I’d like to start a discussion around KPIs for MakerDAO with the community. Unlike the traditional financial and equity markets, there is little or no consensus around how cryptocurrencies are valued today. Stocks and bonds are typically valued using a discounted cash flow model - the present value of all future cash flows generated by a company discounted back to the present.
Cryptocurrencies have a variety of different use cases and some present challenges to using a traditional valuation framework. There are some cryptos used primarily as a medium of exchange or store of value where a DCF is not applicable - some analysts have proposed valuing these based on the quantity theory of money. ‘Utility’ cryptocurrencies may be the most complex type of crypto to value - value is largely dependent on the demand for services transacted on the platform and the supply of tokens (which can be impacted by staking and other incentives to lock/remove a portion of the supply from the markets).
Unlike the aforementioned types of cryptocurrencies, the framework for valuing DeFi tokens lends itself to traditional valuation methodologies. Many of these tokens take some sort of fee that grows as Total Value Locked (TVL) increases or as transactions increase which makes a DCF a logical choice when attempting to value the token. IMO, MKR falls into this category.
There are many factors which contribute to the success of an enterprise, some more easily quantifiable than others. In order for MakerDAO to succeed long term, we must deeply analyze and understand what drives MKR’s value so we can efficiently allocate capital and resources to maximize it’s value. In order to do this, I’d like the community’s input on what KPIs they are looking at and which they feel are most important to MKR’s long term success. Here are a few I’m sure most have thought of to start the discussion (in no particular order):
- Total Risk Assets Outstanding
- Interest Income Correlation
- Net Interest Income
- Total DAI Outstanding
- DAI Market Share
- DAI on-chain volume
- Gross Interest Income
- Vaults Opened
Once we have a reasonable consensus on our most important KPIs, we can evaluate potential opportunities and investments more effectively and prioritize. Important factors to consider for prospective investments include: TAM (Total Addressable Market), cost to implement, ROI (long-term), margins (how lucrative could this investment be, strategic advantages (i.e. will offering a complementary product improve our lending demand), and risks. For starters, I think focusing on three to five primary KPIs feels optimal. Looking forward to hearing your thoughts!