LINK VALUATION MODEL ROUND 2

There's a lot more to tokenized assets than just sending them from A to B, you know.

Before you can transfer tokenized assets, you first need to tokenize them.
That means proving you have the necessary reserves, on-chain pricing information, on-chain interest rates, NAV data in general, on-chain credit ratings, audits, certifications, ...
Not only do these things have to happen for the tokenization itself to be possible (before any transactions can be made), but often they are required steps in real time for each and every transaction.

Pic is just a basic example. If you want to subscribe to a fund, you're basically using THREE distinct Chainlink operations:
- nav data
- oracle interactions between the source chain and Swift (actually this implies two distinct interactions)
- CCIP interaction between the source chain and the destination chain.

It would be just the 'DEFI' part of the formula, as explained in the OP.
Thanks for your input anon.
I'm aware of the situation, that's why I specified:

This accounts not only for CCIP fees but also for any fees relating to Chainlink DON data, identity, proof of reserves, and computation needed to create, maintain, and transact tokenized assets.

If I were to account for just the CCIP transaction, I would have included only $0.25 as the fee per Swift message.
It's not that I'm estimating a higher CCIP fee per transaction; rather, I'm estimating that more data is needed for tokenized assets to exist (as you correctly say).
So I also include $0.50, $1, and $2 as fee options to account for all those DON interactions.

Just DeFi in the list bro, accounting for CCIP and more makes number go up significantly higher

BTW I'm revieweing your img again and wondering about this:

oracle interactions between the source chain and Swift (actually this implies two distinct interactions)

So, this is the 'Chainlink' blue box between steps 3-4 and 8-9, right?
In those steps, if I'm not mistake a Chainlink DON is needed to get the data (subscription and payment ammount) from the DTA Smart Contract to Swift and then the to get confirmation back from Swift to the DTA.
Meaning that Swift is the offchain part. But then again, steps 5, 6, and 7 are all about payment to fund distributors and asset managers. It's possible than in the future this part may also be tokenized (when wholesale CBDCs are here).

Anon as much as I appreciate your efforts, the fact is that whatever value you come up with, It will be mere speculation. Why?

Because you (we) don't have factual assumptions to start with. Do we know if those fee percentages are correct? I know the table is source from the CCIP billing website but, who's to say that billing schedule is the totality of their services?

By looking at the SIBOS slides that Sergey presented, there is a fuck ton of underlying services in the background for a SWIFT message. Those services might be brand new and not reflected in the CCIP billing. And we don't know what the fee structure is for NAV attestation / proof of reserves, DECO, or CRE. Hell, even the price feeds we cannot quite put a price on. And that's just for SWIFT. Imagine DTCC or any CBDC like the Brazil one they revealed a couple days ago.

I build financial models for a living. And I wouldn't venture to put together something like yours unless I had enough assumptions.

Closing thoughts: $1000 EOY is FUD

Thanks for this work, anon. can you explain what Valuation Multiplier is, please?

If it doesn't communicate with Algorand it's useless. EVMs are over. Open your butt for the AVM.

So really what you're doing is calculating the total $ amount worth of fees. IMO that really doesn't translate to token value.

Let's assume Link captures only 10% of Swift traffic, that means 5M messages per day.
Let's assume $1 fee per Swift message (an average of 4 underlying node operations per message, with $0.25 per node operation)
5M * $1 = $5M per day in pure raw token demand for fees, without staking.

That means nearly $2 billion per year in raw systemic demand.
Only Swift
Only 10% of Swift
No "valuation multiplier"
And without staking

That's 50x more systemic demand than ETH had in 2017*

*In 2017, ETH had 120k ETH worth of systemic demand, and the average price per ETH in 2017 was roughly $300, so about $35 million

The bigger factor here is what you call the "value multiplier", i.e. speculation.
Speculation means anticipating something like 90% Swift capture, and DTCC, and Euroclear, and Fidelity, and the Brazilian CBDC.
Hell, speculation means anticipating a flood of additional institutional use, considering the current growth rate.
Speculation also means anticipating staking, so a % of the value in question being locked up in Link tokens.
We're really only starting to scratch the surface here.

