Pricing a Cryptocurrency: Reddcoin
DESCRIPTION OF BLOCKCHAIN APPLICATION: Reddcoin is a digital currency which can be integrated with all major social media platforms to make payments and transfer money between users. It is based on the Blockchain and has an innovative “Proof of Stake Velocity” algorithm driving it.
MAIN USE-CASE: Using Blockchain to disrupt the payments through social media platforms.
TOTAL DEMAND: According to a research by Juniper Research, the global digital payments market will reach USD 3.6 trillion in 2016. Cards will account for 90% of these payments. Based on the increasing popularity of payments through social media, we can assume atleast 1% of the total payments will be made through social media (the rest can be wallets). This implies a potential demand of USD 36 billion.
TOTAL SUPPLY: Currently, there are 28.55 billion Reddcoins in circulation (growing at 5% annually).
RISK FACTOR: A lot of risks exist in this project.
*Regulatory Risk: Medium to High, as transfers can be national or international. The coin’s utility to purely to transfer money between people.
**Utility Risk: Medium, social payments itself is slowly picking steam. Trust is a crucial factor and a new entrant will find it very challenging to penetrate this market.
**Platform Risk: Low to Medium, as the coin uses a new and innovative Proof of Stake Velocity algorithm. This ensures fast block approvals, which is a big limitation of leading cryptocurrencies.
**Execution Risk: High, as I could not get enough information on the team behind the Reddcoin.
Based on the above, the Risk Factor for this startup can be (2*0+2*0.33+2*0.33+2*0)/7 = 0.19
POTENTIAL MARKET SHARE WHICH CAN BE CAPTURED: 5% due to entry into a new and upcoming market.
TARGET PRICE FOR REDDCOIN: 36*5%*0.19/28.55 = USD 0.012
(*I do not have any Reddcoins. This is purely my estimate for this cryptocurrency and I arrive at it using a very simplistic approach.)