We've included a price to earnings (P/E) ratio on Token Terminal, alongside the price to sales (P/S) ratio.

The 'E' in the P/E ratio will initially be based on protocol revenue, i.e. money that is generated from the protocol’s business and subsequently allocated to its treasury or distributed to its token holders. 

Please note that in the beginning, the P/E ratio won't take into account a protocol's costs.

How should I use the P/S and P/E ratios when analyzing a protocol?

We’ll go through 3 different scenarios, which highlight the possible revenue distributions of a protocol, and how the distribution affects the two ratios.

I. Protocols that have only supply-side revenue

For protocols like Uniswap, where all trading fees currently go to the liquidity providers (supply-side), there won’t be a P/E ratio available. 

The same applies to e.g. Ethereum, where all the transaction fees currently go to the miners (supply-side).

II. Protocols that have only protocol revenue

For protocols like MakerDAO, where all interest payments currently go to the protocol and are subsequently distributed to MKR holders through buybacks, the P/S and P/E ratios will be exactly the same.

III. Protocols that have both supply-side and protocol revenue

For protocols like Compound, where interest payments are divided between lenders (supply-side) and the protocol’s treasury (managed by COMP holders), there will be both a P/S and a P/E ratio available. 

The P/S ratio is based on total interest paid and the P/E ratio on interest distributed to the protocol’s treasury.

Finally, make sure to check out our new price to earnings (P/E) ratio dashboard here!