The Value of BNB rewards for CUB Kingdoms

in LeoFinance3 years ago (edited)

What are the BNB Rewards

For those that are familiar with CUB finance, just last week, the CUB finance team released the CUB Kingdom. This kingdom is a special kingdom, where it is not an autofarm of another platform like the other kingdoms but a place to autocompound your CUB Den.

The really exciting part of the CUB Kingdom is that it will share in fee Revenue from the other Kingdoms.

The Fee Revenue, will be paid in BNB to CUB Kingdoms holders.

Why I am excited by this

I am excited by this because the BNB rewards provide an underpinning value for the CUB token. What this means is that if there is a steady stream of BNB income, then only naturally, the value of the CUB token, will reflect two things.

  1. At a minimum, the present value of the income stream.
  2. Expectations about the future income stream

On top of this there is the CUB burn that supports the price, and reduces supply (thereby spreading the income over less CUB tokens)

Calculation of Value today

For those that have read my past posts, I like to get into the maths (and yes.. I put an 's' on the end of math on purpose).

The first thing to look at is what is the expected, BNB revenue (expressed as US dollars).

There are currently 4 kingdoms with various different yields and TVL, the table below shows the expected Daily BNB rewards (expressed as USD)
image.png

So as can be seen, there is $41.82 of BNB fee per day.

Value per CUB

There is currently 1,642,794 CUB in the kingdom, which means for every 1000 CUB, the daily earnings are $0.0255

So if 1000 CUB earnings $0.0255 per day in USD what is the value of the coin?
That all depends about expected yield. I have looked at the Yield on BNB and USDT on a few platforms shown below to get a feel for the right yield:

image.png

I am going to choose 5% as a rough guild for valuation purposes.

To determine the present value of a perpetuity, you simply divide by the interest rate. to allow for compounding the daily interest rate is 1.05^(1/365) -1 = 0.013%

The value of 1000 Cub would be $0.0255/0.013% = $190.45
Hence , one CUB is valued at a minimum at $0.19

What else impacts value

I am sure when considering the value of the coin, there is an expectation that the Kingdom revenue would grow. The current value is $0.71, so that means it would only need to grow to a TVL of $4.5m to justify the current price.

I don't have any idea how much growth the kingdoms will receive, but to me growing to $4.5m TVL is quite achievable.

What about inflation?

the other aspect that may reduce the value is the inflation of CUB, but the inflation does not directly impact the value, its how much CUIB is put into the Kingdoms that will change this value. The other thing impacting inflation is the Burns, which reduce the supply. I have plans to do a post about the burns in the future, there are a few things I am waiting on before I will do that, but the money injected by the burns will be significant to the Value of CUB.

So what's this all mean?

This means, that the CUB token will have a minimum value based on the income stream form Kingdoms, I have calculated this minimum value at $0.19 today. But the real exciting part is if Kingdoms grows, the minimum value will also grow, If the TVL grows to $10m for example we are looking at CUB prices at a minimum of $2, otherwise arbitragers will start borrowing USDT on Venus for example and deposit into CUB Kingdoms (now there is collateral issue so I don't think its that easy.. but the example is used to demonstrate a point.)

Moral of this story is if you think the TVL to grow, then buy, the buying pressure will naturally increase CUB price and rewards on kingdoms and attract more capital into TVL, which then will attract more CUB buying etc. its a great cycle to be on.

On the flip side if you don't think kingdoms will grow, at least you have a minimum price that if rational economics prevails you wont expect it to go below.

So what are all the CUB holders waiting for, help the CUB finance team promote the kingdoms, get the TVL increasing, and when @leofinance implements the BNB rewards which I understand is "soon" lets really take advantage of revenue for the benefit of the CUB token.

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All seems like very reasonable math to me! That $0/19 figure feels about right as well.

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Love the maths and I appreciate the explanation of Cub valuation. Now that time has passed have your figures changed?

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