Interesting post. Thank you for your input anon.

I know the table is source from the CCIP billing website but, who's to say that billing schedule is the totality of their services?

The way I see it, the $0.25 fee option (red rows) in my model represents a rather 'pessimistic' scenario, where the total Chainlink fees (CCIP + NAV ± POR ± identity, or whatever else is required) resulting from each Swift message are ONLY equivalent to the current CCIP fee today. From this baseline, you can build toward more realistic and optimistic scenarios.

And we don't know what the fee structure is for NAV attestation / proof of reserves, DECO, or CRE. Hell, even the price feeds we cannot quite put a price on.

Same point as above. However, IMO, this is only a significant problem for investors if the resulting valuations are unrealistically high, not unrealistically low, as might be the case for those rows that assume only a $0.25 total fee per Swift message. I’d rather have good surprises than bad surprises.

And that's just for SWIFT. Imagine DTCC or any CBDC like the Brazil one they revealed a couple days ago.

I agree. Maybe the biggest limitation in my model is that it doesn't include the DTCC. As I said, I've got no idea how to model that.

Sure. The Valuation Multiplier is how I account for differing degrees of speculation. You can think of it as a P/E ratio or something along those lines. It's a multiple for yearly protocol revenue.

The 'pessimistic' option is x25 (akin to the valuation of stocks). Even though crypto coins/tokens are not equivalent to company equity, I wanted to have a really 'down to earth' valuation option to get an idea of what's a fair token price based on usage alone (and not on the crazy speculation typically seen in crypto).

On the other hand, the optimistic Valuation Multiplier is x200, which IIRC is similar to the valuation of many crypto L1s right now. x75 represents a middle ground.

Around $0.30 per link should be realistic. Burgers are going up in price in McDonalds.

The only realistic price is 81000$ in EO2026

Around $0.30 sounds go be a realistic scenario.

checked

i kneel

Is it over linkbros

WHAT IS THAT THIS CANT BE REAL

Did your digits script fail the first time or what?
You raise a good point, and regarding ETH, this is why I asked earlier ITT:

Does anyone know what's the best place to get info into daily protocol revenue of L1s like ETH, SOL, and so on?

Just get a better understanding of what would be considered a 'normal' Valuation Multiplier in crypto.
Of course, what is coming (TradFi adoption) is unprecedented so as you say..

Speculation means anticipating something like 90% Swift capture

What Valuation Multiplier do you think it's fair?
Does x200 not seem optimistic enough for you?

all that is correct and yet it is worth noting that there are tokenized funds, which also require nav data with / and various oracle interactions, already operating without chainlink

Have you checked Clearstream's D7 platform? This is Deutche Borse level and they are already issuing, trading and settling without chainlink. They've issued over 8 billion euro's worth of bonds in the last couple of months. That might sound like nothing considering crypto market caps but Microstrategy raised just over 2 billion dollars the other day and it was a big thing.

HQLAx? i don't think this system wins out in the end but it is growing and optimizing liquidity usage across the likes of BNY Mellon, Goldman Sachs and HSBC.
I'm not talking blackrock wormhole here which is obvious but even in Denmark you can see Nasdaq and VP securities settle bonds on dlt just fine without chainlink.

In conclusion, and writing in good faith considering op's efforts, there are other things to include in a valuation model.

Does x200 not seem optimistic enough for you?

Well let's compare; ETH roughly did a 140x in 2017, with 1/50th the systemic demand Link would have with just 10% of Swift traffic (literally nothing else; no DTCC, no Brazil, ... and no staking)

So you can make a decent case that Link should at least match that ETH run in proportion to the systemic demand, especially knowing it was fueled mostly by the Enterprise Ethereum Alliance news which was just a handful of banks, really.
So technically that would be 140 x 50 = 7,000x

And remember also that Ethereum was already rank 2 on January 1 of 2017.

OP is talking about Swift only though.
And yes, there are other oracles. There always have been. But there's a very good reason why Defi went from 0% Chainlink-backed to majority Chainlink-backed between 2019 and 2022.

