Token value drivers
By Hristo Piyankov - Sep 2019
Scenario 2: BreadCoin as access/coupon token
This model is rarely used, although it is considered one of the most stable ones, and was actually referred to as a viable ICO model by Vitalik Buterin (Ethereum’s chief scientist and co-founder). In this scenario, only fees on the platform are payable in BreadCoin, while all other transactions are settled in another currency. This works out to: Fees for sales: 2 000 000 x 5% = 100 000 USD Company subscriptions: 1 000 x 100 = 100 000 USD Or the total transacted volume, which needs to be facilitated by the Coin is 200 000 USD (only 9% vs Scenario 1). There is only one actor on the market (the platform) which have an interest in cashing out the coin for USD. In essence, this means that:
- The platform can assign any value to the coin, as it is the only party which settles transactions in the coin.
- The platform is forfeiting part of its revenue to bring value to the coin.
Let’s look at some examples:
- If the company sets a par value of the BreadCoin at 50 cents (value at which fees are paid), this would mean that the coin was sold at a 60% discount during the token sale. It would also mean that the total circulating worth of BreadCoins is 250 000 USD. If everyone decides to use their BreadCoins, this means that the company has to forgo all of its revenue during year 1 and 25% of its revenue during year 2, in order to “acquire” all BreadCoins back. Essentially the company raised 100 000 USD during the token sale and paid back 250 000 USD (in the form of forfeited Revenue) during years 1 and 2.
- If the company sets a par value of the BreadCoin at 10 cents, this would mean that the coin was sold at a 100% premium during the token sale. This would essentially mean that half of the money raised during the token sale was raised “for free” at the expense of the investor. This would, of course, have an extremely bad reputation (and possibly legal) consequences for the platform.
This model (assuming the coin is sold at a discount during the token sale) is clearly stable and widely used by companies on platforms like Kickstarter. It is important to point out here that the company is forfeiting revenue and not profit, which might cause liquidity issues for the company.
If you would like more information on how to go about calculating the value based on those models, check out our article dedicated to this topic.
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