Digital Assets: Beyond Currency—Evolving Sector Dynamics

As the digital asset ecosystem matures, investors and market participants must move beyond the outdated “cryptocurrency” label. Today’s digital assets are more than alternative currencies—they encompass a rich landscape of protocols, decentralized finance, utilities, and consumer applications. Clear taxonomy and an understanding of business models are critical for navigating this new terrain.

Sector Structure and Value Creation

Our sector framework divides non-currency digital assets into Protocols and Applications. Protocols—both Layer 1 and Layer 2—form the foundation for innovation, supporting thousands of diverse applications. Their value accrual mechanisms, such as fee distribution and token burning, create tangible benefits for network token holders.

Applications leverage these protocols to deliver DeFi, utility, or consumer solutions, often paying fees for blockspace and network security. The most successful applications are those that achieve product-market fit, tap into the scale of public blockchains, and align their tokens with growth through robust value capture mechanisms.

Protocols Lead, Applications Innovate

Protocols have already crossed the "valley of death"—demonstrating scalable business models and winning broad regulatory clarity as digital commodities. The recent approval of Ethereum ETFs signals a growing institutional acceptance of these networks.

Meanwhile, applications are entering an accelerated phase of experimentation. Enhanced infrastructure, increased blockspace, and a shifting regulatory landscape are driving a new wave of business model discovery. As regulatory attitudes in the US and other markets become more accommodating, application builders are better positioned to experiment with monetization and value accrual for token holders.

Show, Don’t Tell: Proof Through Performance

The digital asset industry is moving decisively into a “show me” era—where performance, transparency, and sustainable economics matter most. As witnessed by the launch and success of the Bitcoin ETF, investor appetite for proven, revenue-generating models continues to grow. We expect both protocols and applications to increasingly showcase real-world use, clear value distribution, and robust business fundamentals, attracting even greater participation from institutional and retail investors alike.