Author: Alana Levin , Variant

Compiled by: Hu Tao, ChainCatcher

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

We seek out large markets that can support and expand individuals' and organizations' access to and ownership of the resources they need for daily life. Our investments in encrypted networks have already brought many of these ideas to life. These networks are based on coordination protocols centered on sovereignty and autonomy.

However, many questions remain about how to assess the value of these networks. Different protocols and projects differ greatly in their objectives, therefore, the key metrics for tracking success and predicting growth also vary.

We believe all tokens fall into one of two categories: stores of value (SOV) assets or equity-like instruments. Of particular note, we believe the store-of-value framework is extremely useful for evaluating Layer 1 (L1) blockchains—one of the largest and most important monetary coordination protocols in the modern financial system.

Through in-depth discussion, we identified a set of fundamental metrics for understanding, evaluating, and tracking the future development of these networks. This article aims to elucidate some of our thought process, hoping to provide a useful reference for others considering these assets.

L1 assets can serve 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 kind of assets qualify as good stores of value? Our key elements are as follows (roughly ranked by importance):

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

Scarcity: Is the asset widely available and easily accessible? How easily is the asset subject to inflation? How predictable is the inflation curve?

Censorship resistance : How easily can a single entity seize the asset? To what extent can economic activities related to the asset be blocked or shut down?

Economic productivity : Can this asset be used to stimulate economic activity? How useful is it in the financial sector, for example, does it have collateral value?

Memetics : Do others believe this asset has a store of value function? An important characteristic of any currency is that society reaches a consensus on its value and use.

Liquidity: Is this asset widely applicable to everyone looking to include it in their portfolio (regardless of size)? We consider this last because it is often a downstream phenomenon of mimicry; liquidity tends to lead to more liquidity, and the greater the interest in an asset, the more likely its size (relative to inflationary currency) is to grow. Bitcoin was not very liquid in its early years, but it is now one of the most liquid assets in the world.

Few markets exceed the total market size (TAM) of stores of value . Gold —the largest and most widely accepted store of value—has a market capitalization of $31 trillion. Silver's market capitalization has also reached $4 trillion. We believe that some Level 1 assets have the potential to become superior stores of value.

Sovereign wealth fund assets

Currently, three L1 assets stand out as having the potential to become the primary store of value: Bitcoin (BTC), Ethereum (ETH), and ZEC . Within our framework, they each excel in different dimensions.

Bitcoin dominates meme perception, earning it the nickname "digital gold." The reflexivity of strong memes is a powerful force and a crucial fundamental consideration for any competitor to this store of value: the more people believe Bitcoin functions as a store of value, the more likely marginalized groups are to believe it does as well. Over the past fifteen years, individuals, funds, corporations, institutions, and even nations have invested in this belief.

Ethereum is technically more durable than Bitcoin. It's easier to upgrade, and its roadmap provides transparent, traceable, and verifiable insights into the future plans of the developer community. Looking ahead—and with the new risks brought by innovations like quantum computing—we believe this adaptability is an advantage, not a disadvantage. At the heart of any high-quality sovereign asset lies the belief that it will still exist a decade from now. Ethereum has already demonstrated remarkable resilience, withstanding significant technical and social challenges—such as The DAO hack, mergers, and more—and we believe it will continue to thrive in this regard.

ZCash excels in censorship resistance and privacy protection. The option offered by its shielded pools (ZCash's privacy-focused trading feature) allows individuals to avoid the risk of future wealth confiscation or widespread state surveillance. This is a lasting advantage of ZCash, providing individuals with a long-term means of protecting their assets.

Overall, the value of stores of value is in the trillions of dollars. This is evident from the current situation alone. We believe this sector will continue to grow rapidly, and multiple stores of value can coexist.

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