It took me some time to find the right parameters to compare Ethereum (ETH) with the other smart contract cryptos. I wanted to keep it simple:
- First, there is the Fully Diluted Valuation (FDV). That's the max supply multiplied by the price of the crypto. So it takes into account all the new coins or tokens that can be minted.
- Then, there is the Total Value Locked (TVL). It shows how much value is locked in the DeFi (Decentralized Finance) protocols on the chain of the coin or token.
The result below is given for 5 cryptos: Ethereum (ETH), Arbitrum (ARB), Polygon (MATIC), Optimism (OP) and Solana (SOL).
The lower the FDV/TVL ratio is, the better it is:
- ETH and ARB seem to be currently the best assets. However, Ethereum has an advantage, since all the gas fees on Ethereum are paid in ETH, and the layer-2 chains built on top of Ethereum mainnet like Arbitrum need to pay gas fees in ETH too...
- MATIC and OP are at the same level, i.e., about 50% too expensive compared to ARB... However, as MATIC is used to pay gas fees on Polygon, it has an advantage over OP which is only used for governance.
- SOL is about 4 times too expensive compared to MATIC and 6 times too expensive compared to ETH...
The FDV/TVL ratio is only one of the parameters to be considered. In the short term, the speculation can affect the value of a crypto independently from its TVL. However, in the longer term, this ratio will have an impact on the value of each of these cryptos.
Disclaimer: this article does not contain any financial advice. The information is provided for general informational and educational purposes only.
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