DeFi, Stablecoin-Led ERC20 Tokens Eclipse Ethereum in Combined Network Value

Ethereum-issued tokens, such as the ERC20 and ERC140 standard, are now worth more than the protocol’s ETH currency. For analysts, this signals a period of undervaluation for the network that made it all possible.

ERC20 Tokens Supersede ETH

The Ethereum network awaits several developments, such as the ETH 2.0 upgrade to staking, the introduction of sharding, and broader enterprise rollout.

But “BUIDL” has seemed to zoom ahead for now. Tokens built on Ethereum – over 90 percent of all cryptocurrencies in the ecosystem – are now collectively worth more than the network itself.

Ex-Bloomberg journalist Camilla Russo tweeted yesterday:

Looks like total ERC20 tokens market cap has surpassed ETH market cap?

ERC20 tokens on Etherscan https://t.co/0jhXPLJJbS
Market cap = $33B
ETH market cap= $27B

I think there was a @coinmetrics chart tracking this?https://t.co/B85MPEq5Tm

— Camila Russo (@CamiRusso) July 13, 2020

Russ noted the market cap for all ERC20 tokens topped $33 billion, edging out ETH’s market cap of $27 billion. She did not make additional comments on what this meant for Ethereum. 

“Wouldn’t be surprised. Just under 2 months ago the gap was only $4bn. DeFi mooned while ETH is only up ~20% since then,” commented Ryan Watkins of on-chain analytics firm Messari.

Watkins linked to a previous post by Messari on the topic, noting that “ETH is increasingly close to being flipped on its own blockchain.”

At the time, he added that transformation in value on Ethereum is not just about assets being stored, but “they’re also being used to move significant amounts of value.”

“Driven by the growth of stablecoins, Ethereum is on pace to settle more than $530 billion this year,” noted Watkins.

DeFi Leads Activity

Much of the on-chain and price activity for ERC20 tokens can be attributed to this year’s rise of DeFi-focussed currencies and projects.

Some like Compound – launched in 2018 – has eclipsed MakerDAO and become the most valued DeFi project weeks after launch. At press time, Compound is worth over $3 billion as per DeFi Pulse, with a market cap of $411 million on Coinmarketcap.

Last month, the token surged to an $800 million market cap as each COMP was worth $300. It has since capitulated and fallen 40 percent to $160 at press time.

In May, Messari’s Watkins said ETH’s use in DeFi helps to solidify its position as Ethereum’s primary store of value. He tweeted at the time:

“ETH is and will always be the most trust-minimized asset available on Ethereum, and it is for this reason that ETH is the reserve asset for Ethereum financial system (DeFi).”

He added that Ethereum is being used more than ever and went from a blank canvas to an agglomeration of novel forms of value” in under two years.