The blockchain industry continues to experience significant growth, largely driven by the increased adoption of blockchain technology across various sectors. Blockchain technology is revolutionizing how data is stored, shared, and secured. The technology’s potential extends beyond just financial applications; blockchain is reshaping industries by offering new ways to streamline operations and create trust in digital transactions. The continuous growth in blockchain startup funding, coupled with the increasing number of blockchain patents filed globally, indicates the sector’s expanding influence and potential for further innovation.
This report highlights key high growth sectors within the blockchain ecosystem, including Decentralized Finance (DeFi), Decentralized Physical Infrastructure Networks (DePIN), Blockchain Gaming, and Decentralized Applications (DApps). We also address valuation and accounting challenges accompanying this growth, particularly under new financial regulations.
Decentralized Finance (DeFi)
DeFi is an innovative financial system that operates on blockchain technology, particularly on Ethereum, L2 scaling solutions and more recently, Solana. These projects aim to provide superior infrastructure, traceability and security to traditional financial services like banking, loans, and asset trading removing the need for central authorities or intermediaries. Utilizing smart contracts, DeFi platforms offer a range of financial services, including lending, borrowing, and earning interest in a peer-to-peer manner. The market was valued at $13.8 billion in 2022, projecting an upward trajectory to reach $497.9 billion by 2032.[i]
Decentralized Physical Infrastructure Networks (DePIN)
DePINs leverage blockchain technology to decentralize and democratize the management of physical infrastructure, including energy grids, internet services, and transportation systems. By incorporating Internet of Things (IoT) devices, DePINs enable more efficient resource usage and enhance transparency in infrastructure management. Notably, the collective market capitalization of DePINs featuring liquid tokens surpassed $20 billion as of 2024. From an investment perspective, DePIN VC deal activity saw a substantial increase from $195.2 million in 2021 to $578.5 million in 2022.[ii] DePIN’s addressable market is currently valued at ~$2.2 trillion and can reach ~$3.5 trillion by 2028.[iii]
Blockchain Gaming
Blockchain gaming integrates blockchain technology into video games, offering unique features like true ownership of digital assets, decentralized operations, and play-to-earn models. This approach enables players to own, buy, sell, or trade their in-game items, often leading to real-world value generation. These games are built on decentralized networks, offering transparency and fairness, and sometimes allow assets to be used across different games (interoperability). The blockchain gaming market is projected to reach a staggering $818.5 billion by 2032, with a compound annual growth rate of 66.5%.[iv] In 2023, the market was valued at $154.46 billion, and it is expected to grow to $614.91 billion by 2030.[v]
Decentralized Applications (DApps)
DApps are programs that run on a blockchain or peer-to-peer network, free from central authority control. They use smart contracts for operations, ensuring transparency, security, and are often integrated with a native cryptocurrency for transactions. These applications can span various domains, including finance, gaming, and social media. The smart contracts on chain record transactions in an immutable way, promoting trust and collaboration amongst its users. In 2023, the Dapps market size reached approximately $31.2 billion. Looking forward, projections indicate a substantial increase, with the market expected to reach around $139.6 billion by 2032.[vi]
M&A Landscape
Despite the fluctuations and turmoil in the cryptocurrency space, many blockchain businesses have demonstrated resilience, yielding increasing valuations and M&A activity. Key acquisitions in 2023 included Coinbase’s acquisition of One River Digital Asset Management, Ripple’s acquisition of Metaco, Bakkt’s acquisition of Apex Crypto, MIAX’s acquisition of LedgerX, Bitget’s acquisition of BitKeep, and numerous others. The consolidation outlook for blockchain-related companies suggests an increasing trend toward mergers and acquisitions as the industry matures. This trend is driven by the desire of established companies to diversify their offerings and gain a competitive edge, and by emerging companies seeking to scale up and access new markets and technologies.
New Accounting Guidance for Crypto Assets
The Financial Accounting Standards Board (FASB) introduced new accounting guidance for certain crypto assets, which significantly transforms the accounting treatment under Generally Accepted Accounting Principles (GAAP). Entities are now required to measure certain crypto assets at fair value. This change means that both increases and decreases in the fair value of these assets will be recognized in the net income for each reporting period. The only crypto assets that will not require fair value measurements are wrapped tokens, tokens created or issued by the subject reporting entity or related parties, non-fungible tokens (NFTs), and stable coins and similar assets. The standard is effective for fiscal periods beginning after December 15, 2024, including interim periods within those years, with earlier adoption permitted.
