🔑 [Analysis] The store of value thesis – Qiao Wang and Dan McArdle

One way of thinking about cryptoasset valuation says that only assets that can become a store of value (SoV) are deserving of high network value. For a coin to be useful, users must want to hold the coin for a while. So whether or not a cryptoasset will become a SoV boils down to: why would people want to hold an asset for a long time versus a short time? &nbsp Cryptoassets must satisfy three properties in order to become a SoV that people are willing to hang on to:

• Immunity to theft: it needs to be immune from malicious actors who may wish to steal from accounts/balances
• Credibly low inflation: is the network technically secure against an attacker who might try to change its rules by force?
• Low cost of conversion: a SoV is something which we don’t need now but can expect to be able to convert to another product or service that we need at some point in the future

We can further deduce second-order properties that lead to these first-order properties

• Immunity to theft requires: small software attack surface, high cost of 51% attack, decentralization, and privacy
• Credibly low inflation requires: small software attack surface, decentralization, and collective commitment to low inflation
• Low cost of conversion requires: utility (direct and indirect) and decentralization

In short, valuing an early-stage cryptoasset boils down to the question of how likely it will acquire and maintain the first, second, and higher-order properties of SoV.