Fidelity Proposes Valuing Blockchains Like Nations Using GDP Formula

Fidelity Investments has proposed a novel approach to valuing blockchains, suggesting that they should be compared to sovereign nations and their economies rather than traditional web2 companies or products. This is due to the embedded currency within blockchains, which Fidelity argues should be valued as money. The firm uses Ethereum (ETH) as a case study to illustrate this concept, applying the traditional GDP formula to blockchain metrics.

The GDP formula, which stands for C + I + G + (X-M), is transposed onto Ethereum blockchain metrics as follows: C represents what users are spending as gas to use decentralized applications or mint non-fungible tokens (NFTs). I denotes the quantity of staked assets or capital in liquidity pools. G is the expenditure by the Ethereum Foundation, including issued ETH to validators. X-M represents the net exports, which includes the minting and burning of stablecoins, bridge flows to and from other chains, and DePIN rewards.

While Fidelity's approach is comprehensive, it raises several questions. GDP is traditionally a measure of domestic production, and when a country exports, it is considered domestic production. However, when stablecoins are bridged onto or off of Ethereum, it inflates the blockchain's "GDP" without any productive activity occurring on the chain. This is contrasted with productive "imports" such as minting stablecoins on-chain or rewarding Helium miners in tokens for providing useful services.

Fidelity's valuation model also explicitly claims that Layer 1 (L1) tokens should be valued based on their function as money, specifically as a medium of exchange and store of value. Fidelity argues that Ether is the dominant trading pair on exchanges and serves as a primary asset to borrow against, justifying its role as a medium of exchange. However, this does not address the "unit of account" aspect of money, which early crypto investors have questioned. John Pfeffer, for instance, argued in 2017 that it is overly simplistic to assume people will hoard the tokens they use for payments.

Account abstraction, formalized by ERC-4337, enables paying gas fees in any ERC-20 token, which improves user experience but removes the need to hoard ETH. This undermines the "monetary premium" of the L1 token. Additionally, staking locks up existing assets without creating new productive capacity, which weakens the predictive link between "Investment" in blockchain GDP and future growth. Furthermore, liquidity provider (LP) deposits can migrate and earn purely extractive airdrops or maximal extractable value (MEV), further complicating the valuation model.