Maker Valuation Thoughts

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Qiao Wang - February 14, 2019

I was a big fan of Maker before it was cool. The idea is sound, and the team executes really well.

That said, as far as investing is concerned, the quality of the project is only half of the formula. The other half is how much you are paying for that quality.

The nice thing about MakerDAO, as well as many other DAOs, is that DAO holders have rights to cash flow**. With Maker, the holders earn “stability fees” with each newly created collateralized debt position and Dai issuance. As such, you can make certain assumptions and use a discounted cash flow (“DCF”) model to get a sense for how much the token is “worth”, relative to the price you’d be paying.

This contrasts with, for instance, base layer tokens which are incredibly hard to value. As a former trader, I have strong opinions on valuation, and truth be told, almost none of the valuation frameworks on base layer tokens I’ve seen so far makes any sense.

I recently did some back of the napkin valuation work, and it looks like MakerDAO is fairly priced at best. Probably overpriced. But certainly no bargain.