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0 pointslucozade7y ago0 comments

The usual approach is to sum the present values of the expectations of any future cashflows.

For most cryptocurrencies, most people come unstuck at that point and just punt.

The only analytical approach I could foresee being useful would be if you could quantify the quality of the marketing of the new asset. My expectation is that that likely drives the bulk of the pricing most of the time.

0 comments

ccarnino7y ago

This is very true. Marketing drives the perceived value a lot of the time. But this is a short/medium term trick. In the long term just the ones valuable will survive.

Do you look at specific data points to understand if the asset is overvalued or a scam?

lucozadeOP7y ago

> Do you look at specific data points to understand if the asset is overvalued or a scam?

Well yes. What you do is calculate the expectation of the future cashflows and PV them.

If there aren't any future cashflows then the fair price is zero and anything else is overvalued. That doesn't mean you shouldn't buy it but you should treat it like any other form of gambling.

If the asset creator won't release any quantifiable information about the future cashflows then the correct response is to assume it's a scam until they do.

That leaves the cases where there are quantifiable cashflows. Some smart contracts fall in this category. What you do then is analyse said cashflows and decide whether the price is justified.

ccarnino7y ago

This is very interesting. I follow your logic for products builds on top of blockchains (e.g. smart contract types of apps).

But for protocols like Ethereum or Stellar, how do define "future cashflows"? Do you use cost of transactions? Or what is the thinking there?

j / k navigate · click thread line to collapse

0 pointslucozade7y ago0 comments

The usual approach is to sum the present values of the expectations of any future cashflows.

For most cryptocurrencies, most people come unstuck at that point and just punt.

0 comments

ccarnino7y ago

This is very true. Marketing drives the perceived value a lot of the time. But this is a short/medium term trick. In the long term just the ones valuable will survive.

Do you look at specific data points to understand if the asset is overvalued or a scam?

lucozadeOP7y ago

> Do you look at specific data points to understand if the asset is overvalued or a scam?

Well yes. What you do is calculate the expectation of the future cashflows and PV them.

If there aren't any future cashflows then the fair price is zero and anything else is overvalued. That doesn't mean you shouldn't buy it but you should treat it like any other form of gambling.

If the asset creator won't release any quantifiable information about the future cashflows then the correct response is to assume it's a scam until they do.

That leaves the cases where there are quantifiable cashflows. Some smart contracts fall in this category. What you do then is analyse said cashflows and decide whether the price is justified.

ccarnino7y ago

This is very interesting. I follow your logic for products builds on top of blockchains (e.g. smart contract types of apps).

But for protocols like Ethereum or Stellar, how do define "future cashflows"? Do you use cost of transactions? Or what is the thinking there?

j / k navigate · click thread line to collapse