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

The DCF model estimates value based on the present value of expected future cash flows. For crypto tokens, "cash flows" are often represented by protocol fees, transaction fees, or distributed staking rewards.

Adaptation involves forecasting these variable and often speculative future revenues, then discounting them back to the present using a suitable, high-risk discount rate, such as the Weighted Average Cost of Capital (WACC) or a high required rate of return. This is best suited for profit-generating DeFi protocols or tokens with fee-sharing mechanisms.