Basic analysis of key crypto assets using token terminals

From BankLess

A year ago, the industry had little understanding of how to value crypto capital assets and only dabbled in concepts such as price-to-earnings ratio (P/E) and price-to-sales ratio (P/S).

We didn’t have Token Terminal before. But we do now, so we can now dig deeper into the VALUE stream of DeFi protocols and crypto capital assets than ever before.

Which agreements are users most willing to pay for?
Where does Maker make most of its money?
How is Aave performing relative to other markets?
What is the cheapest deal in terms of revenue?

There are already answers to these questions. So when mainstream financial institutions take note during the crypto bull cycle, they will see some familiar valuation models.

As always, if you see this, you’ve got a head start.

Let’s learn how to use token terminals to analyze crypto assets.

-RSA (Public Key algorithm)

Strategy 70: How to analyze crypto Assets

Guest writers: HenriHyvarinen, Aleksis Tapper and Robert Valta, co-founders of token terminals

Token Terminal is a data analysis platform that provides traditional financial metrics for crypto assets.

They recently released a major update that gives analysts a new tool to understand the state of the crypto market, as well as information about where it stands relative to its peer group. The strategy will delve into some of the metrics available on the token terminal and look at how we can leverage them to our advantage as we explore new assets.

Objective: Learn how to interpret on-chain business data using token terminals Skills: Intermediate Effort: 1 hour ROI: Better token wager based on basic metrics

What is a token terminal?

Token terminal is a data analysis platform that provides traditional financial metrics for crypto assets.

We believe that both blockchain and blockchain-based applications are conceptually similar to traditional market companies. These are essentially the Internet’s native markets, where revenue generated by the service (usually completely digital) is divided between the project’s users (provider participants) and owners (token holders).

In some cases, the revenue flows directly to one party, as is currently the case with projects like Uniswap and Ethereum, where the supply-side participants (liquidity providers and miners, respectively) earn all the revenue generated.

It’s worth noting that most crypto projects today are venture-backed and still record their costs and expenses off chain (although there are exceptions like Yearn), which is why we initially decided to focus on revenue rather than revenue.

Once more projects start documenting their costs and expenses on the chain, we will also be able to provide accurate P/E ratios.

Token Terminal Initially available indicator

Here is an overview of all the different metrics currently available for Token Terminal:

**1. Market capitalization – What is the value of the project? ** Calculation is based on the fully diluted token supply of the project.

Compound value

2. ** Price-to-sales ratio (P/S) – How should the project be valued relative to its revenue? ** It is calculated by dividing the project’s market value by its annual revenue. Annual revenue is a forward-looking estimate of revenue calculated based on a simple 30-day moving average.

Ethereum price/Sales ratio (P/S)

**3. Token Trading volume to Market Value ratio (VOL/MC) – How efficient is the price discovery of project native tokens? ** The calculation method is the daily trading volume of the project’s original token divided by the market value.

MKR token Trading volume to Market Cap (VOL/MC)

**4. Locked In Total Value (TVL) – How much money has been deposited into the smart contract of the project? ** Is calculated as the difference between the liquidity deposited into the project smart contracts (swaps) or the assets deposited and borrowed (loans).

Uniswap Locked total value (TVL)

5. Gross Transaction Volume (GMV) – What is the demand for project services? Calculate the volume of transactions or borrowing (lending) of an item.

Gross Turnover of Top Exchanges (GMV)

**6. Revenue – How much do users pay to use the services of the project? ** Calculation method is GMV * adoption rate. Currently, revenue refers to all fees paid by project users. Where possible, we have also included data on how the gross income is divided between the users of the agreement (provider participants) and the owners (token holders).

Top dapp income

**7. Transaction Rates – How much does it cost to enjoy project services? ** This refers to the fees charged in the form of transaction fees (interchange) or interest rates (borrowing) on the total volume of transactions.

Compound transaction rate structure

How to make the most of charts

When browsing the panels of individual projects, it is often useful to write down the following:

The issue date of the project’s native token,
The date of distribution of potential token awards,
The date a new asset (trading pool or lending market) is added to the project platform.

These events are usually clearly visible in gross turnover (GMV) and revenue composition charts. For example, offering a token reward can temporarily increase the demand for the project’s services (increasing its total transaction volume).

Counter chart

The counter chart focuses on current values and is benchmarked against the equivalent group of items (other DeFi items currently listed in Token Terminal). In addition, they include longer periods of month-to-month change and compound monthly growth rates (CMGR). When looking at a counter chart, it is useful to consider the factors that explain its rise or decline from month to month. Is this dynamic online or compared to an equivalent group of projects? Why?

Aave value

History chart

The historical chart provides more insight into how the project has evolved over time.

In historical charts, it is useful to look for patterns (stability, volatility, one-time peaks or dips, correlations with equivalent groups, etc.) as well as underlying events that explain them (such as token incentive initiation). Switching enables users to focus views on items or equivalent groups (DeFi average).

SushiSwap Gross Transaction Volume (GMV)

Compose and standardize diagrams

The composition diagram reveals the basic dynamics of the project business.

Which trading pool or lending market is most commonly used in terms of volume? Which trading pool or lending market charges the highest or lowest fees in terms of adoption? Which trading pool or lending market generates the most fees in terms of revenue?

A normalized version of the composition chart shows how the relationships between different trading pools or lending markets evolve over time. The toggle feature allows users to focus their view on a particular trading pool or lending market.

MakerDAO | accumulated incomes

A chart with multiple trading pools or lending markets

For projects with multiple different gross and revenue components, in addition to the “other” category, we chose to visualize the nine components with the most gross and revenue over a relevant time period (i.e., 30 days, 180 days, or since launch). The “other” category indicates that long tail transactions in trading pools or lending markets generate significant volume or revenue, and vice versa.

The toggle feature allows users to focus their view on a particular trading pool or lending market.

Uniswap revenue composition

conclusion

While DeFi is new, we are beginning to deepen our understanding of this emerging asset class.

DeFi protocol from the perspective of the digital native market. It provides services that do not need to be licensed for use by anyone, anywhere, on both sides of the market (suppliers and demanders).

And we’ve only unlocked phase one. As the project matures and reports its costs and expenses on the chain (see Yearn’s quarterly financial reports), we can also develop metrics and methods for comparing these agreements, which will give us a better understanding of the assets that underpins these systems.

A year ago, we didn’t have these tools. Now, we have. And it can only get better from here.

about

UBI. City – Regarding the future organizational structure of the agreement, we will be releasing more ideas and design mechanism of UBI. We welcome interested blockchain enthusiasts, community initiators, research analysts and Gavin, Iris to discuss the future possibilities of UBI.

Chinadefi-chinadefi.com is a research-driven DeFi innovation organization. Every day, from nearly 900 pieces of content from over 500 high-quality information sources around the world, chinadefi-Chinadefi.com seeks for more in-depth thinking and systematic sorting of content, and synchronously provides decision-making aid materials to the Chinese market at the fastest speed.