New Crypto Toolkit Can Measure Speculation in a Token’s Price
The Economic Suite, developed by Flipside Crypto and Prysm Group, is a new blockchain economic tool that will let projects view advanced economic data about their ecosystem.
The partnership, whose results were announced on May 13, combined Flipside’s data analytics experience with Prysm’s economic expertise.
The Economic Suite features a variety of charts that show key economic indicators of a particular blockchain. It is meant to be used by crypto projects to keep track of the network’s health and overall parameters.
A data suite for crypto projects
Dave Balter, the CEO of Flipside Crypto, told Cointelegraph that the focus of the Economic Suite is purely on crypto projects. Unlike existing data platforms that provide “investor-focused data,” the new toolset focuses on being useful for projects. “We could say they [other tools] focus on price while we focus on economic value — a bit like Wall Street vs. real economy,” Balter said.
Balter said that the platform will provide data that the teams actively requested. By using the Economic Suite, they will be able to “understand their platform, benchmark against others, and improve their design.”
Some of the metrics include measures of decentralization and fairness. One proposed usage is for blockchain projects to measure the real-time effects of adjustments to network parameters, like validator rewards.
The suite is able to measure whether small miners or validators are compensated fairly, or if the mining process is “sufficiently decentralized.” The system uses proprietary formulas and compares results with those from major networks.
The result is that the team behind a crypto project is able to get a better understanding of its state:
“By seeing where the network stands relative to its goals, teams can better assess whether its economic design needs to be changed in order to better meet those goals.”
This data will only be made available to projects, who may then choose to share it publicly.
Destructuring the price into speculative and non-speculative components
One of the suite’s components relates to the price of the token. As Balter explained, projects are often faced with the issue of how to increase or manage the price of their token.
The Economic Suite features a price decomposition chart that divides the price into several components. A speculative part is always present, but the charts also include a “consumer” and “staking” component.
As Dr. Stephanie Hurder, founding scientist at Prysm Group, told Cointelegraph, tokens can be used for purchasing goods and services, but also for staking and governance. “These uses are what create the fundamental economic value of a token — they are concrete commercial activities,” she added.
The system thus attempts to find out how much of a token’s price is due to these factors, while the parts that cannot be explained are assumed to be speculative.
Hurder did not wish to go into the specific details of how their proprietary system works. But she anticipated that “to measure the token value driven by users buying goods and services, we use the equivalent of GDP, which we call Economic Activity.”
She mentioned staking platforms and distributed storage blockchains as examples of systems where the Economic Activity value can be derived.
Some blockchain projects are easier to evaluate than others, however. As Michael Anderson from Framework Ventures previously told Cointelegraph, some decentralized finance protocols lend themselves to more rigorous token valuation models.
An example of that is MakerDAO, which can receive revenue at a protocol level thanks to interest from lending.
