What Is the Discounted Cash Flow (DCF) Method and How Is It Adapted for Crypto?

DCF estimates an asset's value based on the present value of its expected future cash flows. For crypto, "cash flows" are often replaced by expected transaction fees, staking rewards, or protocol revenue, which are then discounted back to the present using a suitable rate, like the Weighted Average Cost of Capital (WACC) or a high-risk adjusted rate.

This method is challenging due to the volatility and difficulty in forecasting future protocol revenue streams. The discount rate must reflect the high risk of the crypto asset class.