Valuing cryptographic tokens has been a challenge since their creation. Here we attempt to model the future value of the Outcome Trading Token ($OTCM) based on its utility.
For something as fundamental as Bitcoin, models such as stock-to-flow or power laws have been proposed. There have also been comparisons to other major asset classes, underlaid with the assumption that Bitcoin may replace these as a monetary asset. For tokens used as gas on a network, the value seems to fluctuate with the general bull/bear cycle in crypto. The only relevant valuation may be a comparison with other tokens. And for Memecoins, the chart action or follower count may be the only way to value them.
Utility
Utility tokens are different. One can attempt to evaluate the specific utility they provide. Of course, any such model will be sensitive to the assumptions on which it is based. Those assumptions are listed below and the reader can determine if they seem reasonable.
This post will be an attempt to create a range of potential values for the Outcome Trading token ($OTCM) for different classes of users, at different points in the maturation of the platform. The goal is to arrive at rough order of magnitude estimates of value rather than price predictions.
In the case of the Outcome Trading token, the primary token utility is a series of discounts on fees charged for the use of the platform. Details of these discounts are available in the whitepaper. In this way, $OTCM’s utility is similar to that of Binance’s $BNB token. The main differences in the utility models are a) that the $OTCM provides larger fee discounts and b) that the token does not need to be surrendered to receive the discounts.
“Value” varies with an individual’s need, cost of capital, and anticipated usage of said utility. Additionally, price is not the same as value. A user is more likely to pay a price less than his perceived value, but that does not mean price will track value. Therefore, this post should not be construed as an accurate prediction of future prices. It is an exercise only.
Three methods to Assess Value
We will examine value in three ways –
- the value of fee discounts to token owners when Mainnet trading begins,
- the potential future value of such discounts as the number of users increases and the token access requirements are decreased,
- and a comparison to an existing token with a similar utility model.
Value of the Fee Discounts (per token)
The chart below presents the modeled value per token (for each access tier) of cumulative fee discounts over a three year period. It then compares those modeled values to the price being charged for tokens in the ongoing Pre-Sale. These values are:
To reach these valuations of the token, we looked at the following factors:
- expected notional trade size,
- expected level of “effective leverage” employed or collateral levels,
- fee rates,
- fee discounts,
- expected trades per year,
- the discount rate applied to the value of the fee discounts,
- and the number of tokens required to reach the discounts
The assumptions for each of these values are as follows:
Put simply, the value estimate for Basic Access is a per-token value for a user who owns 10,000 tokens, trades about 1 Bitcoin worth of notional value with 10x “leverage”, one time per month.
Token Value as User Count Grows
In the Outcome Trading token model, as the number of platform users increases (after 10,000 users), the number of tokens required to reach each discount level decreases (because there is a cap on the number of tokens).
This is a bit confusing. So, let’s restate it. As the number of users increases, we will require fewer tokens to reach each fee discount level to accommodate the new users.
The same value of fee discounts is now being spread over fewer tokens, so the per-token value increases.
Below is an idealized chart of how the per-token value of access discounts could increase with the growth in users.
The value per token becomes extremely high if the user count reaches very high levels. (And, of course, if the modeling is correct.)
The Binance Example
So far, all we have described is theoretical. It is mathematically correct that as the number of tokens required decreases, the value of discount per-token increases. And it is correct that users will pay some amount of money for tokens if they intend to make use of the discount these tokens provide. But we need a real world example of a discount token to be sure this works in reality, not just theory.
Fortunately, we have a real world example in $BNB, the token created by Binance. When $BNB is used to pay for commissions on Binance, users get a fee discount. And, as the number of users has grown, the price per token has increased. In fact, there has been an 87.8% correlation between platform users and the token price.
This model has seen an increase in the price of $BNB from ~$0.10 when it began trading to roughly $700 today.
Conclusion
While we cannot predict the future price of $OTCM, we believe that the values modeled above represent a reasonable estimate of the order of magnitude of value under different growth scenarios.
Again, value should not be mistaken for price. And there is no guarantee that the substantial benefits of the Outcome Trading platform – transparency, ease of use, safety from liquidations – will lead to the level of growth in users mentioned above.
It is up to the reader to determine if the value estimates above make the purchase of $OTCM a good bet at current prices.
Financial Risk
The contents on this site are for informational purposes only and do not constitute financial, accounting, or legal advice. The opinions expressed are subject to change at any time without notice and should not be taken as specific recommendations for any individual or entity. Any information or data presented is general in nature and does not address the circumstances of any particular person or entity.
Investments in tokens involve risk, and past performance is no guarantee of future results. Any prices or benchmarks are referenced for comparison only.