How to accurately value cryptocurrencies?

Written by: Four Pillars

Compiled by: AididaoJP, Foresight News

Key points

• Tokens ≠ equity. Valuation should use enterprise value/holder revenue, not enterprise value/protocol revenue.
• The accrual ratio (the percentage of contractual revenue that the holder will ultimately receive) is a key diagnostic metric. In the projects we compared, this ratio ranged from 25% to 100%.
• There's a difference in "dilution." Team incentives are genuine operating costs (and should be included in the valuation multiple), while investor unlocking and selling are market events (and should not be included in the multiple).
• The value of a national treasury depends on its "withdrawability." The issue isn't "how much money is in the treasury," but rather "can the holders actually withdraw it?"

I often see a common misconception in cryptocurrency valuations: someone pulls out a protocol with $500 million in annualized fee revenue, divides its market capitalization by that number, gets a single-digit multiple, and then concludes it's "cheap." This calculation is flawed in both the denominator and the numerator. Investors think they're buying at 5x valuation, but considering the actual revenue they'll receive, that multiple could be 20x.

The price-to-earnings ratio (P/E ratio) is a good starting point, but it ignores the balance sheet and capital structure—which is precisely why traditional finance uses enterprise value multiples (EV/EBITDA). However, applying the EV/EBITDA concept to tokens encounters three fundamental problems:

• Treasury assets: Holders have no legal right to claim them.
• Agreement revenue: Most of it may never reach the holders.
• Maximum cost: It does not appear on the profit and loss statement, but is reflected in the form of new token issuance.

This article aims to construct a valuation framework adapted to the characteristics of tokens. The core metric is Enterprise Value/Token Holder Revenue—that is, the price you pay for each dollar that ultimately ends up in your pocket (as a token holder), taking into account both balance sheet and actual operating costs. I will use five protocols (HYPE, PUMP, MAPLE, JUP, SKY) as examples. This is not investment advice, but merely a methodological demonstration.

1. How is the "enterprise value" of a token calculated?

The first mistake many token valuations make is starting with market capitalization, but market capitalization is not the same as enterprise value.

In traditional finance, the logic is very clear:

Enterprise Value = Market Capitalization + Debt - Cash

Because if you buy the entire company, you'll assume debt, but you'll also take the cash. Subtracting the cash is reasonable, since that money is legally yours.

But in the crypto world, things are more complicated. From automatic burns (USDC flows in, tokens are permanently destroyed, and no one gets their hands on the USDC), to foundation wallets (holding hundreds of millions of dollars but with no governance or distribution mechanism), the scenarios are varied. The key question isn't "what's in the treasury," but rather "can holders actually withdraw it?" (Of course, if someone acquires the entire protocol, the discount disappears, just like in traditional finance. The "claim discount" mentioned here mainly applies to us minority shareholders.)

I'm using the term "enterprise value" because the logic is the same: you're calculating how much you need to pay to acquire the core business, while excluding what's not on your balance sheet. The formula is as follows:

Enterprise value of a token = Market capitalization + Token debt - Withdrawable treasury assets

Most protocols do not yet have "token debt", so the focus is usually on treasury assets.

Let's first break down what's in the national treasury. A typical agreement's national treasury holds three categories of assets:

• Stablecoins: Real money, which can be fully withdrawn in principle.
• Native token: Your own token. Subtracting this part is equivalent to "subtracting yourself from yourself", which usually requires a discount of at least 50%.
• The agreement holds liquidity (POL) and other assets.

Total Treasury Assets = Stablecoins + Native Tokens × (1 - Your Desired Discount Rate) + POL

However, total assets ≠ available assets, which is precisely the core issue this framework aims to address.

Some protocols don't even have a national treasury to discount. For example, a pure burn mechanism (USDC inflows used to buy back and burn tokens) doesn't create balance sheet assets that anyone can access. In this case, extractable treasury assets = 0, and enterprise value = market capitalization. This is the clearest scenario, requiring no subjective judgment.

For the national treasury that does indeed hold actual assets, I introduce a "claim discount" framework, with a value between 0% and 100% based on the actual degree of control the holder can exert:

• 0% discount: Automatic buyback and burn without governance voting; or the use of funds is entirely up to the token holders.
• 25% discount: Has an active DAO and actual allocation history.
• 50% discount: They have governance rights, but these rights only exist on paper and have never been actually exercised.
• 75% discount: The national treasury is controlled by a team, resulting in weak governance.
• 100% Discount: The funds are controlled by the foundation, and holders have no claim to them.

These percentages are the most subjective and vulnerable part of the whole framework, I admit. But it makes far more sense for two analysts to argue about whether it's 25% or 50% than for them to ignore the national treasury and only talk about the price-to-earnings ratio.

