How Does a Token’s Utility or Governance Role Affect Its DCF Valuation?
For utility tokens, the "cash flow" is often modeled as the discounted value of future fee savings or services the token grants access to. Governance tokens' value is derived from the power to influence network parameters, which can be modeled as the discounted value of future protocol revenue streams or a claim on the treasury.
A protocol's ability to generate sustainable fees or revenue is crucial for a positive DCF outcome. High discount rates are typically used due to the inherent volatility and risk in the crypto space.
Glossar
Dcf Valuation
Premise ⎊ Discounted cash flow valuation, within cryptocurrency, options, and derivatives, represents an intrinsic value estimation predicated on projecting future free cash flows and discounting them to a present value using an appropriate discount rate.
DCF Model
Framework ⎊ The Discounted Cash Flow (DCF) model, adapted for cryptocurrency, options, and derivatives, provides a valuation methodology predicated on projecting future cash flows and discounting them back to a present value.
DCF
Valuation ⎊ Discounted cash flow, or DCF, within cryptocurrency and derivatives markets represents a projection of future free cash flows of an underlying asset or protocol, discounted to present value using a risk-adjusted rate.