Discounted Cash Flow

Discounted cash flow is a valuation method used to estimate the value of an investment based on its expected future cash flows. The future cash flows are adjusted for the time value of money by discounting them back to their present value using an appropriate discount rate.

In the crypto context, this is applied to protocols that generate revenue, such as decentralized exchanges or lending platforms. By estimating the future revenue share or yield distribution, investors can calculate a fair value for the protocol's governance token.

This approach helps bridge the gap between traditional finance valuation and the unique, high-growth environment of digital assets. However, it requires making assumptions about future growth and discount rates, which can be challenging in a volatile market.