Correct me if I'm wrong, as I'm not familiar with this D7 thing, but is this not something more similar to the 'Canton Network' thing i.e. "we are interoperable as long as you only use this network". I've found an article on Ledger Insights about D7, and it says:

Some might argue that these are not blockchain securities. Germany’s electronic securities law, eWpG, distinguishes between securities on a centralized registry versus a decentralized registry. Almost all D7 issuances so far have been via the centralized registry.

Some I'm not sure how to interpret that. Is this a blockchain or a centralized database? And in case it was a blockchain, is it not good that banks are developting their own private chains? All chains will need to be interlinked, and considering that Swift = the banks, whatever Swift picks will become the standard.

ledgerinsights.com/deutsche-borse-clearstreams-d7-issues-e10-billion-in-digital-securities/

I can also add that banks transact via Swift messages mostly for international payments, but they also transact without it (intra-border for instance).
When the banks that make up Swift adopt Chainlink for their tokenized funds, they will make a great deal of use of Chainlink outside of Swift messages as well.

I'm not sure I understand what you are saying.

You are saying that with just 10% of Swift traffic @ $1 fee per message, LINK protocol revenue would be about 50 times bigger ($1,825 million) than ETH in 2017 ($35 million), no?

Rather that focusing on how much ETH went up, maybe what I'd find more useful is the exact MCAP of ETH when its protocol revenue was $35 million in 2017. That's how you reverse engineer the Valuation Multiplier (VM).

And once you have the VM, you can use that to estimate token price based on the potential scenario you propose ($1,825 million LINK protocol revenue).

But they'll use percentage based fees so it doesnt really make sense...

Source? I spent the entire first thread talking with every anon who could shed some light on the flat vs. % based fee issue, and no one knew anything. My conclusion was:

But the fee structure for CCIP's TradFi usage remains unclear. When CCIP was released the burn and mint fee was set at 0.07% but was later changed to a flat $0.25 fee. Some anons argue that fees should be determined by the free market, not centrally fixed. Also, it may be a combination (base fee + % of transfer on a sliding scale based on network conditions). Others raise the concern that pegging fees to an devaluating currency might not make sense. Still, as one anon put it, speculating on fees now is akin to asking for insider information. Fair enough.

Right now I think it makes more sense to use flat fees (± staking to secure high value transactions), because as one anon said:

They're not using % based fees because fundamentally there's no difference to the work being done by the network/node when comparing sending 100 BOOB coins between FartChain to CockLana and sending $1B of tokenized funds between Ethereum and Hyperledger. It's the same fucking thing, send, lock/burn, receive. This is why % will not return. I think it's better, as a community, to accept and understand that rather than hold on to some hopium that % based is coming back. Security for high value TXs will be improved by staking, as has always been the intended case. Staking provides a type of insurance that high value high importance transactions (or data points delivered on-chain in the current v0.2 iteration) execute successfully.

Not sure how useful MC is in this calculation.
In 2017, the Ethereum MC was inflated with around $9B worth of newly circulated ETH.

What matters more is price action.

But if you insist on looking at MC: by the end of 2017 ETH's MC was $73 billion.
Compared to ETH's systemic demand of $35 million for the entirety of 2017, that's a factor of 2,000.

If you apply the same factor to a Chainlink systemic demand of $2 billion, that gives an MC of $4 trillion.
Assuming all tokens are in circulation, that's $4k per token.
Still using the ETH analogy, this MC would be reached at the end of the year during which 10% Swift integration takes place.

And again: this is only Swift and zero else (no DTCC, Brazil, ... not even Defi).
And it's only 10% of Swift. Speculation would obviously call of a lot more than this.

WAGMI.

But joking aside, thanks, anon. That's the calculation I was talking about. It's crazy that the ETH 2017 run results in a Valuation Multiplier (VM) of 2,000, considering the most optimistic VM I included in my model is just 200. Obviously, if someone wants to calculate the token price based on a VM of 2,000, they only need to multiply the most optimistic figures in my model by 10.