Let's look at a real-world example:

• Maple: The Treasury has $9.36 million (99.7% in stablecoins), a relatively small amount. The enterprise value was slightly adjusted from $272 million to $265 million, a minimal impact.
• SKY: The treasury has $140.3 million, but 99.9% of it is in its own tokens. After a 50% discount, I believe the withdrawable value is $70.2 million, and the enterprise value drops from $1.69 billion to $1.62 billion.
• PUMP: Reportedly holds approximately $700 million in stablecoins, but lacks governance mechanisms and distribution channels, making it inaccessible to holders. Therefore, withdrawable assets = 0, and the company's value = market capitalization.
• HYPE and JUP: Both involve pure destruction or closure of the national treasury, requiring no judgment; enterprise value = market capitalization.

2. Revenue and Token Costs: How much of it actually ends up in my pocket?

The gap between the money earned by the agreement and the money actually received by the holder is where most valuation frameworks fail, and it is also the key factor that truly affects the valuation multiple.

You can think of income as a three-tiered waterfall:

• Cost: The total amount paid by the user.
• Protocol revenue: The portion of revenue that the protocol retains after paying out to "suppliers" such as LPs and validators.
• Holder income: The portion that ultimately reaches token holders through buybacks, burns, or direct distribution.

There are two key conversion rates in between:

• Retention rate = Agreement revenue ÷ Expenses (How much of the total expenses can the agreement retain?)
• Accrual ratio = Holder income ÷ Agreement income (How much of the retained portion ultimately reaches the holder)

The combined effect of these two ratios can be drastically different:

• HYPE: Retention rate 89.6%, accrual ratio 100%. Of the nearly $900 million in charges, $805.7 million ultimately went to holders.
• Maple: Retention rate 13% (140.5 million in fees → 18.3 million in protocol revenue), accrual ratio 25.1% (18.3 million in protocol revenue → 4.6 million in holder revenue). Its cumulative approval rate is only 3%, while HYPE's is 90%.

Within the same framework, one is 3%, the other is 90%. If you directly compare these two protocols using "EV/fee" or even "EV/protocol revenue," the difference is enormous.

Why use "holder income" instead of "agreement income" in the denominator?

In traditional finance, EV/revenue is feasible because equity holders have residual claims—legally, it all belongs to them. But token holders don't have this right; they only receive the portion designed for them by the token economic model. If revenue sits in a team-controlled treasury without any mechanism for distribution to holders, then simply holding governance tokens doesn't make that revenue "your" money.

Using "agreement revenue" as the denominator can beautify agreements with low accrual ratios, making them appear "cheaper" than they actually are. I call this discrepancy "accrual discount".

Take Maple as an example:

• EV/Contractual Revenue = 14.5x
• EV/Owner Income = 57.7x

A difference of a full four times! With the same data, based on different denominators, your judgment on "how much the market is asking" will be completely different.

3. Cost: Dilution also varies in quality.

The term "dilution" is used too broadly in the crypto community; if it's categorized incorrectly, the valuation will be wrong.

Category 1: Team Incentives (Equity Incentives) – This is an operating cost.

As Warren Buffett said decades ago: If incentives aren't a cost, then what are they? Gifts? In traditional finance, they'd appear on the income statement, reducing profits. In the crypto world, they manifest as new tokens entering the market, but the economic essence remains exactly the same—they're the real cost of operating the business.

• HYPE: Team incentives annualized at $464.9 million consumed 57.7% of holder income.
• PUMP: Team incentives annualized at $128.5 million.

These should all be included in the valuation multiple.

The second category: Operational token costs (ecosystem incentives, user acquisition, etc.) – these are also operating costs.

Their function is equivalent to user acquisition costs, which are also real expenses and should be included in the multiplier. In addition to team incentives, PUMP also has $77 million in operational token costs, bringing the total token cost to $205.5 million.

The criterion is simple: is it creating a new supply of tokens?

If the protocol simply distributes existing revenue to stakers without issuing new tokens, then the cost is already reflected in the previous cash flow (i.e., the difference between the protocol's revenue and the holder's revenue).

If the protocol mints or unlocks tokens that were not previously in circulation, that is real dilution and a business cost.

The third category: Investors' locked-up shares are unlocked upon maturity – This is a market event, not an operating cost.

You wouldn't subtract VC sell-offs from Apple's profits to get an "adjusted profit." Similarly, this shouldn't be included in the operating multiple.

PUMP's annualized potential selling pressure from investors is $83.5 million, representing 7.3% of its market capitalization. This has a significant impact on price movements and market dynamics, but it is not considered an operating cost. I've included it separately in a diagnostic metric called "Total Token Holder Tax" (i.e., token cost + potential investor selling pressure as a percentage of holder income), but it's not included in the core valuation multiple.

4. Four core multiples and one diagnostic indicator

Based on the above logic, we obtain the following metrics (defined uniformly here and directly referenced below):

• EV/Owner Income (Core Metric): How much you pay for every dollar that ultimately ends up in your pocket.
• Market capitalization/holder income: Same as above, but without treasury adjustments. The difference reflects the impact of the balance sheet.
• EV/(Holder Revenue - Token Cost) (Multiple after cost adjustment): This deducts actual business costs (team incentives, operating costs) but excludes investor selling pressure.
• EV/Agreement Revenue (for reference only): The difference between EV/Owner Revenue is the size of the "accrued discount".
• Total Token Holder Tax (Diagnostic Metric): = (Token Cost + Investor Selling Pressure) ÷ Holder Revenue. It provides a single figure that comprehensively reflects the combined impact of operating costs and supply pressure. For example, PUMP's tax rate of 60.3% means that for every $1 of revenue reaching holders, an additional $0.603 is injected into the market as new supply. This figure itself doesn't directly indicate whether a valuation is high or low, but it does suggest the dynamic relationship between cash flow and supply.

