Variant: Three types of L1 assets are highly likely to become the primary store of value

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Author: Alana Levin, Variant

Translation: Hu Tao, ChainCatcher

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

We look for large markets that can support and expand individuals and organizations in acquiring and owning the resources needed for daily life. Our investments in crypto networks have turned many such ideas into reality. These networks are coordination protocols centered on sovereignty and autonomy.

However, there are still many questions about how to evaluate the value of these networks. Different protocols and projects vary greatly in their goals, so when tracking success and predicting growth, the key fundamental indicators also differ.

We believe that all tokens can be categorized into one of two types: store of value (SOV) assets or tools similar to equity. Notably, we think the store of value framework is very useful for evaluating Layer 1 blockchains (L1)—which are among the largest and most important monetary coordination protocols in the modern financial system.

After in-depth analysis, we have identified a set of fundamental indicators for understanding, evaluating, and tracking the future development of these networks. This article aims to share some of our thought processes, hoping to provide useful references for others considering these assets.

L1 Assets as a Means of Store of Value

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

So, what makes an asset a good store of value? Our key fundamental factors are as follows (roughly ordered by importance):

Technological Durability: Will the asset still exist after 5-10 years? To what extent will its appearance/functionality remain unchanged?

Scarcity: Is the asset widely available and easily accessible? How easy is it for the asset to experience inflation? How predictable is the inflation curve?

Censorship Resistance: How easily can a single entity seize or block this asset? To what extent can economic activities related to this asset be prevented or shut down?

Economic Productivity: Can this asset be used to facilitate economic activity? How useful is it in finance, for example, does it have collateral value?

Memetics: Do others perceive this asset as having store of value properties? An important feature of any currency is societal consensus on its value and utility.

Liquidity: Is this asset broadly applicable to anyone wishing to include it in their portfolio (regardless of size)? We consider this last because it is often downstream of mimetic behavior; liquidity tends to generate more liquidity, and the more interest there is in an asset, the more its scale (relative to inflationary currencies) is likely to grow. Bitcoin had low liquidity in its early years, but now it is one of the most liquid assets in the world.

Few markets exceed the total addressable market (TAM) of store of value assets. Gold—the largest and most widely recognized store of value—has a market cap of $31 trillion. Silver’s market cap is also around $4 trillion. We believe some Layer 1 assets have the potential to become superior stores of value.

Sovereign Wealth Fund Assets

Currently, three Layer 1 assets stand out as highly likely to become primary stores of value: Bitcoin (BTC), Ethereum (ETH), and ZEC. In our framework, they perform well across different dimensions.

Bitcoin dominates memetic recognition, often called “digital gold.” The strong memetic reflexivity is a powerful force and fundamental consideration for any store of value: the more people believe Bitcoin has store of value properties, the more marginalized groups are likely to believe it too. Over the past fifteen years, individuals, funds, corporations, institutions, and even nations have invested in this belief.

Ethereum may be more durable technically than Bitcoin. It is easier to upgrade, and its roadmap offers transparent, traceable, and verifiable insights into future development plans by the developer community. Looking ahead—considering new risks from innovations like quantum computing—this adaptability is an advantage rather than a flaw. The core of any high-quality sovereign asset is the belief that it will still exist in ten years. Ethereum has demonstrated strong resilience, surviving major technical and social challenges—such as The DAO hack, the merge, and others—and we believe it will continue to thrive in this regard.

ZCash excels in censorship resistance and privacy protection. Just the option provided by shielded pools (ZCash’s privacy transaction feature) allows individuals to avoid the risk of future wealth confiscation or extensive government surveillance. This is a lasting advantage for ZCash, offering a long-term way for individuals to protect their assets.

Overall, the value scale of store of value assets reaches trillions of dollars. This is evident from the current situation. We believe this field will continue to grow rapidly, with multiple store of value methods coexisting.

However, looking at today’s market landscape, although digital sovereign wealth funds (SOV) outperform gold or silver on many fundamental indicators, their share of the total SOV market remains small. To us, this presents an ambitious and exciting opportunity.