DeFi versus TradFi Valuation Using Multiples and Discounted Cash Flows

doi:10.1017/9781009362290.004

3 - DeFi versus TradFi Valuation Using Multiples and Discounted Cash Flows

from Part I - Institutionalisation of Digital Assets

Published online by Cambridge University Press: 06 March 2025

Teng Andrea Xu ,

Jiahua Xu and

Kristof Lommers

Edited by

Reena Aggarwal and

Paolo Tasca

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Reena Aggarwal: Affiliation:
Georgetown University, Washington DC
Paolo Tasca: Affiliation:
University College London

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Summary

As of August 2022, blockchain-based assets boast a combined market capitalisation exceeding one trillion USD, among which the most prominent are the decentralised autonomous organisation (DAO) tokens associated with decentralised finance (DeFi) protocols. In this work, we seek to value DeFi tokens using the canonical multiples and discount cash flow (DCF) approaches. We examine a subset of DeFi services including decentralised exchanges (DEXs), protocol for loanable funds (PLFs), and yield aggregators. We apply the same analysis to some publicly traded firms and compare them with DeFi tokens of the analogous category. Interestingly, despite the crypto bear market lasting for more than one year as of August 2022, both approaches evidence overvaluation in DeFi.

Keywords

Cryptocurrencies portfolio allocation predictability forecast combination economic value

Type: Chapter
Information: Digital Assets
Pricing, Allocation and Regulation
, pp. 44 - 68

DOI: https://doi.org/10.1017/9781009362290.004 [Opens in a new window]

Publisher: Cambridge University Press

Print publication year: 2025

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