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Valuation Dilemma: Is Blockchain Repeating the Internet's "Eyeball Economy" Tragedy?
Written by: William Mougayar
Compiled by: Daisy, Mars Finance
How to assess the value of a decentralized network? William Mugaya proposed that every new era of the Internet requires new ways of measuring value.
The current valuation of the blockchain network is reminiscent of the early internet era—traditional financial models struggled to adapt to new technologies at that time.
Despite the increasing application, blockchain networks still lack standardized valuation methods, and existing models are either incomplete or flawed.
A new emerging valuation framework focuses on "velocity of circulation and capital flow", measuring value by tracking the movement of currency and assets in the Blockchain economy (similar to economic circulation).
The current valuation of blockchain networks gives those who experienced the early days of the internet a sense of déjà vu. In the 1990s, analysts, investors, and entrepreneurs struggled to apply familiar financial models to a completely unfamiliar technology. At that time, companies with just a website and a business plan could achieve valuations in the hundreds of millions or even billions of dollars based solely on intangible metrics like "user traffic."
The ending is not beautiful. But in retrospect, those chaotic early years left valuable experiences: technological evolution always outpaces financial regulations, and valuation models must ultimately conform to the forms of innovation.
Today we are facing a similar dilemma in the blockchain field. Although applications are becoming more widespread, infrastructure is gradually maturing, and the cultural and economic momentum is undeniable, there is still a lack of widely accepted standardized blockchain network valuation methods. The few existing models, while having directional reference value, still have flaws or are not sufficiently complete.
To explore the future direction, it is necessary to first review the path we have taken.
The first wave of internet valuation: the eyeball economy, rather than actual earnings (mid-1990s - 2000)
In the mid to late 1990s, the internet was still a wild frontier. Investors had no idea what the "success" of a digital company should look like, so they relied on all quantifiable metrics: page views, banner ad impressions, unique visitors, or monthly active users (MAU). These rough metrics for measuring user attention became the de facto standard of value. The logic was simple: if millions of people visit your website, monetization will naturally follow.
Valuations soared as a result. Startups like Pets.com (see image), Webvan, and eToys raised hundreds of millions of dollars on the promise of becoming industry leaders. However, revenue was only an afterthought, and profitability became a joke. When the internet bubble burst in 2000, people finally understood: user attention without monetization capability is ultimately a fragile foundation for corporate value.
Adjustment period after the bubble burst: Revenue and profit margin become key (2001-2005)
After the first wave of the internet bubble burst, investors' mindsets underwent a significant transformation. The market demands tangible proof, not just beautiful visions. Starting from 2001, companies needed to demonstrate meaningful revenue, gross margins, and gradually achieve profitability.
During this period, unsustainable business models were ruthlessly eliminated. Only those companies with real products, real customers, and sound financial conditions survived. Take Amazon as an example; it shifted investors' attention from abstract future potential to actual operational performance. Its continuous total revenue growth and improving profit margin management capabilities helped rebuild market confidence.
eBay has become a model of a clear business model: a scalable, transaction-based profitable enterprise. These survivors teach investors to evaluate internet companies in a way that is closer to traditional businesses—income statements become crucial.
The Rise of SaaS and Unit Economics (2005-2015)
By the mid-2000s, a new model—Software as a Service (SaaS)—emerged, bringing with it a whole new valuation language. Unlike models that relied on unpredictable advertising revenues or retail margins, SaaS businesses offered a predictable stream of recurring revenue, which was a revolutionary change for entrepreneurs and investors.
This era has given rise to the following key indicators:
These unit economics metrics enable investors to more accurately assess a company's operational health and scalability. The market is beginning to value growth efficiency and recurring revenue, rewarding companies with sustainable, high-margin models and strong customer retention.
SaaS companies can temporarily operate at a loss, but the prerequisite is that their key metrics must tell a clear story: acquiring customers at a low cost, retaining customers long-term, and gradually increasing customer wallet share. This approach has become the core framework for modern technology valuation and remains a mainstream assessment perspective to this day.
Platform Era: Network Effects and Ecosystem Value (2015 to Present)
By the 2010s, companies like Facebook, Google, Uber, and Airbnb had redefined online value. They are not just businesses; they are platforms. Their power lies in their ability to aggregate, their control over data, and the network effects that continue to strengthen as they scale.
Valuation models have also evolved. Analysts began to measure:
Companies are no longer valued solely based on revenue, but rather favored for having built infrastructures that others rely on. This is a qualitative leap – valuations are starting to focus on strategic positioning, not just cash flow.
Contemporary Internet Giants: Profitability, Efficiency, and the AI Moat
In the 2020s, technology valuations have matured. Public market investors are now focused on operational efficiency, profitability, and free cash flow. "Growth at all costs" has become a thing of the past, and the "40 rule" has become the new standard (i.e., the sum of a company's growth rate and free cash flow rate should be ≥ 40%).
Enterprise valuation is determined based on the characteristics of specific sectors: SaaS has its own set of metrics, e-commerce has another, and fintech differs again. At the same time, intangible assets such as proprietary AI models, data ownership, and infrastructure moats are increasingly becoming core elements in the pricing strategies of tech giants.
In short, the valuation system has become both more specialized and more rational, fully aligning with the true value drivers of each digital domain.
What Does This Mean for Blockchain
Despite the internet's valuation being so well-established, the Blockchain is still trapped in a valuation dilemma. While some have attempted to apply traditional metrics—such as discounted cash flow (DCF), validator income, or protocol fees—these often miss the mark. It's like trying to evaluate Amazon's value using transportation costs in 1998.
Blockchain is a public infrastructure, not a private enterprise. Many chains rely on subsidies or token issuance to artificially inflate revenue, which does not reflect real demand. More importantly, as decentralized systems, their original intention is not to extract profit but to achieve permissionless collaboration and trustless economic activities.
Other valuation methods that have emerged currently each have their limitations:
New Perspective: Measuring Circulation Speed and Capital Flow
To achieve breakthroughs, we need valuation models that can reflect the essence of Blockchain. To this end, I propose a framework based on "velocity of circulation and capital flow" to track the movement trajectories of funds and assets in the Blockchain economy. It focuses on usage patterns, transaction cycles, and capital reuse, which are closer to the dynamic nature of economic circulation rather than static indicators—this resonates with the mature methodologies of the internet platform era (the final frontier of digital economy valuation).
The model examines:
This method provides a native and robust value measurement system for Blockchain. It not only focuses on the stock in the system but also tracks the flow - and liquidity is the clearest signal of trust, practicality, and relevance, just as the velocity of money is a recognized indicator of economic vitality.
Conclusion: The Model Needed to Build the Future
The development of the Internet tells us: every technological revolution requires a new financial perspective. Early models are inevitably rough, but the most serious mistake is to cling to outdated frameworks.
Blockchain is still searching for its own valuation narrative.
The future valuation framework will undoubtedly be built through innovation rather than inherited. Just as early internet investors had to invent new tools to understand the new things before them, the blockchain world now faces the same challenge.
If successful, we will not only be able to assess the value of the Blockchain more accurately, but also deeply unlock its economic and social potential.