The value of design based on utility tokens can not be determined by models as a DCF or by free cash flow. Other variables come into play when we look at an ICO. Factors such as a demand for the token, the economic output, how many times the token circulates and sometimes it is “hold” before it is spent are crucial factors in a analyze.
Thus, many believe that the Quantitative Theory of Money is the to determine the value of a project, click Utilities Tokens. A theory Currency is nothing more than a direct match between a in an economy and in the price level.
In a classic way, Irvin Fisher in his book “The Power of Money “of 1911, a beginning begins with the following proposition: the goods you buy with cash and the money can be spent more than once in a period. Such proposition leads us to the following equation:
MV = PQ
M = amount of money in an economy.
V = number of times M is spent in a period.
Q = quantity of goods (or services) produced.
P = Price level.
This same model receives a proposal from Vitalik Buterin which adds the number of times the currency is “hold” before it is spent.What leads us to the following equation:
MC = TH
Where C = 1 / P or the cost of the token.
Where H = 1 / V or how many times the user solves the coin before performing a transaction.
Of course, these variables are formed by a set of incentives among all economy. The investor should note some increase in future demand to hold the token and see their dollar value go up. This guarantees the financing of the project.
The end-user of the token should also envisage incentives to always maintain an of tokens in the portfolio. Whether it is for benefits generated by the stack, or by imagining that its value will increase in the future. This value may increase with stimuli in demand or by greater perceived value of the good or increased service.
A key part of a project is to assess whether all players have incentives to generate positive sum game. An environment in which everyone wins and sees an increase in demand for the token and the perceived value of the good or service offered.
Co-Author
Thiago Bittencourt, https://www.linkedin.com/in/thiago-bittencourt-gil/
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