How to accurately value cryptocurrencies?

Written by: Four Pillars
Translated by: AididaoJP, Foresight News

Key Metric for Token Valuation: EV / Holder Income

Main Points

• Tokens ≠ Equity. When evaluating, use Enterprise Value / Holder Income, not Enterprise Value / Protocol Revenue.

• The Accrual Ratio (the proportion of protocol revenue ultimately received by holders) is a critical diagnostic indicator. In the projects we compare, this ratio ranges from 25% to 100%.

• “Dilution” also differs. Team incentives are real operating costs (should be included in valuation multiples), while investor unlocks and sell-offs are market events (should not be included).

• Treasury value depends on “Extractability.” The issue isn’t “how much is in the treasury,” but “can holders actually access it?”

A common misconception in crypto valuation is pulling out a protocol with $500 million annualized revenue, dividing market cap by that number, and concluding it’s “cheap” based on a single-digit multiple. This approach is flawed because both the denominator and numerator are wrong. Investors think they are buying at a 5x multiple, but considering what they can actually receive, the real multiple could be 20x.

Price-to-Earnings ratio is a good starting point, but it ignores the balance sheet and capital structure—precisely why traditional finance uses EV/EBITDA multiples. However, applying EV/EBITDA to tokens encounters three fundamental issues:

• Treasury Assets: Holders lack legal claim.

• Protocol Revenue: Most may never reach holders.

• Largest Costs: Not on the income statement but reflected as new token issuance.

This article aims to build a valuation framework suited to token characteristics. The core metric is Enterprise Value / Holder Income—i.e., the price paid for each dollar of income that ultimately reaches your pocket (as a token holder), while considering balance sheet and operational costs. I will illustrate with five protocols (HYPE, PUMP, MAPLE, JUP, SKY). This is not investment advice, just a methodological demonstration.

1. How to Calculate a Token’s “Enterprise Value”?

A common mistake in token valuation is starting with market cap, which is not equal to enterprise value.

In traditional finance, the logic is clear:

Enterprise Value = Market Cap + Debt – Cash

Because if you buy the entire company, you assume its debt and take its cash. Subtracting cash is reasonable because that money legally belongs to you.

In crypto, things are more complex. From token burns (USDC inflow, tokens burned permanently, no one can claim that USDC) to foundation wallets (holding hundreds of millions, but without governance rights or distribution mechanisms), the situations vary widely. The key question isn’t “what’s in the treasury,” but “can holders access it?” (Of course, if someone acquires the entire protocol, discounts vanish—similar to traditional finance. The “claim discount” mainly concerns minority equity holders like us.)

I use “enterprise value” because the logic is similar: it reflects how much you need to pay to acquire the core business, excluding parts on the balance sheet that don’t belong to you. The formula:

Token Enterprise Value = Market Cap + Token Debt – Extractable Treasury Assets

Most protocols currently lack “token debt,” so the focus is usually on treasury assets.

First, break down what’s in the treasury. A protocol’s treasury typically holds three types of assets:

• Stablecoins: real cash, in principle fully extractable.

• Native tokens: the protocol’s own tokens. Subtracting this part is like “subtracting yourself,” usually requiring at least a 50% discount.

• Protocol-owned Liquidity (POL) and other assets.

Total Treasury Assets = Stablecoins + Native Tokens × (1 – appropriate discount rate) + POL

But total assets ≠ extractable assets—that’s the core issue this framework addresses.

Some protocols have no assets that can be discounted. For example, pure burn mechanisms (USDC inflow used for buybacks and burns) do not generate any balance sheet assets that can be claimed. In such cases, extractable treasury assets = 0, so enterprise value = market cap. This is the clearest scenario, requiring no subjective judgment.

For protocols holding actual assets, I introduce a “Claim Discount” framework, which adjusts based on how much the holder can actually control, ranging from 0% to 100%:

• 0% Discount: Automatic buybacks/burns, no governance vote needed; or funds are fully at the discretion of token holders.

• 25% Discount: Active DAO with a history of actual distributions.

• 50% Discount: Governance rights exist but are only on paper, never exercised.

• 75% Discount: Treasury controlled by the team, weak governance.

• 100% Discount: Funds controlled by the foundation, no claim rights for holders.

These percentages are the most subjective and vulnerable to debate in this framework. I admit that. But even a debate between 25% and 50% is far more meaningful than ignoring the treasury altogether and only discussing P/E ratios.

Case studies:

• Maple: Treasury holds $9.36 million (99.7% stablecoins), a small amount. Enterprise value adjusts slightly from $272 million to $265 million.