Just to play devil's advocate, I'll point out that 2017 was a crazy year for crypto, and that kind of run may or may not repeat (e.g., the 2021 run was muted in comparison). So yes, a VM of 2,000 is certainly possible given the potential for upcoming TradFi adoption. But I also like to include more conservative options in my model, such as a VM of 25 (like stocks), 75 (middle ground), and 200.

There are absolute ghost chains in the top 10, barely making more than $1,000 a day in fees, yet still valued at $35+ billion in MC. So again, we see the 1,000+ VM you were referring to.

so you're saying link is going to $4000 minimum next year and that's a conservative estimate? xDDDDDD

2017 was a crazy year for crypto, and that kind of run may or may not repeat

the 2021 run was muted in comparison

Comparing the bottoms and tops of these respective cycles (see pic), it seems like the total crypto market cap pumped as follows:
2017: 46x
2021: 23x

So pretty much an exact halving.
So you might say that by the end of the next cycle, crypto MC would have another "pump halving", meaning you should divide the 2017 factor of 2,000 by 4.
So instead of a Valuation Multiplier of 2,000, it will be 500.

So Chainlink systemic demand ($2 billion) times 500 = $1k.
eoy, I might add.

So Chainlink systemic demand ($2 billion) times 500 = $1k.

By which I mean an MC of $1 trillion, and therefore a token price of $1k (at fully diluted supply)

On exchange it is a % based fee and it is "the same fucking thing" too... Bad argument.

Fair point. There are arguments for both sides, but as I said, the fee structure for TradFi usage remains unclear. For the model, I'm going with flat because that's what fees are like right now, it makes sense to keep fees competitive, and it's the most conservative assumption. If you wish to see the valuations based on % based fees, see: warosu.org/biz/thread/59227773

Makes sense to me (as the fatman would say). Based on your proposed parameters (Chainlink gets 10% of SWIFT messages; $1 fee per message; 0% LINK staked), I don't see much difference between what the model I posted in the OP suggests ($375 LINK price with a Valuation Multiplier of 200) and what you estimate (around $1,000 LINK price with a Valuation Multiplier of 500). Will the Valuation Multiplier be 200, 500, or maybe even lower or higher? We'll see. What excites me, though, is that SWIFT is most likely just the beginning.

i respect your modeling efforts, but just as you mention a lack of DTCC
your models don't (and i don't know how they cold) account for LINK becoming used as a unit of value in its own right.
when oracles are heavily relied upon for every day things that normies do then there will be derivatives on LINK, there will be hording.

The only valid model I know of that can be used for LINK is to represent market cap interms of staking APR

I don't see much difference between what the model I posted in the OP

Welllll, your model has Link at less than half of my outcome ($466) at $1 per message and at 100% Swift adoption.
My model has Link at only 10% Swift adoption, and yet I arrive at more than double the price per token ($1,000) even with the same $1 per message.
I mean 10% vs 100% Swift adoption is pretty significant.

My model also accounts more for broader market history and variables, like ETH's valuation modifier, and the general crypto "pump halving" during successive cycles.

copium thread

it's literally twitter linktards jerking off each other with the most delusional (((calculations))) pulled straight out of their ass

the state of this board

delusional (((calculations)))

Capturing 10% of Swift messages is very much in the realm of possibilities within the very near future.
Also, I'm completely disregarding any use from DTCC, Brazil, Euroclear, ... even Defi.

I'd say I'm being extremely conservative.

pulled straight out of their ass

My calculation is based on things like real fees, transactions, ETH's historic metrics, ...
Not a single variable is made up.

LINK becoming used as a unit of value in its own right

What do you mean by that? Can you explain?

your model has Link at less than half of my outcome ($466) at $1 per message and at 100% Swift adoption

I think you looked at the wrong cell, anon. $466 would be the price if the VM were just x25 (the most pessimistic option). What I was referring to was the difference between 200 and 500 for the VM (not 25 vs. 500). At 100% Swift adoption, $1 per message, and 200 VM, the LINK price would be $3,660 according to the model, not $466.

My model also accounts more for broader market history and variables, like ETH's valuation modifier, and the general crypto "pump halving" during successive cycles.

