Framework

-Equity: Companies (Google, Amazon, Facebook) captured value during the internet revolution by controlling and containing the data originating from their platforms

-Open Networks: The blockchain industry is building open protocols that underlie the products built on top of them.

Valuation: Cash Flow vs. Network Valuation

-Companies: The internet industry was previously fueled by companies building closed products and services on top of free, open source protocols.

-Cash Flow: Internet companies are valued based on revenue and profit. Blockchain companies don’t have revenue or profit, they are valued based on use of their network.

-Network Valuation: While some have proposed equations for valuation of protocol tokens, each token is unique and needs to have specific analysis done to evaluate it.

While there are many similarities between blockchain industry and internet 1.0/2.0 industries, there are fundamental differences between them. These nuances will dictate how value will be created, who will capture this value, and what strategy is optimal to build or invest in the space. We believe there are three main distinctions to be made:

Value Capture: Equity vs. Tokens

Value Creation: Companies vs. Open Networks