• SKY: Treasury holds $140.3 million, but 99.9% is its own token. After applying a 50% discount, extractable value is about $70.2 million, reducing enterprise value from $1.69 billion to $1.62 billion.

• PUMP: Reported holdings of about $700 million in stablecoins, but no governance or distribution channels, so holders cannot access it. Extractable assets = 0, enterprise value = market cap.

• HYPE and JUP: Both are purely burn or closed treasury mechanisms, so enterprise value equals market cap without subjective judgment.

2. Revenue and Token Costs: How Much Can Actually Enter My Pocket?

The gap between what the protocol earns and what holders actually receive is where most valuation frameworks fail—and it’s the key to understanding valuation multiples.

Imagine revenue as a three-layer waterfall:

• Fees: total paid by users.

• Protocol Revenue: what remains after paying LPs, validators, etc.

• Holder Income: what finally reaches token holders via buybacks, burns, or direct distribution.

Two key conversion rates:

• Retention Rate = Protocol Revenue / Fees (how much of total fees protocol keeps)

• Accrual Ratio = Holder Income / Protocol Revenue (how much of protocol revenue ends up with holders)

The combined effect can be vastly different:

• HYPE: Retention 89.6%, Accrual 100%. Out of nearly $900 million in fees, about $805.7 million flows to holders.

• Maple: Retention 13% ($141.5 million fees → $1.83 million protocol revenue), Accrual 25.1% ($1.83 million → $460,000 holder income). Total pass-through rate is only 3%, compared to 90% for HYPE.

Using the same framework, one protocol with 3% and another with 90% pass-through, comparing EV/Fees or EV/Protocol Revenue yields vastly different valuations.

Why use “Holder Income” as the denominator instead of “Protocol Revenue”?

In traditional finance, EV/Revenue makes sense because equity holders have residual claim rights—legally theirs. But token holders lack this right; they only get what the tokenomics design provides. If income is held in the treasury controlled by the team with no distribution mechanism, just holding governance tokens doesn’t give you that income.

Using “Protocol Revenue” as the denominator can artificially inflate the apparent valuation of protocols with low accrual ratios, creating an “accrual discount.”

For example, Maple:

• EV / Protocol Revenue = 14.5x

• EV / Holder Income = 57.7x

A fourfold difference! The same data, but based on different denominators, leads to vastly different market valuation judgments.

3. Costs: Dilution Comes in Three Flavors

The term “dilution” in crypto is often used too broadly, leading to valuation errors if misclassified.

First category: Team incentives (equity incentives)—a real operating cost

Warren Buffett said decades ago: if incentives aren’t counted as costs, what are they? Gifts? In traditional finance, they show up on the income statement as reduced profits. In crypto, they manifest as new tokens entering the market, but the economic essence is the same—it’s a real business cost.

• HYPE: Annualized team incentives of $464.9 million, consuming 57.7% of holder income.

• PUMP: Annualized team incentives of $128.5 million.

These should be included in valuation multiples.

Second category: Operational token costs (ecosystem incentives, user acquisition, etc.)—also real operating costs

They function like customer acquisition costs, representing genuine expenses, and should be included in multiples. PUMP, besides team incentives, has $77 million in operational token costs, totaling $205.5 million.

Judgment criterion: Are new tokens being created?

If the protocol only distributes existing revenue to stakers without minting new tokens, the cost is already reflected in the cash flows (the difference between protocol revenue and holder income).

If the protocol mints or unlocks previously non-circulating tokens, that’s real dilution and a business cost.

Third category: Investor lock-up and unlock events—market events, not operational costs

You wouldn’t subtract VC sell-offs from Apple’s profits to get an “adjusted profit.” Similarly, this shouldn’t be included in operational multiples.

PUMP’s annualized potential sell pressure is $83.5 million, about 7.3% of market cap. While market impact is significant, it’s a market event, not a business cost. I place it in a separate diagnostic metric called “Total Token Holder Tax” (token costs + potential sell pressure as a percentage of holder income), but it’s not part of the core valuation multiple.

4. Four Core Multiples and One Diagnostic Metric

Based on the above logic, we define the following indicators (using consistent definitions):

• EV / Holder Income (core metric): how much you pay per dollar of income that ultimately reaches your pocket.

• Market Cap / Holder Income: same as above but without treasury adjustment. The difference reflects balance sheet effects.

• EV / (Holder Income – Token Costs) (cost-adjusted multiple): deducts real business costs (team incentives, operational costs), excluding investor sell pressure.

