Recently, as the Ethereum Shanghai upgrade approaches, SSV Network, the leader in DVT technology, has received more and more attention, and its secondary market performance has also attracted everyone's attention. Many people have given their own calculations on the valuation of the SSV protocol. Today, I also combined some blockchain projects to assess and estimate the value of SSV from different dimensions.
Bitcoin: an emerging payment method
If Satoshi Nakamoto came to you with a white paper, how would you value Bitcoin? Obviously, Bitcoin itself does not generate profits, so if you use traditional company valuation methods to calculate it, you can only conclude that this thing is worthless. But anyone who understands Bitcoin will definitely not regard it as a company for valuation.
First of all, as an emerging payment method, Bitcoin will eat away at a certain market share of traditional payment processors. At the same time, it can be valued for the first time according to the payment network.
Secondly, if it is accepted that Bitcoin can be used as a means of payment, then naturally, Bitcoin can also be used as a value scale to measure the price of goods or services. Therefore, it can be evaluated as a second level by adding the value scale. valuation.
Finally, if you are a larger investor, you can already foresee that Bitcoin can be used as a store of value. Because the output of each Bitcoin is generated through undifferentiated calculations, and the existence of private keys can achieve the protection of private property, this can be perfectly compared with gold in the real world. In this way, gold can be compared. A third valuation of Bitcoin.
Dogecoin: the embodiment of brand value
Dogecoin is a special one among blockchain projects because its birth was originally a joke. In 2013, Palmer bought the domain name dogecoin.com, hoping to make Dogecoin a reality. Marcus contacted Palmer and spent 3 hours modifying 3 parameters in the Bitcoin code (font, total amount 100 billion, mine changed to dig, because dogs can only dig) and released Dog currency.
Now, Dogecoin ranks 9th among all digital currencies, with a market value of US$11.3 billion. Of course, there have been many twists and turns in the process, which is also related to Musk's support. If you were asked to value Dogecoin, what model would you follow? Is the valuation analogous to Bitcoin? Definitely not, Dogecoin should obviously be valued according to its brand value.
It is no exaggeration to say that Dogecoin is the most famous blockchain project after Bitcoin, and its popularity outside the circle even exceeds that of Ethereum. Therefore, Dogecoin is suitable for brand value valuation, and many NFT projects are also suitable for brand value valuation methods.
Uniswap: Challenges of Governance Tokens
In March 2018, V God published a paper: "Improving front running resistance of x*y=k market makers". At the same time, Hayden Adams, a laid-off Siemens employee, was learning Ethereum programming at the suggestion of a friend and began designing AMM products according to Buterin’s vision.
We all know the subsequent story. The emergence of Uniswap turned the idea in V God’s paper into reality. Based on the classic mathematical model of “x * y = k”, AMM broke the previous inherent thinking of order book + matching DEX. restrictions, successfully freed DEX from dependence on CEX's model replication and quotation, and also broke CEX's monopoly on the cryptocurrency trading market, making permission-free, open, free, simple and efficient on-chain transactions a reality .
At the same time, Uniswap’s project token UNI is also the most typical governance token. Holding UNI can only vote. So, how to value the governance token UNI? UNI's current fully diluted market cap is $6.4 billion. The Uniswap protocol has a locked-up amount of US$4 billion, and there is still no good method for valuing such governance tokens. The voting rights represented by governance tokens are important, but they do not seem to be quantified for valuation purposes. If you have any good ideas about how to value governance tokens like UNI, please let me know.
Chainlink: The leader in the oracle circuit
Chainlink is the leader in the oracle field and has become an integral part of DeFi, and I don’t even know who is second in this field. LINK's market capitalization is also very high, with a circulating market capitalization of $3.5 billion and a fully diluted market capitalization of $7.2 billion. But what is Chainlink's annual revenue?
Data from Market.link shows that in the past month, Chainlink has conducted a total of 300 million price feed updates, completed 895,000 VRF requests, 940,000 direct requests, and 60,000 Keepers operations. The node rewards total 740,000 LINK. Calculated based on the price of US$7.23, the rewards received by nodes in the past month were US$5.35 million. Multiplied by 12 months, the rewards received by nodes throughout the year were US$64 million.
We can regard this $64 million in LINK as Chainlink’s gross profit. Excluding costs, Chainlink’s PE may be close to 100 times based on traditional PE calculations. It can be seen that, as a star currency that once had a maximum increase of nearly 400 times, if we value it based on business income, we will miss this opportunity of hundreds of times earnings.
Similarly, there is also a storage track. The eldest and second eldest are Filecoin and Arweave respectively. The annual revenue in 2022 is expected to be US$16 million and US$680,000 respectively, while the circulating market value is US$2.7 billion and US$500 million respectively. .
Lido: The most popular fried chicken on the LSD circuit
Lido is currently the most popular player on the LSD track. It also has the largest number of pledges in the entire Ethereum. It currently has 5.63 million ETH (approximately US$8 billion) pledged and has a market share of 29%. Lido’s business model is simple, taking a 5% commission from ETH staking revenue. Calculated based on the current Ethereum staking yield of 4%, the ETH pledged in Lido can generate approximately US$320 million in rewards per year, of which Lido can receive US$16 million in handling fees, which is annual income.
The current circulating market value of its token LDO is US$2.7 billion, and the fully diluted market value is US$3.2 billion. Market cap and revenue also don't match up. Of course, this is static. Many people are optimistic about the Ethereum Shanghai upgrade, but I personally think that after the Ethereum Shanghai upgrade is completed, it may not be good news for Lido.
Reasonable Valuation of SSV Protocol
After reading the above five projects, let’s look at SSV. First of all, DVT technology is written into the Ethereum roadmap and is also a research outsourced by the Ethereum Foundation. It has both the decentralization and security of Ethereum pledges. Crucial. In this track, SSV is currently the leader, both in terms of the progress of the test network and the token level.
Assume that after the Shanghai upgrade is completed, 20 million ETH are pledged, and 10% of the ETH pledged using SSV technology (platform) is 2 million ETH. Of course, if income is included, these 2 million ETH earn an annualized rate of return of 4% a year, and the Ethereum price is calculated at US$2,000, resulting in an annual US$160 million income. Of the $160 million in revenue, most of the revenue will be distributed to the LSD protocol and the pledge node service providers. This proportion may account for 90%. In this case, SSV's revenue may only be about $16 million.
Of course, here are a few indicators that I personally think are relatively conservative:
The first point is the pledge number of Ethereum, which is currently about 17 million. I chose 20 million for calculation, which is definitely conservative. I am not surprised that the amount of Ethereum pledged increased to 40 million in the period after the Shanghai upgrade.
The second point is the price of Ethereum. I calculated it based on US$2,000. This price is also relatively conservative.
To summarize: the SSV protocol’s leading position in DVT technology and the potential of the Ethereum staking market give it good growth prospects. As the Shanghai upgrade of Ethereum approaches, the market performance of SSV deserves our continued attention and expectations.