Here are some important works on the topic:
The Crypto J-Curve
As the cryptoasset markets develop we’ll see many booms and busts as enthusiasm waxes and wanes. Waxing and waning is…
Today’s Crypto Asset Valuation Frameworks
Over the past year, several leading cryptocurrency investors and thinkers have proposed a variety of frameworks…
Doubts about the Long-Term Viability of Utility Cryptoassets
I’m increasingly sceptical about the long-term value of utility tokens. When I wrote An (Institutional) Investor’s Take…
What’s Wrong with Cryptoasset Valuation Models Today?
Valuation modeling has fascinated cryptoasset enthusiasts in recent years. While it’s a great thing that people are…
Valuing Cryptoassets from the Ground Up
The coins and tokens created with cryptocurrencies are curious things. We shouldn’t really call them currencies because…
Recently, an increasing number of crypto market participants and observers have become interested in a framework for…
Although valuation models started to emerge, long term valuation of crypto assets remains unreliable due to lack of empirical analysis and poor input data. By the way, one important result is that institutional money is still out. Generally, the space feels severely overheated both on secondary markets and in early-stage valuations.
Below is one simple subjective technique that helps me make a quick judgement on an asset. It’s quite unscientific and it goes like this, in three steps:
- Look into your head and clearly divide your personality into the two: you as a consumer and you as a businessman. These personalities are in opposing camps, the very fight between which creates the market forces. It is impossible to make judgements without taking either side first.
- Take your businessman-spirit only, travel back in time to 2008, and imagine the project [behind the token you consider] being pitched to you (as a VC) back then with no Bitcoin itself, no blockchain hype or anything like that in existence. Technically, most today’s large projects were possible back then. See if the project still makes sense “in a vacuum”.
- Now take only the consumer part of yourself and see if the token and the system behind it can continue the scenario of the tragedy of the commons in any meaningful way.
Play this game with your tokens of preference, it’s fun. It helps a lot when you feel the founders are just trying to fool you as an investor, but you lack technical knowledge to be sure your confusion isn’t only your problem. It helps you see the inner value of a system.
PS About The Tragedy of the Commons
What things need to have a public domain version and what don’t? Levels of the reasonable requirement for a resource to have a common version may differ:
- Almost a basic human right (fresh water)
- A constitutional provision (access to zero censorship media)
- A ‘we-better-have-it’ improvement to life (file storage)
Let’s consider an example: the accessibility of the Internet.
1. In the beginning, the resource was available as the common.
Just as pure nectar and fresh water were free and [reasonably] plenty for the limited audience of the Garden of Eden, the Internet access of the early days was free to those who needed it. Scientists and students used it for free around the Globe. Yes, there was someone in the background to actually finance it, but that doesn’t diminish the Internet’s status as a common in the early days. The common does not mean it’s not being paid for. It means one can use it and not be approached by anyone with any questions or requirements.
2. The common version of the resource becomes spoiled or inaccessible.
Reasons may differ, but we always get thrown away from paradise. It could be an overpopulation of the user community. It might be a voluntary seizure of the resource by the mighty. It may be a resonant case of abuse. The result is the same — the resource becomes a subject of the commercial and, not rarely, a political game. Internet access business has quickly become a big source of revenue and the battlefield with telephony, television, and other then-incumbents.
3. The commercialization stage is likely to slide into a quasi-monopoly.
By definition, a resource that qualifies for a public domain status is of high importance. It is therefore a very probable victim of the monopoly positive feedback loop phenomenon — the big get bigger, the rich get richer. For any selected region now, there are normally up to three landline Internet access providers and about the same quantity of mobile services. These low figures are hardly the result of a technological reasoning. Sorry about conspiracy talk but three looks like the number of parties where a cartel talk is relatively easy to arrange.
4. General democratisation process and technology advancement recreate the common, often in a parody form.
At some stage, the technology becomes ubiquitous enough for a variety of players to come up with a ‘free’ version. This version of ‘the common’ does not replace existing centralized commercial providers, but instead creates an alternative that probably has more emotional impact than a real service provision. At some point in time, it was a sign of good taste to provide free Wi-Fi.
5. The common gets abused and becomes inferior.
However, free Wi-Fi has become a source of problems, not a solution. Sometimes, your expectation to locate free Wi-Fi in an airport or in a hotel may be a sick guess. Expecting these facilities might have prevented you from taking proper care of your data roaming tariff. The free access status has also been lost and some identification procedures are applied in most places. Hotspots have also increased the malware distribution threat. Criminals might have tried to use it too. Thus, it was abused from all conceivable directions.
6. Now. Can some token economy fix this?
This is yet to happen in the sector, but if something is capable of fixing public access to the Internet, crypto is among the first candidates. For example, a dedicated token might incentivise hotspot owners to provide a reasonable bandwidth at a reasonable price. That might work if firmware for popular routers could be upgraded to coexist with a crypto wallet client.
Upd: Vitalik Buterin also thinks that “incentivized mesh networking and paid wifi access hotspots are certainly something that would be very interesting to work on.”