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1717## Measuring value
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19−Value and price are distinct concepts that often get conflated. In our view, Urbit address space has value for four fundamental reasons: it’s scarce; it has utility; it’s tradeable with increasing liquidity; and it has network effect. Price, on the other hand, is always a function of supply and demand. Let’s take a look at these fundamentals within the Urbit ecosystem.
19+Value and price are distinct concepts that often get conflated. In our view, Urbit address space has value for four fundamental reasons: it’s scarce; it has utility; it has some limited liquidity; and it has network effect. Price, on the other hand, is always a function of supply and demand, and it's not something we – as builders – concern ourselves with very much. Let’s take a look at these fundamentals within the Urbit ecosystem.
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3636There are 65,536 total stars on the network. In turn, each star is initialized with ownership of 65,536 planets. Stars currently trade on platforms independent of Tlon, such as [urbit.live](https://urbit.live/) and [opensea.io](https://opensea.io/). The current price range can easily be ascertained on those sites, but as of the time of this writing, stars are selling at a price that greatly discounts their planet holdings.
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38−We anticipate the relative pricing of stars and planets to align (so to speak) as Tlon and others increase education about Urbit, and as additional planet sellers and hosting providers enter the market.
38+One would expect that in an efficient market the relative pricing of stars on one hand, and planets on the other hand would eventually align (so to speak). This may come to pass as the Urbit community increases education about Urbit, and as additional planet sellers and hosting providers enter the space.
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40−Finally, there are 4,294,967,296 (or 2<sup>32</sup>) planets on the network. Planets currently trade largely in a range of $10 to $15. While we expect planet prices to fluctuate from provider to provider as described in the previous post, we also expect they will ultimately find an equilibrium price somewhere near their current range for two reasons. First, this range is affordable for most purchasers, and second, the cost to configure addresses for distribution is fairly static and acts as something of a price floor.
40+Finally, there are 4,294,967,296 (or 2<sup>32</sup>) planets on the network. Planets currently trade largely in a range of $10 to $15. We expect planet prices to fluctuate from provider to provider as described in the previous post, based on the quality of services various providers offer. That said, it's worth noting that the cost to configure addresses for distribution is fairly static and this may act as something of a lower bound.
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4242That said, we also anticipate that planet prices will be abstracted away from most purchasers, and will be included in bundled annual packages of hosting and data routing services. For this reason, infrastructure service providers (i.e. hosting providers) will likely be the best positioned parties to capture value from planet distribution.
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5151As a refresher, this use value falls in five broad categories.
52521. Authentication technology is broadly useful. All Urbit identities — planets, stars, and galaxies — can be used for authenticating one’s Urbit computer, and for authentication in general. Urbit ID was designed for Urbit-specific authentication, but a lot of general functionality can be built on top of this infrastructure. Urbit ID is simple, extensible, and easy to use, making PGP style claims much more useful than they are today.
53−2. Network infrastructure services represent a revenue stream. Stars and galaxies specifically should be understood primarily as revenue-generating network infrastructure. We anticipate that stars and galaxies will eventually charge for infrastructure related services, like hosting and packet routing, and will distinguish themselves on quality and service.
53+2. Network infrastructure services represent a potential revenue stream. Stars and galaxies specifically should be understood as providing their owners the opportunity to develop and use network infrastructure. We anticipate that stars and galaxies will eventually charge for infrastructure related services, like hosting and packet routing, and will distinguish themselves on quality and service.
54543. Stars and galaxies are well positioned to offer additional services. Because of their role as high level network nodes, stars and galaxies are uniquely positioned to offer additional services, including content delivery networks (CDNs), Bitcoin and other blockchain-related nodes, 0x relays, and Tor exit nodes.
55554. Schelling points have value. Because stars and galaxies hold a certain authority on the network (by dint of their relationship to their subsidiary nodes), they act as [Schelling points](https://nav.al/schelling-point), or default hubs, for various activities that will arise as the network grows. Already various groups and communities are beginning to collect around stars. This gravity has value and will eventually be priced.
56−5. Voting has value. Galaxies exclusively hold a vote on the network. This voting right can be separated from the galaxy itself and transferred, and we anticipate that this will happen eventually. The value of this right has not yet been priced into the market, though as Urbit adoption grows, the value of a vote will emerge and increase.
56+5. Voting has value. Galaxies exclusively hold a vote on the network. This voting right can be separated from the galaxy itself and transferred, and we anticipate that this will happen eventually. The value of this right has not and may never be priced into the market, though as Urbit adoption grows, the value of a vote may emerge.
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5858Utility is only one component of a value calculation. To further develop the inquiry into value, let’s move on to trading factors.
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6060## Trading, volume, and liquidity
61−Urbit IDs are individually represented by non-fungible ERC-721 tokens, and are therefore tradable on the open market by any platform that supports this token standard. Currently there are three known Urbit-exclusive sales platforms and one generalized ERC-721 trading platform that list Urbit IDs. Aggregate market prices for stars and planets are readily available. Volume is low, as no effort has been made to promote the fact of availability, yet the number of [total transactions](https://azimuth.network/stats/events.txt) has increased steadily since the network was launched to Ethereum in 2019, even absent public messaging.
61+Urbit IDs are individually represented by non-fungible ERC-721 tokens, and can therefore be sold by any platform that supports this token standard. Currently there are three known Urbit-exclusive sales platforms and one generalized ERC-721 platform that list Urbit IDs. Prices for stars and planets are readily available. Volume is low, as no effort has been made to promote the fact of availability, yet the number of [total transactions](https://azimuth.network/stats/events.txt) has increased steadily since the network was launched to Ethereum in 2019, even absent public messaging.
