Authors: Jessica Feng, Investment Manager of Hash Global BNB Fund; James (KK) Shen, Founder of Hash Global

CZ (Founder of Binance):

"I am not skilled in valuation models, but Hash Global's previous estimates have all been realized. The value composition of tokens should have many facets; if such a simple formula can capture all value manifestations, that would be impressive. Market prices often deviate from fundamentals, sometimes too high, sometimes too low. Binance will continue to build and create the fundamentals of BNB's value, while experts like Hash Global can assess the market price."

Liang Xinjun (Co-founder of Fosun Group):

"I have collaborated with the Hash Global team for many years. One aspect I appreciate about the team is that while their investments may sometimes have missteps, their decisions are always based on rational analysis and judgment, rather than blind faith. They communicated with me early on about the Binance ecosystem and the value of BNB. I also participated early in their node staking and BNB fund investments, which yielded good returns. Regarding Bitcoin and Ethereum, I have seen many institutional analysis reports; in terms of BNB, I believe Hash Global's analysis is among the earliest and best in the industry."

Chen Long (Secretary-General of Luohan Academy, Founder of Weixi, former Chief Strategy Officer of Ant Financial):

"Although Web3 is increasingly becoming a new pillar of the financial system, there is a lack of consensus on how to value digital assets. Hash Global has proposed a very valuable perspective based on a monetary programming analysis framework.

If a country's money growth rate synchronizes with economic growth, it will not lead to inflation, which is the well-known benefit of seigniorage. This means that economic transaction activities require the lubricating function of money. When the velocity of money circulation is stable, the overall value of money will synchronize with the volume of economic transactions.

Based on this reasoning, the monetary programming analysis framework can estimate the total value of ecosystem tokens around transaction volume. This method is based on many assumptions, but the logic is grounded in fundamentals, which is a clear improvement over the valuation logic of most digital assets and is worth continuous exploration and refinement. Returning to the primary principle of value creation is a good starting point."

Wang Jingbo (Founder of Noah Wealth):

"As the largest wealth management platform serving the global Chinese community, Noah has always focused on the emergence and value of new asset types. The U.S. and Hong Kong are vigorously promoting the improvement of regulatory frameworks for digital assets, and we observe that digital assets are being accepted by mainstream markets. We place great importance on guiding and helping investors to learn and understand the value of digital assets in a timely manner. Over the past two years, we have invited the Hash Global team several times to share with our investors. Their research and analysis on 'value functional tokens' have provided us with many refreshing perspectives and insights. Their attitude and methods are worth everyone's attention and emulation."

Wei Zhijie (Head of Wealth Management at KGI International):

"I have worked in the wealth management industry for many years, helping various family offices with intergenerational inheritance and asset allocation. KGI has noticed the optimization effect of digital assets on portfolio allocation and is guiding clients to rationally recognize and accelerate the allocation of digital assets. We are particularly focused on functional tokens that have clear economic models and real application scenarios. Hash Global's innovative research in this area has inspired us greatly, and we are discussing the value of these assets with them, jointly promoting the understanding of their value among investors in the traditional financial sector."

I. Introduction

In recent years, the rapid development of Web3 financial infrastructure is reshaping the operational rules of capital markets. Its programmability and openness are also reconstructing the sources of asset value, driving the emergence of a new type of asset. This new type of asset not only carries traditional equity value, representing the value mapping of platforms, protocols, or ecosystems, but also possesses clear utility value, which can be used for paying transaction fees, obtaining service discounts, unlocking access permissions, etc. This report collectively refers to these new types of assets as "value functional tokens," representing composite asset carriers that possess both "asset attributes" and "utility rights."

The emergence of new assets is driving the evolution of the concept of "value" itself, and the valuation methodology of value investors must also evolve accordingly, just as the internet revolution in the early 21st century brought about a new logic for valuing internet stocks. Early advocates of value investment in crypto assets, such as John Pfeffer, proposed: "The primary principle of value investing is to conduct independent thinking based on reliable valuation logic. When new types of assets first emerge, there is no corresponding valuation logic; value investors should strive to discover new valuation logic."

