Blockchain technology and the subsequent crypto markets are still extremely young. This makes analyzing and evaluating the financial viability of projects and tokens very difficult However, we can apply traditional financial evaluation methods to model crypto assets as best we can. This series breaks down the types of financial models we have seen in blockchain technology, what to look out for, what to avoid, and how to determine the true value in a network.
At Status we have kicked off a research initiative investigating the crypto economic models behind our own token use cases. The goal of the initiative is to determine what impact token utility has on the value of the network as a whole. We will explore the parameters of various models and their impact and what information is needed to truly validate these hypotheses in such a nascent market.
Third Point's Dan Loeb discusses their new positions in a letter to investor reviewed by ValueWalk. Stay tuned for more coverage. Loeb notes some new purchases as follows: Third Point’s investment in Grab is an excellent example of our ability to “lifecycle invest” by being a thought and financial partner from growth capital stages to Read More
This article will introduce the various types of models and their parameters uncovered in our research as well as some of the issues uncovered as we dove in; which will go into greater detail later on in the series
- Staking Model
- Equation of Exchange Model
- Token Curated Registries and Incentivization Models
Staking Model and its impact on supply and demand
How does temporarily removing tokens from total circulating supply apply impact the net present value of a network? In this article we explore the variables associated in this model such as growth rate, churn rate, conversion rate, discount rate (to be explored further later on) and their impact on NPV. We will use the example of ENS Registration as a means of illustration.
Equation of Exchange
Does increased value flow within a network increase the net present value of a network? What variables are at play here and what factors have the largest impact? We will look at the Status Sticker Market and other crypto marketplaces as a means of illustrating this financial model.
Token Curated Registries and Incentivization Model
This article deep dives into the concept of token curated registries as a means of token utility and what impact bonding curves have on net present value. What happens to supply in demand in this model and does it increase token usage?
This article deep dives into determining an appropriate discount rate for crypto markets. What is the problem with using traditional discount rates when evaluating such a nascent and potentially risky market.
Should a project burn tokens as a means if increasing token value? Is there a better use for tokens opposed to simply reducing total circulating supply?
This market is very new and there is still not enough data to prove one theory right or wrong over another. We will look back at all the information provided above and compile a recap on the various way to evaluate a crypto project and token in such a young market.