How to Accurately Value Cryptocurrencies: A Framework for Token Valuation

Article by: Four Pillars

Compiled by AididaoJP, Foresight News

• Tokens ≠ Equity. When evaluating, use enterprise value / holder revenue, not enterprise value / protocol revenue.
• The accrual ratio (the proportion of protocol revenue that holders ultimately receive) is a key diagnostic metric. Among the projects we compared, this ratio ranges from 25% to 100%.
• There is also a distinction in "dilution." Team incentives represent genuine operating expenses (and should be included in valuation multiples), whereas investor unlock sell-offs are market events (and should not be included in multiples).
• The value of the treasury depends on "liquidity." The question isn't "how much money is in the treasury," but "can the holder actually withdraw it?"

I often see a common misconception in cryptocurrency valuations: someone takes a protocol with $500 million in annual fee revenue, divides its market cap by that number, gets a single-digit multiple, and declares it “cheap.” This calculation is wrong on both the denominator and the numerator. Investors think they’re buying at a 5x multiple, but when accounting for the actual revenue they’ll personally receive, the multiple could be 20x.

The P/E ratio is a good starting point, but it ignores the balance sheet and capital structure—this is precisely why enterprise value-to-EBITDA is used in traditional finance. However, applying the EV/EBITDA concept to tokens presents three fundamental challenges:

• Treasury assets: Holders have no legal claim to them.
• Protocol income: Most of it may never reach the holders.
• Maximum cost: Not reflected on the income statement, but rather in the form of new token issuance.

This article aims to construct a valuation framework tailored to token characteristics. The core metric is enterprise value divided by holder revenue—the price you pay for every dollar of revenue that ultimately ends up in your pocket as a token holder—while also accounting for the impact of balance sheet items and actual business costs. I will illustrate this using five protocols (HYPE, PUMP, MAPLE, JUP, SKY); this is not investment advice, but rather a demonstration of the methodology.

The first mistake in valuing many tokens is the starting point—using market capitalization directly, but market cap is not equal to enterprise value.

In traditional finance, the logic is clear:

Enterprise Value = Market Capitalization + Debt - Cash

Because if you buy the entire company, you take on its debt but also acquire its cash. Subtracting the cash is reasonable, as that money legally becomes yours.

But in the crypto world, things get complicated—from automatic burn (USDC flows in, tokens are permanently destroyed, and no one can access that USDC), to foundation wallets holding hundreds of millions of dollars with no governance rights or distribution mechanisms. The key question isn’t “What’s in the treasury?” but “Can holders actually withdraw it?” (Of course, if someone were to acquire the entire protocol, the discount would disappear—just like in traditional finance. Here, “discount on claims” primarily refers to us as minority shareholders.)

I use the term "enterprise value" because the logic is consistent: you're calculating how much you would need to pay to acquire the core business, while excluding portions of the balance sheet that do not belong to you. The formula is as follows:

The enterprise value of a token = Market capitalization + Token debt - Extractable treasury assets

Most protocols currently do not have "token debt," so the focus is typically on treasury assets.

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

• Stablecoin: Backed by real assets, fully withdrawable in principle.
• Native token: Your own token. Subtracting this amount is equivalent to "subtracting yourself from yourself," and typically requires a discount of at least 50%.
• Protocol-Owned Liquidity (POL) and other assets.

Total Treasury Assets = Stablecoins + Native Tokens × (1 - Appropriate Discount Rate) + POL

But total assets ≠ withdrawable assets—this is precisely the core issue this framework aims to solve.

Some protocols don’t even have a treasury that can be discounted. For example, a pure burn mechanism (where USDC flows in to repurchase and burn tokens) does not create any balance sheet asset that anyone can claim. In such cases, extractable treasury assets = 0, and enterprise value = market capitalization. This is the clearest scenario, requiring no subjective judgment.

For treasuries that genuinely hold real assets, I introduce the "claim discount" framework, assigning a value between 0% and 100% based on the extent to which holders can actually control those assets:

• 0% discount: Automatic buyback and burn without requiring governance voting; or complete freedom for token holders to decide on fund allocation.
• 25% discount: With an active DAO and a history of actual allocations.
• 50% discount: Governance rights exist only on paper and have never been genuinely exercised.
• 75% discount: The treasury is controlled by the team, and governance is weak.
• 100% discount: Funds are controlled by the foundation, and holders have no claim rights.

I admit these percentages are the most subjective and vulnerable part of the framework. But two analysts debating whether it’s 25% or 50% is far more meaningful than both ignoring the treasury entirely and only discussing price-to-earnings ratios.

