A 🧵on $DOT Investment Thesis and Valuation 👇
You can watch my detailed primer on @Polkadot
A detailed walkthrough of my investment thesis, valuation, and price prediction
You can watch my detailed primer on @Polkadot
A detailed walkthrough of my investment thesis, valuation, and price prediction
Investment Thesis
💪Can be thought of as an ETH 2.0 Hedge ( delays in ETH 2.0 Road map) and a Put Option (captures user base and developers from the ETH community)
💪Highly Scalable – Can process up to 1 million transactions vs 15 currently for ETH and 10K for ETH 2.0
cont...
💪Can be thought of as an ETH 2.0 Hedge ( delays in ETH 2.0 Road map) and a Put Option (captures user base and developers from the ETH community)
💪Highly Scalable – Can process up to 1 million transactions vs 15 currently for ETH and 10K for ETH 2.0
cont...
🚀Broadest type of interoperability ( multiple blockchains and bridges can communicate with each other)
🚀Highly customizable and developer-friendly. Substrate makes it easier for developers to create custom blockchains for bespoke products (DeFi,NFT,Privacy,Gaming etc).
🚀Highly customizable and developer-friendly. Substrate makes it easier for developers to create custom blockchains for bespoke products (DeFi,NFT,Privacy,Gaming etc).
👏this can lead to strong Network effect as developers jump in and focus/execute on business logic.
👏$DOT on-chain governance is wildly unappreciated by the markets.
🦾Developers can test wildest ideas, flag errors, and optimize on $KSM before they launch on, making it safer
👏$DOT on-chain governance is wildly unappreciated by the markets.
🦾Developers can test wildest ideas, flag errors, and optimize on $KSM before they launch on, making it safer
Unique Value Proposition
😍The ability for parachains to talk to each other and transfer assets.
So far, the testnet has been successful between @AcalaNetwork and @hydra_dx they were able to use the XCMP to complete a token transfer (see tweet below)
😍The ability for parachains to talk to each other and transfer assets.
So far, the testnet has been successful between @AcalaNetwork and @hydra_dx they were able to use the XCMP to complete a token transfer (see tweet below)
https://twitter.com/AcalaNetwork/status/1367311232903110656
Demand Side of Tokenomics
DOT has a handful of key uses.
💠Bonding:
if you want to secure a parachain, projects have to commit DOT. If projects no longer want to have a parachain, the DOT gets unlocked and returned.
Continued
DOT has a handful of key uses.
💠Bonding:
if you want to secure a parachain, projects have to commit DOT. If projects no longer want to have a parachain, the DOT gets unlocked and returned.
Continued
Staking:
This is important to the consensus on the relay chain. “Validators” stake DOT for a chance to be nominated to generate new blocks on the core relay chain.
This also incentives good behavior as dishonest validators will see their stake slashed.
This is important to the consensus on the relay chain. “Validators” stake DOT for a chance to be nominated to generate new blocks on the core relay chain.
This also incentives good behavior as dishonest validators will see their stake slashed.
Transaction fees:
DOT is paid to transfer data to the Relay Chain. This can also be done in the native token of the parachain.
Governance:
DOT has on-chain voting for upgrades, changes to network fees, auction rules for obtaining a parachain, and other proposals.
DOT is paid to transfer data to the Relay Chain. This can also be done in the native token of the parachain.
Governance:
DOT has on-chain voting for upgrades, changes to network fees, auction rules for obtaining a parachain, and other proposals.
Supply Side of the tokenomics:
-Polkadot has no cap on supply.
-The network will issue staking rewards in perpetuity to encourage users to stake and ensure a high cost of an attack on the Relay Chain.
-Polkadot has no cap on supply.
-The network will issue staking rewards in perpetuity to encourage users to stake and ensure a high cost of an attack on the Relay Chain.
-Currently there is 10% annual inflation available to stakers and validators
- This inflation rate is dynamic and depends on the amount of DOT staked. If the actual staked amount deviates from this “target value”
-New issuance that doesn’t go validators ends up in the treasury
- This inflation rate is dynamic and depends on the amount of DOT staked. If the actual staked amount deviates from this “target value”
-New issuance that doesn’t go validators ends up in the treasury
-Token Burn:
1% of any Treasury funds not spent during its 24 day budget period will be burned.
Amounts staked in relation to a rejected governance proposal will also be burned.
-Currently 62% of all $DOTs in circulation is staked on the network
1% of any Treasury funds not spent during its 24 day budget period will be burned.
Amounts staked in relation to a rejected governance proposal will also be burned.
-Currently 62% of all $DOTs in circulation is staked on the network
Blockchain Architecture
I have a made 30-minute video on it which can serve as a useful primer.
Alternatively, this Tweet by @danreecer_ does a fantastic job
Continued
I have a made 30-minute video on it which can serve as a useful primer.
