March 6, 2018 at 6:27 am #20494pauldoffmanMember
I’ve started a Youtube channel about Crypto and wanted to bring an element of austrian economics into it so I joined the site 🙂
I want to build a system that helps me gain a better understanding of what the future price of a coin might be base on how its intended to be used.
Most coins or tokens represent an idea and have no working product that they are used within. There is huge amount of speculation that a token will be in demand in the future to give a user utility within a certain decentralized app. (dapp)
I suspect however that the price of some coins and tokens is already higher, based on speculation alone, than the demand for the coin by users of the dapps could ever cause it reach.
I’ll give an example of a particular token I’ve been looking at recently.
An dapp that connects brands with social influencers users its own unique token to facilitate all payments for social influencer campaigns. Brands have to buy the token in order to pay the social influencers.
I won’t go into why this app chooses to create its own crypto for their services but some companies make stronger cases that others.
Brands who want to buy these social influencer campaigns create demand for the tokens. The more brands want to spend in the system the higher the price will go. The supply of the tokens is fixed at 1B.
This is what I would call the use case price. What is the price created by the demand to use the token in a scenario where there is 0 speculation.
Where I’m upto with this so far.
I look at the entire potential market spend on the sector the dapp is trying to gain a share of. In this case social influencer marketing. I do some research and find that its predicted that in 2019 the global annual spend is likely to be 1.2B.
I then look at how well I think they could do. For example if they were wildly successful they might gain 10% of that market share.
This would mean that 120M of that spend would need to go through the dapp and would have to be used to purchase the tokens.
The total supply of the coins is 1B. Would this mean that this price of each token would be $0.12.
This is where I’m stuck because would that not mean that all of that money would have to bid for all of the 1B tokens at the same time?
So to simplify this.
Let’s say all campaigns take 1 month to run. The tokens are brought on day 1 and sold 1 month later.
There are multiple companies bidding for the tokens just as they would bid up the price of campaigns in fiat. To make up the anual total spend 1/12 of 1.2B is exchanged for tokens each month.
Demand $120M/12 = 10M
Price per coin = 10M / 1B = $0.01
So if the coins were tied up in campaigns for 1 year the coins would be valued at $0.12 but if campaigns lasted 1 month they would be valued at $0.01.
I know in reality it would be very different to this but fundamentally the longer the coins are tied up with participants and being used on the dapp the less there are available in the market and the higher the price.
Can anyone help me understand how I should be thinking about this? Is this in anyway the right direction? Any suggestions on how I can model this would be very much appreciated!November 10, 2019 at 6:48 pm #20495dan0Member
This is an interesting but very complex question. I always wonder why projects like this decide to create their own token. If they had built this system using BTC or ETH they might have something but I don’t know why any influencer would take payment in this token so I think the value is $0. I don’t think they ever capture 10% or even 1%.
I know that is not the answer you were looking for. Anyway, I think what you are doing might be valid for BTC or ETH. I don’t know that it is a wise use of time to try to figure out the value of altcoins until they have real adoption and data on use.
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