Native Asset

ALL 0-9 $A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Sovereign Assets • Layer 1s • Payment Networks

foundational protocol-level token

Native Asset — Core Protocol Token

A native asset is the foundational token built directly into a blockchain’s protocol. It is not created through a smart contract but is issued by the network itself at the base layer. Native assets are used to pay transaction (gas) fees, participate in network consensus, and often serve as the primary medium for staking, validation, or governance. They represent the most fundamental form of value on a given blockchain.

Use Case: Native assets are required to use a blockchain’s core functions, such as sending transactions, deploying smart contracts, and securing the network.

Key Concepts:

Base Layer Token — Asset issued at the protocol level, not via smart contract
Protocol-Level Asset — Integral to blockchain operation and security
Gas Price — Transaction fees paid exclusively in native assets
Staking — Native assets used to secure Proof of Stake networks
Validator Rewards — Compensation paid in native assets for block production
Layer One Protocol — Base blockchain where native assets originate
Validator Node — Network participant earning native asset rewards
Consensus Mechanism — System secured by native asset staking or mining
Smart Contract Token — Non-native tokens created on top of the network
Non-Native Asset — Tokens issued via smart contracts, distinct from native assets
Proof of Stake — Consensus model where native assets are staked for security

Examples of Native Assets:

$BTC — Native asset of the Bitcoin blockchain
$ETH — Native token of the Ethereum network
$FLR — Native asset of the Flare network, used for staking and fees
$XRP — Native token of the XRP Ledger, required for transactions and wallet activation
$ADA — Protocol token for Cardano, used in PoS staking and governance
$HBAR — Hedera’s native token used for payments and network services

Summary: Native assets are the lifeblood of their respective blockchains—required for transactions, security, and governance. Unlike smart contract tokens, they exist at the protocol level and cannot be separated from the network itself. Understanding the distinction between native and non-native assets is fundamental to evaluating blockchain ecosystems.

Feature	Native Asset	Smart Contract Token
Creation	Built into protocol at genesis	Deployed via smart contract
Gas Payment	Required for all transactions	Cannot pay gas directly
Network Security	Used for staking/mining	No direct security role
Existence	Inseparable from network	Can exist on multiple chains
Examples	$BTC, $ETH, $FLR, $XRP	$USDC, $UNI, $LINK

Native vs Non-Native Assets

understanding the fundamental distinction

Native Assets
• Protocol-level issuance
• Required for gas/fees
• Used in consensus mechanism
• Validator/miner rewards
• One per blockchain
• Examples: $BTC, $ETH, $FLR

Non-Native (Smart Contract)
• Deployed on existing chain
• Uses native asset for gas
• No direct security role
• Created by developers/DAOs
• Unlimited per blockchain
• Examples: $USDC, $LINK, $UNI

Key Insight: You always need a network’s native asset to interact with that blockchain. To move USDC on Ethereum, you need ETH for gas. To move USDC on Solana, you need SOL. The native asset is the universal requirement.

Core Functions of Native Assets

what native assets do for their networks

Transaction Fees
• Pay for network resources
• Prevent spam attacks
• Compensate validators/miners
• Creates baseline demand
• Burns (some networks)
• Universal requirement

Network Security
• Staked for PoS validation
• Mining rewards (PoW)
• Slashing collateral
• Economic security budget
• Aligns validator incentives
• Sybil resistance

Governance
• Voting on upgrades
• Parameter changes
• Treasury decisions
• Protocol direction
• Weighted by holdings
• On-chain proposals

Economic Coordination
• Unit of account on-chain
• Base pair for trading
• Collateral in DeFi
• Value transfer medium
• Store of value
• Network bootstrapping

Major Native Assets Comparison

characteristics across leading blockchains

Asset	Network	Consensus	Max Supply	Primary Use
$BTC	Bitcoin	Proof of Work	21M	Store of value, transfers
$ETH	Ethereum	Proof of Stake	Unlimited*	Gas, staking, DeFi collateral
$XRP	XRP Ledger	Federated (UNL)	100B	Payments, bridge currency
$FLR	Flare	Proof of Stake	~100B	FTSO, staking, data provision
$ADA	Cardano	Ouroboros PoS	45B	Staking, governance
$SOL	Solana	PoS + PoH	Unlimited	Gas, staking, high-speed txs

*ETH Note: Ethereum has no hard cap, but EIP-1559 burns base fees. When network activity is high, ETH can be deflationary (more burned than issued).

Native Asset Investment Considerations

evaluating protocol-level tokens

Bullish Factors
• Network usage drives demand
• Staking reduces supply
• Required for all activity
• Protocol success = token value
• Usually most liquid asset
• Ecosystem development

Risk Factors
• Competition from other L1s
• Technology obsolescence
• Regulatory targeting
• Inflation schedules
• Centralization concerns
• Adoption metrics

Demand Drivers
• Transaction volume
• DeFi TVL on network
• Smart contract deployment
• Staking participation
• Developer activity
• Cross-chain bridges

Supply Considerations
• Fixed vs inflationary
• Staking lock-ups
• Burn mechanisms
• Unlock schedules
• Foundation holdings
• Validator distribution

Native Asset Checklist

understanding protocol-level tokens

Core Understanding
☐ Know native vs non-native distinction
☐ Understand gas fee requirement
☐ Know staking role in security
☐ Recognize L1 relationship
☐ Understand validator rewards
☐ Know consensus dependency

Comparison Knowledge
☐ Know smart contract tokens
☐ Understand non-native assets
☐ Compare PoS vs PoW natives
☐ Evaluate supply models
☐ Assess utility functions
☐ Compare across networks

Major Native Assets
☐ $BTC — Bitcoin (PoW, 21M cap)
☐ $ETH — Ethereum (PoS, burns)
☐ $XRP — XRPL (Federated)
☐ $FLR — Flare (PoS, FTSO)
☐ $ADA — Cardano (Ouroboros)
☐ $HBAR — Hedera (Hashgraph)

Investment Evaluation
☐ Check network activity metrics
☐ Evaluate staking participation
☐ Assess developer ecosystem
☐ Compare supply dynamics
☐ Monitor governance activity
☐ Track cross-chain integration

The Principle: Native assets are the foundation of blockchain value. Every network requires its native token for basic operations—this creates fundamental, non-optional demand. When evaluating a blockchain, the native asset’s utility, supply dynamics, and staking economics tell you about the network’s long-term sustainability. The strongest native assets are those where network growth directly translates to token demand.

« Index