Article Outline
1. Income Survey and Analysis
2. Revenue and Token Value Capture
3. Track Analysis
I have been thinking about a question recently. Some people say that web3 is a scam, some people say that web3 is the future, and some people just want to ask if web3 can make money? I am quite curious about whether it can make money or how much money it can make. So I spent some time looking for some data to see how much money these familiar public chains and products such as web3 can make in a year and why their market value is so high.
We also hope to find out which projects investors and the market prefer, to help and guide us in establishing an overall perspective on industry investment.
If we regard the web3 project as a company, operating income is definitely the most important indicator. How much revenue can web3 companies currently generate? Although different companies have different business models and revenue models, I try to divide them into public chain L1.
Application category: NFT exchange, defi, gamefi, and tools.
Studying the competition landscape and revenue model of each track separately can help us have an overall understanding of a single track and grasp the specific investment direction.
Since the revenue model of each project is relatively complex and it is impossible to collect data for each project separately, I chose to use the more reliable data source Token Terminal.
Output the following complete analysis content. Since it is impossible to fully aggregate the on-chain data, only the project data owned by the Token Terminal website is retained below, and the main indicator used is the total revenue indicator.
Total Revenue: Total revenue is equal to the total fees paid by the user. It is calculated over a given time period. For example, the daily total revenue for a given day is equal to the fees paid during that day (24 hours).
(The explanation comes from the website white paper. Some protocols do not issue tokens, so the protocol revenue indicator is not used.)
1. Income Survey and Analysis
1. Revenue of web3 blockchain L1 in the past year
▲Top blockchain L1 by cumulative total revenue in the past 365 days
Bitcoin and Doge are not suitable for public chain analysis. FIL, AR storage protocols and HNT Internet of Things need to be analyzed separately.
Top Player: Ethereum
Its total revenue in the past year was 10 billion USD, far ahead of the rest of the list. Its main revenue model is “selling block space”, which is the GAS fee, equivalent to a tax levied by the platform.
Many strong players: Binance, etc.
An An firmly holds the second place, and the Avalanche Chain has achieved revenue of over 100 million. Among them, the second-layer Arb and OP revenues are worth noting, which have surpassed the third-tier public chains.
Laggards: Erlond, Near, and the two cross-chain kings Polkadot and Cosmos.
2. Web3 decentralized application revenue in the past year
The income of application-based NFT exchanges is royalties, and the income model of Defi is mainly transaction fees and liquidity LP income, as well as the spread of asset management.
Gamefi's revenue model is mainly royalties, transfer fees, NFT sales, etc. The revenue model of tools is mainly service fees.
The main income structure of applications is composed of Defi accounting for 50%, Nft exchange accounting for 34%, Gamefi accounting for 12%, and tools accounting for 3%.
Although the total revenue of applications is much higher than that of public chains, nearly 90% of the revenue of Defi applications is provided to their investors LP, and the protocol itself does not capture such high protocol revenue.
2. Revenue and Token Value Capture
The total revenue generated by Web3 companies is composed as follows:
Total income = capital income + agreement income.
Capital income
The investors provide liquidity for the protocol to make markets and provide loans, or pledge to become investors. After they obtain the income after deducting the principal, this part of the income is obtained by the investors, and the income naturally belongs to them. The applications with obvious income structure are: Uni, Aave, Lido, etc.
Agreement income
The income earned by the protocol after providing services or products belongs to its own income, and the protocol income can be used to measure the profitability of the protocol. For example: gas fees, tool fees, NFT transaction fees, etc. This part of the income is mainly distributed to the treasury or token holders, or ETH is directly destroyed.
(I personally calculated that the StepN project revenue is close to 400m, including taxes and GMT token burning, and the Raca Yuanshou game has accumulated more than 200m in revenue through the sale of nodes and Yuanshou agreements, which can enter the top 20.
As other related popular games are centralized and distributed on different chains, the BSC chain's protocol revenue website is not counted.)
Web3 decentralized applications and blockchain protocol revenue in the past year
The main problem with Web3 protocol tokens at present is that although users enjoy staking income and governance rights, the core economic benefits are still not guaranteed. The design of the protocol token model does not allow the protocol token to capture the protocol's revenue. This is also criticized.
3. Track Analysis
Public Chain
The main business model of the public chain L1 is to sell block space and obtain gas fees as company income. Among them, Ethereum captures a large amount of transaction fee consumption through high gas fees, which is equivalent to directly repurchasing and destroying ETH tokens with transaction fees, supporting its market value through its huge income.
Other public chains such as Sol, Ada, Polk, etc. form market value support through the locking of stakes by relatively centralized nodes. However, due to the low handling fee income, the operating income of their business model is worrying, and their market value is mainly formed by market value management and lock-up. Some third-tier public chains cannot support their valuation space simply by relying on business income.
