OSU Backers’ Guide: Fair Value vs. Market Price of the EDU ERC20 Token

opensourceuni (44)in #blockchain • 6 years ago (edited)

This article was originally written by Hristian Daskalov on Medium

Our EDU tokenomics setup has always been a trait of excellence and a hot topic to discuss online or over a breakfast with team and community members.

What is the fair value of the EDU Token?

In accounting and in most schools of economic thought, the fair value is the rational and unbiased estimate of the potential market price of a good, service, or asset. It takes into account such objective factors as: acquisition, production, distribution costs, replacement costs, or costs of close substitutes. Now that the EDU token generation and distribution campaign is over and some community members are starting to look into utilizing their EDUs beyond our platform, we go back to the subject once more, given that OS.University’s team is proud to be among the few crypto projects that can actually provide expert details on their valuation.

The EDU Token value was appraised by a respected financial consultancy back in October 2017. The appraisal of the utility token was commissioned by the team and was run independently in an effort to price an asset that belongs to an emerging asset class to which standard valuation methods don’t apply. While this appraisal did not intend to offer investment advice of any kind, it was important to share the details, regarding the results of the EDU utility token analysis, covering the token’s value proposition, the market opportunity & the existing alternatives, so that the full extend of the blockchain-based project is considered before a decision to back the project is made on a personal level.

Based on the outlined areas of assessment and taking into consideration the ETH market price as of October 15th 2017, a price range of 700 to 1400 EDU tokens per ETH was recommended as part of the appraisal for a pool of 34.8 million tokens that were to be sold during the different phases of the token sale. This appraisal turned out to be accepted extremely well and its conclusions were backed throughout the months to follow by numerous experts, crypto-asset analysts, edtech industry insiders.

What is the market price of the EDU token?

This is a question than cannot be answered convincingly for at least a quarter or two more without merely speculating around it.

Here are the 3 key reasons why:

The OS.University projects intends to offer a utility token, rather than a security token, therefore pitching EDU as a trading vehicle, instead of a platform-access vehicle, is not and has never been part of our team’s agenda. Our strategy remains simple. While we believe that the EDU Token is as an attractive crypto asset on its own (based on the conclusions of its underlying legal and technical audits conducted and available on our Project page, we focus on our decentralized platform — software and business-wise. By doing so, we strengthen the reasoning behind owning the EDU Token in the short and in the long run. Only a solid platform and a healthy community around it will justify the growth of our token. Anything different than the fair value of the token prior to achieving these goals should not be referred to as a “market price” of the EDU token, but should be looked at as a pure speculation.
Upon invitations, coming from interested respected exchanges, we do consider them and eventually agree to have EDU listings (e.g. DDEX, Nebula, Chankura). This is done with the primary reason to enable our community to gain access to EDU tokens after the end of the initial token distribution (pre-sale and main sale that we organized and conducted successfully. This does not only democratize the access to EDU, but also boosts the trust in the project as only 4% of all crypto crowdfunding campaigns actually make it to an exchange and get listed, according to industry-wide data. Passing through the whole due-diligence time and time again creates global recognition and trust in our token as a fully compliant crypto asset — a trait of excellence that we are proud of!
Ensuring an easy access to acquiring EDU, whether in a centralized or decentralized manner, does not mean that we encourage the trading of the token beyond the above mentioned reasoning. Even in isolated cases when the token is being traded speculatively, no statistically significant insights can be derived at this point in time for transaction data to be considered as a benchmark. The only way for reliable data to be derived, is for the EDU token to approach the phase of its listing on some of the top 10/15 exchanges worldwide, which is planned to happen in our roadmap only after a stable beta release of our platform and a broader mass adoption of OS.University’s core value proposition is achieved. The value proposition that we offer to the world is linked to our credentials wallet as a service, which we provide to learners and professionals worldwide, as well as to the distributed educational and job marketplaces that we build on top of our B2A, B2L, L2A smart contracts.

Does it make sense for the EDU token to be traded far below or far above its fair value in the short term?

No, it doesn’t. As highlighted above, the EDU token is considered a utility token, meaning that it gives the owner access to a specific protocol /network, thus it is not to be classified as a financial security (to which other valuation and regulation procedures apply. This is a conclusion, confirmed by the outcomes of the pre-sale token appraisal and EDU’s SEC Howey Test results.

It can be stated, however, that given the fact that just a 3rd of the EDU tokens was distributed by the end of the token distribution campaign, i.e. July 1st 2018, there is an incentive for the price of those tokens that are in circulation to rise in order to compensate for the reserve, which remained undistributed. This assumption would be valid only in case that the pace of adoption of the OS.University platform is taken into calculation and should not be expected to occur on its own in a week’s or month’s time. OS.University is a mission-in-the-making and we will work on creating value for our users and community base strategically, not speculatively. We’ve always been different in that regard from the majority of crypto projects out there and we will remain different. On purpose.