A Guide to Valuing $USUAL
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A Guide to Valuing $USUAL

$USUAL - is the community yield & governance token of Usual.

In this guide, we will delve into the unique characteristics of $USUAL tokens and how they are valuable. Additionally, we will discuss how to value $USUAL with different valuation methodologies.

Main Concepts behind $USUAL

$USUAL is a distinctive token granting stakeholders ownership in the Usual DAO, providing full entitlement to all generated protocol revenue (for example, Tether is making around $5B each year). It will be used as the token for distribution for all users within Usual to align the Usual ecosystem. Unlike centralized players in the stablecoin ecosystem, we are committed to distributing economic and governance rights, aligning with the core ethos of the crypto community.

$USUAL is minted proportional to USD denominated collateral deposits and yield from this collateral. It has been specifically engineered to align the ecosystem through deflationary rates (meaning the proportional minting rate that $USUAL is minted at decreases with time - and TVL).

$USUAL serves as the centrepiece of the protocol and is used for all distribution of value. Specifically, whatever has been minted is distributed to users as a yield for staking (either liquid or illiquid).

How Valuable is $USUAL?

Based on the design of $USUAL, we can understand its value based on how much earnings per token are generated based on the DAO’s revenue. The main aspects that impact the valuation model will be the anticipated earnings distributed per $USUAL accounting for the deflationary rates and the speculation built into this price.

Earnings Per Token

The DAO absorbs all revenue from the collateral and any fees from the protocol. Therefore, since $USUAL is a DAO governance token, we can measure its value based on the earnings per token. This is a major benefit of holding $USUAL tokens as most other DAOs do not absorb any tradfi revenue and typically have low real earnings per token. With this, we can compute an EPT based on the revenue generated from the DAO using all fees generated (which varies based on the utilization of modules within the protocol) and the yield earned from the collateral (which varies based on the yield rate of the real world asset collateral held behind Usual stablecoins (USD0).

EPT=Yieldcollateral+feesSupply($USUAL)EPT=\frac{Yield_{collateral}+fees}{Supply({\texttt{\$USUAL}})}

By calculating this metric, we can use this to value $USUAL. However, the valuation model will also need to account for the supply of $USUAL as determined by the deflationary mechanism.

Deflationary Mechanism

The deflationary mechanism for $USUAL decreases the emission and minting rate for $USUAL with both time and TVL. This is a discrete system where every day we update the minting rate based on the growth of TVL (only using USD0++ or locked TVL).

Mt=Mt−1×TVLt−1++TVLt++M_t=M_{t-1}\times \frac{TVL_{t-1}^{++}}{TVL_{t}^{++}}

The supply is updated based on the TVL locked but is independent of any tokens that have been previously distributed. Ideally because of this the EPT should grow with TVL and as more tokens are distributed the EPT’s change in value will not perfectly reflect any growth in TVL.

Supply($USUAL)=Mt×TVLt+++∑i=0tDistiSupply({\texttt{\$USUAL}})=M_t\times TVL_t^{++}+\sum_{i=0}^t Dist_i

Based on this model we can calculate the total supply of $USUAL as people deposit and time increases. This can be used for the valuation model for $USUAL.

Valuation model for $USUAL

With an understanding of the inherent earnings per token and the supply of $USUAL, we can delve into creating a model that calculates an expected price for $USUAL (based on assumptions set).

Ultimately, this comes down to two separate models with one being more traditional in the financial world and the other being more frequently used in Decentralized Finance (DeFi).

Valuing $USUAL using a Price-to-Earnings Model

Given that we have the EPT we can build a traditional finance model around a price-to-earnings ratio.

p($USUALt)=EPTt×PEp(\texttt{\$USUAL}_t)=EPT_t\times PE

Based on this, we can anticipate the price of $USUAL based on the TVL in the protocol (as this impacts the supply of $USUAL).

