Messari Analyst: The Long-term Layout Logic of RAIL

Author: Jake, Messari Analyst; Translation: xz@Golden Finance

After the excitement caused by the release of the Ethereum Foundation's Kohaku wallet SDK has subsided, I have conducted some research and reflection on RAIL, summarized as follows:

(1) Over the past two weeks, RAIL has been fluctuating within the range of $2.00 to $3.20. I currently hold a large position in RAIL, with an average cost of about $1.50. If the price breaks below the support level, I will start to increase my position. If you have not entered the market yet, then the price near the lower end of the channel is relatively attractive.

(2) The core logic remains unchanged; only the market has changed. After the liquidation event on October 10, RAIL plummeted from about $5.00 to $2.20. Since then, its price movement has remained highly synchronized with BTC's volatile sideways market.

(3) According to the quick calculation model by AJC, the enterprise research manager at Messari: If 1% of ETH and stablecoins on Ethereum flow through the RAILGUN privacy pool, it will generate an annualized revenue of approximately $82.4 million. This calculation is based on a 1.25% revenue capture rate (historical annualized capture rate is 4-10% of TVL) and a 1.0% potential market penetration rate (current market size is $450-500 billion in ETH and about $175 billion in stablecoins). At a price of $2.30, its fully diluted valuation (FDV) is $132 million, which means that the annual revenue under the baseline scenario is equivalent to 62% of its total FDV. Even under a pessimistic assumption (0.1% market penetration + 1.25% revenue capture rate), it can still generate $8.2 million in annual revenue, accounting for 6.2% of the total FDV (while a bullish market scenario with 10% market penetration would bring $823 million in annualized revenue, equivalent to 624% of FDV). Furthermore, this is just one dimension of assessing RAIL. Comparing similar valuations (Zcash - FDV $6.46 billion / Monero - FDV $5.95 billion), RAIL's current FDV is less than 3% of its competitors (considering Railgun's quantifiable cash flow potential, a reasonable valuation should be close to 10-15% of its competitors). Not to mention that ZEC's continued strong performance will further boost RAIL's bullish logic in the privacy sector.

(4) Potential Catalysts: Usage Continues to Rise. Railgun has processed $1.6 billion in privacy transactions this year, slightly less than half of the protocol's total transaction volume ($4 billion) since 2021.

Railgun plans to showcase its wallet technology at the Devconnect Argentina conference in two weeks.

Ethereum's ecosystem continues to ramp up efforts in the privacy sector, especially Railgun…

The Ethereum Foundation continues to increase its investment in institutional-grade solutions, especially institutional-grade privacy solutions like Railgun…

(5) With the occurrence of market clearing events, the window for using RAIL as a short-term trading option has closed, but the window for treating it as a long-term investment (with at least 3-5 times potential) is now fully open.

Summary: Hold RAIL firmly.