Dividend Discount Model

The dividend discount model is a quantitative method used to value a stock by discounting the value of all future dividends back to the present. In crypto, this is applied to protocols that distribute a portion of their revenue to token holders as a form of yield.

It assumes that the token's value is derived from the stream of cash it provides to the holder. While useful, it is often limited in crypto because many tokens do not pay traditional dividends or have highly variable payout structures.

It serves as a useful framework for analyzing yield-bearing tokens, but must be adjusted for the specific risks of the underlying protocol. It helps investors assess if the yield is sustainable.