Version 1.01 - 10.06.2019
Abstract. The MIDASCAPS ecosystem and business model is
predominantly centered around the production of capsules -
an innovative technology for conveniently carrying and
dispensing nutritional supplements. This physical product,
called Midas Capsules, facilitates the creation and use of a
utility token, MidasCoin, which can be used for the purchase of
capsules and as currency on the MidasEngine platform. In
turn, MidasEngine taps into the sharing economy, enabling
users to organize local small scale sports events in which
anyone to participate for a fee.
This document will outline our approach towards building a
sustainable token economy for MidasCoins, its monetary and
interaction policies, as well as providing an adequate fair price
estimate for the tokens down the line.
Table of Contents
2.1 Quantity theory of money
2.2 Kickstarter model
2.3 Discounted Cashflow Analysis
2.4 Used methodology
3. Monetary policy
4. MidasCoin financials
5. MidasCoin token valuation
5.4 Token value
About the author
The global market for sports nutrition is huge. It is projected to reach 81.5 billion
USD by 2023 with a projected CAGR of 9.92%1. That being said, there is still a lot to be
desired when it comes to the ease of use and accessibility of those products, especially
as it has to do with their packaging:
● They require expensive upfront payment (you typically have to pre-purchase at
least 30 doses)
● Usually, you need to prepare them at home up-front
● When you buy in bulk, you get an overwhelming amount of the same product
with the same flavour
● Unconsumed doses are exposed to oxidation
● Sachets solve some of the above problems, however, they are messy and the
user usually gets dirty using them
MIDASCAPS’ capsules aim to solve all those issues by introducing an easy to use
container, which keeps the supplement head loaded into the bottle in a practical and
clean way. They can be sold by vending machines in gyms, clubs, and malls, as combo
packages on MidasCaps e-commerce sites, or just as single capsules on normal retail
The main goal of the MIDASCAPS token sale is to fund the creation of facilities for
production of the capsules and their subsequent marketing, distribution and sales.
While the production of capsules is the core business behind the project, MIDASCAPS
aims to also develop a secondary business stream in the form of an on-line platform for
sports event sharing - MidasEngine. The idea behind the platform is that anyone can
organise a local sports event of any size - starting from gathering a few people to play
basketball on a local court and stopping at inviting a pro basketball team for a
professional match. The organiser does the organisation and supplies the facilities for
the event and in turn can define prices for attendance, viewing and participation. After
that, the event is open for anyone.
The document that follows outlines the economic setup, forecasts and expectations for
the token that will be facilitating the operation of the MIDASCAPS platform - MidasCoin.
It is important to point out at this point that MidasCoin’s purpose is to be utility payment
token for the platform and to certify that each MidasCapsule is original. Since it’s a utility
token, an IEO is the best-suited way to offer it to investors.
In this section, we will outline the valuation methodology used to determine our
token’s current and future price, as well as examine the applications and possible
shortcomings of those methodologies.
2.1 Quantity theory of money
Probably the most widely used valuation methodology for utility tokens is the
quantity theory of money2 and more precisely the equation of exchange3 . Several
models4 5 based on those principles have been developed and widely accepted by the
cryptocurrency community. In a nutshell, the equation of exchange is:
is the amount of money in circulation within a specific system
is the velocity of money, or in other words: how often does money
change hands within a predefined period (e.g. annually)
is the price at which transactions are happening within the system
is the number of transactions for a predefined period (same period as
used to measure the velocity)
in this regard is essentially the total economic output of the system
for the selected time period, sometimes referred to as GDP of the system.
