Original title: The Rainmakers of the Crypto Market
Original author: TokenTerminal
Original translation: Mars Finance, MK
introduce
This newsletter focuses on the protocols that generate the most significant fees (including blockchains and decentralized applications). The main reasons why we pay attention to these protocols include:
Which protocols do users prefer to pay for services? What kind of services do these protocols provide and what is their business model? How much do users actually pay in total? Which specific market sectors are more popular than others? Are there any protocols that dominate certain market sectors? By analyzing a detailed chart, we will delve into the industry trends of the cryptocurrency market.
Let’s explore it in detail!
1. Focus on the top charging protocols of blockchain
Protocols of focus include: Ethereum, Tron, Bitcoin, Solana, BNB Chain, and Base.
The main cost comes from the general blockchain
Among the top 20 protocols, 5 are layer 1 (L1) blockchains and only 1 is a layer 2 (L2) blockchain.
Ethereum has the highest fee generation over the past 30 days, reaching approximately $180 million. Although Base’s average transaction fee is relatively low at approximately $0.03 (compared to $4.5 for Ethereum L1), Base has also managed to enter the top 20 due to increased user activity at the L2 level.
Apart from L1 and L2 blockchains, all other protocols in the top 20 fall into the decentralized finance (DeFi) category.
2. Top fee-based protocols, focusing on Lido Finance and Jito
Key protocols: Lido Finance and Jito.
Lido ranks first in fee generation among all crypto applications
Jito operates two distinct businesses: Liquidity Staking (JitoSOL), which is profitable through AUM-based management fees, and the Maximized Extractable Value (MEV) market, which is profitable through MEV tips collected from validators (this chart only includes MEV tips).
In contrast, Lido focuses on one business, liquidity staking, earning commissions through staking rewards charged to depositors. Lido generates about twice as much fees as Jito, but Jito is growing faster.
Lido manages $3.35 billion in staked assets, while Jito has $160 million. Lido’s fully diluted market capitalization is $190 million, while Jito’s is $250 million.
3. Top fee-based protocols, focusing on decentralized exchanges (DEX)
Key protocols: Uniswap, PancakeSwap, Aerodrome, Uniswap Labs, and GMX.
Uniswap DAO dominates the DEX category with monthly fees approaching $100M
In the DEX space, Uniswap DAO has the highest fee production. Notably, Uniswap Labs is included as a separate entity that makes its profit by charging users who access the Uniswap protocol using the official Uniswap Labs front-end application.
Compared to other top 20 DEXs, Uniswap DAO generates roughly twice as much in fees.
As a Base-based DEX, Aerodrome generates twice the fee of its underlying L2 blockchain.
4. Top fee-charging protocols, focusing on MakerDAO and Ethena
Key protocols: MakerDAO and Ethena.
Ethena has the potential to surpass MakerDAO in terms of fees
MakerDAO and Ethena dominate the field of decentralized stablecoin issuers. The largest stablecoin issuers on the market, such as Tether (USDT) and Circle (USDC), are not included because their fees and revenues are primarily generated off-chain.
Ethena is expected to launch in November 2024, while MakerDAO was launched as early as November 2017.
5. Top fee-based protocols, focused on lending protocols
Key protocols to focus on include: Aave, Morpho, Compound, and Venus.
Aave is the fourth largest fee generator in the cryptocurrency space.
In the lending category, Aave leads the pack with a whopping $30 million difference in fees over second-place Morpho.
Although both Compound and Aave were launched in 2020, Aave has managed to surpass Compound in terms of active lending and fee generation.
Although Aave leads the entire lending space, Venus has a clear lead in the BNB chain’s lending market, with around 90% of its fees currently coming from its operations on the BNB chain.
6. Top charging agreements; chain segmentation
This section mainly introduces the blockchain deployed by the application.
Most of the top fee-based applications choose to deploy on multiple blockchains.
In the crypto space, most of the top 20 fee-paying applications are deployed on Ethereum (both L1 and L2).
It is worth mentioning that asset issuers (such as stablecoin issuers and liquidity staking providers) mostly adopt single-chain management, and their core products (stablecoins or LST) play the role of bridge assets on multiple other chains.
Of the top 20, Aerodrome is the only application that originates from an L2 blockchain (Base).
Frequently Asked Questions
What are the fees?
Fees refer to the total amount paid by the end user of the Agreement Services.
Different market sectors employ different fee structures, as protocols in each sector have their own unique business models:
Blockchain L1 and L2 = Selling block space for transaction fees
Liquidity staking = Get rewards by investing in users’ staked assets
Exchanges (DEX, derivatives) = exchange transaction fees for assets
Loan = lending service by providing interest
Stablecoin issuers = a way to earn returns by providing interest-bearing USD or investing user deposits
Asset management = earning returns by investing users’ deposits
What is the difference between expenses and revenue?
Revenue is calculated based on an agreed fee collection rate (%).
This collection rate can vary between 0 and 100%.
Currently, Uniswap DAO and Bitcoin have an adoption rate of 0%, while Ethereum is typically around 80%.
What is the difference between income and earnings?
Returns are calculated by deducting token incentives and operating expenses from revenue.
Token incentives refer to the protocol’s spending on user acquisition, calculated based on the USD value of the protocol’s native token.
Operating expenses include the investment in manpower and infrastructure during the development, maintenance and optimization of the protocol.
Please note that most protocols do not disclose their operating expenses on-chain, which is why many protocols have not yet introduced this metric.
When should expenses, revenue, or gains be considered?
As a rule of thumb, investors should focus on fees in the early stages before the protocol starts monetizing, and on revenue and/or earnings once it has started monetizing:
Early stage: focus on fees to show the agreement has paying customers.
Late stage: Focus on revenue, demonstrating that the protocol is able to monetize its paying customers.
Mature stage: Focus on returns, reflecting the protocol’s ability to create value for its token holders.
At the same time, the following ratios should also be paid attention to:
Revenue / Fees = Ideally, the display protocol has greater influence over the supply side (LPs) and is able to charge higher fees.
Yield / Revenue = Ideally, this indicates that the protocol has low user acquisition costs and operating overhead, allowing it to retain a higher percentage of revenue as revenue.