Valuation of Utility Tokens based on the Quantity Theory of Money

Abstract

A framework to value utility tokens would allow for more transparent Initial Coin Offerings (ICO) and help in the development of digital assets. In this paper, we derive a formula to value utility tokens and the network that supports it. As expected, the value of a network doesn't depend on the number of tokens issued as that variable doesn't appear in the formula. The value of the network is directly proportional to the price of the resource being provided and the size of the serviceable obtainable market for that resource. Also, it is inversely proportional to the velocity of the token. In section 4 we derived a formula for a crypto conversion factor that relates the price of the token to the price of the resource provided, the factor is not linear and has Seven variables. We believe that by making these formulas available to the Blockchain/DLT community, we can help network developers to understand how key variables impact the value of the network, they are trying to build.