Editor’s letter: Is this crypto token really worth $8b?

Dear readers,

We’ve been doing more crypto-related stories, and it’s been gratifying for me to dive into that space again and explore all its nooks and crannies.

Our series on Axie Infinity has been well received, and last week, we followed that up with a deep dive into Yield Guild Games (YGG), a fascinating Philippine startup funded by A16Z that’s trying to make blockchain gaming accessible to all.

YGG does so by investing in in-game assets, which are often required for playing, and then lending them out to cash-strapped players in exchange for a cut of the revenue they earn. It certainly sounds like a win-win situation.

But I was surprised to learn that a couple prominent people in the crypto space have publicly called YGG a unicorn (defined as a company that’s valued north of US$1 billion). Their basis for saying so is that the “fully diluted” market value for YGG’s tokens (this includes unissued ones) is close to US$8 billion.

Going from zero to US$8 billion in a month – that certainly sounds fantastical.

As we edited our story on YGG, we debated about whether to call it a unicorn. I also consulted knowledgeable folks in the crypto space.

In the end, I decided against it. I’ll probably flesh out my full train of thought as an analysis piece, but it all came down to my reservations about pegging a blockchain entity’s valuation to its tokens, let alone unissued ones, which often vastly outnumber the coins in circulation.

“The basic problem with fully diluted value is that it ignores the possible decrease in the price of a token with the eventual increase in its circulating supply,” one crypto expert notes.

All this does not take away from YGG’s great potential, though. It’s an entity to watch, and it certainly can become a unicorn (though I must emphasize that great startups aren’t obsessed about valuations).

Speaking of promising projects, we covered plenty of them last week.

We looked at how a new digital bank could instill venture capital faith in Indonesia’s sharia fintech, analyzed the numbers from India’s leading insurance aggregator, and spotlighted the startups from Indonesia’s accelerating e-grocery race.

We also covered the giants, looking at Sea Group’s latest earnings to surface a few surprises and examined why food delivery apps are rushing to deliver groceries.