What is fair value for DeFi-related tokens?


DeFi-related tokens have recently been the center of attention in the market. The value of a DeFi-related token, including COMP, has largely skyrocketed.

Against this backdrop, a couple of attempts to measure fair value for DeFi tokens have been announced.

To give the conclusion first, it is likely to be easier to calculate the value of a DeFi token than that of a cryptocurrency, such as BTC.

Currently, DeFi tokens function as governance tokens, which are similar to voting rights without dividends used to decide what to do on a platform. Therefore, it is difficult to measure their value. But, sooner or later, platforms will start charging fees.


In fact, some DeFi platforms are already keeping fees in their community pools (a pool from which to pay development, advertising, and other expenses). The source is a portion of fees charged for users’ loan transactions and coin exchanges on DeFi.

Because DeFi platforms are decentralized exchanges and lending platforms, cash flows – fees – are generated from there. We should be able to use the cash flows to logically calculate the value of a DeFi token with the discounted cash flow (DCF) method.


While dividends are not currently paid to token holders, it will be possible to make dividend payments in the future. In addition, because the levels of fees and dividend payments are decided by votes of token holders, value can be calculated by assuming voting rights for a DeFi platform’s governance to be rights to decide future dividends.

While these discussions have been ongoing, because no dividend payments have been made, it is difficult to project the extent to which cash flows will be generated by a DeFi platform in the future.

In any event, there are many tokens traded at very high prices compared to current levels. The situation where they have become mere objects of speculation rather than having value based on fundamentals is common to Altcoins as a whole.

It is likely that once fair value is fixed, there will gradually be a convergence of value. Therefore, during a period where value has not yet been fixed and price movements are volatile, money is concentrating on the excitement of speculation.


*This articre was written by FISCO Guest Analyst, Tetsu ‘BIGSTONE’ OISHI