This article was originally meant to follow last Thursday's article "The Investment Value of UNI," but I didn't write it on Friday for some reason, so I'm making up for it today.

In Thursday's article, when I mentioned estimating the dollar-cost averaging price for UNI, I wrote this sentence:

"In the past, I would refer to the highest value that UNI had ever reached…"

The implication of this sentence is that my assessment standard for UNI's intrinsic value is based on the highest price UNI has previously reached.

In Dan Yongping's investment Q&A, he pointed out the fallacy of this evaluation method very directly. So, in fact, I no longer use this method to assess the intrinsic value of an investment target (that can generate cash flow).

The reason I still included this flawed method in last Thursday's article is that I wanted to compare it with the method I currently use (my understanding of value investing). This way, readers can see the core and key of the value investing method I understand, which is based on estimating future free cash flow.

In that Thursday article, I quoted the data that UNI generates approximately $500 million to $800 million in annual fee income. To simplify, I will take this data as the free cash flow generated by UNI each year.

Let's assume:

• Next year and every year thereafter, UNI's free cash flow will be $500 million to $800 million.
• The UNI project can exist indefinitely. Because it is a smart contract, it can be permanently stored on Ethereum and run forever.
• The current risk-free rate of return (i.e., the yield on U.S. Treasury bonds) is approximately 4% to 5%. However, this is not the norm; according to the Federal Reserve's expectations, the normal value of U.S. Treasury bond yields is 2.5%. Therefore, we will use 2.5% as the discount rate for future free cash flow.

Then, the present value of all free cash flow generated by Uniswap during its perpetuity (as of today, 2025) can be calculated as follows:

Calculating with the lower limit (at $500 million/year), we get:

5/(1.025) + 5/(1.025)^2 + …… + 5/(1.025)^n

As n approaches infinity, the result of the above calculation is $20.8 billion.

Calculating with the upper limit (at $800 million/year), we get:

As n approaches infinity, the result of the above calculation is $33.3 billion.

Therefore, the total free cash flow that Uniswap can earn in the future, discounted to this year, is approximately $20.8 billion to $33.3 billion.

The current supply of UNI has two values: one is the existing circulation of 629 million, and the other is the maximum issuance of 1 billion. When calculating the valuation, we will conservatively choose 1 billion.

So, the intrinsic value of UNI is approximately $20.8/1 ~ $33.3/1, which is $21 ~ $33.

If it exceeds $33, the price of UNI can be considered "overvalued"; if it is below $21, the price of UNI can be considered "reasonable."

If you want to dollar-cost average, you could apply a discount on the reasonable price, for example, a 50% discount would be $10, which could be set as the dollar-cost averaging price.

As of the time of writing, UNI's price is clearly below $10, so it seems like it can be dollar-cost averaged, right?

The theoretical calculations seem to yield this result.

But the next part is the most difficult and critical aspect of (my understanding of) value investing:

- How do I know that the Uniswap team will earn at least $500 million every year during its future perpetuity?

- Why should I believe that the Uniswap team will use one-sixth of the fees to repurchase tokens every year during its future perpetuity?

To understand the first point, one must have a deep understanding of the business model of the enterprise/team: for example, can we see that it has a strong moat? Can we see that its profit model can indeed generate that much cash flow every year?

To understand the second point, one must have a deep understanding of the corporate culture of the enterprise/team: for example, does the enterprise/team prioritize the interests of shareholders/token holders? Do they seriously consider the interests of shareholders/token holders?

Dan Yongping mentioned in his investment Q&A that he understood the business models of NetEase and Apple because he himself was in the gaming industry early on and later moved to mobile phones, so he could understand their business models and firmly believed they could make money, which is why he dared to buy their stocks.

He emphasized that one important aspect of a listed company's corporate culture is to examine whether the company values the interests of shareholders; if it does not, he would not consider such a company.

Returning to UNI, I have shared the valuation method, but the most critical question remains: I do not understand UNI's business model and corporate culture, so at least at this stage, I will not buy its tokens.

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