Valuation Issues
Companies will need regular valuations of booked crypto assets, quarterly for public companies and at least annually for privately held companies. In addition to the valuations of other acquired intangible assets, most acquired crypto assets will also need to be valued when performing a purchase price allocation under ASC 805 Business Combinations guidance. Purchase price allocations for blockchain company acquisitions may also include crypto assets used as purchase consideration and novel or complex identifiable intangible assets, including smart contracts, DApps, platform interfaces, regulatory licenses or permits, customer data, and mining rights or capacities.
It is increasingly common practice for blockchain and cryptocurrency companies to transfer, donate, or license intellectual property (IP) to newly formed foundations, associations, decentralized autonomous organizations (DAOs), and other entities. Changes in the global tax landscape have brought increased scrutiny of intercompany transactions as technology, cryptocurrency, and blockchain companies have engaged in transferring their IP to low tax jurisdictions. Intellectual property valuations play a pivotal role across various critical business functions. They are essential for the transfer of IP to newly developed entities, allowing companies to strategically allocate resources, focus on core business activities, and optimize the overall tax position.
Teknos Valuation Services
With close to a decade of specialization in the blockchain and digital assets space, Teknos Associates has established itself as the top provider of valuations for tokens, digital assets, and related intellectual property. Our experience translates globally as we regularly value digital assets and IP for multinational clients across various jurisdictions. As pioneers in this emerging industry, Teknos brings unmatched expertise and rigorous methodology to each valuation engagement. The company’s early leadership enabled it to build strong collaborative relationships with premier law firms, accounting practices, venture capital funds, and other key players across the blockchain and Web3 industries throughout the world. This expansive network and depth of experience provide invaluable insights that continue to enhance Teknos Associates’ valuation capabilities – no matter how complex the situation. To learn more, contact Teknos Associates at info@teknosassociates.com.
[i] Source: https://www.grandviewresearch.com/industry-analysis/decentralized-finance-market-report
[ii] Source: https://www.finalis.com/blog/depin-the-new-tech-standard
[iii] Source: https://cointelegraph.com/news/navigating-depin-emerging-trends-and-growth-opportunities-interview-with-iotex
[iv] Source: https://finance.yahoo.com/news/blockchain-gaming-market-garner-818-154400628.html
[v] Source: https://cryptonews.com/news/blockchain-gaming-industry-to-exceed-over-600-billion-in-value-by-2030.htm
[vi] Source: https://www.reportsandinsights.com/report/decentralized-applications-dapps-market
Blockchain Markets: Exploring Key Sectors and Valuation Challenges
The blockchain industry continues to experience significant growth, largely driven by the increased adoption of blockchain technology across various sectors. Blockchain technology is revolutionizing how data is stored, shared, and secured. The technology’s potential extends beyond just financial applications; blockchain is reshaping industries by offering new ways to streamline operations and create trust in digital transactions. The continuous growth in blockchain startup funding, coupled with the increasing number of blockchain patents filed globally, indicates the sector’s expanding influence and potential for further innovation.
This report highlights key high growth sectors within the blockchain ecosystem, including Decentralized Finance (DeFi), Decentralized Physical Infrastructure Networks (DePIN), Blockchain Gaming, and Decentralized Applications (DApps). We also address valuation and accounting challenges accompanying this growth, particularly under new financial regulations.
Decentralized Finance (DeFi)
DeFi is an innovative financial system that operates on blockchain technology, particularly on Ethereum, L2 scaling solutions and more recently, Solana. These projects aim to provide superior infrastructure, traceability and security to traditional financial services like banking, loans, and asset trading removing the need for central authorities or intermediaries. Utilizing smart contracts, DeFi platforms offer a range of financial services, including lending, borrowing, and earning interest in a peer-to-peer manner. The market was valued at $13.8 billion in 2022, projecting an upward trajectory to reach $497.9 billion by 2032.[i]
Decentralized Physical Infrastructure Networks (DePIN)
DePINs leverage blockchain technology to decentralize and democratize the management of physical infrastructure, including energy grids, internet services, and transportation systems. By incorporating Internet of Things (IoT) devices, DePINs enable more efficient resource usage and enhance transparency in infrastructure management. Notably, the collective market capitalization of DePINs featuring liquid tokens surpassed $20 billion as of 2024. From an investment perspective, DePIN VC deal activity saw a substantial increase from $195.2 million in 2021 to $578.5 million in 2022.[ii] DePIN’s addressable market is currently valued at ~$2.2 trillion and can reach ~$3.5 trillion by 2028.[iii]
Blockchain Gaming
