On Investing In Digital Commodities

What does it mean to invest in digital commodities? Looking back at the 20th century, newly discovered physical commodities such as aluminum and oil powered products that reached billions of people — light bulbs, air conditioning, refrigeration, television, cars, planes, computers, and smartphones. Per‑capita real GDP rose roughly 4.5× across the century as mass production increased per‑capita consumption of underlying commodities by orders of magnitude (e.g., copper, oil, aluminum). These commodities ultimately served three primitives: motion (moving matter), materials (transforming matter), and conductivity (communicating via matter).

Layer‑1 crypto networks similarly provision digital commodities — the same primitives but for bits. Compute (moving bits) is provisioned by networks like Ethereum, Solana, and BNB Chain; storage (storing entropy in bits) by Filecoin, Arweave, and Sia; and connectivity (communicating via bits) by Helium, Pollen, and XNET.

What makes something a commodity?

Smarter folks before us have described three qualities: usefulness, fungibility, and combustibility. A barrel of oil is useful (it powers things), fungible (within a grade, any barrel will do), and combustible (you can use it only once). L1 tokens like ETH and SOL share these properties: they’re useful (access to apps with censorship‑resistant guarantees), fungible (token standards), and combustible (usage burns tokens; design varies by chain).

Evidence of billion‑user use cases

Digital primitives already support billion‑user applications: e‑mail and social networks serve 4B+ users; 3B+ people play video games; 2B+ use YouTube monthly. It’s reasonable to expect more digitally native, billion‑user use cases over time — AVs, smart homes/cities, industrial IoT, crypto gaming, and metaverse experiences among them. Meanwhile, per‑capita Internet traffic has quadrupled in half a decade (2016–2021), underscoring expanding demand for compute, storage, and connectivity.

On crypto value accrual

Outside of Bitcoin, the majority of developer activity, venture funding, and network value has accrued to compute blockchains. Excluding stablecoins, all top‑10 cryptoassets by value are compute‑focused L1s. As of the writing referenced here, the top five compute networks (ETH, BSC, SOL, ADA, DOT) sum to ~$240B in network value. Venture appetite was clear in 2021–early 2022 with large protocol rounds (e.g., Terra $1B; NEAR $350M; Avalanche $230M; Aleo $200M; MINA $92M).

By contrast, markets price connectivity and storage networks under $5B combined (e.g., Helium ~$1.1B; Pollen ~$0.2B; Filecoin ~$1.4B; Arweave ~$0.5B). Multiples can obscure forward utility; rational investors should focus on discounted future expected utility (or cash flows) rather than backward‑looking ratios.

A multiples snapshot

According to WatchTheBurn, trailing 7‑day Ethereum usage was ~$24M (~$1.3B annualized). With ~$170B network value, that implies ~130× on network “cash flows.” In Helium’s case, prior on‑chain metrics were distorted by faucet gaming; after mitigation, LoRa data‑credit burns fell below ~$33K annualized, implying a ~30,000× multiple at a ~$1.1B network value — ~250× pricier than ETH on this crude basis. Pollen trades at a few hundred million with negligible organic cash flow (fewer than ~320 active SIMs at the cited time).

This suggests markets may be pricing DeWi as a long‑dated option — appropriately small today if cash flows are highly uncertain. But we think that misses key, near‑term catalysts.

DeWi catalysts & traction

• Roaming/offload. DISH disclosed a partnership with FreedomFi (supporting Helium’s 5G expansion) in Dec‑2021 and indicated work toward a bilateral roaming agreement. Additional partners were teased on early roadmaps.
• 5G buildout. Helium’s 5G network passed 1,400+ radios online with accelerating MoM adds; 5G token incentives (launched July) further support growth. Pollen, live with incentives since February, reached ~500 outdoor radios and added ~130 in 30 days.
• Operator interest. Nova Labs leadership publicly bet that at least one US nationwide carrier (200K+ users) would roam onto Helium 5G by end‑2022.

Why connectivity could be valued at a premium

Compute chains effectively make users pay for censorship‑resistance — a valuable but expensive property at current scalability limits, which constrains many real‑world activities. The biggest demand drivers thus far are crypto‑native (DEXs, NFTs), with stablecoins as a notable mass‑market exception.

Connectivity chains, by contrast, can pay users for censorship‑resistance while being cheaper than centralized alternatives by pushing cost to the edges. Today, Helium’s LoRa data transfer is priced at ~$0.00001 per data credit (often <$0.50/MB at cited token prices), versus Verizon NB‑IoT at ~40× that price. Helium 5G user pricing of $0.50/GB is ~5× cheaper than traditional consumer telco rates (coverage still emerging).

Summary & outlook

• Digital commodities = compute, storage, connectivity — similarly sized markets globally in 2025 ($0.7–1.1T revenues), yet connectivity chains are valued <1% of compute.
• Compute chains charge for censorship‑resistant blockspace; adoption is gated by fees and behavior change.
• Connectivity chains can deliver censorship‑resistant bandwidth at lower cost than incumbents — no behavior change required.
• Near‑term catalysts (5G roaming/offload) could drive meaningful network cash flows over 12–24 months. At an ETH‑like multiple (~130×), ~$8M of annual cash flows could justify a ~$1.1B valuation.

Escape Velocity is actively investing behind this DeWi thesis and working with founders and communities to de‑risk and scale these networks. If you’re building in DeWi, reach out — you’re building the rockets; we’ll help with the fuel.

References

• Josh Wolfe on directional arrows of progress — podcast
• Cisco Global Internet traffic highlights — report
• Global population growth — Our World in Data
• CoinMarketCap — market data
• WatchTheBurn (ETH usage) — dashboard
• Pollen stats — explorer
• Helium 5G stats — explorer
• DISH × FreedomFi pilot — Light Reading
• Vitalik on why decentralization matters — essay
• Verizon NB‑IoT pricing — plans

Disclaimer

Opinions, estimates and projections constitute the current judgment of EV3 and are subject to change without notice. Any projections, forecasts and estimates contained herein are necessarily speculative in nature and based upon certain assumptions, some or all of which may not materialize or will vary from actual results.