Despite its prevalence, the above formula (1) is not directly applicable to
cryptocurrencies due to the fact that, in a token/cryptocurrency economy, the two sides
of the above equation are denominated in different units. When talking about the
system’s GDP, the expected Revenue in USD is generally used. On the other hand, the
2 Friedman M. (2008) Quantity Theory of Money. In: Palgrave Macmillan (eds) The New
Palgrave Dictionary of Economics. Palgrave Macmillan, London
3 Bordo M.D. (1989) Equation of Exchange. In: Eatwell J., Milgate M., Newman P. (eds)
Money. The New Palgrave. Palgrave Macmillan, London
4 Chris Burniske (2017) Cryptoasset Valuations
5 Brett Winton (2017) How to Value a Crypto-Asset — A Model
left hand side of the equation is still denominated in the native token. We can solve this
by introducing an additional parameter
which represents the exchange rate
between the token and USD (or any other FIAT currency based on the denomination of
the system’s GDP). The equation then becomes:
This enables us to solve for
(3) and get the expected token exchange rate (or
token value), provided we can come up with adequate estimations for the other
variables. From (2), we can solve for the token value as:
2.2 Kickstarter model
Perhaps the simplest and most robust model is the Kickstarter one, where the
tokens in the ICO acts as an effective discount on the services offered. In essence, the
ICO raises money for the development of the project, and the only function of the token
thereafter is to enable access to the deliverable of the project, meaning that it cannot be
used to purchase goods or services on the platform which are provided by 3rd parties.
It is interesting to point out that Vitalik Buterin (Ethereum co-founder and chief scientist)
has said the following6 for this kind of sale model:
“If it were the developers themselves that were acting as the seller, then this would be a
very reasonable and normal arrangement, very similar in nature to a Kickstarter-style
product sale. The token actually would, in a meaningful economic sense, be backed by
the services that are provided by the developers…..
The developer builds the product and gives it to each of the buyers. At the end of the
day, the buyers are happy, and the developer is happy. Nobody feels like they made an
avoidable mistake in participating, and everyone’s expectations have been met. This
kind of economic model is clearly stable.”
6 Vitalik Buterin (2017) On Medium-of-Exchange Token Valuations
In this scenario, the company defines par value of the token post-ICO (e.g. 1 token is
initially equivalent to 1 USD, might change over time) and sells the token at a discount
during the ICO. In essence, the company ops to forfeit a certain amount of revenue
down the road (said discount) in order to fund the project upfront.
2.3 Discounted Cashflow Analysis
Discounted Cashflow Analysis (DCA) has been around for a while and has been
established as one of the main evaluation methodologies of an investment based on its
future cashflows. The purpose of DCF analysis is to estimate the money an investor
would receive from an investment, adjusted for the time value of money7. While it has
not widely been used in cryptocurrency up to now (start of 2019), our expectation is
that, with the increasing number of Security Token Offerings (STOs), it is going to
establish itself as the de-facto standard for any token with periodic cashflow payments.
The formula for calculating the net present value of a future cashflow goes as follows:
is the net present value of the investment
is an expected future cashflow at period
is the discount rate, also referred to as the cost of capital
is the terminal value (or exit value) of the investment
In turn is еvalualted as:
With the two new elements being:
representing the expected long term growth rate of the underlying
representing any liquid assets available at the end of period
7 Investopedia, Discounted Cashflow Analysis -
2.4 Used methodology
The summary of the three different methodologies above begs the question - why
use three separate valuation approaches instead of one? The reason for this is that in
MIDASCAPS, we recognise the two different scenarios of the further development of
our business model:
I. Scenario 1: where we achieve only the core of our business plan - the
construction of the needed facilities for production of MidasCaps
II. Scenario 2: construction of the needed facilities of MidasCaps and the
successful launch of the MidasEngine platform.
Scenario 1: under this scenario, the purchase of MidasCaps is the only use of
MidasCoins and in turn, MIDASCAPS is the only supplier of products sold. This is
clearly a setup almost identical to a Kickstarter project. Our assumption is that under
this scenario, MidasCapsules will only be purchasable with MidasCoins. This restriction
will be introduced in order to increase the demand for MidasCoins and support its price.
Scenario 2: under this scenario, there is an additional driver for the demand of
MidasCoins by participants on the MidasEngine platform, where all activities will only be
payable by the token. This interaction, however, drives the MIDASCAPS business
model further away from a Kickstarter scenario and thus requires more elaborate
modelling using the quantity theory of money and the equation of exchange (3). Under
this scenario, we intend to enable the purchase of MidasCapsules with all kinds of
currencies in order to drive accessibility and potential sales up. Here we assume a
conservative 20% of all sales being facilitated by MidasCoins.
3. Monetary policy
Running and project’s token economy is akin to running a small country. Without
adequate monetary and fiscal policies, even if the sale is successful, you still might be
setting up for failure down the road8 9.
