When I was a banker quite some years ago, I dealt often with stocks and bonds. I've studied the field and it was quite easy for me to define the inner value of a stock according to certain indicators. Like that I could build a nice portfolio of shares that I knew were bought at a good price.
How to define the value of a token ?
Like many of you, I lived through the ICO wave and then the STO wave and later I met all the DEFI stuff. I've seen many things and many projects were still born or abandoned. So how can we define the inner value of a token or a crypto currency ?
The distribution
One of the most important factors to evaluate the inner value of a token is to look at it's distribution. How many people are owning and using the token? The more people use it the better. There are a lot of very high market caps where very few people own the token. The market cap and the token price can be manipulated quite easily, especially when few people own this token.
The more people actively use the token the better
The use cases
There are so many different tokens and not all of them have meaningful use cases. If you have a token that can be staked for the sake to produce more of the same token it is nice and well but in the end this won't be enough. When you have new tokens produced, what can you do with the existing ones?
When you look at Etherieum, the principal use case is to use all the fancy tokens on the etherieum blockchain to pay the gaz fees. It's an use case.
Let's look at Bitcoin. The use case of bitcoin is to protect your fortune. Thanks to the deflationary aspect of the coin, people see it as a perfect fit to protect their capital and to profit from the price development. But with bitcoin it's not possible to pay stuff.
For every use case there is a competition between tokens and blockchains. Some will not survive and some with strive.
If you combine distribution and use cases together this is for me a good indicator for the internal value of a token.
The network effect
I've seen a lot of projects lately that integrate several blockchains into their services. This is a very important success factor because linking blockchains and token economies together is an amazing multiplication effect for the distribution of the token and of the use cases.
These are the indicators that I try to use to evaluate the potential of a token. For me the short term price doesn't matter that much. What does a nice price development mean when the token won't be around anymore in the near future?
But tell me how do you define the inner value of a token?
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