"As a Math and Operations research guy (PhD Stanford) , I want to start off a formal discussion on how to model “tokenomics” (the economics of token prices).
I want to start out with the Kyle Samani “velocity paper” which I think is a good start but not the final answer on this. But start reading that before diving into the thought process below
Here are the variables
TS — Total circulating token supply, eg: 97,000,000 for ETH
P — Current price per token, eg: 834 for ETH
HT — Hold time of a a Token in Ecosystem (fraction of year). e.g: 0.1 if the average ecosystem participant holds the coins for a bit over one month (one tenth of a year)
TV = transaction volume per year measure in $. Let’s look at a marketplace doing 100 Million dollars in transaction volume per year, and assume all of this is in the token Then TV = 100,000,000. In the case of ETH, TV = 1 Trillion USD.
GTV = Growth in TV per year. You want TV to be growing as much as possible. A growth rate of 100% or more implies that there are new entrants who need your tokens. A zero growth rate means whatever equilibrium price you are at, it’s an equilibrium — it won’t go up
TT = transaction time. How long does a transaction last in terms of time.
TMCAP = token market cap = TS * P
R = TV / TMCAP = ratio of transaction volume to transaction market cap. As we will show below, its about 0.1 for ETH
R1 = R / TT. The R valuation metric is adjusted for the transaction time.
R2 = R / HT. A different valuation based on hold time
Law 1: You want HT to be as big as possible.
As Kyle Samani points out, there is no value in investing in a token that is only held for a short amount of time. The example would be buying a ticket with tokens. If I need the token to buy the ticket, but the transaction with the seller is immediate and he can cash out immediately with tokens, there is zero long term demand for tokens, no matter how big the transaction volume (TV) is."
Continued at ... :
https://medium.com/workcoin/how-to-think-about-tokenomics-b3da509444e5
