Recently, @web3_ayush recommended me to read Chris Burniske’s Blog Crypto asset Valuations and I was hooked cause I came out of degen shitcoin schedule and didn’t understood half of the terms on the sheet, so I buckled up and got into the Arc Invest research paper’s and found one more gem-of-an analyst Brett Wiston there and thought that I have some great projects in mind(emphasis on I), so instead of blindly targeting any numbers, take inspiration from this models and do an CryptoAsset valuation myself.

I had a ground-breaking project in my mind named Pingpong building on Morph L2 and quite briefly saying the most fresh project I have seen in a while and with the most cool, witty founders there can be.

So, to start with Pingpong is a protocol buidling(do you see what I did here) in DePIN sector and to start with why DePIN will be the most purest form of Blockchain adoption read the Messari Research report below along with some more great links.

Pingpong is buidling(again) pivotal DePIN liquidity and service aggregator to transform compute resources into a new form of liquidity and elevate the quality of DePIN services to energize the DePIN ecosystem.

And they are trying to achieving this transformation with our 3(I say 7) flagship products, strategically targeting both the supply and demand sides of DePIN, building a healthy flywheel to get the ball rolling:

• On the supply side, we have the Aggregated & Dynamic Mining App(PINGPONG App), which maximizes users' mining efficiency and yields. In addition, the Omni-chain DePINFi Money Market brings a dynamic marketplace for DePIN derivative trading and aggregated staking, offering better liquidity and opportunities for wider participation and diverse revenue.

• On the demand side, the DePIN All-in-one SDK improves DePIN services by providing a unified development experience and reliable uptime, boosting the DePIN ecosystem’s demand.

So let’s get straight into the numbers game and try to understand each product sided by side and little disclaimer before that

That I have not gone through the trad route of copying the exact model from Burniske or Brett but rather learn from it and incorporate it in my learnings and thoughts. Sometimes considering asset velocity(read Burniske), sometimes excluding it, going with Fee, going with revenue, marketcap, market size and I am also puzzled if they are the right choice for the right model.

I have gone on different models on different products some of them go through the CAGR route, some purely based on my assumption without any metric to support it, some with comparison to historical protocol which are somewhat architecturally similar too them, so enjoy the ride

Hope you guys like it and if not that's great too, just leave some comments on how to improve and your overall thoughts, GGs

Tokenomics

So, to start off, the first thing that differentiates my numbers/valuation is that, the utility of token will be for governance only and for the fee in the money market and aggregated mining, some Q/A for that below..

Would staking be a part of the token? I don't think so, the bonding power will only increase from token buy backs and speculation from holders

Decrease in PPP token in holding each year will occur or not? -> Can be 2 ways AND more velocity if token utility increases Staking in the roadmap - Then node float bonding comes into play No staking but only community token - It will be like Uniswap but won't be that much of a disadvantage like UNI cause of buybacks for each transaction

First, on the tokenomics frontmost of thing are same except as you can below but I have added a metric(bonders increasing) because the more % of Community & Airdrops tokens get unlocked and airdropped to token holders and users and the more % of profits we use to buy back circulating tokens"

You can read more about the tokenomics design on the community post below

But one thing wanted to point out is the below statement in it

“the more % of Community & Airdrops tokens get unlocked and airdropped to token holders and users and the more % of profits we use to buy back circulating tokens ↑profits => ↑unlocks & ↑buyback”

I think the upper model is great for not deflating token price as more profits come in, more token get's unlocked which get sold and then they are buyed back by the Treasury.

Calculating GDP of Pingpong

The most important thing I have noticed in both Brett Winton and Burniske models were their different ways of calculating size of the monetary base required to support a crypto-economy(M) of size PQ with velocity V and then I merged the calculation of all three with the Fee collected(revenue, not profit) by the different products in Pingpong and set that equal to M.

And as the token wouldn’t have any other utility other than community voting, so it won’t facilitate the transaction in a direct manner but by token buy-backs, that’s why I have decided to go for Fee Collected instead of volume flow.

