Intrinsic value of #AMPLIFI
One can think of the value of the #AMPLIFI token as soft-pegged to the underlying $ETH yield the protocol generates.
To calculate a fair and accurate intrinsic value for Fused Amplifiers, we can take the current “Risk Free Rate” ETH yield devised by Lido, currently offering around 5%, or if we assume a 10% rate on validator return. Both models suggest fair estimates to calculate intrinsic value.
In this case we define "intrinsic value" as the value one needs to be holding in $ETH to generate the same amount of ETH yield as the AmpliFi Fuse Pools.
For example, if $500 worth of $ETH returned $50 a year in $ETH at a 10% annualized return, and $500 in fused #AMPLIFI (via a Fused Amplifier) also returned 10% in $ETH yield, the intrinsic value of fused #AMPLIFI is $500 in $ETH.
Another way of looking at it: If fused #AMPLIFI is trading below its intrinsic value, users can essentially arbitrage the risk free rate of $ETH.
In this case, if $500 in $ETH generates $50 in ETH yield per annum, and $250 in fused #AMPLIFI generates $50 in $ETH yield per annum, fused #AMPLIFI would be trading at a 50% discount to $ETH's yield and its intrinsic value backing it; therefore, users could Fuse and earn twice as much $ETH yield than staking their $ETH would otherwise yield.
Here, we can take the quantity of Amplifiers in the Fuse pool and multiply it by 20 (the number of #AMPLIFI tokens needed to create an Amplifier) to determine the quantity of tokens that make up the pool. So, at 400 fuses, there would be 8,000 tokens in the pool. Now say 10 $ETH was accrued in 1 month, we can annualize that (meaning multiply it by 12 months), which equates to 120 $ETH or 180,000\8000 tokens = $22.5 in $ETH per fused #AMPLIFI token annually. Assuming a 6% rate of return on ETH, one would need $375 in $ETH to obtain the same yield as one fused #AMPLIFI token currently trading at $26. Stated differently, you'd need to stake $375 worth of $ETH to earn $22.50 in $ETH per year.
Alternatively, with Lido's current $ETH staking yield of 3.9%, $22.5/.039 = $576.92 needed. In layman's terms, if you instead staked with Lido, you'd need to allocate $576.92 worth of $ETH to earn the same yield.
The value of holding the native #AMPLIFI token at spot can be thought of as being backed by the intrinsic value of the entirety of the pool of fused holders. However, should #AMPLIFI trade at a discount to the $ETH yield rate, we’d take the intrinsic value of the $ETH backing fused holders and /2 to find the “fair market value” for the native #AMPLIFI token at $187.50.
(If applying a 50% discount rate on the native token for this model)
Whether the price of $ETH goes up or down, #AMPLIFI benefits. Let's explain why:
AmpliFi captures fees in two primary ways:
- 1.Fees priced in $ETH
- 2.Fees priced as a percentage of your transaction
When fees are priced in $ETH (0.008 for example), these fees primarily go toward validator acquisition, yield amplification, and $gAMP revenue sharing. All of these endeavors are priced in and paid out in $ETH. The "purchasing power" of the fees captured does NOT decrease as a result of the price of $ETH decreasing, because they're all based in $ETH. If $ETH drops 10%, the price of a validator remains at 32 $ETH, and AmpliFi continues to capture the same amount. It's like if the US dollar lost 10% of its 'value', but the cost of goods remained the same - you'd still be paying the same amount for your coffee relative to the USD.
When fees are priced as a percentage of your transaction, it actually benefits the protocol for the price of $ETH to decline... this is because these fees are captured in #AMPLIFI, then swapped and liquified in our USDC pool. Once swapped for USDC, these funds are allocated toward validators, which would be less expensive on a USDC basis. Simply put: Our percentage-based fees go further in the fundraising of validators when the price of $ETH declines (validators go on sale!).
So, regardless of market conditions, #AMPLIFI's intrinsic value continues to benefit.
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Last modified 7mo ago