is the belief that people should be able to own their money, identity, and data.

We seek large markets that can support and expand the ability of individuals and organizations to acquire and own the resources needed for everyday life. Our investments in crypto networks have turned many of these ideas into reality. These networks are coordination protocols centered on sovereignty and autonomy.

However, there are still many questions regarding how to assess the value of these networks. Different protocols and projects have vastly different goals, so important fundamental metrics vary when tracking success and predicting growth.

We believe that all tokens can be classified into one of two categories: Store of Value (SOV) assets or equity-like instruments. Notably, we believe that the Store of Value framework is particularly useful for assessing Layer 1 blockchains (L1)—L1s are among the largest and most important currency coordination protocols in the modern financial system.

After in-depth discussions, we have identified a series of fundamental metrics for understanding, evaluating, and tracking the future development of these networks. This article aims to elaborate on some thought processes, hoping to provide helpful reference for others thinking about these assets.

L1 Assets as a Store of Value

One of our core frameworks is that L1 can be analyzed and modeled as a store of value.

So, what constitutes a good store of value? Our key fundamental elements are as follows (roughly in order of importance):

Technical Durability: Does the asset still exist in 5-10 years? To what extent will its appearance/function remain unchanged?

Scarcity: Is the asset widely available and easy to obtain? How difficult is the asset's inflation? How predictable is the inflation curve?

Censorship Resistance: How easy is it for a single entity to seize the asset? To what extent can economic activities related to the asset be prevented or shut down?

Economic Productivity: Can the asset be used to facilitate economic activities? How useful is it in the financial domain, for example, does it have collateral value?

Memetics: Do others view this asset as having store of value functionality? An important characteristic of any currency is the consensus among society regarding its value and use.

Liquidity: Is this asset broadly applicable to anyone looking to include it in their portfolio (regardless of size)? We placed this last because it is often a downstream consequence of mimetic behavior; liquidity tends to attract more liquidity, and the greater the interest in an asset, the more likely its scale (relative to inflationary currency) will grow. Bitcoin had low liquidity in its early years, but it has now become one of the most liquid assets in the world.

Few markets can exceed the total market size (TAM) of store of value assets. Gold—the largest and most widely recognized store of value—has a market capitalization of up to $31 trillion. Silver also has a market capitalization of $4 trillion. We believe that some L1s are poised to become superior stores of value.

Sovereign Wealth Fund Assets

Currently, three L1 assets stand out and are very likely to become major stores of value: Bitcoin (BTC), Ethereum (ETH), and ZEC. In our framework, they excel in different dimensions.

Bitcoin dominates in memetic recognition, often referred to as "digital gold." The reflexivity of strong memes is a powerful force and an important fundamental consideration that any competitor to store of value assets faces: the more people believe that Bitcoin has store of value functionality, the more likely fringe groups are to adopt that belief. Over the past fifteen years, individuals, funds, corporations, institutions, and even nations have invested in this belief.

Ethereum may be technically more durable than Bitcoin. It is easier to upgrade, and its roadmap provides transparent, traceable, and verifiable insights, demonstrating future plans from the developer community. Looking ahead—and considering new risks brought about by innovations like quantum computing—we believe this adaptability is an advantage, not a flaw. The core of any quality sovereign asset is the belief that it will still exist a decade later. Ethereum has shown robust resilience, withstanding significant technical and social challenges—such as The DAO hacking incident, the merger, and so on—so we believe it will continue to thrive in this regard.

ZCash excels in censorship resistance and privacy protection. The options provided by the shielded pool (ZCash's privacy transaction feature) allow individuals to avoid risks of future wealth confiscation or extensive state surveillance. This is a lasting advantage of ZCash, providing a pathway for individuals to protect their assets long-term.

Overall, the value scale of store of value assets reaches trillions of dollars. This is evident simply from the current state. We believe this space will continue to grow rapidly, and multiple stores of value can coexist.

However, looking at the current market landscape, although digital sovereign wealth funds (SOV) outperform gold or silver on many of the aforementioned fundamental metrics, their proportion in the total SOV market remains very small. For us, this presents an ambitious and exciting opportunity.

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