So, let’s dive straight into different products and what amount they will contribute to the token price by getting what revenues

DePIN all-in-one SDK - It is 1inch for DePIN, treating computational resources as a new form of liquidity and aggregating them to streamline app development process on various DePIN Stacks.

We’ll compare it with onchain revenue of the DePIN projects which is generated by the transaction fee.The onchain revenue for major DePIN projects is around 2m in average and this will not depreciate much as it does not includes the underlying computation resource but the blockchain’s transaction fee which is pretty low at the current levels(1 cent).

So if we take 36.9% CAGR for that it comes to 13m revenue in 2031 and Pingpong will start at 1% of that and may capture upto 20% cause of interdependence of DePIN projects onto each other

And again, I’ll not divide this by Velocity cause it’s pure revenue we are talking about.

You may be thinking that taking 36.9% CAGR which is of whole DePIN sector general is wrong, i completely agree but these are brand new products and very less can be predicted about them so to somewhat compensate for that I have taken their initial revenue according to already established DeFi projects

The Aggregated & Dynamic Mining App- It allows you to connect your device to multiple(6+) DePIN networks and mine on them at the same time for maximized yield.

It is the at the most bottom of the DePIN supply chain and I’ll use the estimated market size for this which is acc. to DragonFly estimated to be worth $420 billion and is expected to grow to $1 trillion in 2028, a 15.7% CAGR.

On the initial penetration percentage we’ll start with 0.001% and saturation level at 0.69% by 2031 which comes to be 4.2m in 2025 and 690m in 2030 and to give an analogy it is quite similar to the validators market which take a fee for your staking rewards and taking an percentage of around 4% of the mining rewards(validators range b/w 5-10%) it comes to 200k in fees in 2025 and 28m in 2031.

Money Market

There is nothing like the money market on DePIN at the moment, it will will be a whole new paradigm, I’ll compare each of the 5 products it consists with some blue-chip DeFi projects to evaluate them correctly

So the DePIN tokens are from late before the DeFi but have recently caught attention of everyone from the starting of 2023 and sits at 25b total marketcap at the moment and I will take this as the starting point for all the newest addition of Defi on top of it -

DePIN Resources Lending and borrowing - for this I’ll take example of Aave, DeFi started in 2018 with a measly TVL of 500k which rose to 180b in 2022 and currently(2024) is at 100b

At the same time Aave was launched in 2020 when the defi TVL was around 1b and TVL for Aave started at 50m which rised to 18b in 2022 and is currently at 12b

As lending and borrowing is at the not a derivative product and will share the market with current DePIN market and it will not be seen as a whole new different product from the top

We will derive this from the onchain fees of Aave which is around 15m monthly on avg. and 180m for the year and going by the Aave’s model assigning 1/20th of which comes to 36m yearly and with 36.9% CAGR for the whole DePIN(we took the CAGR for DePIN not Aave as it is not a derivative and a whole new out of the box product) will go to 170m yearly fee

DePIN Aggregated Mining Yield Futures: It will be a completely new product in the market and will be derivative so will use Pendle for the reference and Pendle got started in 2021 with around 1m in volume and now averages 10b in volume, it got traction in a lot of time cause it was a new instrument but I think Pingpong will catch more fast as the market know the financial instrument now.

Instead of ratio of Pendle(TVL)/DeFi(TVL) we will take the CAGR for Pendle as there is no Money market on DePIN now to compare with the wide Defi space and I think PingPong will grow more or less the same cause DePIN’s TVL(25b) now is also somewhat similar to DeFi’s TVL(20b) in 2021, but lifetime for Pendl’s functioning is 3 years only, so I will play on the CAGR which comes a staggering 480% but for culture I’ll only take 420.69% with the starting TVL 5m instead of 20m which comes to 4b in marketcap , but I’ll not consider it in the our prediction as TVL can be most of the times misleading cause of whales, insider money, static money, no flows and different fee structures

The yearly revenue for Pendle which started from the starting of late 2023 - early 2024 is around 18m and which taken monthly started in January at 150k and peaked at around 4m in April and is averaging at 1m monthly which comes to 12m yearly on average and with CAGR of 36.9% (DePIN) comes to 80m in fee in 2031

