Exploring Encryption Asset Valuation Models: A Multidimensional Analysis from Public Chains to Bitcoin

Cryptocurrency has become one of the most promising sectors in the fintech field. With a large influx of institutional funds, how to properly assess the value of encryption projects has become a key issue. Traditional financial assets have mature valuation systems, such as discounted cash flow models and price-to-earnings valuation methods.

There are various types of encryption projects, including public chains, exchange platform coins, decentralized finance projects, and meme coins, each with its own characteristics, economic models, and token functions. Therefore, it is necessary to explore valuation models suitable for each field.

1. Public Chain Valuation: Application of Metcalfe's Law

The core content of Metcalfe's Law is: the value of a network is proportional to the square of the number of nodes.

V = K*N² (V is the network value, N is the number of active nodes, K is a constant)

This law is widely recognized in the valuation predictions of internet companies. Research shows that over a statistical period of 10 years, the value of some large social network companies exhibits characteristics of Metcalfe's Law in relation to user numbers.

For the practical application of Ethereum, research has found that its market value has a logarithmic linear relationship with daily active users, which basically conforms to Metcalfe's Law. The specific calculation formula is:

V = 3000 * N^1.43

Statistical data shows that this valuation method is indeed correlated with the market value trend of Ethereum.

However, the Metcalfe's Law has some limitations when applied to emerging public chains. For example, this approach may not be very applicable to early public chains with a smaller user base. Furthermore, it cannot reflect the impact of factors such as staking rates, burning mechanisms, and ecosystem security on token prices.

2. Valuation of the Trading Platform Coin: Profit Buyback and Destruction Model

The platform coins of centralized exchanges are similar to equity tokens, and their value is closely related to the exchange's income, ecological development, and market share. These platform coins usually adopt a buyback and burn mechanism, and some also have a fuel fee burning mechanism found in public chains.

The valuation of platform coins needs to consider the overall income and destruction mechanism of the platform. A simplified valuation method is:

Platform coin value growth rate = K * trading volume growth rate * supply destruction rate (K is a constant)

Taking the platform coin of a well-known trading platform as an example, its empowerment method has evolved from profit buyback to automatic destruction. Currently, the platform adopts an automatic destruction mechanism based on coin price and block number, as well as a real-time destruction mechanism similar to Ethereum's EIP1559.

However, in practical applications, it is necessary to closely monitor the changes in market share of exchanges and the impact of regulatory policies, as these factors may have a significant effect on the valuation of platform coins.

3. Valuation of Decentralized Finance Projects: Token Cash Flow Discounting Method

For decentralized finance projects, a token cash flow discount valuation method can be employed. The core logic is to predict the future cash flows generated by the token and calculate the current value at a certain discount rate.

Valuation formula: PV = Σ(FCFt / (1+r)^t) + TV / (1+r)^n

Among them, FCFt is the free cash flow for year t, r is the discount rate, n is the forecast period, and TV is the terminal value.

Taking a certain decentralized exchange platform as an example, suppose its annual revenue growth rate is 10%, the discount rate is 15%, the forecast period is 5 years, the perpetual growth rate is 3%, and the free cash flow conversion rate is 90%. By calculation, it can be concluded that the valuation of the project is close to its actual market value.

However, this approach also faces some challenges: governance tokens are often difficult to directly capture protocol revenue, future cash flow forecasts are challenging, determining the discount rate is complex, and the profit buyback and burn mechanisms adopted by certain projects may affect the accuracy of valuation results.

4. Bitcoin Valuation: A Comprehensive Consideration of Multiple Methods

For Bitcoin, various valuation methods can be used for comprehensive analysis:

1. Mining Cost Valuation Method: Over the past five years, the time when Bitcoin prices were below the mainstream mining machine mining costs accounted for only about 10%, indicating that mining costs can be regarded as the bottom line for Bitcoin prices.

2. Gold Substitute Model: Bitcoin is regarded as "digital gold" and can partially replace the value storage function of gold. Currently, Bitcoin's market value accounts for 7.3% of gold's market value. If this ratio increases, the price of Bitcoin may reach higher levels.

However, it is important to note the differences between Bitcoin and gold in terms of physical properties, market perception, and application scenarios, as these factors can affect actual valuation.

Conclusion

Finding suitable valuation models for encryption projects is crucial for promoting industry development and attracting institutional investors. Especially during market downturns, reasonable valuation methods can help identify projects with long-term value. Just as some high-quality technology companies emerged after the internet bubble burst in 2000, we also look forward to uncovering future giants in the encryption field in the current market.