The investment value of UNI

After the article was published yesterday, a keen-eyed reader discovered an issue in the article: the total circulation of UNI is not 6.29 billion, but 629 million.

Here I used the circulating supply instead of the maximum supply (1 billion) mainly to make the calculation more in line with the current situation.

Additionally, this reader provided a set of UNI transaction fee income from another perspective:

The trading volume in the past 30 days is 148.5 billion USD. If we roughly calculate the transaction fee at 0.05%, the transaction fee for 30 days would be 7.425 million USD, which amounts to about 89 million USD per year. If we conservatively estimate, the lower limit of annual revenue would be 500 million USD. Therefore, the annual transaction fee income for UNI is approximately 500 million USD ~ 890 million USD.

The fee income per token is approximately $0.79 ~ $1.41, and the cost for repurchasing tokens is $0.13 ~ $0.235.

Using the above data plus the corrected circulation of 629 million coins for recalculation, the resulting PE and “dividend yield” are as follows:

Based on the price of UNI before the significant increase at $5, its PE ratio is between 3.55 and 6.32, and its dividend yield is between 2.64% and 4.72%.

Based on the price of $9.22 after a significant increase, its PE is 6.54 ~ 11.67, and its dividend yield is 1.44% ~ 2.56%.

There is an element of uncertainty here, which is how much it actually costs.

Because Uniswap does not need to disclose financial data like traditional listed companies, we cannot see its various costs. Therefore, we cannot calculate its net profit and free cash flow, and can only consider its trading fee revenue as its net profit.

If we take costs into account, its actual PE will be higher than the calculated one above, and the actual “dividend yield” will be lower than the calculated one above.

Nevertheless, even so, looking at UNI with this data, from its PE perspective, whether before or after the price surge, its premium risk is not considered high. Even when viewed with the standards after the surge, its premium risk is still relatively low.

The premium risk is not high, so what we need to look at next is its revenue.

In terms of revenue, aside from the costs mentioned above that cannot be clearly assessed, another factor that I believe has a more profound impact is whether its business model has a very strong moat.

I have shared some concerns about this in previous articles: that is, at least in certain ecosystems, such as BASE, the leading effect of Uniswap is not very obvious. Moreover, with Uniswap now having its own layer 2 expansion, it certainly hopes to direct TVL and traffic as much as possible to its own layer 2.

Will doing this unknowingly give the trading market of other ecosystems to competitors?

Finally, when I consider whether UNI is worth investing in, I directly compare it with Ethereum, mainly in two aspects: one is risk, and the other is “dividend yield.”

The so-called risk refers to my assessment of the risks of the UNI project continuing to exist and develop compared to Ethereum, which is greater?

Clearly, I think the risks of Ethereum are smaller than those of UNI.

The so-called “dividend yield” refers to the project returns that token holders can directly enjoy. Based on the calculated UNI dividend yield above (without considering costs), I estimate it to be approximately 2.6% ~ 4.7% when overestimated. Currently, the income from staking Ethereum is about 2.6% ~ 3.2%.

UNI will be slightly higher.

If I consider the overall risks and returns, at this stage I would tend to choose Ethereum. However, I am not even buying Ethereum right now, so I definitely won't buy UNI.

Some readers mentioned wanting to dollar-cost average; I personally do not dollar-cost average UNI, but I can give a rough method that I have used before:

In the past, I would reference the highest value that UNI had reached before, and then calculate a discount price based on that highest value along with the risk I could bear, treating it as the fixed investment price.

But there is a prerequisite for doing this: that is to assume that UNI will definitely exceed its previous high in the future.

This method is for reference only. Readers must pay attention to this premise when using this method.