Speculation and The Smart Contract Wars

“No one is using it. There’s no way this ghost chain should be valued this much versus ETH.” - overheard on Twitter

Sometimes people forget that markets are forward looking. But before we dive into smart contract platform valuations, first some background.

Today smart contract platforms are once again the center of speculation, but this time with a twist. Unlike prior cycles, smart contract platforms are no longer mere ideas for world computers, they’re lively ecosystems of users, capital, and applications that are collectively driving trillions of dollars in economic activity. Ethereum has led the charge here, now securing over $700 billion in assets, transacting more than $2.5 trillion per quarter, and hosting thousands of applications. It has been rewarded handsomely for this growth with Ethereum reaching an all-time high $450 billion market capitalization in recent months.

But it is not alone in this surge.

As Ethereum sits at a pivotal stage on its scaling roadmap and struggles to support rising user demand, a window of opportunity has opened. With the promises of scalability now, smart contract platform competitors have pushed aggressively to lure users to their own chains offering UX improvements and incentives. These offerings have been rewarded with activity increasing substantially on these chains over the past couple months as gas prices on Ethereum continue surging. Unsurprisingly, speculators are piling into these platforms’ corresponding tokens as Ethereum’s dominance gets thrown into question.

However, as many point out, price action isn’t always indicative of value, and even though activity on Ethereum’s competitors has grown substantially, it's still just a fraction of the activity on Ethereum. So small that you begin to ask are these valuations rational? Why are some competitors worth double digit percentages of Ethereum, yet have single digit percentages of its activity?