ethereum is the home of decentralized finance (DeFi), considering the more than $100 billion in total value locked (TVL). Although the figure fluctuates, depending mainly on the performance of eth, it is clear that DeFi has proven to be revolutionary, opening up new use cases that span multiple sectors, including finance and insurance.
Are ethereum DeFi Protocols Undervalued?
Moving on to x, an analyst is now x.com/JustDeauIt/status/1803468009908085239″ target=”_blank” rel=”noopener nofollow”>convinced that a group of established DeFi protocols on ethereum, including Uniswap and Aave, are very likely to be highly undervalued.
To put it in context, the DeFiLlama data ethereum” target=”_blank” rel=”noopener nofollow”>sample that Uniswap, a decentralized exchange, Aave, a decentralized money market, and Lido Finance, a liquidity staking platform, are among the largest according to TVL.
The analyst noted that the price-to-fee ratio of these protocols, a metric used to measure financial health, is unusually high and much better than major traditional financial platforms listed on exchanges across the United States.
Of those identified, Uniswap has a price-to-fee ratio of 9.6 times the $807 million in fees collected over the past year. However, according to LinkedIn data, DEX employs approximately 137 people.
Meanwhile, Maker, a lending and borrowing platform and issuer of the DAI algorithmic stablecoin, has a price-to-fee ratio of 6.9 times. The protocol generated $252 million in fees last year from a team of about 100 employees.
The same trend can be seen at Aave and Lido, where their price-to-rate ratio stood at 2.8x and 1.5x, respectively, although their team remains relatively small.
To understand the possible undervaluation of DeFi protocols, the analyst compared these price-fee ratios with those of the TradFi giants. ai giant Nvidia has a price-to-sales ratio 40 times that of Uniswap.
However, the Wall Street giant employs a larger workforce of approximately 32,000 people. The same trend can be seen on Robinhood. Although the brokerage has a price-to-sales ratio of 9.8 times, it generated $2 billion in revenue but with a larger workforce of more than 3,300 employees.
Growth potential, regulatory clarity and continued scaling
Although Nvidia might have a higher ratio than Uniswap, DeFi protocols are inherently more scalable than traditional financial institutions. Consequently, as ethereum finds regulatory clarity, it is likely to continue collecting more fees and scaling to serve new vectors.
In addition to the regulatory clarity that comes with the United States Securities and Exchange Commission's (SEC) approval of an ethereum exchange-traded fund (ETF) and the decision to pause its investigation into ethereum 2.0, the ethereum ecosystem more broad is climbing.
According to chain x.com/LeonWaidmann/status/1803428782281461778″ target=”_blank” rel=”noopener nofollow”>dataCore network, layer 2 and layer 3 solutions process around 300 transactions per second (TPS).
Featured image from Canva, TradingView chart
