Crypto-Asset Market: Classification, Composition, and Competition

This paper presents a novel classification method for crypto-assets (CAs) based on their supply and demand functions, identifying four categories corresponding to distinct submarkets. Native CAs have their supply defined by blockchain code, while non-native CAs rely on smart contracts from a host blockchain. On the demand side, CAs are primarily used for payments or to access blockchain services and decentralized markets. We apply our framework to the Top 50 CAs by market capitalization from 2013 to 2023 to study sub-market dynamics. While Means-of-payment cryptocurrencies once dominated at 90%, they now represent only 12%, with Platform cryptocurrencies (48%), Utility tokens (30%), and Stablecoins (10%) gaining prominence, indicating a shift toward decentralized economic activities. Competitive structures vary across sub-markets, including quasi-monopoly, oligopoly with a dominant firm, Schumpeterian dynamic competition, and duopoly with niche competitors. Key factors like network effects and first-mover advantage shape these landscapes. The findings underscore the importance of tailored approaches for investors and regulators when managing portfolios or developing regulations, as these sub-markets form the core of Web 3, and each play a distinct role in the decentralized ecosystem.