Aggregated DePIN Mining Yield Tokens : It is quite similar to HyperliquidX but for mining yield, the same derivatives and basket of derivatives on which users can speculate without paying for underlying compute resources

So for this we will take inspiration from HyperliquidX only but there are no definite number on it’s revenue and there are various transactions happening like funding rate, liquidations, orders etc., so the guestimate is quite hard there, so we will take GMX as the alternative as it’s revenue is open sourced

GMX started at the starting of 2022 with the annual fee of around 20m and is now standing at average yearly fees at 35m but the number of mining yields to speculate is a lot less than the amount of tokens in a derivates exchange so we’ll start by only 25% of GMX which comes to be 5m and taking a CAGR of 36.9% on this comes to 32m in fee in 2031

Points Trading : It will be quite similar to Whales market which has incurred a total fee of 2m in half an year and Pingpong will have a bit less market size in it as it is solely focused on DePIN sector and is a direct competition for whales market which  encompassed all sector’s token but one thing will be in favour of pingpong as miners can use those tokens around the different Money market products by Pingpong.So going by initial revenue of 4m yearly(whales market) and getting 25% of that comes to 1m but I will not take 36.9% CAGR on this as points market is very unpredictable so taking a CAGR of 15% takes it to 3.6m in revenue in 2031

DePIN Aggregated Staking : This is similar to Sanctum’s architecture at the moment but the products are quite different on the most basic level as what Sanctum does with validators on a single chain(Solana), Pingpong will do that with multiple chain at once but from miners not validators, so the scaling dynamics are quite different.

But for the number we will take the example of Sanctum which in half an year has gone from 20m TVL to 1b in TVL compared to to total of 65b $SOL staked and will scale at the same rate.

Considering other LST projects like Lido with a upper cap of 30%(just like Lido) in 2031 but we can’t take 30% as Lido has the first mover advantage in the whole industry and one positive for Pingpong is that it will have an whole ecosystem for different LST so the max cap can be set at 20%.

The Staking Returns in DePIN projects like Filecoin and Aakash are above 20%, so we’ll take that as the standard here and after taking 10% revenue sharing from the protocol(like Lido), the fee comes to be 2% on the total collateral staked

So going by current marketcap of DePIN at 25b and around 10b(40%) worth of projects providing staking at the moment which we cap at 75% in the future with increasing number of protocols incorporating staking.25b at 36.9% CAGR comes at to be 120b marketcap with 90b mcap worth protocols open to staking and with the standard of around 50% staking in most of the protocols

So, the starting stake percentage we take from Sanctum which comes around 2% and then max caps at 20% in 2031, so the fee numbers are 10b*2%*2% = 2 million in 2025 and 90b*20%*2% - goes to 360m fee in 2031

I have taken the Saturation percentage quite high(more than 2% of Chris) cause I am only considering decentralized market and not comparing it with centralized market for the DePIN space.

Final numbers

You maybe underwhelmed by the measly return of 900%(from $0.34 → $2.67) on the asset, but that is just the half of the story, it is coming this low cause of the assumptions of the massive liquidity and adoption gotten in the first year for all the products which will be there in my opinion cause of all the bull waves, political situations and endlessely growing DePIN narrative but this neglects 2 things, pre market discount of tokens and token buybacks

So for the sake of more X returns(as it’s crypto babyy), we'll discount the token at the 1/10th price at it's launch in it's initial community distribution before it go's live with all of it's products which get's us to the projected 9000% return over the period of 6years.

The thing I most liked about Brett Winston’s Model is the second order valuation for number of investors which are late to the party maybe on purpose or maybe they have a plan to buy higher(who knows)So below are some second, third order valuation numbers with a discount rate of 7% but with a lot reduced realization timeframe of 1year which is normally around 5 which I took is beacuse of the volatile nature of crypto markets and being such a new over the top model, these assets can reprice very quicky

And on the ending note, by quoting Brett Winston

“In effect the asset must reward the investor for not spending the money today as well as compensate for risk that the price may go the wrong way. What this model does not capture, however, is almost certainly the most important feature of any prospective network: the vision and talent of the underlying developer team.”

Thanks for reading this, much lub from PP