SwissBorg — The Invest Insider : How to value a token?

At every conference we attend, blockchain enthusiasts constantly ask us the same question: “how do you value a token?” In order to answer the question we decided to conduct an analysis of how to value a token and applied it to CHSB, the SwissBorg token.

How can we measure value?

The standard approach for valuing an asset is based on its expected earnings or cash flows, this makes sense for stocks and security tokens, but it doesn’t work as well for utility tokens because they do not represent a future cash flow, but they do have a present or future utility, and their value should be based on the demand for that utility.

Today, no “pricing model” exists for tokens as it does for stocks. This is normal because if we step back a little, we realize that our tools for measuring values are obsolete, more than that, there is value all around us that we cannot measure yet. A good example is data.

The most common tool for measuring economic value is the GDP. But, despite the significant usage of Data, it is not even included in the GDP. If a country has Wikipedia (data) and another country doesn’t have Wikipedia but sells encyclopedias instead, from a GDP perspective the latter has more “value”.

More than a digital currency, Bitcoin is a first step toward a valuation model for Data. A sort of first proof of concept and this is extremely exciting !

It means that we can use an alternative way to measure the value of the CHSB, using a “peer comparison” to see whether an asset is undervalued or overvalued relative to other comparable tokens.

Competitive Landscape On-Chain Fintech

There are over 1,600 tokens available to trade at the moment. All of these tokens are not necessarily comparable to each other. We need to classify them into comparable groups. There is no standard industry classification for tokens, so we decided to create a test of our own to the find true peers for the CHSB Token.

There are 48 on-chain fintech tokens (out of a sample of 1,623) and we have divided them into 6 sub categories:

Table 1: FinTech DAO sub-categories

The details of the list of fintech tokens and their category or sub-group are shown in the Annex 1.

A straightforward approach to value is to look at the market capitalization:

Graph1: FinTech DAO Market Capitalisation Comparison

We can refine this approach by looking at the average market cap of both the Fintech DAO and wealth management sub-category:

Graph 2: CHSB token compared to average Market Capitalisation

When we compare SwissBorg to its FinTech DAO peers we come to the penultimate spot with a market cap of $13,112,200 compared to $1,619,181,045 for Binance Coin, the first FinTech on our sample by Market Cap.

The total average market capitalization worth is $165,223,334 which is 12 times higher than the CHSB’s market cap. However, when we refine our list to only the Crypto Wealth management category we notice that the CHSB needs to increase by only 5.5 times to reach the average price. (Annex 2)


ANALYSIS

Qualitative Analysis

Peers valuation is the ultimate metric for a FinTech to track and it is the best leading indicator for future market share. Defining value can be difficult but a straightforward definition is simply what is the worth of your product or service worth.

In this section we tried to measure and create a clear understanding of value. The spider chart below, can serve as a simple tool to evaluate the competitive advantage of a fintech and is therefore a second step to correctly value a token.

We selected the following six criteria to evaluate each FinTech DAO and we focused our analysis on the Crypto Wealth Management sub-category:

  1. Products

We score them from 0 (MVP) to 10 (Functional App)

2. Number of token holders

The higher the number of token holders, the higher number of users will want to use it

3. International Presence (Number of offices)

The number of offices in different countries and cities is a measure of how global the reach and therefore the demand for the token will be

4. Token utility in regards to products

A qualitative analysis of the utility giving a score from 0 to 10. We admit, this can be subjective..

5. Exchanges in which the token is listed

The more exchanges, and especially top exchanges, the larger the reach the token will have and therefore the higher likely demand.

6. Awareness

A composite measure of social media followers

We used these six indicators and ranked them on a 10 point scale and depicted in a 6 point radar chart (Graph 3). The details of the calculations are shown in the Annex 3.

Graph 3: Peer’s Analysis
Graph 4: Industry Average vs SwissBorg

The analysis illustrated in Graph 4, reveals that SwissBorg DAO over-performs the industry average following the 4 criteria. Using this method, the graph above shows how we have a very strong international presence, thanks to our broad global footprint (Switzerland, London, France, Canada and Japan), the Exchanges, the Number of token Holders we have, as well as our brand-recognition that is a result of our active marketing, participation in conferences and publications. However, there remain domains that we need to improve: the product itself and the token utility in regards to our product.

Relative Post-ICO Performance

An alternative analysis is to compare the performance of the CHSB token to our FinTech DAO sample. In this analysis we took the price in Ether to neutralize the market fluctuations.

To have a view of the growth perspectives we calculated the following ratio:

Where i = 1,2 …..,N FinTech DAO, t = 0,1, ….,T month after ICO

The Graph 5 shows the performance in ETH of all the FinTech DAO starting from the end of their ICO. The best return goes to Binance with 150x after 8 months and the worst goes to FOTA 8 with 0.09x 8 months after their ICO. (Annex 4)

Graph 5: FinTech DAO Performance after ICO

Again, we refined our selection by only taking the wealth management DAO in the following graph (Annex 5):

Graph 6: Wealth management DAO Performance after ICO

We are now facing a maximum ICO return of 19x and a minimum of 0.02x.

Since the CHSB is 4 months old we have reduced our timeline to this number and have taken into account only the median ICO to have a clearer comparison. Our Median ICO target was found by calculating the average performance for the 48 FinTech DAO, sorting them and then looking for the token median (Iconomi token). (Annex 6)

Graph 7: Median FinTech DAO Performance after ICO vs SwissBorg ICO performance
Graph 8: Median Wealth Management DAO Performance after ICO vs SwissBorg ICO performance

Currently, the CHSB’s return since the ICO is 0.36x compared to a median of return of 3.27x in the same period. The CHSB has clearly underperformed the median peer (Graph 7&8).

Conclusion

According to our quantitative analysis it is clear that our current market cap is below the benchmark. However, our qualitative analysis shows us that we do have a strong position in 4 criteria out of 6. There are 2 areas where there is much room for improvement (Products and token utility). Also, it is important to emphasize that we are at the nascent stage of our development. Our product is still a minimum viable product (it is at around 20% of development), we are have, currently, at the 15% mark of our roadmap but in term of product USPs components we are in the top (with 80%) revolutionizing wealth management.

We are working hard to launch our product and improve the utility of the CHSB token in order to close the gap between us and our median peers. Needless to say, we are eager to see how these developments will impact the price of our CHSB token.

Google spreadsheet

*Disclaimer: This is for educational purposes only and should not be considered as investment or any other kind of financial advice.