Much has been said on social media recently about how Temple is being traded below its risk-free value (RFV) and what this means for the token as an investment opportunity. So what is RFV and how is it calculated? Let’s dig in.
IV and RFV
Risk-Free Value (RSV) along with Intrinsic Value (IV) are the two most commonly used numbers when discussing the value of the Temple protocol.
Intrinsic Value (IV)is a smart contract value for the Temple price at which the protocol is guaranteed to buy back tokens sold on the AMM (ie Floor Price). Simply put, IV is the AMM Price floor. Over a threshold price, as the treasury grows, so does IV.
Risk-Free Value (RFV) is the claim users have for each $TEMPLE token they own if the protocol intended to distribute all its assets to them. It is equal to $1.72 at the time of this writing.
RFV is the sum of assets owned by Temple (not including native tokens) divided by the amount of Temple tokens held currently by and promised to users by the smart contract through staking and other mechanisms.
One way to think about RFV is like this, which was well described by DCF God in a recent twitter thread:
- Each future $TEMPLE is backed by $0.66, with this figure only increasing over time.
- You buy 100 Temple Tokens at $.90 and spend $90 doing so.
- Then, you wait the entire runway and earn 0.7% a day in fresh temple tokens.
- After 87 days, you will have 100 * 1.007^88 = 184.75 Tokens.
- At an IV of $0.66, that is 184.75*0.66 = $122
- That is a 35% ROI for staking and chilling