Valuation of Utility Tokens based on the Quantity Theory of Money

This article is gold , I have learned a lot about the basis of the theory of money and token valuation. Thanks Jay Pazos for sharing it.

Acronyms to remind:

  • TAM: Total addressable market.
  • SAM: Serviceable available market.
  • SOM: Serviceable obtainable market, the market that the company can realistically address.
  • PSOM: %market penetration of the company in SOM.
  • Q: quantity of the resource provided.
  • Q = SOM x PSOM

Abstract

Ok, you do not have time to read the 6 pages article, just read the abstract, I guess it will convince you to read the rest.

A framework to value utility tokens would allow for more transparent Initial Coin Offerings (ICO) and help in the development of digital assets. In this paper, we derive a formula to value utility tokens and the network that supports it. We found that valuation is directly proportional to the price of the resource being provided and the size of the Serviceable Obtainable Market (SOM) for that resource. Also, it is inversely proportional to the velocity of the token. In section 4 we derive a formula for a crypto conversion factor that relates the price of the token to the price of the resource provided, the factor is not linear and has seven variables. For cases where the growth of SOM and the growth in price of the resource are not high, longer times to develop the network will
decrease valuation; this is because discount rates for start-up and growth companies are high. On the other hand, if the build-up of the network goes on-time as planned, posterior valuations of the network will yield higher values. As expected, valuation doesn’t depend on the number of tokens issued as that variable doesn’t appear in the formula. We believe that by making these formulas available to the Blockchain/DLT community,
we can help network developers to understand how key variables impact the valuation of the network they are trying to build.
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View Ether transactions live

Ethviewer.live is the type of visual pages you can view for hours, you learn with the different things that are represented, and enjoy how they move.

Last weekend had the opportunity to discover this place with a group of people that were explaining me the details about:

  • How the transactions are validated,
  • how the blocks are completed,
  • how the nodes are connected and how they are mining.
  • why some blocks are discarded and the transactions moved to other blocks.
  • how the transactions with more gas are managed with more priority,
  • etc.

To me, to understand the dynamics of a block chain, this is now the best visual reference I know.

Ethviewer

Ethviewer

Wei

Ether is a fundamental cryptocurrency for operation of Ethereum, which thereby provides a public distributed ledger for transactions. It is used to pay for gas, a unit of computation used in transactions and other state transitions.

A wei is a fraction of an ether:

  • 1: wei
  • 10^3: Kwei
  • 10^6: Mwei
  • 10^9: Gwei
  • 10^12: szabo
  • 10^15: finney
  • 10^18: ether

Where can I see what miners are accepting?

You can visit https://ethgasstation.info/ and obtain that information from there.

You can also calculate the cost of a transaction (TX) on https://ethgasstation.info/calculatorTxV.php

Ether gas calculation

Metronome (MTN)

Metronome (“MTN”) is one of the crypto currencies that will be launched at the end of

2017. They define themselves as first cross-blockchain cryptocurrency, making decentralization possible and delivering institutional-class endurance.

 

The goal

Reading some articles from founder (Jeff Garzik) it enable the users to jump from one currency to others, so an individual can avoid the volatility of a currency moving the assets to other currency.

Applying the tragedy of commons principles, if everybody changes their positions from one currency to other, doesn’t it increase the volatility?

Target launch

First try was for the end of 2017. It was finally postponed.

It’s scheduled for March 2018, but today (March 16th) there is still not final date announced.

Today, March 28th the launch is rescheduled for May 2018.