It’s Sunday, having some free time to play with my favorite financial modeling tools, I’ve decided to figure out how much is a incentivized testnet ADA worth; the basic assumptions are:
a) Rewards earned on incentivized testnet will be transferred to mainnet
b) Epoch on incentivized testnet will last for 5 days (21 600 slots; 20s per slot)
c) You will be able to capture 90% of the projected rewards; 10% loss due to network errors and other things out of your control
d) Testnet will last for 6 months
In order to determine current value of a testnet ADA, we will use the deferred cash-flow model. So the determined value will depend network participation, that’s why we will have a lower and higher bound for the incentivized testnet ADA. According to IOHK calculator and Explaining the Shelley Incentivized Testnet incentive model blog-post the rewards will vary based on staking participation in a way presented in the table below.
For our calculation we will make a models for participation levels from 30% to 80% using increments of 10% (for reference, current staking participation on Tezos mainnet blockchain is approximately 75%).
The used model does not account for any collection of transaction fees, it assumes stake-pool efficiency discount including stake pool fee of 10%. It takes into account compounded staking rewards.