We believe that the most representative value functional token currently is Binance's platform token, Binance Coin (BNB), which is the largest cryptocurrency exchange in the world. BNB reflects platform value on one hand and has actual utility value within the ecosystem on the other, making it the earliest and most mature example of such assets. Binance completed the economic design of BNB as early as 2017, defining the asset class of value functional tokens. In 2019, adhering to the primary principle of value investing, we proposed a valuation framework based on monetary programming (MV = PQ) to evaluate the value generation logic of BNB and value functional tokens.

Over the past six years, we have released five reports, receiving numerous inquiries and feedback from investors and institutions. We continuously optimize our model, which has also received preliminary validation from the market. We now present this methodology in an organized manner, hoping to assist asset management institutions, investors, industry researchers, and project parties in their analysis and decision-making regarding investment evaluation, asset pricing, and token economic design for value functional tokens.

Web3 distributed ledger technology has already and will permanently change the foundation of capital markets. A more efficient and transparent Web3 financial system will undoubtedly become the core of future financial infrastructure. As the global regulatory framework for crypto assets continues to improve, such as the recent passage of the "Digital Asset Market Structure Clarification Act" (the "CLARITY Act") in the U.S., and the introduction of stablecoin legislation in both the U.S. and Hong Kong, we believe that we will see a large emergence of value functional tokens represented by BNB, just as Tesla issues new "stocks," which will be value functional tokens issued on Ethereum or Binance Smart Chain, not only having "equity value" but also allowing for discounts on charging at charging stations using ecosystem tokens. We look forward to value functional tokens becoming the primary form of asset carriers in future capital markets!

II. Definition and Characteristics of Value Functional Tokens

The value functional tokens defined in this report refer to crypto assets that possess the following two types of value foundations simultaneously:

1. Asset Attributes / Equity-like Attributes: Represent the value mapping of a specific platform, protocol, or ecosystem. Their value is typically driven by macro factors such as ecosystem scale, user growth, and trading activity, logically similar to company equity.

2. Functional Attributes / Currency-like Attributes: Perform actual functions in specific use scenarios, such as being used to pay transaction fees, gas fees, staking, participating in governance, exchanging services, or enjoying platform discounts.

For this type of asset, the report chooses to construct a valuation model based on monetary programming (MV = PQ), mainly based on the following two considerations:

First, although value functional tokens possess certain "equity-like" characteristics, their asset attributes differ from traditional securities. Taking BNB as an example, this token does not represent any form of equity or cash flow rights in Binance. From the perspective of ecosystem development, the founding team of Binance has bound the interests of all ecosystem participants (shareholders, management, users, and other ecosystem stakeholders) together since the project's inception, placing the growth of ecosystem value on the unique token BNB, embodying the spirit of ecosystem co-construction and sharing that Web3 advocates. Since 2021, Binance has further adjusted the BNB burn mechanism from "profit-linked buyback and burn" to "automatic burn based on on-chain transaction volume," actively severing the direct link between token value and platform financial performance to avoid securities risks.

In 2025, the CLARITY Act released by the U.S. will further clarify the distinction between "digital commodities" and "security tokens." In this regulatory direction, we believe that future value functional tokens will be designed to lean towards "digital commodities." Although they may derive value support from traditional equity value, their design avoids the standards of "investment contracts" and securities tokens under the Howey test. Therefore, such tokens do not possess the legal characteristics of traditional equity-like assets; in terms of valuation methodology, they cannot be directly evaluated using enterprise valuation models based on cash flow discounting.

On the other hand, the value of functional tokens mainly comes from their actual use scenarios within the ecosystem. They perform functions such as payment, gas, staking, participating in new offerings, and governance within the platform, essentially acting like circulating currency within the economy. Their value is influenced by multiple factors, including the scale of ecosystem economic activities, token usage frequency, and supply adjustment mechanisms. Therefore, compared to securities valuation methods, monetary programming is more suitable for capturing the "currency-like" attributes of these tokens and integrating diverse sources of value into a unified logical system for modeling.