• EV / Protocol Revenue (for reference): the gap with EV / Holder Income indicates the size of the “accrual discount.”

• Total Token Holder Tax (diagnostic metric): = (Token Costs + Investor Sell Pressure) / Holder Income. It reflects both operational costs and supply pressure. For example, PUMP’s ratio is 60.3%, meaning for every dollar of income reaching holders, an additional $0.603 is exerting market pressure via new supply. This number doesn’t directly indicate valuation but signals cash flow and supply dynamics.

5. Data Overview and Case Highlights

• HYPE: Accrual ratio 100%, 9.4x holder income. Cost adjustments raise multiple to 22.2x. Revenue structure is straightforward; complexity isn’t on the income side.

• PUMP: Looks cheapest (2.4x), accrual ratio 98.8%. But treasury is inaccessible, with a large unlock event in August 2026. Cost-adjusted multiple rises to 4.2x; total token holder tax is 60.3% (highest in sample).

• MAPLE: Largest accrual discount (4x). Protocol revenue at 14.5x vs. holder income at 57.7x, a huge gap. No token costs, so cost-adjusted multiple remains unchanged.

• JUP: The cleanest balance sheet. “Net-zero emissions” governance, no token costs, no investor sell pressure, no extractable treasury. All multiples approach 7.7x.

• SKY: Accrual ratio 45.8%, a prime example of how denominator choice affects valuation. Protocol revenue multiple is 7.3x (seemingly cheap), but holder income multiple is 16.0x (less cheap). Treasury is mostly (99.9%) its own token, which needs to be discounted.

6. Conclusion

This framework has limitations:

• Claim discount on treasury is subjective: I use 25%, you might choose 50%; no definitive answer.

• “Minting” judgment can be complex: some protocols have minting functions active but distribution channels dead, tokens stuck in pools, making valuation ambiguous.

• Data sources have noise: DeFiLlama’s 30-day annualized data can vary depending on snapshot timing, making the same protocol look cheap or expensive by a factor of two.

But it’s a practical starting point. Adjusting for balance sheet and real operational costs via EV / Holder Income helps clarify how much of what you pay actually translates into income you can access.

The gap between protocol earnings and what holders receive is the biggest fundamental mismatch in the current market. Many protocols generate hundreds of millions in fees, but holders only get crumbs, and most valuation frameworks fail to distinguish this.

Fortunately, the industry is beginning to focus on value capture: fee switches are turning on, buybacks are replacing inflationary staking, governance is voting to pause incentives. We are building tools to measure what’s truly happening more accurately.

7. Data Sources and Methodology

• Revenue Data: DeFiLlama annualized figures (last 30 days × 12). Pros: more sensitive than half-year data; cons: single-month volatility can introduce noise.

• Holder Income: Directly from DeFiLlama’s “Holder Income” field, including only buybacks, burns, and direct distributions.

• Treasury Data:

  • MAPLE: $9.36 million (DeFiLlama, 99.7% stablecoins)

  • SKY: $140.3 million (DeFiLlama, 99.9% own tokens)

  • JUP: $0 (closed)

  • PUMP: Estimated $500 million median stablecoins (range $286 million–$800 million)

• Token Costs:

  • MAPLE: $0. No ongoing staking rewards after MIP-019 (October 2025). Although a 5% inflation smart contract may still mint tokens, no distribution channels exist. (Sources: docs.maple.finance, The Defiant 2025/10/31)

  • SKY: $0. Savings module (STR) distributes SPK and Chronicle Points, not SKY tokens. (Verified March 2026 at app.sky.money/rewards). The “6 billion SKY per year” figure mentioned in August 2024 is outdated; governance can restart at any time. (Sources: sky.money FAQ, vote.sky.money)

  • JUP: $0. The “Net Zero Emissions” proposal passed on Feb 22, 2026 (75% approval). DAO treasury is closed until 2027.

• Investor Sell Pressure:

  • PUMP: Estimated steady-state annual sell pressure of $83.5 million (~7.3% of market cap). Actual unlock cliff begins August 2026; future 12-month sell pressure roughly $48.7 million (assuming 7/12 months).

• Lending Protocol Metrics:

  • MAPLE: Uses actual AUM ($3.79 billion, Q1 2026 report) instead of TVL from DeFiLlama ($1.945 billion). Net Interest Margin (NIM) = protocol revenue / AUM. Detailed metrics in Excel appendix.

• Operating Expenses: Not estimated due to lack of disclosure; guesses could distort accuracy.

• Equity Incentive Valuation: Based on current token prices; sensitive to price changes.

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