However, it can be seen that the market has an optimistic valuation of the public chain track. Since the public chain token can capture public chain tokens by borrowing its ecological applications and provide a large number of application scenarios, even if the public chain fee income is not as high as that of a single Defi, the valuation is still high.
The main valuation model of the new public chain cannot be evaluated by revenue, and pricing must be based on future space and hype consensus. Long-term development requires ecology, technology development and application bring traffic, and traffic brings funds.
Application
Defi is still the strongest application track of blockchain. Although it has been de-bubbled, the protocols at the top of each public chain that have finally settled down have indeed earned a lot of revenue through their business model. However, due to their token economic design, the tokens of a large number of protocols have not received any value return in the form of income.
For example, the UNI protocol has generated nearly 1.3 billion in revenue, all of which was fed back to LP providers, and the UNI token has not received any value feedback at all. This is truly decentralized, and in the future, perhaps the V4 version will extract a share of the handling fee to empower the UNI token.
The tokens of many DEFI protocols are jokingly called commemorative coins and mining coins, and their market value support can still only rely on market making management and future consensus.
However, as the public chain ecosystem prospers, the corresponding on-chain head effect will naturally produce a stronger Matthew effect. If the protocol application is to be innovative, it is necessary to pay attention to differentiated markets where there are no leaders yet, such as derivatives, insurance, etc.
NFT exchange is a monopolistic and popular track. The popularity of NFT is currently basically completely captured by the Ethereum chain. The royalties of the trading platform are extremely high (2-2.5%), compared with DEX which can achieve a handling fee of 0.3%.
The business model of NFT track applications is very imaginative. Among them, Opensea, which has not issued any tokens, can be called a cash cow, and Looksrare, which has already issued tokens, has a large number of fake transactions. Although the transaction mining model has generated a lot of cash income, its income structure is unhealthy, resulting in a dumping of tokens, which is a huge harm to token holders.
Due to the huge head effect, latecomers need very strong product design and a large number of high-quality NFT projects to have a greater impact on the existing market. NFT development is still in its early stages, and the exchange track is still worthy of attention. Combined with excellent token design, there is still great imagination.
The Gamefi application has generated a very large operating income. Its business model is based on royalties, transfer fees and NFT sales. It is a real cash cow and is well integrated and enabled with project tokens.
Although most protocols have become a roller coaster, it is because of the Ponzi model with a fixed payback period that they promised, which caused the debt crisis to collapse. The governance tokens continued to drain the value of the economy. The utility tokens, as the objects of their debt, continued to be over-issued and inflated, leading to continuous declines and making the game economy unsustainable in the long run.
Like Axs and StepN, the governance tokens captured part of the revenue returns, and more of the value behind the explosion came from Ponzi's speculative frenzy, and it did not achieve long-term externalities.
In order for blockchain games to continue for a long time, more reasonable economic model design and game mechanism are needed. Since blockchain games integrate multiple economic elements and transaction behaviors, they can combine the successful experience of traditional games and have many innovative possibilities. They are a track that is worth paying attention to. As an individual investor, speculative bubbles are a very large source of profit.
Tools, the most obvious of which is the Metamask wallet. Its main source of income is token exchange fees. It has not yet issued tokens, but has captured the value of providing convenience to users.
Another non-financial application, ENS, captures the dividend value of the Ethereum ecosystem. The overall revenue model is very stable and grows, relying on the overall blockchain ecosystem development. However, since the ENS income is averaged into the treasury, no token empowerment feedback is given.
Tool applications currently account for a relatively small proportion of the total. It is easy to make small and beautiful applications, which can form a very good competitive advantage in the subdivided field. They belong to the track that will develop with the blockchain industry in the long term and are a long-term value track. At this stage, the imagination space of tool protocols is relatively small. Only when the blockchain ecosystem continues to develop further, there will be room for imagination.
A brief analysis of the business model that Web3 companies already have and their ability to generate huge revenue. Combined with the daily active user data of major public chains (500,000 for Ethereum and 1 million for Binance), it can be predicted how much room for improvement there will be in the magnitude of revenue that Web3 companies can generate in the future.
The super strong cash flow income and extremely low-cost labor operation model are powerful forces that constantly attract talent and capital.
How to make product revenue generate better value feedback for the entire community or tokens? This is an issue that Web3 entrepreneurs need to constantly think about. And we investors also need to keep up with market projects, analyze their competitiveness and innovation value, judge their potential value space, and profit from them.
Related Websites:
Income data source:
https://tokenterminal.com/terminal/metrics/total-revenue
Active user data source:
https://kingdata.com/topic/
That's all, Dyor.