Let’s look at a real-world example:

• Maple: The treasury holds $9.36 million (99.7% in stablecoins), a relatively small amount. Enterprise value has been slightly adjusted from $272 million to $265 million, with minimal impact.
• SKY: The treasury has $140.3 million, but 99.9% of it is its own token. After applying a 50% discount, I estimate the extractable value at $70.2 million, reducing the enterprise value from $1.69 billion to $1.62 billion.
• PUMP: Reported to hold approximately $700 million in stablecoins, but with no governance mechanism or distribution channel, holders cannot access these funds. Therefore, withdrawable assets = $0, enterprise value = market capitalization.
• HYPE and JUP: With pure burn or closed treasury, no judgment needed—enterprise value equals market capitalization.

The gap between the money earned by the protocol and the money received by holders is where most valuation frameworks fail and where the key impact on valuation multiples lies.

You can think of income as a three-tiered waterfall:

• Fee: The total amount paid by the user.
• Protocol revenue: The portion retained by the protocol after paying out to suppliers such as LPs and validators.
• Holder Income: The portion that ultimately reaches token holders through buybacks, burns, or direct distributions.

There are two key conversion rates in between:

• Retention rate = Protocol revenue ÷ Fees (how much of the total fees the protocol retains)
• Accrual ratio = Holder income ÷ Protocol income (the portion of retained income that ultimately reaches holders)

When these two ratios are combined, the results can be drastically different:

• HYPE: Retention rate of 89.6%, accrual ratio of 100%. Of nearly $900 million in fees, $805.7 million ultimately went to holders.
• Maple: Retention rate of 13% ($140.5 million in fees → $18.3 million in protocol revenue), accrual ratio of 25.1% ($18.3 million in protocol revenue → $4.6 million in holder income). Cumulative approval rate is only 3%, compared to HYPE’s 90%.

Under the same framework, one is 3% and the other is 90%. If you directly compare these two protocols using "EV/expense" or even "EV/protocol revenue," the difference would be enormous.

Why is "holder income" used as the denominator instead of "protocol income"?

In traditional finance, EV/revenue is viable because equity holders have residual claim rights—legally, those rights belong to them. However, token holders do not have this right; they can only receive what the token economic model allocates to them. If revenue sits in a treasury controlled by the team, with no mechanism to distribute it to holders, then simply holding a governance token does not make that revenue "yours."

Using "protocol revenue" as the denominator inflates the perceived affordability of protocols with low accrual ratios, making them appear cheaper than they actually are. I refer to this discrepancy as "accrual discount."

Using Maple as an example:

• EV / Protocol Revenue = 14.5x
• EV / Holder Income = 57.7x

A fourfold difference! Using the same data but different denominators, your judgment of "how much the market is asking for" will be completely different.

The term "dilution" is used too broadly in the crypto space, leading to misclassification and incorrect valuations.

Category 1: Team Incentives (Equity Incentives) — This is an operating expense.

Warren Buffett said decades ago: If incentives aren’t a cost, then what are they? A gift? In traditional finance, they appear on the income statement, reducing profits. In the crypto world, they manifest as new tokens entering the market—but the economic reality is identical: this is a genuine cost of doing business.

• HYPE: The team incentive amounts to $464.9 million annually, consuming 57.7% of holder income.
• PUMP: Team incentive annualized at $128.5 million.

These should all be included in the valuation multiple.

Category Two: Operational Token Costs (ecosystem incentives, user acquisition, etc.)—these are also operating expenses.

They function as customer acquisition costs, are real expenses, and should be included in the multiple. In addition to team incentives, PUMP has $77 million in operational token costs, bringing the total token cost to $205.5 million.

The criterion is simple: are you creating new token supply?

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

If the protocol mints or unlocks tokens that were previously not in circulation, that is genuine dilution and a business cost.

Category Three: Investor Lock-up Expiration and Unlock — This is a market event, not an operating cost.

You wouldn’t subtract VC sales from Apple’s profits to arrive at an “adjusted profit,” and the same should not be applied to enterprise multiples.

The annualized potential selling pressure from PUMP investors is $83.5 million, representing 7.3% of the market cap. This has a significant impact on price movement and market dynamics, but it is not an operating cost. I have isolated it in a separate diagnostic metric called "Total Token Holder Tax" (i.e., token cost plus investor potential selling pressure, expressed as a percentage of holder income), and it is not included in core valuation multiples.

