How can you figure out if a chain is undervalued?
Hi HODLers and DeFi lovers,
Considering the ever moving space, to have a great perfomance, one shoudl always look at the current Layer 2 landscape. A few weeks ago, Solana had an incredible Bull run thanks to a vibrant ecosystem and VC support.
For the past few days, Avalanche another ETH competitor is having great momentum in terms of project, price and TVL.
But how do you value these protocols despite knowing some have a lot of dapps and other a less dynamic ecosystem.
Centralized or decentralized?
This is an underrated metrics as it does not work every time. But most of the time, investors and users value decentralization.
Bitcoin and Ethereum are quite decentralized chains and are the Top 2. At the 3rd spot we have Binance Smart Chain which is a mostly centralized chain with puppet nodes.
Binance Smart Chain has been quite stagnating for the past months. Mostly due to a strong regulatory push by the US to kick them out. Binance has focused mostly on making sure it could operate in the future in developed economies and let his chain grow by itself. This was also the first mass market alternative to Ethereum due to low fees and numerous dapps.
Solana and Avalanche are clearly not fully decentralized networks but much more than Binance and have been gaining momentum with a great gaming, NFT and DeFi ecosystems.
I have my eyes on Fantom which in my opinion should be in the same bucket as it has a good amount of developers, decentralization and dapps.
Market Cap / TVL
This is a valuation metric to compare each chain in terms of valuation / TVL.
Fantom seems anormally cheap compared to other networks. I do not take into account TRON as it is very centralized and lately Justin Sun brought back all its assets and therefore inflated the denominator.
Heco is less centralized than TRON but it would be as much as BSC so I am also not very interested.
Kava is also a new chain to keep an eye on and sitting on the same ratio type.
Are these ratios changing your view?
Stay safe out there and keep farming !
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I don't use consider this approach before. Thanks for sharing another way to do research.
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My pleasure, thanks for your kind comment ;)
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This post made me understand some things I hadn't understood before. I thought Solana was totally decentralized. Then it's the first time I've heard of Heco. Where does the HECO blockchain come from? What is your token?