Usual TVL = $ 1 Billion after 4 years

Year
PE (10)
PE (20)
PE (50)
0
$0.05
$0.10
$0.25
1
$0.06
$0.11
$0.28
2
$0.07
$0.15
$0.37
3
$0.13
$0.25
$0.63
4
$0.21
$0.43
$1.07

Usual TVL = $ 5 Billion after 4 years

Year
PE (10)
PE (20)
PE (50)
0
$0.05
$0.10
$0.25
1
$0.07
$0.14
$0.34
2
$0.12
$0.25
$0.61
3
$0.30
$0.59
$1.49
4
$0.73
$1.47
$3.67

Usual TVL = $ 10 Billion after 4 years

Year
PE (10)
PE (20)
PE (50)
0
$0.05
$0.10
$0.25
1
$0.08
$0.15
$0.38
2
$0.16
$0.31
$0.78
3
$0.45
$0.89
$2.23
4
$1.30
$2.59
$6.49

*Each table assumes we accumulate $100 Million TVL during the pre-launch phase.

In addition to using a more traditional model like this, we can use a more DeFi based model that allows to better understand the value of $USUAL compared to other projects.

Valuing $USUAL using a FDV/TVL Model

It should also be noted that $USUAL can be looked based on comparative value of other tokens as well. By looking at FDV/TVL for other projects, we can see how the market is valuing these to get a better understanding of the speculative assumptions the market has created for the industry.

Using projects similar (Reserve Rights, Ondo, Frax, DAI), we can compute FDV/TVL values for each and use this within our own model. As of Jan 1, 2024, here are the FDV/TVL metrics for similar projects (with varying levels of achieved success):

Protocol
FDV
TVL
FDV/TVL
Ethena
$18,793,877,103
$2,176,000,000
8.64
Ondo
$8,298,030,809
$260,200,000
31.92
Frax Finance
$723,399,762
$1,245,000,000
0.58
DAI (MakerDAO)
$3,674,646,162
$8,712,000,000
0.42

*Last updated on April 8, 2024.

Using these FDV/TVL valuations we can compute the associated price of $USUAL.

p($USUALt)=E[TVLt]×MFDV/TVLSupply($USUALt)p(\texttt{\$USUAL}_t)=\frac{E[TVL_t]\times M_{\texttt{FDV/TVL}}}{Supply({\texttt{\$USUAL}}_t)}

By this logic if we assume a fixed TVL for Usual (let’s say after 4 years for example), based on these expected TVL assumptions and the FDV/TVL metrics from the competitors we can compute the expected price of $USUAL (after 4 years). Also to understand the change in price we will assume $100 million in TVL was deposited for the duration of the pre-launch phase (this will allow us to calculate a beginning price to get a price multiple for $USUAL).

Usual TVL = $ 1 Billion after 4 years

Protocol
FDV/TVL
$USUAL (t=0)
$USUAL (t=4)
Price Multiple
Ethena
8.64
$0.86
$3.70
4.28
Ondo
31.92
$3.19
$13.66
4.28
Frax Finance
0.58
$0.06
$0.25
4.28
DAI (MakerDAO)
0.42
$0.04
$0.18
4.28

Usual TVL = $ 5 Billion after 4 years

Protocol
FDV/TVL
$USUAL (t=0)
$USUAL (t=4)
Price Multiple
Ethena
8.64
$0.86
$12.68
14.68
Ondo
31.92
$3.19
$46.86
14.68
Frax Finance
0.58
$0.06
$0.85
14.68
DAI (MakerDAO)
0.42
$0.04
$0.62
14.68

Usual TVL = $ 10 Billion after 4 years

Protocol
FDV/TVL
$USUAL (t=0)
$USUAL (t=4)
Price Multiple
Ethena
8.64
$0.86
$22.41
25.94
Ondo
31.92
$3.19
$82.81
25.94
Frax Finance
0.58
$0.06
$1.50
25.94
DAI (MakerDAO)
0.42
$0.04
$1.09
25.94

Overall, using the FDV/TVL model we can use this to understand the price of $USUAL comparing to other projects. FDV/TVL helps us better understand the speculation on these assets and how that would impact the price of $USUAL.

More on $USUAL Valuation Models

Below is a sample $USUAL valuation guide with simple parameters to look at potential $USUAL prices are using a FDV/TVL or PE valuation model.

Spreadsheet