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Continue Capital Horse: An exploratory analysis on top-tier public chains and their ecological valuation models

Pima

2023-03-20 16:21

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Original title: "Exploratory Analysis on Top Streaming Public Chains and Their Ecological Valuation Model"

Original author: Pima, Continue Capital

The popular ARB will be launched soon. This time the market has finally returned to rationality. After looking at various valuation models, it is basically reasonable. There is not much difference between 10 billion and 20 billion hubs. You can refer to other data (TVL/wallet number/transfer/active address, etc.). At present, the market's valuation of the public chain is relatively stable, and the difference in perception of future technology evolution determines the future upside of the public chain, which is an alpha with a relatively high degree of difficulty. What's more, we must understand what is normal when we invest, just like when a person is sick, you don't necessarily know the name of the disease, but you can definitely feel some of your daily behaviors are different from normal people, such as normal people You defecate once a day, but you have three or four times. When a normal person sleeps until dawn, you wake up once a day from 1:00 am to 3:00 am. You don’t know what’s wrong, but you have to understand that this is not a normal state.

Back to investment, you must also understand some valuation norms, such as the CEX long-term secondary valuation represented by BNB The value center is PE=5. You can go to the financial report of Binance every quarter. Other HT/FTX can be retrospectively queried. There are data for both bull and bear markets. The median is basically around 5. Sometimes PE reaches 3 or bull market PE reaches 10, which is normal. Interval, but here you need to understand the importance of industry perception parameters. The so-called industry cognition parameters mean that most people don’t understand a market segment in the early stage of development, but the prospects depicted are full of hope. At this time, good and bad people are often mixed, and the typical feature is that you don’t know who is the leader. , the growth rate of the industry is very fast, and the given PE will be very high; with the rapid growth of the market value, the improvement of industry awareness, and the penetration rate reaching the critical point of 30%, the growth rate will start to slow down, and the valuation will gradually stabilize. PE will return to the central line, the value mining is completed, the industry has entered a mature development period, and the market value is driven by profits rather than valuation. (The current L2/ZK is a typical initial stage of industry development)

After so many years of development, many data valuation models have basically tended to In terms of stability,The purpose of this article is to discuss the public chain and ecological valuation system from another angle.

Suppose we define that the Public Chain Market Cap of other top public chains in the same period except ETH is PMC, define Ethereum Market Cap as EMC, and define PE=PMC/EMC

Currently normalized and stable top public chain market value: ADA 12 billion, MATIC 11 billion, SOL 8 billion; denominator ETH 210 billion< /p>

We select the market value of the top public chains in a certain period of time (rough data)

< br>

ETH market value: 130 billion in 2017, 10 billion in 2018; 540 billion in 2021, 140 billion in 2022

ADA market value: 30 billion in 2017 , 1 billion in 2018; 95 billion in 2021, 9 billion in 2022

EOS market value: 15 billion in 2018, 2 billion in 2018 74 billion and 10 billion)

SOL market value: 90 billion in 2021, 4 billion in 2022

Let's look at the comparison of PE=PMC/EMC market value in different periods:

ADA PE: bull market 300/1300= 23% bear market 10/100=10%; bull market 950/5400=17.5%, bear market 90/1400=6.4%

EOS PE: bull market 150/740= 20%, bear market 20/100=20% (of course, after a round of bull and bear market, EOS will not belong to the top of the same period)

SOL PE: bull market 900/5400= 16.6% bear market 40/1400=2.8% (need to consider the extreme factor of SOL’s bankruptcy due to FTX)

The current normalized market: ADA 120/2100=5.7%, MATIC 110/2100=5.2%, SOL 80/2100=3.8%

This is not to compare the market value ratio of each public chain and ETH, but to choose a certain Compared with the one with the largest market value (ADA, EOS, SOL) among the non-ETH smart contracts in the stage, we give the following conclusions

Public chain valuation law 1: The PE normalization range of the optimal non-ETH smart contract platform falls in the range of 6%-20%

The above law 1 has What's the use?

Our statistics here are based on the market capitalization of the Market Cap, not the full circulation of FDV. During the last two rounds of the bull market, the investment of project institutions was relatively small, unlike the current Most projects have a small circulation ratio. I personally think that the greater role of Law 1 is to give you a valuation center at the beginning of the new project listing, that is, we use the market value of the new project FDV/ETH to measure the valuation.