In summary, the core advantage of using monetary programming to value value functional tokens lies in the fact that this model provides a clear structure, quantifiable variables, and strong adaptability, capable of comprehensively covering all sources of value for such tokens.

III. Building the Valuation Model

This methodology constructs a systematic valuation model applicable to value functional tokens by combining monetary programming (MV = PQ) with discounted cash flow (DCF) methods:

MV = PQ: A structural logical framework for constructing token value generation +

DCF: Discounting and summing the "monetary appreciation" brought by future ecosystem expansion, converting it into the current theoretical price of the token.

3.1 Introduction to Monetary Programming (MV = PQ)

The quantity theory of money was proposed by economist Irving Fisher and is a classic theory explaining the relationship between the total money supply and economic activity. In this theory:

• M: Money Supply
• V: Velocity of Money
• P: Price Level
• Q: Total Transactions or Total Output Value

In traditional macroeconomics, MV represents total money demand, while PQ represents nominal economic output, and both should remain consistent in a long-term equilibrium state.

We believe that for functional tokens with actual use scenarios on-chain, their economic role is highly similar to "currency within the ecosystem." Their value primarily comes from the expansion of ecosystem scale and changes in the token supply-demand structure, aligning closely with the logic of monetary programming. This model is particularly suitable for tokens with the following characteristics:

1. Serving as the main payment medium within the ecosystem (such as transaction fees, gas, etc.);
2. Having a transparent issuance system, deflationary design, or lock-up mechanism that affects effective circulation;
3. Their value primarily based on the development of ecosystem activities.

3.2 Structural Modeling Based on Monetary Programming

Under the MV = PQ framework, the theoretical value of the token is driven by two main paths:

• PQ: Total economic value of the ecosystem
• M × V: Represents the token supply and its circulation rate

Any variable that affects the token's value (such as the number of users, transaction volume, burn mechanisms, etc.) ultimately impacts the token price through its effect on PQ or M × V.

Among these, V (velocity) is a technical challenge in modeling. Due to the lack of directly observable data, actual valuations typically assume that the initial market price reflects a reasonable equilibrium state, and then use known PQ and M to backtrack V, assuming that this velocity remains stable or moderately increases or decreases in the future.

Theoretical price derivation:

Unlike general national fiat currencies, the price of ecosystem tokens is usually denominated in USD. Therefore, in the model, the total circulating supply of the token

(M) can be broken down into:

The total value of the ecosystem (PQ) divided by the token circulation and velocity gives the theoretical price of the token. This formula is the valuation basis of this model.

3.3 Introducing Discounted Cash Flow (DCF) for Quantitative Valuation

Monetary programming provides the logical framework for the token value generation mechanism but does not directly output prices. Based on this, we further introduce the Discounted Cash Flow (DCF) method. By predicting the total economic growth of the ecosystem and combining changes in token supply and velocity, we calculate the annual increment of the token's unit value and discount and sum the future value to obtain the theoretical valuation. This process can also be understood as calculating the present value of "monetary appreciation."

The specific steps are as follows:

IV. Valuation Case: Taking BNB as an Example

To demonstrate the applicability of this valuation method in practice, we take BNB as an example and apply our proposed "MV = PQ plus DCF" model for quantitative valuation analysis.

4.1 BNB as a Value Functional Token, Monetary Programming is the Best Valuation Model

BNB is the core value carrier of the Binance ecosystem (Binance Exchange + BNB Chain) and has two sources of value:

1. Asset attributes/equity-like attributes: The economic model of BNB integrates the value creation logic of traditional finance. Just as U.S. stocks enhance shareholder equity through stock buybacks, BNB continuously reduces its circulating supply through a quarterly burn mechanism, creating a long-term deflationary trend on the supply side, providing stable support for the token price. However, unlike traditional equity, BNB's burn mechanism is not linked to platform profits but is anchored to its supply-demand relationship within the ecosystem. Therefore, BNB is not strictly an equity asset but possesses a "quasi-equity" attribute—reducing the actual circulation of BNB through burns to construct the value mapping relationship between BNB and the Binance ecosystem.

