Unlike most other cryptocurrencies Governance tokens for decentralized finance (DeFi) are suitable for classic basic analysis techniques. Since they are similar to traditional heritage in many ways, You can use established structures to evaluate a company.
Cointelegraph spoke Pankaj Balani, CEO of the Delta Exchange derivatives platform, For more information on your company’s investigative exercise, contact Give the compound protocol token a fair value.
The monetary value of governance
The researchers initially focused on Assign a monetary value to the ability to control the protocol. They took the example of the stock exchanges where Each company can have different voting rights for each share. “Almost always, voting shares are traded at a premium for non-voting shares,” said Balani.
After his analysis This premium is usually 2.5% to 5% and a maximum of 15%. To the COMPthe researchers assumed that Governance accounts for 20% of its value to explain what it believes means more freedom of choice.
To estimate the remaining 80% of the value, the researchers used a classic valuation method used by banks:
“You have depositors who donate your assets and you have borrowers who basically lend them. And then there is a net interest margin that the bank captures. “
He explained that Bank stocks are usually traded in modest multiples of the size of their books or the amount of their lending. Although Compound is not a bank, the protocol works similarly. and instead, you can imagine capturing the same value as a bank.
Traditional banks They are valued at approximately two or three times their book value. For COMP the researchers You multiplied the book value five times to account for future growth. However, this still resulted in a “fair value” of $ 40. compared to the current price of $ 173. The researchers used a book value of $ 400 million According to DeBank, this corresponded to the borrowed assets of the protocol in early July.
Is the rating fair?
The team noticed that The valuation method is based on some key assumptions, mainly the book value multiplier. However, there are some other caveats to this investigation. The team used the fully diluted market capitalization of 10 million COMP, in contrast to the currently outstanding offer of 2.5 million.
On the other hand, The formula they use assumes that the COMP value is only included in the governance. However, it is expected that the token will soon have a mechanism that can capture the economic value of the protocol.
Now, Compound’s market capitalization is approximately half of the total amount borrowed from the protocol. But there is also a very important limitation.
The extent of agricultural production
According to the composite statistics More than $ 800 million of the $ 1 billion in borrowed assets is made up of DAI, while the total existing DAI is $ 200 million. On July 1, only 30 million DAI were borrowed. Something similar happened with the USDC, where the value rose from USD 30 million to around USD 180 million. practically overnight.
As Balani noted:
“There are many [activos] Increase related income that is stated in terms of COMP. […] And when the price starts to normalize, much of this book can relax. “
The DAI and USDC surge can be used to estimate how much of the compound book is being used fairly and how much is due to liquidity deprivation. These funds flow almost exclusively on the most profitable agricultural commodity, as evidenced by BAT loans, go from Almost $ 300 million to just over $ 1 million at DAI Acquired popularity.
The difference between before and after for USDC and DAI is $ 881 million which was added by aggressive liquidity miners.
So, The actual book value of the connection must not exceed USD 119 million. Some of them are probably still from less aggressive “production farms”.