Let’s review: On 22.10.23, at the beginning of APT’s listing, FDV was 10 billion, and ETH was 160 billion in the same period PE=100/1600=16% APT At the lowest point of USD 3, PE=30/1400=2.1%; on January 26, 2023, APT FDV was 20 billion, ETH was 200 billion in the same period, PE=200/2000=10%, and the current APT PE=130/2100=6.2%< /p>

OP, 2022.06.02, FDV 6.4 billion, ETH 210 billion in the same period, PE=64/2100=3%, 2022.06.19, OP FDV 1.8 billion, ETH 120 billion, PE=1.5%, the current OP is 11 billion, PE=5.2%

Then we probably have a central concept now, ARB assumes that according to 100/200/ 30 billion FDV was listed, and the PE was 4.7%, 9.5%, and 14.2%, respectively. It is clear at a glance whether the price corresponds to the high range or the low range in the first law. In the high range, it is suitable to replace the molecular end public chain with the denominator ETH.

It should be noted that the applicable condition of Law 1 is that it must be the top public chain in the non-ETH that you think, and you can’t put it in this range. Don't say 6% of many public links, maybe 1% of ETH's market value is less than, so the question becomes which is the top public chain? This is essentially a question of buying. I’m sorry that Lu Xun didn’t say it, but the first law can provide an approximate selling point: that is, the closer to the upper limit of 20%, the more you can sell it for ETH. What needs to be distinguished is that this selling point is not an absolute unit price selling point. For example, if you sell your APT for 10 yuan, it will rise to 100 yuan in 25 years. You can’t compare it like this, but in 25 years, maybe ETH will be 10,000 yuan. PE=100 billion/1200 billion=8.3%, the essence of the first law is to measure the growth rate of the top public chain and ETH.

Will the law be broken in the long run? Like a ten-year cycle? very possible. From the perspective of historical development, it is difficult for any one thing to dominate in any perfectly competitive market. When a leader occupies 70% of the market share, the leader’s market share must be at the top stage. The development of everything cannot be dominated by one single company. With Holland, France, Britain, the United States and the Soviet Union, any country must have a second child to contend with in the ruling stage. In the same way, our stock market is familiar with the chip market/e-commerce market/new In the energy market/real estate market/and many other tracks, the market share of the boss and the second has a ratio (whether it is 4:3; 4:2, 3:2, 5:2), including the current currency market, BTC accounts for The ratio is 43%, and the second largest ETH accounts for 18%. Therefore, in the long run, there will definitely be projects in the smart contract market that will challenge projects that account for 40% or even 50% of the market value of ETH. A matter of time, it took nearly ten years for ETH to achieve the feat of stabilizing at 50% of BTC's market value. The next project that stands at 50% of the market value of ETH may also need to maintain long-term competitiveness amidst endless changes, and the degree of difficulty is very high; on the other hand, ETH is also constantly developing dynamically, that is to say In the future, the market value of ETH will continue to increase. To reach 50% of its market value, the absolute market value of the challenger may be very high, which further increases the difficulty of competition.

Public Chain Ecological Valuation Law 2: The DP normalization range of conventional DEX in their respective public chain ecology falls within the range of 1%-3%

Suppose we define the DEX Fully Diluted Valuation of each ecological head as DFDV, and the Public Chain Fully Diluted Valuation as PFDV, then DP=DFDV/PFDV, that is, the total market value of DEX/ The entire market value of the public chain.

There are many kinds of public chain ecology. We should first focus on the core part. At present, the development of any public chain ecology is inseparable from DEX. The market value of DEX can be used as the The value center of a public chain ecology, thus serving as a reference for measuring the valuation of other types of projects.

First of all, we still need to understand what is normal, the current normal market value (3.20 days FDV):

UNI 6.5 billion, ETH 210 billion DP=65/2100=3%

CAKE 3 billion, BNB 68 billion DP=30/680=4.4%

JOE 180 million, AVAX 12 billion DP=1.8/58=3%

ORCA 80 million, SOL 12 billion DP=0.8/120=0.6%

Quickswap 84 million, MATIC 12 billion, DP=0.84/120=0.7%

Velodrome 150 million, OP 11 billion, DP=1.5/110=1.3%

Camelot 400 million , ARB Unknown

Secondly, let’s see what the market will give when DeFi is a new track environment and the whole market is in a bull market. The valuation of DEX:

UNI, the high point is 40, corresponding to FDV 40 billion, the market value of ETH is 400 billion in the same period, DP=400/4000=10%

