Discounting Cash Flows in Cryptocurrencies

Determine a rigorous, market-consistent method to discount future cash flows denominated in a cryptocurrency in the absence of fixed-maturity lending and bond markets, by constructing an appropriate term structure of interest rates (yield curve) for that cryptocurrency.

Background

In current cryptocurrency markets, only very short-term interest-rate proxies exist, primarily through proof-of-stake staking rewards and decentralized lending protocols such as Aave and Compound. These rates are variable, protocol-specific, and do not naturally extend across maturities.

The paper highlights the need for a broader term structure to support intertemporal valuation but notes the absence of fixed-rate lending and bond markets in cryptocurrencies. This motivates the question of how to discount future cash flows in a given cryptocurrency, which the authors approach by inferring implied interest rates from derivatives via call–put parity and inverse futures.