Blockchain gaming integrates blockchain technology into video games, offering unique features like true ownership of digital assets, decentralized operations, and play-to-earn models. This approach enables players to own, buy, sell, or trade their in-game items, often leading to real-world value generation. These games are built on decentralized networks, offering transparency and fairness, and sometimes allow assets to be used across different games (interoperability). The blockchain gaming market is projected to reach a staggering $818.5 billion by 2032, with a compound annual growth rate of 66.5%.[iv] In 2023, the market was valued at $154.46 billion, and it is expected to grow to $614.91 billion by 2030.[v]
Decentralized Applications (DApps)
DApps are programs that run on a blockchain or peer-to-peer network, free from central authority control. They use smart contracts for operations, ensuring transparency, security, and are often integrated with a native cryptocurrency for transactions. These applications can span various domains, including finance, gaming, and social media. The smart contracts on chain record transactions in an immutable way, promoting trust and collaboration amongst its users. In 2023, the Dapps market size reached approximately $31.2 billion. Looking forward, projections indicate a substantial increase, with the market expected to reach around $139.6 billion by 2032.[vi]
M&A Landscape
Despite the fluctuations and turmoil in the cryptocurrency space, many blockchain businesses have demonstrated resilience, yielding increasing valuations and M&A activity. Key acquisitions in 2023 included Coinbase’s acquisition of One River Digital Asset Management, Ripple’s acquisition of Metaco, Bakkt’s acquisition of Apex Crypto, MIAX’s acquisition of LedgerX, Bitget’s acquisition of BitKeep, and numerous others. The consolidation outlook for blockchain-related companies suggests an increasing trend toward mergers and acquisitions as the industry matures. This trend is driven by the desire of established companies to diversify their offerings and gain a competitive edge, and by emerging companies seeking to scale up and access new markets and technologies.
New Accounting Guidance for Crypto Assets
The Financial Accounting Standards Board (FASB) introduced new accounting guidance for certain crypto assets, which significantly transforms the accounting treatment under Generally Accepted Accounting Principles (GAAP). Entities are now required to measure certain crypto assets at fair value. This change means that both increases and decreases in the fair value of these assets will be recognized in the net income for each reporting period. The only crypto assets that will not require fair value measurements are wrapped tokens, tokens created or issued by the subject reporting entity or related parties, non-fungible tokens (NFTs), and stable coins and similar assets. The standard is effective for fiscal periods beginning after December 15, 2024, including interim periods within those years, with earlier adoption permitted.
Valuation Issues
Companies will need regular valuations of booked crypto assets, quarterly for public companies and at least annually for privately held companies. In addition to the valuations of other acquired intangible assets, most acquired crypto assets will also need to be valued when performing a purchase price allocation under ASC 805 Business Combinations guidance. Purchase price allocations for blockchain company acquisitions may also include crypto assets used as purchase consideration and novel or complex identifiable intangible assets, including smart contracts, DApps, platform interfaces, regulatory licenses or permits, customer data, and mining rights or capacities.
It is increasingly common practice for blockchain and cryptocurrency companies to transfer, donate, or license intellectual property (IP) to newly formed foundations, associations, decentralized autonomous organizations (DAOs), and other entities. Changes in the global tax landscape have brought increased scrutiny of intercompany transactions as technology, cryptocurrency, and blockchain companies have engaged in transferring their IP to low tax jurisdictions. Intellectual property valuations play a pivotal role across various critical business functions. They are essential for the transfer of IP to newly developed entities, allowing companies to strategically allocate resources, focus on core business activities, and optimize the overall tax position.
Teknos Valuation Services
With close to a decade of specialization in the blockchain and digital assets space, Teknos Associates has established itself as the top provider of valuations for tokens, digital assets, and related intellectual property. Our experience translates globally as we regularly value digital assets and IP for multinational clients across various jurisdictions. As pioneers in this emerging industry, Teknos brings unmatched expertise and rigorous methodology to each valuation engagement. The company’s early leadership enabled it to build strong collaborative relationships with premier law firms, accounting practices, venture capital funds, and other key players across the blockchain and Web3 industries throughout the world. This expansive network and depth of experience provide invaluable insights that continue to enhance Teknos Associates’ valuation capabilities – no matter how complex the situation. To learn more, contact Teknos Associates at info@teknosassociates.com.
[i] Source: https://www.grandviewresearch.com/industry-analysis/decentralized-finance-market-report
[ii] Source: https://www.finalis.com/blog/depin-the-new-tech-standard
[iii] Source: https://cointelegraph.com/news/navigating-depin-emerging-trends-and-growth-opportunities-interview-with-iotex
[iv] Source: https://finance.yahoo.com/news/blockchain-gaming-market-garner-818-154400628.html
[v] Source: https://cryptonews.com/news/blockchain-gaming-industry-to-exceed-over-600-billion-in-value-by-2030.htm
[vi] Source: https://www.reportsandinsights.com/report/decentralized-applications-dapps-market