DEX ORCA in the SOL ecosystem reached 18 twice in October and November 21 100 million FDV, SOL FDV in the same period were 95 billion and 125 billion respectively, and the two DPs corresponded to 1.9% and 1.4% respectively

DEX JOE in the AVAX ecosystem reached 2.2 billion FDV in September and November 21 respectively, and AVAX FDV in the same period was 54 billion and 96 billion respectively, and the two DPs corresponded to 4% and 2.2%

We see that UNI, as the most typical project in the DeFi industry, enjoys an exclusive monopoly premium and overestimates the initial stage of the development of the entire DeFi track Under the premise of the value, the maximum DP is 10%, so it is difficult for conventional DEX to reach this valuation. In addition, we can see the unit price k-line chart of UNI/ETH, which has been in the range of 0.002-0.006 for a long time. Considering the difference in quantity between the two, the corresponding UNI circulation market value/ETH market value probably falls in the 2%-6% range. Considering the UNI Due to the current monopoly position and the particularity of orthodox premium, I personally still believe that the normalized upper limit of DP of conventional DEX in their respective public chain ecology is 3%.

We do not deny that factors such as short-term sentiment/capital/liquidity will affect DP changes, but still believe that long-term normalization is the anchor of valuation and can become the center of value return. On the other hand, what we are investigating here is only the regular DEX, and does not include the full-chain DEX. I personally think that the full-chain DEX will become the jewel in the crown of DeFi, and it will be the final breakthrough (the functions of the full-chain DEX are not through cross-chain Bridge, so that EVM interacts with non-EVM assets) I will have the opportunity to expand this in detail later.

The question is what is the function of the second public chain ecological valuation law?

One, for the underestimated interval. We know that there must be a DEX that matches the market value of its public chain. For example, Velo currently has 150 million, OP 11 billion, and DP=1.5/110=1.3%, which can only be said to be reasonable. Similarly, there must be a DEX in zkSync/Starkware and other projects that have not been launched, and it will reach 1%-3% of the market value of zkSync/Starkware in the future. Although the two mainnets have not been launched yet, you can probably give a certain valuation according to the lower limit of Law 1, such as 8 billion, then the corresponding DEX FDV is about 800-240 million. As for which DEX it is, this requires deep cultivation Community, constantly observe its data/users/development capabilities and other conventional factors to make choices. The key here is that zkSync/Starkware has not issued coins, but its ecological DEX may have already issued coins, which means that you have the window to participate in advance, and the remaining You only need to be patient;

For example, APT has already issued coins, but I don’t know which one can run out of its ecological DEX, but it’s worth your time in DEX FDV Participate appropriately when 500-1000w or even lower, because according to the second law, there will be a DEX on APT reaching 1%-3% of its market value.

Second, for the overestimated interval. You can also refer to the upper limit of the range of its law 2. The more it exceeds, the more suitable it is for the parent-public chain to be exchanged.

ZyberSwap is a DEX in the ARB ecosystem, with a high FDV of 400 million. Conventional DEXs are basically micro-innovations. There is no big difference. Liquidity mining Specific differences and details such as mine/ve/(3,3) modes are not paid much attention to. Less short-term liquidity + rapid increase in tvl + airdrop expectations + short-term emotional capital surge, etc. have contributed to a wave of rises, but this is not important. The core is that the valuation is 400 million, which means that if ARB is 10 billion, then DP=4 /100=4%, if ARB=20 billion, then DP=2%, conventional DEX will face the attacks of other competing products in an endless stream for a long time, and it is difficult to build a moat, so the closer to the upper limit of 3% of the law, the more suitable it is to replace it with ARB

The same example, DEX Camelot on ARB, we found that the valuation is also 430 million, the same assumption ARB FDV 10 billion and 20 billion, then the DP of Camelot is 4.3% and 2.15%, which is also in the public chain ecological valuation law The upper half of the second area is also cautious.

When we After DEX has a valuation central system, it will have a suitable reference for extending from DEX to other tracks in the public chain ecology, just like having a weight, which can weigh most of the projects.

So far we have properly summarized the valuation model of the public chain and its ecology through the screening of some data, intending to find a more general Find the balance point of the pendulum. Of course, I believe that it can be derived from DEX to various tracks such as loans/contracts/NFT/games. I have not done further research, so I will start here. If you are interested, you can change the parameter model to continue exploring.