The token’s monetary policy mainly pertains to the number of tokens as a total and the
release schedule of those tokens. It also covers any mechanisms to expand or contract
this supply as needed or even the introduction of continuous inflationary or deflationary
The bottom line of the token’s monetary policy is based on a fundamental law of
economics: supply and demand. Highly scarce and commercially beneficial tokens can
lead to low market liquidity and high price volatility, which can eventually result in
deflationary spirals. Highly abundant and not commercially viable tokens can result in
severe token price drops. A proper balance is key.
To achieve that balance, MidasCoins will be issued as a floating supply token with both
inflationary and deflationary mechanisms:
● Each produced MidasCap will trigger the minting of new MidasCoins which will
come prepackaged with the capsule. This will ensure that the supply of
MidasCoins will grow together with the expansion of the business, as well as
increasing the adoption of MidasCoin across the various users of MidasCaps.
● The number of coins distributed with each capsule will be variable. Our current
expected numbers are starting at 1 MidasCoin per capsule in Year 1 and then
halving each subsequent year. This will have the dual effect of both promoting
the usage of MidasCapsules and significantly slowing down the inflation as the
business grows. Based on our financial projections, the MidasCoin which your
recieve with a capsule in year 1 would effectively pay for the capsule by year 8,
making the capsule itself free. MIDAS will have the option to adjust this rate in
order to either stimulate the use of capsules or to reduce inflation.
8 Avtar Sehra (2017) Economics of Initial Coin Offerings
9 Hristo Piyankov (2018) A bad token economy model can kill your project, even if your
Figure 1: Number of MidasCoins distributed with each MidasCapsule produced
Additionally, each transaction on the MidasEngine platform will incur a minimum 10%
fee, with the following breakdown:
● 5% of the tokens will be burned
● 5% of the tokens will be used for sustaining the business operations of the
Note that the above fee structure is just an initial estimate of what might work, but it’s
subject to change as necessary in order to increase adoption of the platform and
increase the value of MidasCoins at a reasonable, consistent rate.
While MidasCoins are labelled as flexible supply, it is important to realise that the
tokens are inflationary in the short run, but deflationary in the long run.
MidasCoins are going to increase in supply with the production of new capsules, but the
amount of new coins released into circulation becomes minimal by year 7-8 due to the
halving each year. In the meantime, burning MidasCoins equal in value to the 5% fee
for each transaction on the MidasEngine platform ensures that the token supply will
deflate in the long run.
4. MidasCoin Tokensale
MidasCoins will be made available to investors through an IEO, which will be
structured with separate rounds, similarly to how traditional startups raise seed funding
from venture capital firms. We plan to have three rounds of IEO funding with the
Initial price: $0.01
Supply: 250,000,000 MDC
IEO Round 1
Token for sale: 60,000,000 MDC
Percentage of total tokens: 24%
Token price: $0.01
Total amount to be raised: $600,000
Bonus for early investors: 10% of total invested
Lockup period: 3 months after conclusion of IEO round
IEO Round 2
Token for sale: 60,000,000 MDC
Percentage of total tokens: 24%
Token price: $0.015
Total amount to be raised: $900,000
Bonus for early investors: 7% of total invested
Lockup period: 2 months after conclusion of IEO round
IEO Round 3
Token for sale: 50,000,000 MDC
Percentage of total tokens: 20%
Token price: $0.02
Total amount to be raised: $1,000,000
Bonus for early investors: 5% of total invested
Lockup period: 1 month after conclusion of IEO round
In total, there will be 170,000,000 MDC sold through the 3 investment rounds,
representing 68% of the total token supply. An additional 12,500,000 MDC will be
awarded as bonuses through the 3 rounds, representing 5% of the total token supply.
Of the remaining tokens, 42,500,000 MDC will be withheld from circulation as a reserve.
This provides the MIDASCAPS team with a means of maintaining some stability
The complete token distribution can be seen in the figure below.
Figure 2: Total token allocation. Assumes reached Hardcap.
Also note that we want to leave open the possibility of another round of funding in the
future. This is because opening new production facilities for MidasCaps will require up
front capital, and doing so will be essential for us to reach our long-term revenue
projections by fulfilling our production estimates.
The details of any future funding rounds will be determined after the business is already
operational and will be announced publicly by our team at that time.
