How much is one Ayin worth? Let’s do the math
In this article I will present a valuation model for Ayin that takes into consideration the Alph vesting schedule, its unlocked and circulating supply, Ayin’s own vesting schedule and the wider market conditions.
Let’s start with a simple question, what makes Ayin valuable and why would someone want to buy it? The answer is very straightforward, the value comes from the fact that Ayin holders who stake Ayin in the xAYIN single pool get 50% from all trading fees in the Ayin dex. So not just trading fees from 1 pair (like LPs do), but from all current and future pairs that will be listed on the dex. The other 50% goes to the respective pair LPs.
In contrast to the Alph token, whose value at the moment is mainly speculative, Ayin has a revenue stream backing it.
This dynamic is one of the key factors that make Ayin’s objective value measurable and also projectable. I will delve deeper into that later. Now let’s say a few words on Alephium.
What is Alephium?
Alephium is a little known L1 that uses state of the art sharding tech which can reach 10K TPS on a raspberry pi. For more on Alephium check out this Twitter thread I wrote a while ago. Although we’re still early in Alephium’s growth cycle, most presale coins have already been unlocked and less than 50% has been moved. Worth noting that since a lot of these (unlocked but unmoved) coins are on the sidelines waiting to enter the market, this is also an important valuation factor for Ayin. We will measure this value down the line as well.
Ayin vs Alph Tokenomics
Let’s just say that Ayin is much scarcer than Alph. Today there are ~90M unlocked Alph. 50M of these coins are circulating, which means they have been moved at least once and still out there in liquid form. The other 40M are either coins that have been unlocked/mined and never moved or coins that were manually locked again by the holders after being vested.
This is possible because on Alephium users can lock their coins up to a certain date. Ayin on the other hand is not mined, but only vested to LPs and xAYIN stakers. The current circulating supply of Ayin is 286k. In the graph above I’ve also shown the additional amount of total coins (Alph and Ayin) that will be vested and mined in the next 12 months from today.
Ayin Valuation
Ayin’s value as a whole should be based on the amount of revenue that it can generate. As explained above, Ayin holders who stake their Ayin in the single stake xAyin pool receive half of the total fee revenue of the dex. Considering that the trading fee on Ayin is 0.30%, it means that 0.15% of all trading volume is used to buy back Ayin which is then distributed to xAyin stakers proportionally to the share of the pool they hold.
Since we don’t know the future, we can start by calculating the fee revenue for xAyin stakers for a worst case scenario where the trading volume on the dex is on average the same as that on CEXes where Alph has been listed for the past 7 months. This is a worst case scenario because of the various CEX barriers to entry such as geofencing & KYC/AML regulations but also because of overall bear market conditions. Dex trading is permissionless no geofencing or KYC applies. This means much higher accessibility for people that haven’t been able to access exchanges where Alph was listed for legal/regulatory reasons. We must also consider that Ayin stakers will take fee revenue not from only one pair but from all trading pairs listed on the dex. Once the eth bridge is deployed, aside from stable coin pairs we will also see eth pairs and also other usdt pairs of other erc20 tokens ported over to Alephium to benefit from the lower network fees.
In this worst case scenario Ayin would be generating approximately $8.6k per month or ~105k per year from 1 single trading pair. This means that the capitalization of the staked ayin should be a multiple of 105k. This multiple varies from year to year, but is 7 on average and tends to be higher for fintech/tech companies because of the considerable upside that comes with them. This upside is due mainly to typically higher growth rates, and becomes even higher in a bull market. With this in mind we could say that the capitalisation of the staked Ayin (xAyin pool) should be around $1M for the valuation to be fair with respect to the present market conditions. If the capitalisation exceeds $1M then Ayin could be seen as overvalued (if all things are equal) and under $1M it would be undervalued.
The xAyin market cap as fair value gauge
The xAyin market capitalization can be calculated by multiplying the spot price of Ayin with the total amount of Ayin staked in the pool. The total amount of Ayin staked in the pool can be calculated by multiplying the total xAyin in circulation with the coefficient shown in the xAyin page.
At the time of writing there are ~121k Ayins in the single stake pool so the market cap of the pool considering the current spot price of $0.59 is $71k which is 14x less than the worst case fair price valuation of ~1M. Again, $1M is a worst case valuation that doesn’t take into consideration additional pairs, the advantages of onchain trading and those stemming from improved products (such as mobile wallets) that increase accessibility further.
Alph vs Ayin Utility
It should be clear from what we’ve discussed so far why I consider Alph a relatively barren token compared to Ayin, at least for now. The reason is that Alephium’s ecosystem is still nascent with few users and even fewer dapps. Alephium’s community on the other hand is quite solid, although it consists mainly of holders.
Because of Alephium’s groundbreaking sharding tech, and the benefits that come with it, Alph will probably grow in terms of utility as Alephium gains scale. But as of today we are very far from that happening. The amount of tokens being bought for utilitarian purposes is negligible in practice. The main use case of the Alph token is speculation, which means that most people buy it now hoping to sell higher at a later date. Some will succeed, others may capitulate and sell for lower. Regardless of the direction, most of these holders/traders will pay their 0.15% to Ayin stakers. The service provided is that of making it possible to trade Ayin globally without having to go through legal hoops and loops. Which means better liquidity, UX and better privacy. Because of these reasons I expect a lot more liquidity, and most of the unmoved Alph to date, to probably enter markets once we have an ALPH-USDT pair on Ayin. That will happen once the eth bridge is deployed. To summarize, despite being very early in Alephium’s growth cycle Ayin is today the exact opposite of Alph in terms of utility because it feeds on speculative activity which will also be the main activity in the foreseeable future.
Other Ayin streams of revenue
In my valuation model I ignore other streams of revenue such as the Ayin rewards that go to LPs in the Ayin-Alph pool (which currently offers 160% APY) because I consider this to be a downstream consequence of Ayin’s success. One could think of Ayin stakers as a group of independent market participants that together build momentum for the entire Alephium defi since a more valuable Ayin becomes a strong incentive for LPs to join Alephium offering ever deeper liquidity and better user experience for the dex economy.
Disclaimer: This is not financial advice. Everything discussed here is for informational purposes only.
Disclosure: I hold Ayin
