coindesk.com
A new report from Schwab’s Center for Financial Research breaks the crypto market into three sectors and shows most of the value has concentrated in just one of them: foundational blockchains like Bitcoin and Ethereum.
As spot crypto exchange-traded funds have opened the door to more mainstream investors, Schwab reiterated that crypto isn’t one asset class but rather an ecosystem with deep structural differences, underscoring the importance of where you invest.
The report defines the crypto market in three layers. At the bottom are foundational networks like Bitcoin and Ethereum. These base-layer blockchains process and record transactions and form the backbone of nearly every other crypto application. According to Schwab, these networks accounted for nearly 80% of crypto’s total market cap of $3.2 trillion as of the end of 2025.
The second layer is infrastructure, or software that connects blockchains and applications. This includes oracles that bring in outside data, bridges that move assets between blockchains and scaling tools that speed up transactions. These protocols are critical, but Schwab says they face a tough business model: users don’t interact with them directly and switching to new competitors is often easy.
At the top are products, including exchanges, lending platforms, staking services, and other tools that users directly engage with. These tend to have more loyal users, higher switching costs and more potential to become industry standards. Schwab points to protocols like Aave AAVE$154.25 for crypto lending and Lido (LDO) for staking as examples, though it does not recommend specific investments.
To illustrate the point, Schwab compares crypto to the traditional software industry. Foundational networks are like cloud computing platforms — AWS or Microsoft Azure — on which everything else is built. Products are like Salesforce or Netflix, with direct user interaction. Infrastructure software, while essential, tends to get squeezed and too far from the customer to command loyalty, and too replaceable to demand pricing power.
The report also introduces a framework for evaluating cryptocurrencies that borrows from growth equity investing. Schwab suggests analyzing protocols using four criteria: network effects, market share, scalability, and tokenomics — which refers to factors such as token distribution, reward mechanisms, and supply management.
Ethereum, for example, is used as a case study. It leads the smart contract sector with over 10 times the market share of its next closest competitor, according to total value locked (TGL) in its ecosystem. Its early start and broad adoption have made it the default choice for developers, creating a strong network effect. But Ethereum’s slower transaction speeds and concentrated ownership raise concerns, Schwab notes.
One key takeaway: infrastructure protocols, despite being vital to the ecosystem, often struggle to retain value. The report shows that among projects with market caps over $100 million, product protocols were nearly twice as common as infrastructure ones. And foundational networks — while fewer in number — held most of the market’s overall value.
Schwab emphasizes that cryptocurrencies remain speculative and high-risk. But for those stepping into the market, the report suggests it’s not enough to just “buy crypto.” Investors need to understand where value actually lives, which in Schwab’s view, is likely to be in the networks that everything is built on and the tools people use every day.