Key Highlights:
- Grayscale Investments evaluates decentralized finance protocols using tokenholder yield and adjusted earnings yield to measure true economic return against token inflation.
- Based on Oct. 20 data from the FTSE Grayscale Financials Crypto Sector, Hyperliquid ($HYPE) achieved the highest tokenholder yield at 8.0%, while PancakeSwap ($CAKE) led adjusted earnings yield at 14.4%.
- Grayscale applies a separate valuation methodology to monetary assets like Bitcoin, treating BTC as digital gold rather than assessing it through cash-flow-style yield metrics.
Differentiating Economic Return From Protocol Revenue
To accurately capture the real value delivered to cryptocurrency investors, Grayscale Investments assesses decentralized assets through two distinct lenses: tokenholder yield and adjusted earnings yield. Tokenholder yield combines staking rewards and token buybacks, subtracts protocol issuance, and divides the final figure by circulating market capitalization. Meanwhile, adjusted earnings yield takes an application’s total earnings, divides it by circulating market cap, and subtracts the rate of circulating supply inflation. Used alongside one another, the two metrics separate the raw fee revenue generated by a protocol from the net financial benefit actually delivered to tokenholders.
How Buybacks, Burns, and Token Issuance Impact Value
Capital return structures vary significantly across digital asset ecosystems. While buybacks, burns, and staking payouts are designed to deliver value, their benefits are frequently countered by token unlocks and ongoing emissions. For instance, Hyperliquid leverages trading fees generated on its platform to finance $HYPE buybacks, linking investor returns directly to the exchange’s operational performance. In Grayscale’s framework, an important operational distinction exists between these mechanisms: buybacks reduce circulating supply, whereas token burns permanently reduce total supply. Factoring in both elements against new token issuance allows analysts to see whether tokenholders are receiving a net positive return or facing severe supply dilution.
Staking distributions operate under similar dynamics. Networks like Ethereum reward validators for committing capital and performing core consensus functions—such as proposing blocks and validating network activity—while penalizing downtime and slashing for bad behavior. Grayscale incorporates these staking payouts alongside buybacks when calculating tokenholder yield, but explicitly subtracts new issuance created over the evaluation window to evaluate the true economic distribution rate.
Yield Rankings Across the FTSE Grayscale Financials Crypto Sector
Applying this methodology to protocols in the FTSE Grayscale Financials Crypto Sector that rank among the top 100 by circulating market capitalization (excluding centralized ventures), Grayscale revealed substantial performance divergence across projects based on data as of Oct. 20:
- Tokenholder Yield: Hyperliquid ($HYPE) topped the ranking among the 10 evaluated protocols with an 8.0% yield, whereas Curve DAO ($CRV) landed at the bottom of the group with a yield of -5.5%.
- Adjusted Earnings Yield: PancakeSwap ($CAKE) registered the strongest figure, leading all tracked protocols at 14.4%.
Valuing Bitcoin and Monetary Assets as Digital Commodities
While cash-flow and yield-based calculations suit application-layer decentralized finance protocols, Grayscale notes that Bitcoin requires an entirely distinct valuation framework. In analysis by Pandl, Bitcoin is viewed as a digital commodity and decentralized alternative to traditional fiat currencies, warranting treatment comparable to digital gold. Grayscale evaluates Bitcoin using blockchain on-chain metrics and historical benchmarks rather than earnings multiples.
Additionally, Grayscale assesses non-application monetary assets by benchmarking them directly against Bitcoin. In comparative evaluations of XRP and Zcash, Grayscale tracked market capitalizations against Bitcoin using 30-day moving averages, evaluating their market position, performance, and relative scale within the broader digital currency asset class.
Why This Matters
As the digital asset market matures, institutional analysts and market participants are increasingly moving away from vanity metrics—such as unadjusted nominal staking yields or gross protocol revenue—which often disguise heavy token dilution. By accounting for emissions and unlocks against buybacks and net earnings, Grayscale’s analytical model provides a standardized baseline for comparing decentralized finance protocols against one another and traditional equities, while recognizing that store-of-value assets like Bitcoin must be evaluated through monetary frameworks.
Frequently Asked Questions
What is the difference between tokenholder yield and adjusted earnings yield?
Tokenholder yield calculates the direct return sent to tokenholders by adding staking rewards and token buybacks, subtracting token issuance, and dividing by circulating market capitalization. Adjusted earnings yield measures protocol-level performance by dividing total earnings by circulating market capitalization and subtracting circulating supply inflation.
Why did Curve ($CRV) post a negative tokenholder yield?
A protocol registers a negative tokenholder yield when the pace of new token issuance and supply inflation exceeds the combined value returned via staking payouts and token repurchases over the measured period.
Why does Grayscale exclude Bitcoin from earnings and yield calculations?
Grayscale classifies Bitcoin as a monetary commodity and digital gold rather than a revenue-generating application. Consequently, Bitcoin is evaluated using blockchain network metrics, historical cycles, and relative valuation against other monetary assets rather than protocol earnings yields.
