Some ideas about Stargaze valuation

stargaze_valuation.md

Disclaimer

I’m not involved in any private discussions (I wish!) —I’m only sharing my personal views, which may be mistaken. I have no agenda beyond supporting the Stargaze community and the team, who invested enormous time and effort during a bear market to build what I believe is one of the best NFT marketplaces across all blockchains.

I’m an early Stargaze investor (signed a SAFT in Sept 2021), worked on Constellations for over two years (now the Stargaze indexer, boosting performance and speed), and still hold a significant amount of STARS. I decided to leave the project in July 2024 and didn't interact much with the founder since.

I’m frustrated the Hub leaked talks about buying Stargaze, only for Stargaze to announce they’ll use the Atom community pool instead. What changed, and why? Merging two chains is incredibly complex and unprecedented, but I hope it works out well for everyone if it happens.

Personal views about Stargaze valuation

Some ideas too long to hold in a single tweet, please contribute here as comment or reply to http://x.com/fabienpenso.

• Market cap doesn’t reflect the true value of a project like Stargaze, which comprises many other components. At $3.5 million, the token valuation underestimates the project’s actual worth.
• Many teams have tried and failed to build an NFT marketplace—what sounds easy is actually very hard. As Shane, the founder, often says at public talks, Stargaze combines multiple startups: it runs its own IPFS cluster, a proprietary indexer I built, its own on-chain contracts, a frontend, and more. The team spent months optimizing performance and ensuring a user experience on par with top products.
• A due diligence should definitely be executed, and then a deck summarizing all information about Stargaze, so potential buyers have all details within one document. That due diligence could look at:
  • Ownership of IP for all critical third-party components powering Stargaze
  • Volume of code produced and estimated time for anyone else to rebuild it
  • Total user base and retention rate
  • Cumulative development cost
  • Market value of comparable projects, adjusted for their lack of Stargaze’s infrastructure (IPFS cluster, proprietary chain, etc.)
  • Exceptional user retention (~40%), a rate rarely seen in digital products

Stargaze should define clear minimum and maximum valuation thresholds and be ready to walk away from any deal that isn’t fair. I’d rather see it fail than be sold for an unjust price—failure could allow the community to take it over and achieve a better outcome than a sale. I believe the Cosmos Hub has far more to gain by acquiring Stargaze than most people realize.

Stargaze comprises:

• A public blockchain run by validators; any acquisition must pass a community proposal, with incentives for validators and major token holders.
• A suite of on-chain smart contracts (ownership to be determined).
• A frontend and website (ownership to be determined).
• A US-based entity, funded by the community pool.
• A creator/artist community with numerous NFT collections.
• Multiple third-party providers for specific components.

A few ideas for pricing:

1. Calculate the Total Development Cost

Focus on what was invested in the project — “sunk costs”— as a baseline.

• Labor Costs: Estimate the total hours spent across all components (e.g., IPFS cluster, smart contracts, frontend, backend, Cosmos chain, indexer). Multiply these hours by market rates for developers, designers, blockchain engineers, and marketers.
• Infrastructure Costs: Include expenses for servers, cloud hosting, IPFS nodes, Cosmos chain setup (nodes, validators), software licenses, and tools (e.g., CI/CD platforms).
• Marketing Expenses: Add costs for campaigns, paid ads, or tools used for tweets and community building.

2. Assess the Market Value of Similar Projects

Look at what the market pays for comparable NFT marketplaces or blockchain projects to gauge a competitive price. Obviously the current state of NFT compared to 2 years back doesn't help but it still gives valuable information.

• Research Comparables: Investigate sales or valuations of other NFT platforms (e.g., OpenSea, Rarible) or Cosmos-based projects. Look for:
  • Acquisition prices.
  • Funding rounds.
• Apply a Multiplier: Market sales often exceed development costs by 2–3x for "classic" tech projects. Using the total development cost previously stated helps.
• Adjust for Uniqueness: Stargaze custom Cosmos chain, most famous Cosmos NFT collections, custom IPFS cluster justifies a higher multiplier

3. Project Future Revenue and Cash Flows

Look at the project based on its earning potential since it's already generating revenue. Then look at:

• Revenue Streams: Transaction Fees and royalties, staking rewards and validator fees, potential partnerships with outposts to other chains. I'm sure Stargaze got asked by multiple parties in the past to deploy outposts to their chain. The team already built intergaze.xyz deployed on Initia (I don't know the details).
• Growth Rate: How much could that platform grow annually, user based and fee wise.
• Discounted Cash Flow (DCF): Project revenue over 5 years and discount it to present value using a 10% rate (common for tech startups).
• Present Value (PV).

4. Evaluate Intellectual Property and Technology

The proprietary tech — IPFS cluster, smart contracts, backend indexer, frontend and Cosmos chain — adds significant value beyond costs and should be added to the price.

• Replication Cost: Estimate what it would cost a buyer to rebuild:
  • IPFS cluster
  • Smart contracts
  • Indexer
  • ...
• Uniqueness Premium: innovative tech like ICS721 (CosmWasm IBC NFT Transfers)
• Get an expert Valuation if doable.

5. Factor in Brand Value and Marketing Efforts

Tweets, marketing, and community efforts have built intangible value.

• Cost to Replicate: Estimate the expense of similar marketing
• Social Media Metrics: Value the following on all social network
• Community Strength: Value the user base and current user retention

6. Consider Strategic Value to the Buyer

• Buyer specific upside with the buyout (user base, tech integration, time saved, branding).
• Synergies: Integration with ATOM and revenue added by having native users coming to the hub on top of the existing user base.
• Competitive Edge by adding the 1st Cosmos NFT marketplace to the hub.

7. Account for Ongoing Costs and Liabilities for the next 2 years.

Questions

• What happens if Cosmwasm is being removed from the hub like I saw tweets about? Who pays for moving existing contracts to the new smart contract engine (EVM based I guess).

• Is there any plan B? What happens if that sale doesn't go through?

• What's the expected timeline to make it happen (Shane said one month in the space, I believe it would be waaay longer than that seeing at all the parties involved).

• As a prospective buyer acting solely in my own interest, I’d wait for the token to drop further to secure a cheaper acquisition—time favors the buyer, not Stargaze. I'd even leak private discussions.