Dear Bankless Nation,

We publish token ratings on the first Friday of the month. Today’s that day.

Bankless Token Ratings are an ~ENTERTAINMENT ONLY~ analysis on whether you should buy, hold, or sell certain tokens based on our valuation models.

This month we’re covering:

• 🆕 MATIC, RBN, INDEX
• 🔄 OP, MKR, FXS

The first token is open for everyone, the rest is exclusive for Bankless Premium Subscribers.

Here’s the tea. ☕️

- Bankless Team

🚨 None of the information in this article is financial advice. All of it is for educational purposes only. Please do your own research.🚨

This report initiates analyst coverage on three tokens: MATIC, RBN, and INDEX.

It also updates coverage on OP, MKR, and FXS.

Below, we’ll discuss the rationale behind each rating by delving into the driving catalysts, as well as its potential impact on the token’s price.

We are also providing a comprehensive overview of each token we cover via the Bankless Token Bible!

📓 Token Bible access at the bottom of this report. Bankless Premium only!

Intended to complement our ratings and valuation models, the Token Bible is a one-stop-shop where investors can get all the relevant information they need about each token covered, whether it be fundamentals, financials, tokenomics, and more.

Rating Scale and Fair Value Estimates

Before we dive into the coverage and ratings, let’s take a moment to explain our rating scale and fair value estimates.

The ratings reflect how we expect each token will perform over a six-month time horizon relative to the performance of the overall crypto-market based on market capitalization. It is not indicative of our opinion on the long-run potential of each token.

The rating scale is as follows:

• ✅ Overweight: We expect this token to outperform the broader market over the next six months.

• ➖ Neutral: We expect this token to perform in line with the market over the next six months.

• ❌ Underweight: We expect this token to underperform the market over the next six months.

To help inform our ratings, we also provide valuation estimates for any of the applicable tokens using a discounted cash flow (DCF) model.

These models aim to value each protocol's core business offerings based on the revenues it generates and its future growth prospects, which are influenced by the catalysts discussed in this report. It is not applicable to all protocols covered in the report as not all of them are generating revenue.

While these models are certainly not the only factor that goes into determining a token’s rating, especially given the short-time horizon on which they are made, we view these fair value estimates as the price ceiling under which we would consider the token to be undervalued and if above, overvalued.

Now that’s out of the way, let’s dive into the report.

✅ Overweight

These are tokens we believe will perform in-line with the market over the next six-months.

🟣 Polygon (MATIC)

Analyst: Ben Giove

• Type: Coverage Initiation
• Sector: L1
• Current FDV: $8.4B

We are initiating coverage of MATIC with a rating of overweight.

Key Catalysts

MATIC is being assigned an overweight rating due to the upcoming launch of the Polygon zkEVM.

In July 2022, Polygon revealed that they were developing and would soon be launching a EVM-compatible, zero-knowledge (zk) rollup, which they refer to as the zkEVM.

The zkEVM is thought of as a silver-bullet scaling solution, as it combines the firepower of zkrollups, which have greater transaction throughput than optimistic rollups, while benefiting from the network effects of the EVM through inheriting its developer tooling and supporting infrastructure.

The hype is rolling in with Polygon’s zkEVM expected to launch its mainnet in early 2023.

Potential Price Impact

The launch of the zkEVM should lead MATIC to outperform as the token will likely be used to decentralize portions of the network such as the sequencer.

In addition, the zkEVM should increase demand for MATIC, as there is a strong possibility the token will be able to be used to pay for gas on the network. Finally, MATIC should also benefit from a wider valuation re-rating among-L2 tokens, as by launching their own, Polygon will be associated with being a rollup provider rather than a standalone Layer 1.