Blockchain networks based on smart contracts, like Ethereum, are becoming emerging network nations. They manifest not only through technology stacks but also through currency jurisdictions and reserve currencies, shared values and beliefs, common histories and cultures, and sometimes even foundational myths. This article is derived from a piece written by Diario and compiled and translated by PANews. (Previous context: Is Ethereum doomed? Solana Raydium's trading volume has surpassed Uniswap for two consecutive months, with ETH ecosystem funds experiencing a net outflow of $1.2 billion in a month) (Background information: A senior Ethereum developer jumps to Solana: Feeling frustrated with Ethereum… Community responds: SOL is just a paper tiger with financial power) Traditional valuation methods for blockchain networks often fall into misconceptions, viewing blockchain networks as enterprises and using formulas designed to calculate fair stock prices, which are based solely on very narrow considerations. This approach has fundamental flaws. Blockchains, especially smart contract platforms like Ethereum, are not enterprises. As I explained in previous articles, they are emerging, sovereign digital economies with their own reserve currencies. These currencies not only serve their native networks but can also play roles in value storage (SoV), unit of account (UoA), and medium of exchange 'overseas'—for example, $ETH serves not only its original mainnet but also permeates and becomes a reserve currency in multiple extension networks (L2), which belong to its currency jurisdiction and even thrive beyond those borders (similar to how the US dollar operates today). Moreover, proof-of-stake blockchains (POS) introduce mechanisms similar to bonds, where participants stake assets to secure the network in exchange for future returns. These dynamics reflect the structure of national economies, with financial instruments supporting their defense and current and future operational stability. In other words, blockchain networks based on smart contracts, like Ethereum, are becoming emerging network nations—digital nations. They manifest not only through technology stacks but also through currency jurisdictions and reserve currencies, shared values and beliefs, common histories and cultures, and sometimes even foundational myths. Gross Decentralized Product To meet the demand for a more suitable valuation framework for these emerging digital economies, we propose the Gross Decentralized Product (GDP) approach, which captures not only the total money supply but also the economic activities of the blockchain ecosystem. Unlike the Gross Domestic Product (GDP) of traditional economies, Gross Decentralized Product covers a broader scope: it considers economic activities generated within the ecosystem and monetary base as well as the market value of protocols, decentralized applications, and cultural assets built on specific blockchains. The theoretical foundation behind this extension framework is the normalization shift represented by blockchain economies. Although these ecosystems share similarities with traditional national economies, their fundamental difference lies in the liquidity of every aspect of the economy, which possesses some degree of monetization. In this normalization, outputs and production factors are not just components of the economy; they also become forms of 'money' that can be traded and monetized on-chain. Therefore, the most effective way to invest in such blockchain economies is through their native currencies. These currencies support all economic activities on the blockchain through programmatically set supply caps. Their value is closely related to the system's growth, reflected in the continuously rising market value. Over time, the native assets of the most successful blockchain economies will generate monetary premiums, becoming the most original form of collateral in their ecosystems, gaining status as reserve assets for value storage (SoV) in the broader crypto space and even the real world. Below, we outline the key indicators that constitute the framework using Ethereum and other leading blockchain networks as examples. Note: All data used in this article is sourced from Token Terminal, DeFiLlama, and NFT Price Floor, as of November 26, 2024. 1⃣ Market Capitalization: Measuring Currency Sovereignty The market capitalization of a blockchain's native currency can serve as a representation of its monetary base and economic scale, similar to how the M2, M3, and M4 money supplies function for the US dollar. As mentioned, sometimes the monetary base extends beyond the blockchain's mainnet, as its native currency becomes a reserve for a series of network extensions (such as ETH's L2s/L3s), and even assets on other blockchains outside the same currency jurisdiction can be transferred through bridging. It is important to note again that since the monetary base (supply) of the blockchain cannot be arbitrarily increased, we observe that whether when its native economy expands or when its native currency transcends its own network boundaries and colonizes foreign economies, it is an increase in its legal value to maintain and support economic growth. This is why every time we mention the monetary base, we refer to market capitalization. If we use the simplest money supply (M1/M2) as an indicator, the top blockchain economies are: BTC: $1.82 trillion, ETH: $400 billion, SOL: $108 billion, BNB: $90 billion, TRON: $16 billion. Including LST and LRT tokens here is akin to measuring the M3 or M4 money supply of smart contract-based blockchain economies. For example, ETH's M1/M2 is $420 billion, M3 is $467 billion (LST), and M4 is $481 billion (LST + LRT). 2⃣ Total Value Locked (TVL): Capital Utilization in DeFi TVL measures the value of assets locked in decentralized finance (DeFi) protocols. Critics question its utility, but it remains a powerful indicator of active economic activity on the blockchain. For decentralized economies, this metric is akin to tracking the scale of financial intermediary activity in a national economy. Not only that, it also indicates the reliability and security of the currency jurisdiction, as well as its ability to attract not only investors wishing to engage in short-term trading but also those looking to store wealth for longer periods. The top blockchain economies ranked by TVL are: ETH: $66.6 billion, SOL: $9.25 billion, TRON: $8 billion, BNB: $5.5 billion, BTC: $4.4 billion. 3⃣ L1 Transaction Fees: Revenue from Economic Activity The fees generated by the blockchain reflect users' valuation of accessing its services. These fees represent the 'tax revenue' of the blockchain and are directly counted in its GDP. Having a strong and sustainable fee market is fundamental; it must achieve a perfect balance to provide global accessibility for users and protocol/application deployers, maintain operational stability and network security, while ideally offsetting monetary issuance. Otherwise, you may end up trapped in a dysfunctional system, as we see today in heavily indebted economies. The top blockchain economies ranked by annual fee revenue are: ETH...

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