Alternatively, this Tweet by @danreecer_ does a fantastic job
https://twitter.com/danreecer_/status/1350933277352341509
Continued
Blockchain Architecture
Conceptually, the design of Polkadot has similarities with Ethereum 2.0. Whether you break up a network into parachains or shards, you still need to get them to talk to each other and stay in sync. They doing this from a different approach.
Conceptually, the design of Polkadot has similarities with Ethereum 2.0. Whether you break up a network into parachains or shards, you still need to get them to talk to each other and stay in sync. They doing this from a different approach.
Valuation
At the current price range – the market assumes Polkadot will only be able to capture 6.5% of the ETH market share (see below).
continued
At the current price range – the market assumes Polkadot will only be able to capture 6.5% of the ETH market share (see below).
continued
Valuation
Given my base case, I expect it to capture 25-30% in the next couple of years. This would make the Target price $73 and $88 assuming ETH price stays at 2700
Given my base case, I expect it to capture 25-30% in the next couple of years. This would make the Target price $73 and $88 assuming ETH price stays at 2700
In recent months there has been a significant pick up in development in DOT ( almost 2X of ETH).
Nice infographic by @CryptoDiffer
A developer's time is a relatively expensive resource in crypto it implies:
The project is serious about its business proposition/features
Nice infographic by @CryptoDiffer
A developer's time is a relatively expensive resource in crypto it implies:
The project is serious about its business proposition/features
Valuation
Given Polkdot’s developer community, their commitment it won't be surprising if DOT ends up capturing 50-60% of ETH’s share (see below)
This scenario could also be accelerated if there is a delay in the execution of ETH 2.0 road map
Given Polkdot’s developer community, their commitment it won't be surprising if DOT ends up capturing 50-60% of ETH’s share (see below)
This scenario could also be accelerated if there is a delay in the execution of ETH 2.0 road map
Valuation
If we compare Dot with other layer 1` and layer 0 comparables – it's in the middle of the valuation range
To quote Charlie Munger
"A great business at a fair price is superior to a fair business at a great price"
.
If we compare Dot with other layer 1` and layer 0 comparables – it's in the middle of the valuation range
To quote Charlie Munger
"A great business at a fair price is superior to a fair business at a great price"
.
Parachain Auction can act as a Catalyst to Unlock Value.
Based on my modeling of the price impact of para chain auction( see below).
🚀My base case scenario shows 127% price appreciation.
I walk through the model in this video ( 14:19 min)
Based on my modeling of the price impact of para chain auction( see below).
🚀My base case scenario shows 127% price appreciation.
I walk through the model in this video ( 14:19 min)
Valuation
I also attempted to value the network effect of Dot and its competitors, by proxying the network effect via Twitter following (see below 1st chart).
😋I find the $ value per follower of Dot to be second cheapest behind ATOM (see below 2nd chart).
I also attempted to value the network effect of Dot and its competitors, by proxying the network effect via Twitter following (see below 1st chart).
😋I find the $ value per follower of Dot to be second cheapest behind ATOM (see below 2nd chart).
Valuation
-At current prices of and at current total crypto market cap. Dot has a dominance of 1.25%.
-If the crypto market space expands to 3-4 trillion and Dot market dominance ranges between 3.25% - 4.50% we can see Dot price to range between $89 to $165 (see below)
-At current prices of and at current total crypto market cap. Dot has a dominance of 1.25%.
-If the crypto market space expands to 3-4 trillion and Dot market dominance ranges between 3.25% - 4.50% we can see Dot price to range between $89 to $165 (see below)
😋If Dot captures 0.5% of Global Equity Market Cap. Target Price of $DOT could range between $390 to $436.
There are 7 risks to my investment thesis (attached below).
Which could mean that DOT fails to capture enough market share of $ETH and the fair value range may be between $18 to $6 (see below).
Which could mean that DOT fails to capture enough market share of $ETH and the fair value range may be between $18 to $6 (see below).
Technical Analysis
If DOT tests mid-trendline resistance at the end of 2021 we can expect TP of 48-52. This is also the previous ATH
This TP is also the GANN 2/1 Support
Bounce from recent low could have had initiated 4th Elliot Wave and we can expect price heading $50
If DOT tests mid-trendline resistance at the end of 2021 we can expect TP of 48-52. This is also the previous ATH
This TP is also the GANN 2/1 Support
Bounce from recent low could have had initiated 4th Elliot Wave and we can expect price heading $50
Let me know what you guys think
@amelia_cai_ @jackbplatts @rphmeier
@marwolwarl @JumperWave @CryptoMichNL
@Adri_crypto @Pastore1314 @helloiconworld
@TheCryptoLark @kusamoon @22loops @tycoonshowers @eth_stalker @thedotcollector
@cryptomc1111 @tycoonshowers @Pastore1314
@amelia_cai_ @jackbplatts @rphmeier
@marwolwarl @JumperWave @CryptoMichNL
@Adri_crypto @Pastore1314 @helloiconworld
@TheCryptoLark @kusamoon @22loops @tycoonshowers @eth_stalker @thedotcollector
@cryptomc1111 @tycoonshowers @Pastore1314
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