REN Token Valuation

The value of REN is derived from trading fees which are paid to darknodes in exchange for processing orders. Bonds are submitted in REN by both darknodes and traders in order to utilize the network. Fees and bonds are interconnected such that each darknode is required to hold a bond of 100,000 REN to access the network and receive fees. With some basic market assumptions, we diagram base and bull case scenarios for the potential value of REN.

Assuming increasing annual trade volumes of digital assets, trading fees of 40 bps (20 bps each for buyer/seller), a dark pool market capture of 15% of total trade volume and a discount rate of 40%, we employ a DCF analysis model to calculate base and bull cases for REN.

In our base case, we assume Republic Protocol captures a conservative 0.35% of the total digital asset trade volume by the year 2022. This assumption is in line with decentralized exchanges (DEXs) such as IDEX, DDEX and the Waves DEX, which collectively capture less than 0.2% of today’s market. Of note, DEXs have been growing at a remarkable rate and will likely capture much greater trading volume over the next few years. In this base scenario, the resulting price per REN is 1.84 USD, representing a 19x (1,800%) increase from its current price.

Bull Case Scenario

In our bull case scenario, we assume a more aggressive market capture for Republic Protocol, forecasting a capture 1.7% of the total digital asset trade volume by 2022 (approximately 1/10th of total volume traded in dark pools). Based on the revenue (Table 1) to each node, we find that each REN token could be worth up to 9.05 USD, representing a ~94x (9,300% gain) increase from its current price of 0.096 USD.