5. Data Overview and Case Study Highlights

• HYPE: Accrual ratio 100%, 9.4 times holder income. However, team incentive costs are high, raising the multiple to 22.2 times after cost adjustments. The revenue structure is clear; the complexity lies not on the revenue side.
• PUMP: Appears to be the cheapest (2.4x), with an accrual ratio of 98.8%. However, it cannot be withdrawn from the Treasury, and there will be a large-scale unlock in August 2026. After cost adjustment, the multiple rises to 4.2x, and the total token holder tax is as high as 60.3% (the highest in the sample).
• MAPLE: Largest accrued discount (4x). Protocol revenue 14.5x vs. holder revenue 57.7x, a huge difference. No token cost, so the multiple remains unchanged after cost adjustment.
• JUP: The cleanest balance sheet. Through "net-zero emissions" governance, there are no token costs, no investor selling pressure, and no way to extract from the national treasury. All multiples are close to 7.7x.
• SKY: With an accrual ratio of 45.8%, it's a prime example of how denominator choice affects valuation. The protocol's revenue multiple is 7.3x (seemingly cheap), while the holder's revenue multiple is 16.0x (not so cheap anymore). The treasury's main (99.9%) holdings are its own tokens, meaning their value needs to be discounted.

6. Conclusion

This framework definitely has flaws:

• The discounting of the treasury's claim right is subjective: I may offer 25%, while you may offer 50%, and neither of us can convince the other.
• The determination of "whether to issue more tokens" can be complicated: some protocols have minting functions enabled, but the distribution channels are dead, and tokens are piling up in unallocated pools, making the situation unclear.
• The data source is noisy: DeFiLlama's 30-day annualized data may make the same protocol appear cheaper or twice as expensive due to different snapshot months.

But this is at least a workable starting point. EV/owner income, adjusted for balance sheet and real business costs, allows you to see more clearly how much of the income you ultimately receive for every dollar you pay.

The gap between the money generated by the protocol and the money received by the holder is the biggest fundamental mismatch in the current market. Many protocols generate hundreds of millions of dollars in fees, but holders only receive a fraction of that, and most valuation frameworks don't even distinguish between the two.

Fortunately, the industry has begun to focus on value capture: fee switches are being turned on, buybacks are replacing inflation-linked pledging, and governance is voting to suspend incentives. We are building tools to more accurately measure what is actually happening.

7. Data Sources and Methods

• Revenue DeFiLlama annualized data (last 30 days x 12). The advantage is that it is more sensitive than half-year data, but the disadvantage is that monthly fluctuations may introduce noise.
• Holder Income: Directly adopts the "Holder Income" field of DeFiLlama, which only includes buybacks, burns, and direct distributions.
• Treasury
  • MAPLE: $9.36 million (DeFiLlama, 99.7% stablecoins)
  • SKY: $140.3 million (DeFiLlama, 99.9% proprietary tokens)
  • JUP: $0 (Closed)
  • PUMP: Median estimate for stablecoins is $500 million (actual range: $286 million - $800 million).
• Token cost:
  • MAPLE: $0. Staking distribution for the MIP-019 proposal (October 2025) has ended. While smart contracts with 5% inflation may still be minted, there is no distribution channel. (Source: docs.maple.finance, The Defiant 2025/10/31)
  • SKY: $0. The Savings Module (STR) now distributes SPK and Chronicle Points, not SKY tokens. (Verified March 2026 at app.sky.money/rewards). Rune's "600 million SKY annually" figure mentioned in August 2024 is outdated, but governance can be restarted at any time. (Source: sky.money FAQ, vote.sky.money)
  • JUP: $0. The "net-zero emissions" proposal was passed on February 22, 2026 (75% in favor). The DAO treasury will be closed until 2027.
• Investor selling pressure:
  • PUMP: Steady-state annualized $83.5 million. The actual cliff unlocking begins in August 2026, with actual selling pressure of approximately $48.7 million over the next 12 months (based on a 7/12-month timeframe).
• Loan Agreement Indicators:
  • MAPLE: Using actual assets under management (AUM) ($3.79 billion, reported in Q1 2026), instead of DeFiLlama's TVL ($1.945 billion). Net Interest Margin (NIM) = Protocol Revenue / AUM. See the Excel appendix for detailed metrics.
• Cash operating expenses: Not estimated. Speculation due to the non-disclosure of the agreement could lead to unrealistic accuracy.
• Equity incentive valuation: Calculated based on the current token price. Sensitive to price changes.