5. MidasCoin token valuation
In this section, we aim to provide a comprehensive valuation MidasCoin in order
to have a clear picture of the possible future of the token.
As outlined in the methodology section above, we will be relying on the quantity theory
of money to estimate the fair token price in a time horizon of several years. It is
important to point out that the model does not account for speculative price hikes or
irrational market behaviour. The methodology used aims to estimate a fair token price
which might substantially differ from the market token price.
Before we can estimate the fair token price, we need to first estimate/assume several of
the components, as outlined in the equation of exchange (3).
MIDASCAPS’ revenue (with regards to MidasCoin) has two components:
● Sale of MidasCaps (under the assumptions of 20% of the sales volume facilitated
by MidasCoins). This production is assumed to start at 4 MM MidasCaps per
month, at an average price US $0.32 and steadily ramp up to 19 MM MidasCaps
over the course of 5 years.
● Transactions on the MidasEngine platform, entirely facilitated by MidasCoins.
Since sports sharing is a relatively new concept, no market data is available for
the potential market size and adoption. When performing our estimations, we
have assumed a target adoption at business maturity of 0.1% annually of the
total sports market (worth 90 bn), over the course of 10 years. The revenue itself
is based on the fact that we plan to launch the MidasEngine in Year 2 and that
we will charge a 10% fee for each transaction on the platform.
This brings us to the total combined expected sales:
Figure 3: Projected company performance & growth, based on financial assumptions
provided as-is by the company.
The projected sales above follow a standard S-curve business growth model (Fig. 4),
although the unpredictable performance of the MidasEngine leaves open the possibility
that total growth won’t actually level off around Years 7-8. This is because, although
MidasCaps can reach the majority of their target market in that time, the MidasEngine is
a nascent idea that may take longer to achieve significant adoption.
Figure 4: Assumed adoption curve
There are several factors which we assume are going to impact the total number
of MidasCoins in circulation at any given time.
Lost tokens: Inevitably some small % of tokens is going to be lost from circulation each
year due to lost private keys. We will assume that approximately 0.5% of all tokens will
be lost per year. This is a conservative estimate, as studies have found that
approximately 4 MM Bitcoins have been lost (approximately 25% of the available bitcoin
supply as of 2017), over the course of 10 years10.
Burned tokens: All transactions on the MidasEngine will incur a 10% fee in
MidasCoins, 5% of which will be used for operating costs of the platform and the other
5% of which will be burned (i.e. permanently removed from circulation). Burning tokens
is a deflationary mechanism, meaning that it decreases the total token supply.
Amount of tokens minted: As outlined in the Monetary Policy section, new MDC will
be minted each time a MidasCapsule is sold. However, the amount of MDC minted will
be cut in half each year, such that it becomes negligible within 7-8 years after
MidasCapsules are first sold. Based on this halving schedule and our estimated
production rate for capsules, we can determine a rough inflation timetable.
10 JEFF JOHN ROBERTS and NICOLAS RAPP (2017) Exclusive: Nearly 4 Million Bitcoins
Lost Forever, New Study Says
Figure 5: Total MDC created by MidasCapsule sales
Finally, this allows us to determine what the total circulating supply of MidasCoins will
be, year-by-year. We took into account the initial influx of tokens from our IEO rounds in
Year 1, and then calculated the amount of MDC that would be entering and leaving
circulation each year based on our estimated sales and operational costs as well as
lost, burned, and newly minted tokens. This is reflected in Fig. 5 below, where the blue
line shows the total amount of circulating MidasCoins that will not be absorbed (yet)
through sales of MidasCapsules or burn from fees on MidasEngine.
Note that lost and burned tokens are factored into the calculations and reflected in the
blue line, but the values were not significant enough to be easily visible in the graph, so
we did not include them.
Figure 6: Total token supply (blue line) based on IEO statistics, projected sales, burn
and loss rate, and rate of tokens sold on secondary markets to sustain business
Essentially, this means that MIDASCAPS will be able to absorb the majority of the
circulating token supply from the IEO Rounds as well as inflation within 3 years, and the
entirety of it within 7-8 years (i.e. when the blue line crosses the horizontal axis). After
that point, MIDASCAPS will be able to set the price of MDC however they like (within
reason). For example, if MidasCapsules are being sold for $1 each at retail locations,
MIDASCAPS could set the price of MDC $0.9, such that purchasing a capsule with
MDC still offers a discount to consumers and supports the value of the token.