Yeah, I thank you for your input, it's interesting to see what other projects are valued at.

if sir gay shows up one day looking fit and healthy (not taking the ozempic), what would you think that would mean for the chainlink project?

$466 would be the price if the VM were just x25 (the most pessimistic option)

Yeah, but that x25 isn't based on anything.
Any speculative multiplier would have gone up exponentially between 1% and 100% Swift adoption.

I mean, imagine actually having become the backbone of the world's financial system but experiencing a speculative effect that is 80x smaller than 2017 Ethereum's.

This is the most bullish thing that could happen.
I pray for Sergey's health.
The thing is, you are probably right, but I am not making any assertions about what will happen:

Understand that this is NOT me telling you what price LINK will/should be. This is a model that allows you to adjust how bullish (or not) you are based on a comprehensive matrix of variables

As I explained in a previous post:

The 'pessimistic' option is x25 (akin to the valuation of stocks). Even though crypto coins/tokens are not equivalent to company equity, I wanted to have a really 'down to earth' valuation option to get an idea of what's a fair token price based on usage alone (and not on the crazy speculation typically seen in crypto).

Imagine we go through a dotcom like event, and 99% of crypto implodes (no more memecoins, etc.), leaving only fundamentals coins, etc. In that case, a 25 VM might not be as crazy as it seems now. Personally, I don't believe the 25 VM will happen, but including that pessimistic option in the model is useful for those who want to estimate price based on usage alone.

I mean, imagine actually having become the backbone of the world's financial system but experiencing a speculative effect that is 80x smaller than 2017 Ethereum's.

Sometimes the market takes a long time to realize what you now know. See picrel.

Sometimes the market takes a long time to realize what you now know

Anon, we're talking about a situation where there's 100% Swift integration of Chainlink.

the average age of a crypto holder is like mid-20s, and the average age of someone who knows what swift is easily in their 40s or 50s. the information disconnect is staggering. even when link starts being purchased by these actors for use, the crypto market will be generally unaware of why the price is going up, merely that it is.

What’s the valuation multiplier? I don’t understand it, what value is it multiplying?

You're extremely delusional.

What’s the valuation multiplier?

see

homie, dogshit like pepe is at a multi-billion dollar valuation, you are a crazy person if you think the average crypto market participant is mature enough to understand what chainlink is doing. and thats just from a "knowing what things are" perspective, let alone difference of opinion like xrp or quant claiming to be the one over chainlink

You can't just ignore being 100% integrated into the foundation of the global financial system.

this is a correct point of view.
you can build a correct model, but it may only make up a very small portion of chainlink's value capture

"the market can stay irrational longer than you can stay solvent" is not just a turn of phrase, anon. the market is ultimately eventually rational, but sometimes only after trying everything else. for the market to be aware that chainlink has won the races it has, the bare minimum is that chainlink absorb's xrps market cap because they both purport to do the same thing except chainlink actually does it. because imageboards are the last bastion of delusion, I would not consider the market to have accepted this until there is no longer an xrp general on this board.

Buddies were extremely against % based fees because this would make the price absolutely skyrocket (like 81k meme)

And as a fairly grounded link holder I'm staying pessimistic and assume it'll be a flat fee.

It's just the same as the ratios we use for valuing stocks. Valuation multiples express the relationship between a stock or crypto protocol MCAP and a financial performance measure, revenue in this case. For example, price to earnings (P/E), enterprise value to EBITDA. If the 'Valuation Multiplier' were only x1, the stock or protocol would be valued solely based on its current value or revenue. But markets are forward looking, so valuation multipliers are never just 1. For stocks, they range from 20 to 100; for crypto, 200+. Did my explanation make sense?
This is quite interesting though, because there are some ghost chains like the XRPL that IIRC only generate in fees like $1-2k per day, which if you calculate their VM you'll see that they are valued at VMs of several thousands. Maybe even over 9,000? I imagine this is because holders believe the future financial system will be based on their L1s, as you mentioned. So, it would indeed be strange for Chainlink to process 100% of Swift's messages and have only a ×25 VM.
Anon, I agree with you. Can you me some ideas on how to improve the model? Or some other things to take into acount?

it wouldn't be strange necessarily, because most crypto projects are valued irrationally high. However, I think chainlink is also irrationally valued but from the other end, being valued irrationally low.

