Aragon Total Addressable Market

User Molan_one asked about the TAM (Total Addressable Market) for Aragon in /r/aragonproject: https://www.reddit.com/r/aragonproject/comments/bteyc1/what_do_people_believe_is_the_total_addressable

I thought it was a good question, because it’s very hard to answer. Aragon represents a zero to one, a technological and social leap that doesn’t incrementally innovate or builds upon existing rules of the game. It rather disrupts the game and creates new rules for it.

I will post a thesis on this matter soon, but I will jump straight into the TAM question.

TAM for the Aragon client

In a world where Aragon entities become de facto standard for operating organizations, the following markets are disrupted:

  • Law advise
  • Accountants
  • Other bureaucratic agents

The amount of value gathered by those entities is probably in the trillions of dollars, since the annual revenue for law firms in the US is about $275 billion.

Of course Aragon entities don’t intend to be as costly to maintain, and therefore don’t intend to capture all that value, but rather outcompete their traditional counterparties by being more flexible and better priced.

We would also have to factor in a new market: entities that couldn’t exist without Aragon, that can now exist. Those entities are crypto networks, sporadic partnerships, pseudonymous corporations… It’s hard to predict the market size for those, but we can foresee that crypto networks will be a trillion dollar market again.

Aragon entities are free to run and operate, and fully open source. They don’t require any token to be used, apart from the native token of the chain they run on. In the current case, it’s ETH. Therefore, there is a bull case for blockchain platforms that run DAOs, which today is basically Ethereum.

Now you may think: how can Aragon be disrupting a trillion dollar market yet not capturing value? That’s not fair! Well, read on.

TAM for the Aragon Network

When Jorge and I started Aragon, we realized that Aragon entities are just one side of the coin. These entities can exist by themselves, but would greatly benefit from services provided at a network-scale.

In the end, the world is now an interconnected mesh and entities don’t live isolated.

We thought about nation states and their services, which have made possible great progress for society. The fundamental services they provide are legal security and property rights.

That means that there is a legal framework that you can expect all network participants (or the nation’s citizens) to abide by. In turn, that creates certainty and makes possible to conduct market interactions.

Smart contracts also disrupt that, since for some interactions you can now just trust the code. However, we quickly realized that it’s impossible to encode all human subtleties in code. (And if it was possible, that’d probably mean that programming is so advanced that AI has already taken over)

That’s why the Aragon Court is the very first service that the Network will provide.

The Aragon Court will make it possible for pseudonymous entities to establish trust by attaching human-readable agreements to smart contract interactions, therefore covering all possible aspects of a market interaction. Both parts can provide collateral, in case one party doesn’t honor their part of the agreement. The Court then rules the winning party if a dispute arises. That provides limited liability, which provides certainty, which again is what makes market interactions possible.

So the Aragon Network is effectively a new legal system. In that regard, the current market for legal security and property rights is… huge.

As an example, the US is expected to collect $3.643 trillion in taxes during 2020.

But of course the same case as before applies with the Aragon Network now. The Aragon Network doesn’t intend to capture all that value, since it needs to differentiate with a new business model adapted to the new times. Since the market is a race to the bottom, new business models need to be less extractive to compete.

Then we have to factor in that the Aragon Network also services newer markets that didn’t exist before, such as open organizations where people can just buy tokens and participate.

Those organizations suffer from 51% attacks (read more), which makes them less viable long-term. Because that’s quite an issue for the success of Aragon entities, that is the very first niche that the Aragon Network will target.

I think it’s too early to set in stone how that business model will work. It seems like the very first initial implementation of the Court will just impose a fixed subscription fee per organization that wants to use the Court.

Then the total TAM for the first version of the Aragon Network would be amount of organizations subscribed * subscription fee.

In subsequent versions of the Aragon Network, it might be worth to try to find models where the subscription fee goes attached to the amount of funds being secured. This is because it may be proportionally more costly for the Aragon Network and the Court to provide legal security and property rights as the amount of funds goes up. In that model, entities with more funds would pay a proportional fee based on the amount that is being secured by the Court.


Hope that sheds some light into the TAM for Aragon, and I will post a thesis where all of this will be expanded soon. There is also a token primer blog post and more posts on ANT’s valuation model will be coming from @lkngtn.

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Hello Luis,

As I am pretty new in the forum and as a curious individual and interested in token valuation models was a pleasure to read the visionary statement of the valuation part, is it also possible to see the valuation model - without compromising the confidentiality of course :slight_smile:

I’d like to see the reflections of the visionary statement over the actual methodology, valuation & calculations, as the TAM is a pretty important metric for the Utility Value Output.

If it’s already there and I couldn’t find it because I am a newbie, thanks for the re-direction.

Thanks in advance.

T

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I don’t think there are valuation models yet. Maybe closer to the launch of the Court we could expect some!

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Thanks for the answer Luis, let’s wait & see then.

It could be bigger than US and China, it could be something like Brazil or Mexico, it can become the default standard of any future organisations.

This is great. I’d like to see more thought and analysis driving value to the ANT token, and thus the entire Aragon platform/ecosystem. This is essential for Aragon to continue scaling past the treasury funds.

In addition to market for legal services (incorporation, dispute resolution, accounting), there is also the financial services industry. There is a large market for services related to venture capital, IPOs, and loans. Aragon currently allows projects to come together and form an organization (company). Then the next thing any (non purely altruistic/hobbyist) organization needs is funding (financial services). Aragon currently funds Nest Grants and Flock teams, but the AA gives this money away.

With the addition of the Fundraising app any Aragon organization will essentially be able to launch their own mini-IPO. What if instead of giving away funds, the AA (Nest/Flock) invested it in the projects they were supporting? This would not work for all projects and grants are essential for early stage development. This would, however, work for projects that have a business model. This could include, but not be limited to a share of the project’s tokens (equity) and/or a significant voting position in the projects DAO (board seat). As Aragon shifts from relying on treasury funds to being self sufficient this will become more and more relevant. Having this option available would also encourage more projects to actually think through and create real business models. Incentives => Actions. Creating an Aragon investment arm could supports Aragon projects ia financial capital, connection, and advice. This could drive value to the ANT token while also increasing the value and quality of projects in the Aragon ecosystem.

Now… really anyone could do this. Anyone could create a 3rd party court system too. A1 is uniquely positioned to provide this value, and to do so in a way that drives value to the ANT token vs a 3rd party, because of their expertise and timing early in the market. I think it’s another avenue beyond legal that is worth considering.

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I think this could be an interesting way of looking at the next version of Flock. Each team could have a clear sustainability path, and then the Aragon Network DAO or even third parties just put money into the curve.

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Do you think that something like a CFDAO proposal would be appropriate to fund a study identifying potential market opportunities for the Aragon ecosystem and strategies that could lead to sustainable growth for Aragon and Flock teams?

  • I’m sure you guys are already working on that at A1, but maybe it would it be helpful to also make it a more community centric initiative. This could help bring awareness to sustainability and self sufficiency as part of the values/culture of the Aragon community. It would also give teams an opportunity to weigh in with ideas and examples of real world pain points that need to be addressed. Seems like it could be cool

EDIT: so I’ve kind of just started diving into this with my Aragon Network Token evaluation. It’s not like a full analysis or anything, but it is a lot of fun. The thread is getting a bit large though… I keep thinking of and discovering other ideas that could drive value to ANT, and I add them, and the thread gets larger… Thinking maybe a GitHub repo like the Web3 Business Model Primitives would be good, but for DAO (and ANT) specific strategies.

EDIT 2: might be starting this with DAOresear-ch