As the top holder of MidasCoins, the MIDASCAPS project has a strong incentive to
make the token more valuable. If possible, more utility functions can be added to it over
time to help accomplish this.
The token velocity is possibly the hardest and most sensitive assumption to
make out of all. In order to get an adequate estimate of the expected velocity, we have
used Bitcoin’s on-chain velocity11 12 and the velocity of USD M1 and M2 money supply13
We are using only the on-chain velocity as any actual transfer of value within the
Bitcoin blockchain is eventually recorded on the chain. Transaction volumes from
exchanges, on the other hand, are largely speculative and can be manipulated. It is
interesting to point out that, based on a more detailed study, the actual velocity of
Bitcoin might be even lower than observed14.
M1 is the money supply of currency in circulation (notes and coins, travelers’ checks
(non-bank issuers), demand deposits, and checkable deposits)
M2 component includes M1 in addition to saving deposits, certificates of deposit (less
than $100,000), and money market deposits for individuals.
Figure 7: Bitcoin velocity of on-chain transactions. The calculation is based on an
annualised 90 average transaction volume.
11 Data for Bitcoin’s on-chain velocity
12 Data for Ether’s on-chain velocity
13 Data for M1 and M2 USD velocity
14 Harry Kalodner, Steven Goldfeder, Alishah Chator, Malte Möser, Arvind Narayanan
(2017) BlockSci: Design and applications of a blockchain analysis platform
Figure 8: Ether’s velocity of on-chain transactions. The calculation is based on an
annualised 90 average transaction volume.
Figure 9: Velocity of US Dollar M1 and M2 money supply.
Based on the above numbers, we have estimated a conservative velocity of the
circulating supply of 10 transactions per second (TPS) throughout the lifetime of the
token. When we take into account the circulating number of tokens and the tokens held
or otherwise taken out of circulation, we can now also estimate the hybrid velocity of the
coin and compare it to our chosen benchmarks.
It is worth noting that the assumption for the velocity of 10 TPS is only valid for scenario
2 - the full rollout of MidasCaps and MidasEngine. If only MidasCaps is launched, we
assume a much lower velocity due to the fact that MIDASCAPS will be the only “end
point” for tokens.
Figure 10: Hybrid token velocity (velocity based on total available tokens after taking
into account tokens not put into circulation ) compared to Bitcoin min/max observed
velocity and M1 velocity
5.4 Token value
Having all the components as outlined above, we can now solve for the fair token
value using the equation of exchange (3). Please note that the calculation below does
not include a discount rate.
Figure 11: Projected fair token price based on company revenue assumptions.
A fair question at this point in time would be: whether the MidasEngine part of the
estimation is too high and what would happen in case the MidasEngine part of the
project fails as a whole?
As mentioned previously, in this unlikely scenario, MIDASCAPS is prepared to shift the
majority of the sales of MidasCaps to MidasCoins payment. This means that either the
capsules will only be purchasable with MidasCoins or that the FIAT proceeds from the
sale of capsules will be used for the purchase of MidasCoins without putting them back
into circulation immediately. In this scenario, we get the following revenue projection of
Figure 12: P rojected company performance & growth, based on financial assumptions
provided as-is by the company.
Another important observation is that under this scenario, MIDASCAPS would be
operating in a Kickstarter-like fashion, where the only market for MidasCoin is
essentially the MidasCaps. As such, MIDASCAPS would have full control on releasing
new tokens into circulation. In practice, this means that MIDASCAPS would be able to
set the price for the token, given that all tokens would eventually end up back at
MIDASCAPS. Below is a projection on the time it would take for all tokens to be
reabsorbed by MIDASCAPS under the assumption that:
● MIDASCAPS eventually sells tokens 0.36 USD per token (the top price assumed
by the model above)
● MIDASCAPS sells some percentage of the tokens received each year, at a lower
price, in order to cover operational expenses. This part is only applicable for the
first 7-8 years, when there will be a natural creation of secondary markets below
the 0.36 USD threshold.
