Applying DCF To FUTR and MNY
Synthchain WP (10)
When we purchase 114 FUTR for 1 ETH while the Futereum smart contract is selling in the first of ten tiers, by the time the exchange of all FUTR and all Ether takes place, assuming that the total number of tokens that count be issued are so in year two, then we would be able to value the FUTR’s net present value discounting the asset at a comparable rate of return we might achieve in the underlying asset.
Let’s assume that ETH is $500 today, and that you expect to receive 8x the amount of Ether from the Futereum smart contract as per the realistic probability of doing so if all the tiers of the smart contract are sold out somewhere in year two. Further, you assume that ETH has risen to $2,000 by three years’ time and that the growth rate going forward is 35% (around half).
The Futereum smart contract will not accept any re-exchange until year 3 if that is the case. Further, you estimate that you make around 50% profit per year trading comparable cryptocurrencies. Therefore:
The result is that the value you have obtained from the Futereum smart contract’s functionality is $4717.50 per Ether, representing what is a time-adjusted equivalent present value of an additional $4,267.50 when Ether is in the form of a Futereum digital note.
Presciently, the DCF formula can be used to certify whether holding the actual underlying asset or whether purchasing whatever digital note proxy coin equivalent is a better bet. For instance, assuming that the appreciation of Ether is expected to be around 1000% per year for the next 3 years then:
In this case, our expected value for Ether in 3 years’ time is $50,000, with an additional $5,000 a year in future growth since we discounted the growth down by 10x after the realization of the investment and since Ether was growing at a rate of an additional 1000% per year during the invested period.
The value at which we invest our $500 is enhanced with thousands in additional capital once the Ether is inside the Futereum smart contract as we can see. This means that to make the same sort of return as we could expect to make using making Futereum digital notes we would need to have an extra 200 times the capital we do today! Such a scenario is not unrealistic in venture capital investments, doubling the potential excitement for such digital note products.
Clearly, the ability to calculate currency values on the same basis that we do income-generating assets is a unique and unchartered innovation prospect.
The flexibility of digital notes to make permissible discounted cash-flow valuations of cryptocurrency utility is perhaps the most exciting aspect of the smart contract build in terms of wider application to the investment world, for in allowing such valuations to be performed, digital notes can be compared on a like-for-like basis directly with all sorts of investments, such as real estate, stocks, bonds and others.
Further, such investments now that they have a discounted future value based on a specific income ratio equivalent, can be ascribed multiples for trading, in the way that securities are valued via the business cash flows.
Remarkably, all this is made possible without securitizing a single portion of the digital currency unit as well, inviting the possibility for significant levels of disruption in equity and securities markets henceforth over the next few years.
