Andrew Forson, Empowa’s Head of Quantitative Analytics and Risk, unpacks the various methods used to value our token from our blackpaper.
For those who prefer a written explanation, we have summarised the video below.
The valuation of any asset is critical in determining its worth and potential for investment. The same applies to the EMP token, the native token of the Empowa platform. Empowa has done extensive work on valuing the EMP token, and this article delves into the different models and approaches that are used.
Valuing the EMP token is complex because of the unique properties associated with it. For instance, the EMP token is associated with the market value of houses used to collateralize it, but this market value is based on a weighted average because the collateralization reduces over time. In addition, the valuation can be done from the perspective of the revenue that the platform generates or the amount of debt that is collateralized. Further still, analysts may want to look at the EMP token’s employment across different project portfolios or countries, and the valuation would use a weighted average portfolio model.
Empowa has developed several valuation models for the EMP token. One such model is the collateral allocation model, which looks at the market value of the property and the collateral associated with that property on a weighted average across all the projects, plus the amount of EMP that is utilized. Another model is the proxy purchase price model, which evaluates the value of the token when the market prices of homes have not been evaluated because of purchase prices. Each model aims to give traders and analysts a sense of what the fundamental value of one single EMP token is.
It is worth noting that different models may give different valuations, but when done precisely, there should be a convergence. This convergence is the Empowa platform’s value, which is the total market value of all houses in the Empower ecosystem times the proportion of each house collateralized by EMP, plus the net present value of the cash flows generated through platform fees.
Traders and analysts can use this convergence to ascertain whether the EMP token is trading at a premium or a discount to the market price. However, it is essential to note that the market price is not always correct, especially in the early stages when there is insufficient liquidity. Therefore, the valuation models developed by Empowa are crucial in determining the true value of the EMP token.
The valuation of the EMP token is a crucial subject that requires careful analysis and consideration. Empowa has developed several models and approaches to valuing the token, which are critical in determining its worth and potential for investment. By using these valuation models, traders and analysts can make informed decisions about investing in the EMP token.
If you would like to find out more about the Empowa approach to raising capital for affordable housing check out the full video series explaining the Empowa Blackpaper here or visit the Empowa website at Empowa.io/blackpaper.