Figure 13: C ompany net revenue minus the value of the outstanding tokens in
circulation, until the tokens are fully utilised
As it can be seen by those projections, the full value of the original IEO tokens would be
reabsorbed by Year 5. After this point, MIDASCAPS would have the option to either
keep this arrangement, while increasing the sale price of MidasCoins, or to introduce
more tokens into circulation at the same price.
Below is our estimate of project deliverables and their cost for 2 years
immediately following the IEO. Note that this is not an exact guarantee because there is
uncertainty involved in any startup, but rather it’s meant to give prospective investors a
rough overview of our intentions to deliver the best possible results.
By now, hopefully it’s evident that the MIDASCAPS IEO is well structured, relies
on solid economic principles, and can produce more than good results even in the face
of uncertainty. At the end of the day, our expectation is for the token to reach greater
than 90 MM USD Market capitalisation over the course of 10 years.
Figure 14: Estimated token market capitalisation based on the projected token price
and total tokens outstanding
Please read this section of the document carefully. Consult a legal, financial, tax or other
professional advisors, if you are in any doubt as to the action you should take. The information in this
document may not be exhaustive and does not imply any elements of a contractual relationship or
obligations. While we make every effort to ensure that any material in this document is accurate and up to
date, however, such material in no way constitutes the provision of professional advice. We do not
guarantee nor accept any legal liability whatsoever arising from the accuracy, reliability, currency, or
completeness of any material contained in this document. No part of this document is legally binding or
enforceable, nor is it meant to be.
The document presented here is developed by the author based on an evaluation method generally
accepted by the cryptocurrency community (quantity theory of money and discounted cash flow analysis)
and relies on a generally accepted school of economic thought (monetarist school of economics). That
being said it is important to note that the blockchain and cryptocurrency area is still very new and there is
little to no historical data, past performance result and academic research on the topic of
cryptocurrencies, let alone on the tokenization, economics and long term valuation of those asset classes.
Stocks(equity) has been around since the early 1600s, and it is only in the past 100 years that we have
begun to have more comprehensive and widely accepted valuation models. They, however, are still
subject to a lot of bias, interpretation and suffered from the quality of their inputs. Cryptocurrencies, on the
other hand, have been around since 2008, with a wider recognition around 2016 and an explosion in the
number of tokens in 2017. As such it is way too early to evaluate or comment on the performance,
monetary policy and models behind any of them. As a result, the author of the current document prefers
to rely on sound economic principles backed by data and reasonable assumptions.
Furthermore, the current model relies on a number of assumptions, forecasts and requirements explicitly
specified by the company behind the token offering. As such this model is only as good as those
assumptions are. Any significant deviation from the input numbers would subsequently impact the outputs
of this model. The model presented here aims to provide a fair token price valuation based on the merits
of the business behind it (as far as they are known/estimated at the time of the creation of this model) and
cannot account for any possible speculative actions and market manipulation by any party as well as for
irrational market behaviour.
None of the information or analyses in this document is intended to provide a basis for an investment
decision, and no specific investment recommendation is made. This document does not constitute
investment advice or an invitation to invest in any security or financial instrument. No regulatory authority
has examined or approved any of the information set out in this document. No such action has been or
will be taken under the laws, regulatory requirements or rules of any jurisdiction. You acknowledge and
agree that you are not using the information in this document for purposes of investment, speculation, as
some type of arbitrage strategy, for immediate resale or other financial purposes.
Some of the statements in the document include forward-looking statements that reflect our current views
with respect to execution roadmap, financial performance, business strategy and future plans. All
forward-looking statements address matters that involve risks and uncertainties, do not constitute a
guarantee that these results will be achieved and may lead the actual results to differ materially from
those indicated in these statements. No statement in this document is intended as a profit forecast.
Given that the “regulations” for cryptocurrency in most countries at best are highly ambiguous, or
completely non-existent, each buyer is strongly advised to carry out a legal and tax analysis concerning
the purchase and ownership of cryptocurrency and tokens according to their nationality and place of
Everything in this document is the author's own work, with external sources and references provided
where appropriate. Some parts of this document, pertaining to non-project specific texts, charts, graphics
and formulas, might be identical with other documents produced by the same author. Those include, but
are not limited to the explanation of some formulas, modelling techniques, economic theories and