The cryptocurrency exchange FCoin has recently launched the native cryptocurrency FT as the proof of equity of the trading platform itself, with an innovative "transaction is mining" mechanism. The total amount of FT tokens issued will be constant at 10 billion, and it will never be issued again. FCoin will distribute most of the income to FT token holders in a timely manner. At the same time, the FCoin community will also initiate smart contract voting to allow FT holders to jointly enjoy various rights of community governance and participate in the decision-making of major business affairs.

The income of the FCoin trading platform will be distributed to FT holders according to a fixed ratio - the distribution ratio is 80% to FT holders, and 20% to FCoin development and operation.

But the problem is that this incentive mechanism may cause people to "swipe their orders", or even deploy trading robots on the FCoin exchange, and then get FT token compensation by contributing transaction fees every day. On the other hand, as the transaction volume grows, the income pool will also create a self-reinforcing spiral growth phenomenon, which will lead to a greater and greater demand for FT tokens. When the FT token ICO was launched, the price was US$0.01, but then it skyrocketed to US$1.05, and the current market value has exceeded US$550 million.

So, is FTCoin, which invests in the "transaction as mining" mechanism, reliable or not? Perhaps, we can estimate it by analyzing the fair value. Fair value refers to the price determined by buyers and sellers who are familiar with market conditions under fair and voluntary conditions, or an asset can be bought or sold or an asset can be bought or sold under fair conditions between unrelated parties. The transaction price at which the liability can be discharged. Asset appraisal agencies often use the indicator of "fair value" to evaluate the net assets of those merged or acquired companies.

Before evaluating, we need to have four hypothetical prerequisites, namely:

1. FCoin earns income after the "transaction is mining" project ends;

2. Market implied rate of return is used to calculate the discounted final value;

3. The income distribution mechanism will not change;

4. Investors can reinvest all the income generated in FT tokens according to the mining price of FT tokens.

first step

first step

Assuming that all FTs have been issued, first calculate the present value of FTs (Present Value), and then their "transaction is mining" project will end, and "swiping orders" will also stop, because even if "transactions" are made later, It will not bring you more FT tokens either. At this point, the only benefit of holding FT tokens is the ability to earn dividends from exchange revenue from actual organic activity. By designing this income distribution mechanism, FT token holders are entitled to a cumulative dividend of 80% of exchange transaction fees.

Let's make a positive assumption - assuming that FCoin exchange can grow into one of the largest cryptocurrency exchanges in the world by the end of the transaction-as-mining project. Currently, major cryptocurrency exchanges such as OKEx, Huobi, Binance, and Bitfinex have an average daily trading volume of roughly $1 billion. Since transaction fees vary across cryptocurrency exchanges, we used a median value of five basis points (0.05%) as an estimate. Of course, we have also taken into account factors such as discounts/points/rebates that market participants can obtain. Therefore, if calculated in this way, the total transaction fee amount that the FCoin exchange can generate on average every day is about 500,000 US dollars, of which 80% will be allocated to 10 billion FT tokens—that is, the maximum circulating supply of FT tokens.

In this case, we can calculate the annualized return of holding 1FT tokens:

$0.0146, which is the "Terminal Value" of FT tokens

second step

second step

Calculate and compare the equivalent value of 1FT tokens in the future with today's 1FT tokens after the "transaction is mining" project ends.

Given the current transaction-as-mining project and the current revenue distribution mechanism, it is assumed that:

1. The number of FT tokens currently in circulation is n

2. The upper limit of circulating FT tokens is N

According to the FT token market value data on June 14, 2018, n=527 million US dollars; according to the FT token white paper, N=10 billion. If we assume that we currently hold x FT tokens, and then we reinvest all distributed income into FT tokens until the end of the "transaction-as-mining" project, we can conclude:

According to the above calculation results, today's 1FT tokens are equivalent to 3.32FT tokens at the end of the "transaction is mining" project. Therefore, the fair value of 1FT tokens today is $0.57:

As of this writing, FT tokens are trading at $1.05 on FCoin.com.

Note: The author of this article does not hold any FT tokens, and the content of the article does not constitute investment advice.