Total Addressable Market, abbreviated TAM is the total amount of value which could be expected to flow through a cryptocurrency across all use cases.

It’s used in the ESC valuation framework to calculate cryptocurrency price floors, and in tokenomic architecture, analysis, and design.

All else equal, a cryptocurrency or token with a larger Total Addressable Market, following the principles of tokenomics, will have a higher price.

Components of Total Addressable Market

A currency’s TAM and its components come from each of its use cases.For example, Ethereum’s native token, ETH has multiple Total Addressable Markets.

ETH is used to pay fees for all of the applications running on the Ethereum network. Demand for payment of ETH fees is one component of its Total Addressable Market.

ETH also used to collateralize other tokens – Dai, for example. So another of ETH’s Total Addressable Market is use as collateral.

This in turn comes from demand for Dai (a stablecoin with many uses) and varies with Dai’s capture of its Total Addressable Market.

To maximize ETH’s fundamental value or price floor, these two use cases must be maximized.

When seeking to maximize a token’s price, TAM should be made large.

This is generally done by having a token transfer large amounts of value, or giving it many uses.