combined with intrinsic mechanisms to break down monopoly effects, mean that the vast majority of this economic surplus will accrue to users. While tens or perhaps hundreds of billions of dollars of value will also likely accrue to the cryptoassets underlying these protocols and therefore to investors in them, this potential value will be fragmented across many different protocols and is generally insufficient in relation to current valuations to offer a long-term investor attractive returns relative to the inherent risks. The one key exception is the potential for a cryptoasset to emerge as a dominant, non-sovereign monetary store of value, which could be worth many trillions of dollars. While also risky, this potential value and the probability that it might develop for the current leading candidate for this use case (Bitcoin) would appear to be sufficiently high to make it rational for many investors to allocate a small portion of their assets to Bitcoin with a long-term investment horizon. We can break cryptographic token use cases into three broad categories: 1. Network backbone / Virtual Machine (e.g., Ethereum) 2. Distributed applications (Dapps) 3. Money, and in particular: a. Payments b. Monetary store of value. I will start by looking at the first two use cases from a general perspective and then dive deeper in analysing the largest current example of the first one, Ethereum. I’ll then turn to a discussion of the different functions of money, the potential for cryptoassets to perform them and the implications for the value of such cryptoassets, including Bitcoin. The economics and valuation of utility protocols Use cases 1 and 2 can be grouped into what I call utility protocols. I will start with some general observations on utility protocols and the implications for their network valuation at equilibrium and then specifically consider the network value of Ethereum at mature equilibrium. General observations A blockchain protocol is a database maintained by a decentralised consensus mechanism operated by its nodes. Utility protocol tokens serve to provision scarce network resources: the processing power, memory, and bandwidth necessary for maintaining the blockchain in question. These resources have a real-world cost in terms of energy and the equipment employed, and these costs are borne by the miners who maintain the blockchain by providing computational services. The miners may be remunerated for their service with block rewards, paid in protocol tokens, and/or transaction fees, paid in protocol tokens or some other means of exchange. While protocol developers may claim that tokens are the basis for other kinds of exchange among users and not just a means of allocating and paying for computing resources, it is my argument that, at mature equilibrium, tokens will do no more than allocate computing resource, with the exception of the special case of a cryptoasset that serves as a monetary store of value. A given protocol is analogous to a simplified economy. The GDP of such an economy would be the aggregate cost of the computing resources necessary to maintain the blockchain, based on the quantity of processing power, memory and bandwidth consumed, multiplied by the unit cost of each. The token is typically the currency used to pay for those resources. The total network value is analogous to the money supply M (i.e., all tokens in issuance), where M = PQ/V; PQ (Price x Quantity) is the total cost of the computing resources consumed, V is 2