2. Functional attributes/currency-like attributes: BNB has various use functions within the Binance Exchange and public chain ecosystem, including paying transaction fees, participating in new offerings, serving as Gas Fee, and participating in governance. BNB has essentially become the "circulating currency" within the entire ecosystem, and its value depends on changes in the scale of the ecosystem economy and the supply-demand relationship of the token within the ecosystem.

In summary, as a circulating currency in the ecosystem, the value of BNB primarily depends on the currency supply-demand relationship (MV) and the economic value of the ecosystem (PQ). Therefore, monetary programming can comprehensively capture the core value drivers of BNB, making it the best valuation model.

4.2 BNB Valuation Calculation

The analysis will focus on the following three core steps:

1. Define and predict key variables PQ, M₀, V
2. Calculate the annual value increment of the token ΔPt
3. Use the discounted cash flow method to discount and sum the future incremental value
4. Define and predict key variables: PQ, M₀, V

Total Economic Value PQ

The Binance ecosystem mainly includes the Binance Exchange and BNB Chain, so PQ is the total economic activity value driven by BNB in these two parts, mainly including:

1. The portion of transaction fees from spot and derivative trading in the centralized exchange (CEX) that is paid in BNB (transaction volume × fee rate × proportion paid in BNB (assumed to be 50%));

2. BNB Chain Gas fees (total gas income on-chain).

In the estimation, we assume the annual growth rate of the ecosystem economy to be the following values, summarizing to obtain the future nominal economic total value PQt for each year.

• 2025–2027: 25%, 15%, 10%, respectively;
• 2028 and beyond: long-term stable growth rate of 3%.

Total Circulating Token Supply M₀

According to the Binance white paper and on-chain data, the initial total supply of BNB is 200 million tokens. After deducting team-locked holdings (approximately 80 million tokens) and historical cumulative burn amounts (approximately 11.65 million tokens), the current theoretical circulating supply is about 108 million tokens. Combining Binance's current burn mechanism and future burn predictions, it is expected that the circulating supply will remain at this level between 2025 and 2027 and gradually stabilize to 100 million tokens in the long term. This is the maximum supply available for secondary market trading under the condition of no ecosystem use cases.

On this basis, further exclude the four major ecosystem locking scenarios (transaction fee payment, node staking, wealth management products, long-term value holding) to obtain the actual circulating supply M₀t.

Velocity V

The velocity of BNB is difficult to measure directly. We use a reverse calculation method: through the actual market price in 2024, PQ, and M₀, we derive a benchmark value for V of 0.57. For future years, a ±10% range can be set, and its impact on valuation can be verified in subsequent sensitivity analyses.

2. Calculate Annual Value Increment ΔPt

According to the formula from the previous section:

We calculate the new value added to the ecosystem year by year and divide it by the actual circulating scale of BNB and the velocity for that year to obtain the theoretical value increment per unit token each year.

Based on the actual data from 2024, assuming growth rates of 25%, 15%, 10% for the next three years, and a long-term rate of 3%:

3. Value Discounting and Summation: Calculate Theoretical Valuation

Using a discount rate of 10%, we discount each year's value increment ΔPt to obtain the total present value of all future "monetary appreciation":

4.3 Hash Global's Previous Four Reports - BNB Target Price Achievement Timeline

V. Conclusion

This report uses BNB as a case study to propose the concept of "value functional tokens" as an asset class and constructs a systematic valuation framework based on monetary programming. We hope this framework can provide reference and inspiration for project parties in token economic design, investors in value judgment, and researchers in model evaluation.

As the Web3 industry is still in a phase of rapid evolution, we will continue to update our models and research findings, and we welcome investment institutions, researchers, and developers to discuss and provide feedback on the report's content.

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