A Framework for DAO Token Valuation

Abstract

In this article, we discuss a valuation framework for Decentralized Autonomous Organizations (DAOs). As previous work on DAO valuation is limited, we attempt to introduce a formalized framework on the subject. Although we base ourselves on conceptual frameworks from corporate finance, we introduce DAO-native valuation concepts. We argue that DAO token valuation can be mainly done in two ways, namely, according to a fundamental valuation approach and a comparable analysis approach. In the fundamental valuation approach we attempt to value the DAO token according to fundamentals while in the comparables approach we attempt to compare DAO tokens based on various metrics. Finally, we discuss various token specific considerations to potentially take into account in the valuation exercise. A valuation framework would allow the community to gauge DAOs’ performance in value generation for token stakeholders and help introduce more accountability towards the development teams behind the DAO.