How Does the Potential for a ‘Protocol Sink’ Affect the Terminal Value?

The potential for a 'protocol sink' (a mechanism that permanently removes tokens from circulation or locks them up) positively affects the Terminal Value (TV). A strong sink increases scarcity and reduces token velocity, suggesting a more sustainable long-term value.

This can justify using a higher perpetual growth rate ($g$) in the Gordon Growth Model or a higher Exit Multiple, as the protocol has a built-in mechanism to sustain token value beyond the explicit forecast period.