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6464<img class="" src="https://media.urbit.org/site/posts/essays/value-of-address-space-pt2-tps.svg">
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6868<img class="" src="https://media.urbit.org/site/posts/essays/value-of-address-space-pt2-tss.svg">
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71−Trading non-fungible tokens like Urbit IDs is rather different than trading quasi-fungible tokens like Bitcoin (even setting aside the issue of volume). Each Urbit ID is unique, and so they tend to be purchased by end users for their specific characteristics, rather than generically. As an example, the planet `~parret-barret` sold for about $1,000 at a time when most planets were selling for $10-20, perhaps due to its rhyming name. Planets with circular sigils also often sell for significantly above market rate — we’re not entirely sure why this is the case.
71+Buying non-fungible tokens like Urbit IDs is rather different than trading quasi-fungible tokens like Bitcoin (even setting aside the issue of volume). Each Urbit ID is unique, and so they tend to be purchased by end users for their specific characteristics, rather than generically. As an example, the planet `~parret-barret` sold for about $1,000 at a time when most planets were selling for $10-20, perhaps due to its rhyming name. Planets with circular sigils also often sell for significantly more than other planets — we’re not entirely sure why this is the case.
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7373## Planet Sales
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8989This ID-specific trading pattern is generally appropriate in our view: Urbit ID isn’t designed to be rapidly traded at high volume. Urbit is more like a house than a fungible good like a currency.
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91−Nevertheless, it would be theoretically possible to create a more traditional orderbook for unstarted addresses. Unstarted addresses have different names and sigils, but they’re functionally the same in every other way, so they could be collateralized to a specific token to encourage price discovery. This hasn’t happened, and Tlon has no intention of releasing such functionality, but it’s worth mentioning in a discussion of liquidity.
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93−For the time being trading of Urbit IDs happens through auctions on specific platforms, and via person-to-person transactions, because each trade is for a _specific_ Urbit ID. Again, Urbit ID is designed in the spirit of property titles, rather than currencies, so this makes sense.
91+For the time being buying and selling of Urbit IDs happens through auctions on specific platforms, and via person-to-person transactions, because each transaction is for a _specific_ Urbit ID. Again, Urbit ID is designed in the spirit of property titles, rather than currencies, so this makes sense.
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9593Strictly speaking, liquidity is a measure of the degree to which a given asset will change in value due to a given transaction. In that sense, Urbit address space is likely fairly illiquid. But liquidity can’t be properly understood without volume. As noted above, the volume of transactions on the network has been steadily increasing since inception, and yet the price has remained fairly constant. This seems to indicate a healthy ratio.
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103−A further impact on liquidity and volume is that of available supply. At present, the majority of Urbit address space is locked by smart contracts. These lockups began to release at varying linear rates in January 2019. All address space will be completely unlocked and tradeable by January 2025. We anticipate initial downward price pressure on stars and planets as availability outstrips initial demand. Eventually as both understanding and demand increase, we anticipate that planets will find their equilibrium price, and stars will be repriced accordingly.
101+A further impact on liquidity and volume is that of available supply. At present, the majority of Urbit address space is locked by smart contracts. These lockups began to release at varying linear rates in January 2019. All address space will be completely unlocked and tradeable by January 2025. Eventually as both understanding and demand increase, we anticipate that planets will find an equilibrium price, and stars will be repriced accordingly.
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105103We’ll discuss lockups and spawning limits in more detail in the third installment of this series.
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122120The upshot is that Urbit can serve as the meta-network for many different kinds of individual networks, each with their own value. Urbit is much more akin to the internet itself than it is to, say, Facebook. Reed’s and Metcalf’s laws therefore apply to Urbit in some very interesting ways.
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124122## Network laws
125−Three laws are typically cited to express the value of a network:
123+Before diving into a discussion of network effect, it's worth noting that although individual tokens and users of those tokens benefit in various ways from a thriving network, the structure of the Urbit network does not grant token holders any rights to profits or losses "generated by the network" as a whole. In fact the very notion is counter to the intent of Urbit's ethos of decentralization. Individuals on the network may profit by their own activities, but there is no central authority profiting off activity in the aggregate; there is no ownership of the network as a whole, and so there are no centralized profits and losses to share. Address space tokens represent one's ownership of their own parcel of land as it were.
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125+That said, an entire continent may have aggregate value even though it is distributed. To explore this notion with regards to Urbit, it's worth reviewing the three laws typically cited to express the value of a network as a whole:
126126- Sarnoff’s law states that the value of a network increases proportionally to its size. This is widely understood to understate the value of most modern networks.
127127- Metcalf’s law states that the value of a network is the square of the number of users (n^2).
128128- Reed’s law states that the value of a network increases with the number of groups that can be built on the network. This is expressed as 2^n, where n is the number of groups.
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134134Urbit’s unique approach to groups also helps resolve two other problems which lead to value loss in many networks: Urbit’s design significantly reduces both network pollution (i.e. irrelevant feeds) and network congestion (clogged bandwidth), as individual clusters can easily separate their activity from other networks on the platform.
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136138## Urbit is a platform network
137139It’s important to note that Urbit has utility absent the network, as Urbit OS is in fact a Turing-complete virtual computer. Though the system is designed around communities, individuals can use Urbit to create personal documents, archive data, and write code for the system. This is how Urbit’s total network size can be relatively small and still provide value for individual users and clusters. However, Urbit already has users, and for many of these, critical mass — the point at which the network is more valuable than its cost — has already been reached. In addition, as each of these individual clusters writes code for the platform, positive indirect network effects increase (more utility arises from these individual development efforts).
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