Based on the above logic, we derive the following metrics (uniformly defined here and referenced directly in subsequent sections):

• EV / Holder Income (Core Metric): How much you paid for every dollar of income that ultimately ends up in your pocket.
• Market Cap / Holder Income: As above, but without treasury adjustments. The difference between the two reflects the impact of the balance sheet.
• EV / (Holder Income - Token Cost) (Cost-Adjusted Multiple): Adjusted for actual business costs (team incentives, operational expenses), but excludes investor selling pressure.
• EV / Protocol Revenue (for reference only): The difference between EV and holder revenue represents the magnitude of the accrued discount.
• Total Token Holder Tax (Diagnostic Metric): = (Token Cost + Investor Selling Pressure) ÷ Holder Income. It consolidates the dual impact of business costs and supply pressure into a single metric. For example, a PUMP of 60.3% means that for every $1 of income received by holders, an additional $0.603 enters the market as new supply. This figure does not directly indicate valuation levels, but highlights the dynamic relationship between cash flow and supply.

• HYPE: Accrual ratio of 100%, 9.4x holder earnings. However, high team incentive costs raise the adjusted multiple to 22.2x. Revenue structure is clear, with complexity not originating from the revenue side.
• PUMP: Appears cheapest at 2.4x with an accrual ratio of 98.8%. However, treasury funds cannot be withdrawn, and a large unlock is scheduled for August 2026. After adjusting for costs, the multiple rises to 4.2x, with a total token holder tax as high as 60.3%—the highest in the sample.
• MAPLE: Highest accrued discount multiple (4x). Protocol revenue multiple of 14.5x vs. holder revenue multiple of 57.7x, showing a significant gap. No token cost, so the cost-adjusted multiples remain unchanged.
• JUP: The balance sheet is the cleanest. With net-zero governance, there are no token costs, no investor selling pressure, and no withdrawable treasury. All multiples are approaching 7.7x.
• SKY: An accrual ratio of 45.8% is the quintessential example of how denominator selection impacts valuation. The protocol revenue multiple is 7.3x (appearing cheap), while the holder revenue multiple is 16.0x (less cheap). The treasury is predominantly (99.9%) composed of its own token, requiring a discount in valuation.

This framework certainly has flaws:

• The discount on treasury claims is subjective: I might apply 25%, you might apply 50%, and neither of us can convince the other.
• Determining whether to mint additional tokens may become complicated: some protocols have minting functions enabled, but distribution channels are no longer active, causing tokens to accumulate in unallocated pools, creating ambiguity.
• Data source contains noise: DeFiLlama’s 30-day annualized data may cause the same protocol to appear twice as cheap or expensive due to differing snapshot months.

But this is at least a practical starting point. EV-to-revenue, adjusted for the balance sheet and real business costs, helps you understand clearly how much of the income you're paying for actually ends up in your pocket.

The gap between the revenue generated by protocols and the amount received by holders represents the largest fundamental misalignment in today’s market. Many protocols generate hundreds of millions of dollars in fees, yet holders receive only a fraction—most valuation frameworks don’t even distinguish between the two.

Fortunately, the industry has begun to prioritize value capture: fee switches are being activated, buybacks are replacing inflationary staking, and governance layers are voting to pause incentives. We are building tools to more accurately measure what is truly happening.

Revenue data: DeFiLlama annualized data (last 30 days × 12). Advantage: more sensitive than six-month data. Disadvantage: monthly fluctuations may introduce noise.

Holder Income: Directly use 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% native token)

JUP: $0 (Closed)

PUMP: Stablecoin median estimate of $500 million (actual range: $286 million - $800 million)

Token cost:

MAPLE: $0. The MIP-019 proposal (October 2025) has concluded staking allocations. Although a smart contract with 5% inflation may still be minting, there are no distribution channels available. (Source: docs.maple.finance, The Defiant 10/31/2025)

SKY: $0. The Savings Module (STR) now distributes SPK and Chronicle Points instead of SKY tokens. (Verified on app.sky.money/rewards as of March 2026.) The figure of "600 million SKY per year" mentioned for Rune in August 2024 is outdated, but governance can restart it at any time. (Source: sky.money FAQ, vote.sky.money)

JUP: $0. The "Net Zero" proposal passed on February 22, 2026 (75% in favor). The DAO treasury is locked until 2027.

Investor selling pressure:

PUMP: Stable annualized amount of $83.5 million. The actual vesting cliff begins in August 2026, with an estimated selling pressure of approximately $48.7 million over the next 12 months (prorated at 7/12 months).

Lending Protocol Metrics:

MAPLE: Use actual assets under management (AUM) ($3.79 billion, Q1 2026 report), not DeFiLlama's TVL ($1.945 billion). Net Interest Margin (NIM) = Protocol Revenue / AUM. Detailed metrics are available in the Excel appendix.

Cash operating expenses: Not estimated. Due to the protocol's lack of disclosure, estimating would create a false sense of precision.

Equity incentive valuation: Calculated based on the current token price. Sensitive to price fluctuations.