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Augur (REP) Fundamental Analysis

Since the emerging crypto asset class is much like venture capital with liquidity, performing a quick market size analysis can provide insights into potential fundamental asset value.

What is Augur (REP)?

Augur is a decentralized platform for prediction markets. On the Augur network, users can bet on future outcomes and be rewarded financially when correct. REP is the native crypto asset on the Augur network. REP is required to create a prediction market on the platform and to validate event outcomes. REP holders are rewarded with market fees when participating. There are penalties for falsely reporting outcomes (validating incorrectly).

Questions to Consider when Investing

  1. Is there a published whitepaper? 

Yes…positive

  1. Is there a detailed development road map? 

Yes, live product as of today…positive

  1. Does it use an open, public blockchain, and is the code published? 

Yes…positive

  1. Is there clear, logical, and fair pricing? 

Yes…positive

  1. How strong is the technology’s differentiator (Strong, Mediocre, Weak)? 

Strong, as a decentralized platform Augur is truly global in a way that centralized platforms cannot be (not subject to one jurisdiction) …positive

  1. How competitive is the industry the asset is entering (Strong, Mediocre, Weak)? 

Strong, there are other decentralized prediction markets under development and centralized markets already exist…negative

Price Target:

Assuming:

  1. Augur (REP) survives potential regulatory and technological hurdles.
  2. Augur is adopted by users.
  3. Augur captures .5% (half of one percent) of global gross derivatives market value by 2021.
  4. Average on platform fees are 1% for prediction markets.
  5. A Casino and Gaming Industry Price to Cashflow ratio of 5.48 is applied to value REP.
  6. A 30% discount rate is used to bring future price targets (3 years in this report) to today’s dollar values. Although 30% is significantly higher than the current risk free rate, crypto assets must be discounted significantly to account for risk.

Augur (REP) is a decentralized prediction market platform and therefore is similar to a derivatives market. REP can be valued based on a share of the global gross derivatives market value ($12.7 Trillion). At .5% share, gross transactions on the Augur network would be $63.50 billion by 2021. Charging a 1% fee to users would leave $635 million in total fees. We then take the yearly fees collected by REP holders ($57.72) and multiply by the average Price to Cash Flow ratio (P/CF) of the Casino and Gaming Industry (most recent figure is 5.48). We feel Casino and Gaming Industry investors and potential REP investors share a similar risk appetite when making investment decisions, and therefore would exhibit similar pricing/valuation behaviors.

Given the assumptions (above) the 3-year Augur (REP) price target is given below:

augur rep fundamental analysis

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