>LINK becoming used as a unit of value in its own right

What do you mean by that? Can you explain?

we are in a dying currency environment, the USD is dying as are other fiats world wide.
BTC imo won't become a widely used currency.
meanwhile LINK's model being a universal gas token allows it to be transacted on any chain, by its own mechanism, ala CCIP.
There is a timeline where LINK becomes the new world reserve currency.
Think what XRP schtizos say but for LINK (not I'm not going to say it will be quadrillions in market cap)
but at some point if LINK is required for every significant transaction, which is a big IF and not in my list of assumptions, it wouldn't be unreasonable to see people just transact and save in LINK. A currency that pays yield and goes up in value.
In this scenario world wide the 81k EOY meme is possible.

$1 quadrillion on chain

how is this token NOT going to be $10,000+ ?

'you' 100% can

ignore being 100% integrated into the foundation of the global financial system.

because the market is doing so, the market is retarded.
look at stock valuations,
look at precious metals
look at GME vs Rhodium short squeezes.
hell if people were rational they would all just start spending 50% of their disposable income on silver and the worlds financial system would stop working against them over night.
in my opinion, the issues regarding silver are way more simple than the revolution which chainlink is participating in

Good question, the fuddies try to answer it but they are not convincing

i didnt see this reply till after posting but unfortunately I can't imagine how to build a model like this which I would find 'acceptable'
i think the best / craziest/ biggest value approach would be to model

how much value is transacted in the world.
what portion of value is going to flow through a chainlink product
what fee (as a proportion of transaction does that product charge)
then use a value multiplier
personally i expect LINK to stablize out at 0.5 - 3% APR

i think at peak LINK staking from real revenue will go as low as 0.1%
i plan on laddering out into Silver and other crypto projects if LINK goes below 1% apr this cycle, selling up to half of my bag.
hoping it'll level out to a higher APR (due to price lowering) then i will rebuy

I also prefer to stay conservative on the flat vs % Q.
Checked. That's why I also included a pessimistic VM of x25.
I see what you mean now. Of course, if in the very distant future, LINK becomes somewhat of a store of value (remember how BTC started out as peer-to-peer electronic cash and is now all about 'digital gold'), that changes everything. But that's an extremely speculative scenario IMO, because:

but at some point if LINK is required for every significant transaction

Not really. LINK is/will be needed when trust is required (which does not necessarily apply to EVERY transaction or economic interaction). LINK = commoditized trust. Also, remember that the 'Store of Value' (SOV) function applies to all assets (real estate, equities, bonds, cash, precious metals, crypto, and so on). So it's not an EITHER/OR situation. Every asset class fulfills this SOV function to some extent.

Based have a bump for the hard work and OC, this is good stuff. Take off is imminent hope your bags are packed chuddie kiddos.

That he finally healed his wound of humiliation.
Eating is a compensation mechanism for the belief that please is a bad thing that made him into a masochist, because his mother had the same issue he inherited.
By eating he is allowing himself to enjoy the pleasure of food at least.
The more problems from others that don't belong to him he takes and the bigger he becomes.
This is a way for his body to tell him to stop taking on problems that don't belong to him.

How does that make you feel to know that you are creating the next generation of bag holders?

Your valuation model is unrealistic.
Chainlink may reach a trillion market cap one day but it won't be from the direct effect of Swift network usage but from the adoption of hybrid smart contracts.
Unfortunately this will take a decade at least.

it won't be from the direct effect of Swift network usage

not according to Swift. they go live next year. what are you basing this lie upon?
break it down for us, do.

it'll take too long FUD

How many times must I repeat this:

Understand that this is NOT me telling you what price LINK will/should be. This is a model that allows you to adjust how bullish (or not) you are based on a comprehensive matrix of variables.

You can pick all the pessimistic options if you wish, resulting in $11 LINK price.