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Is it possible to calculate the future value of a REP token on the basis of an estimated betting volume and average reporting fee?

E.g. 1.000.000.000$ yearly betting volume with an average 0.5% reporting fee (0% market creator fee)?

If not, which other criterias are needed to perform this calculation?

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To calculate the future value of REP you must first predict the future open interest of all Augur markets. Once you have that number, multiply it by 5 (subject to change) and you have the REP market cap. Divide the result by 11,000,000 and you have the REP token value.

For example, if the total amount of ETH in escrow across all open Augur markets is 1,000,000 (I have no idea if this number is reasonable, I just made it up) then the REP market cap would be 5,000,000 ETH, which means each REP would be worth 0.45 ETH. At a USD exchange rate of 300 USD/ETH that would result in a REP token value of 135 USD.

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    Where do you get the "multiply by 5" from? – dschihejns Aug 28 '17 at 10:16
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    I thought I already had a Stack Exchange answer to that question, but it appears not. I recommend asking a new question so the answer is easily searchable to future readers. The short version of the answer is that for REP to effectively secure the system, we need REP market cap to be at least 2x bigger than Augur outstanding interest. Since markets are not perfectly efficient, we want to increase a bit higher than that in order to absorb shocks to the system (sudden growth, etc.) and we felt that 5x was sufficiently higher than 2x, but not so high as to be a burden on traders. – Micah Zoltu Aug 28 '17 at 16:47
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    I just created a Q&A for this: augur.stackexchange.com/questions/389/… – Micah Zoltu Aug 28 '17 at 17:09
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Augur's decentralized oracle bases its self worth directly on the USD market cap, irrespective of the price of an ether. The "5x multipler" has been switched to a 7.5 times multiplier in the new version of the white paper.

The formula for estimating REP value is to determine the total open interest of REP (the total amount of ETH or Dai bet within the Augur system at any given time). Then, multiply that value by 7.5. Then, divide by the total number of REP tokens (11 million).

Let's assume REP is able to capture 1% of the current open interest of sports betting ($40 billion) within the next 5 years. This assumes a yearly open interest of about $400M. Because this is a yearly value, the actual value held within REP's 7-day windows at any given time is smaller. We must divide this yearly value by the number of weeks in a year, giving us about an $8 million dollar open interest value.

$8M * 7.5 = $60 million.

$60 million / 11 mil rep = $5.45 REP

Adapted from: https://www.reddit.com/r/Augur/comments/6w9ey6/how_to_value_rep_in_the_new_model/

To play devil's advocate for a moment, Augur can be used for a lot more than sports betting... It is left as an exercise to the reader to perform the same calculations beginning with the $1.2 quadrillion dollar derivatives market ;)

  • Really not great math here. Will edit tomorrow on desktop. – JohnAllen Jun 12 '18 at 5:01

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