Grayscale's Top DeFi Picks Focus on Revenue, Not Narratives

Grayscale Research published a list of its preferred decentralized finance protocols this week. The selection leaned on revenue generation – fees and lending spreads – rather than user growth or total value locked. Uniswap, Aave and Lido were singled out, the report said.

The firm applied price-to-sales multiples and discounted cash flow models, similar to how equity analysts value software companies. Several DeFi protocols trade below 10x annualized fee revenue, Grayscale noted. Traditional fintech companies often trade above 20x. The goal is to identify protocols that can sustain revenue through market cycles, the report said.

Grayscale penalized protocols with high token dilution, arguing that inflation reduces value accruing to existing holders. It also favored broad token distribution, warning that concentrated supply introduces governance risk.

Uniswap collects a portion of every swap. Aave earns from borrower interest. Lido generates revenue from staking commissions. Grayscale called these models more resilient than protocols that depend on incentive-driven token emissions. The firm recommended focusing on high revenue retention and low dilution.