Part 1/3: The Value of Traditional and Digital Assets — Market and Book Value
tldr: This is the first of a three-part series from mokens.io that defines and explores the value of digital assets on the blockchain. It will define valuation methods for traditional and 2 Classes of digital assets.
Background: Please Read “The Value of Digital Assets on the Blockchain” and “What are crypto-collectibles?
How to determine the value of objects and ideas is a question that may be as old as humanity. Humans form agreed upon understandings about what things mean and what values they have (symbolic cultural interactionism). Value can be assigned in subjective and objective manners. Determining the value of something is required for any action, nonetheless transactions, to take place. All human interactions, on some level, are transactionary and determining the value of the “objects”/”ideas” (symbols) is important for those interactions to benefit all parties.
Beyond the analysis of psychological and cultural aspects of value, accounting principles are the result of centuries of human schemas and ontologies regarding the communication of value. Accounting and finance professionals have methods for determining the book value and market value of assets. Fungible tokens like crypto-currencies, non-fungible tokens like crypto-collectibles or composables, can all be understood as digital assets. For this reason, exploring the existing method for digital asset evaluation is the most reliable framework to begin determining the value of fungible and non-fungible digital assets like Mokens.io or CryptoKitties.
Value of Traditional and Digital Assets: Market and Book Value
The book value and market value are two methods of determining the value an asset. An asset’s book value can be higher or lower than its market value. Book value refers to the value according to its or financial statements, or the asset’s historical purchase price. Market value, sometimes called fair market value, is the value of an asset it is currently priced in the marketplace. Book value is considered a more reliable guide for determining value but is less relevant than market value since there are non-book related qualities that the market considers. Digital assets, like traditional assets, retain qualities of the book and market value. There is no one method that is universally applicable and accepted. A method that convinces accountants for financial reporting, does not work for economists or possibly an individual consumer.
Valuation of Digital Assets: Three Principles
The New School of Information Security has outlined three principles to provide a basis of understanding and evaluating digital assets that provides a framework to operate within:
1) You cannot value the digital asset outside the context it derives its value from.
- For example, an erc-20 or erc-721 digital asset have value within the context of the Ethereum Mainnet Blockchain.
2) You must consider all costs “sunk”.
- The value of the asset is living and has future value according to context.
3) You value the digital asset according to its role in creating economic value. This divides digital assets into two classes:
- Class 1: Digital assets that directly drive revenue and/or competitive advantage
- Class 2: Everything else.
Tomorrow we will release Part 2 of this article series on Class 1 Digital Assets. Wednesday’s article will cover Class 2 Digital Assets. Here is a preview of what is to come!
Tuesday, July 24th
Part 2: Class 1 Digital Assets: Triple Threat Valuation for NFTs and cNFTs
A definition, method of valuation, and example of non-fungible tokens (NFTs) and composable non-fungible tokens (cNFTs).
Featured DApp: mokens.io, Axie Infinity,Wednesday, July 25th
Part 3: Class 2 Digital Assets: Licenses, Certificates, and Identities, OH MY!
A definition and example for the value of having digital assets on blockchain.
Featured DApps: mokens.io, Titan Seal, Evernym, 0xCert.
Be sure to follow mokens.io so you don’t miss a thing!
**mokens.io will launch to the Mainnet August 4th 3:00 PM UTC (8:00 AM PS)** Sign-Up for email notification here. Unlock your MetaMask Wallet and Join Us!
Edited by Nick Mudge
Follow us here:
Medium: https://medium.com/mokens
Medium: https://medium.com/@haleysummers
Email Updates: https://mokens.gr8.com
Twitter: https://twitter.com/mokens_io
Discord: https://discord.gg/bQXM2U
Citations for In-Text Hyperlinks
0xcert — Supporting uniqueness. (n.d.). Retrieved from https://0xcert.org/
Asset Market Value vs Asset Book Value • The Strategic CFO. (2018, April 27). Retrieved from https://strategiccfo.com/asset-market-value-vs-asset-book-value/
Axie Infinity Inc. (n.d.). Collecting and raising Axies. Retrieved from https://axieinfinity.com/
T. (2018, March 22). BITCOIN EXPLAINED. Retrieved from https://www.youtube.com/watch?v=YHjYt6Jm5j8
Evernym. (n.d.). Retrieved from https://www.evernym.com/
Evernym. (n.d.). Retrieved from https://www.evernym.com/
Gad, S. (2018, June 05). Market value versus book value. Retrieved from https://www.investopedia.com/articles/investing/110613/market-value-versus-book-value.asp
How to Value Digital Assets (Web Sites, etc.) « The New School of Information Security. (n.d.). Retrieved from https://newschoolsecurity.com/2009/10/how-to-value-digital-assets-web-sites-etc/
How to Value Digital Assets (Web Sites, etc.) « The New School of Information Security. (n.d.). Retrieved from https://newschoolsecurity.com/2009/10/how-to-value-digital-assets-web-sites-etc/
Learning, L. (n.d.). Sociology. Retrieved from https://courses.lumenlearning.com/intro-to-sociology/chapter/reading-symbolic-interactionist-theory/
MetaMask Ethereum Browser Extension. (n.d.). Retrieved from https://metamask.io/
Mokens. (n.d.). Retrieved from https://mokens.io/
Sartwell, C. (2016, October 05). Beauty. Retrieved from https://plato.stanford.edu/entries/beauty/
Staff, I. (2018, May 31). Financial Statements. Retrieved from https://www.investopedia.com/terms/f/financial-statements.asp
Staff, I. (2018, April 27). Market Price. Retrieved from https://www.investopedia.com/terms/m/market-price.asp
Summers, H. (2018, July 22). The Value of Digital Assets on the Blockchain — Haley Summers — Medium. Retrieved from https://medium.com/@haleysummers/the-value-of-a-digital-assets-on-the-blockchain-6e5bbe22fa8b
Summers, H. (2018, July 06). What are crypto-collectibles? — mokens — Medium. Retrieved from https://medium.com/mokens/what-are-crypto-collectibles-4d56220958d1
What is Analysis of Transactions? definition and meaning — Business Jargons . (2016, June 13). Retrieved from https://businessjargons.com/analysis-of-transactions.html
Titan Seal. (n.d.). Retrieved from https://titanseal.com/
