Author: Donovan Choy, Thor Source: onchaintimes Translation: Shan Ouba, Golden Finance

Introduction

In the ever-changing crypto industry, thousands of projects come and go. What have withstood the test of time are the enviable few that have found some form of product-market fit. Which protocols are users actually paying for using? This article will analyze the most profitable business models in the crypto industry since 2024.

[8] Base

Base was launched by Coinbase in Q3 2023 and is an Ethereum L2 chain built on the Optimism Stack. Less than a year after its launch, Base has generated an impressive $52 million in year-to-date revenue, making it the eighth-highest-grossing protocol. Revenue comes from users paying fees to trade on Rollup.

In terms of earnings, Base has been quite profitable, with a year-to-date profit of about $35 million. There are two key factors here. First, Base has significantly reduced its data availability costs due to the use of blob fees in EIP-4844, which was implemented on March 13. Base immediately took advantage of blob fees, and data availability costs dropped from $9.34 million in the first quarter of 2024 to $699,000 in the second quarter of 2024, a significant reduction of about 13 times. Second, Base’s high yield relative to its L2 competitors is also due to the zero token incentive costs paid, as it does not have its own native token. [7] Lido Lido’s business model is fundamentally tied to Ethereum. Historically, Lido’s responsibility has been to lock up staked ETH on the beacon chain. With its stETH derivative, Lido allows ETH stakers to simultaneously earn network rewards (i.e., ETH issuance, priority fees, and MEV rewards) and unlock the illiquidity of their staked capital by staking ETH. This all changed in April 2023 when the Shapella hard fork upgrade allowed beacon chain withdrawals.

Today, Lido remains popular as it enables ETH holders to participate in network validation and earn a percentage of network rewards. Another advantage enjoyed by Lido stakers is the efficiency of automatic compounding, while single stakers are limited to 32 ETH blocks staked.

Lido actually acts as a two-sided marketplace connecting regular ETH holders and professional node operators. The ETH staked by users is directed to a diverse group of node operators approved by the Lido DAO. As of today, there are 109 node operators, the vast majority of which joined when the simple DVT (Distributed Validator Technology) module was implemented in April.

The liquidity staking giant ranks as the seventh-largest protocol by revenue. So far this year, Lido has generated $59 million in revenue on the two chains it operates: Ethereum L1 and Polygon PoS. Lido’s revenue comes from a 10% fee on user staking rewards, which is then split 50:50 between node operators and the Lido DAO Treasury.

After deducting the 5% staking rewards paid to node operators and LDO rewards paid to CEX/DEX liquidity pools, Lido DAO’s total profit for the year to date has reached $22.5 million.

[6] Aerodrome

Enter Aerodrome, an AMM DEX on Base L2, founded by the founders of Velodrome DEX on Optimism. Aerodrome was launched in August 2023 and quickly became the largest DEX on Base with a total locked value of $470 million. According to TokenTerminal, Aerodrome has generated $85 million in revenue so far this year, while paying out $29.7 million in token rewards in the past 30 days.

What is the secret of Aerodrome's success? It has madly copied and combined many successful mechanisms in the DEX space.

To attract deep liquidity, Aerodrome relies on the veCRV (Voting Escrow CRV) bribe token economics of its AERO token. AERO token holders can lock up AERO for up to four years and gain voting rights to direct future issuance to LPs based on the number of veAERO votes received each week. On Aerodrome, 100% of pool trading fees go to AERO lockers, while on Curve the ratio is 50:50 between LP and CRV lockers. Another interesting twist is that, unlike Curve, rewards are proportional to the volume performance of the pool, thereby incentivizing veAERO voters to direct issuance to the most productive trading pools. Both of these core protocol design mechanisms are key incentives behind Aerodrome’s deep liquidity pools.

To simplify its voting escrow system, Aerodrome took a page from Curve and implemented its own version of “Votium” called “Relay,” where locked AERO tokens are automatically pooled for voting, and compounded earnings can be exchanged back to VELO.

Another factor in Aerodrome’s success is “Slipstream,” a fork of the Uniswap V3 centralized liquidity contract. This undoubtedly helps Aerodrome compete with Uniswap on particularly high-volume trading pairs such as WETH/USDC.

[5] Ethena

The most successful protocol in 2024 is undoubtedly Ethena. Backed by major investors Dragonfly and Arthur Hayes, Ethena has jumped on the scene as a new entrant into the stablecoin market. Since its launch in January 2024, USDe has grown to an impressive $3.6 billion market cap, making it the fourth-largest stablecoin asset today. However, its USDe token is not technically a stablecoin pegged to the US dollar, but more accurately a synthetic dollar.

How does Ethena work? Like Maker’s DAI, Ethena’s USDe is a stable asset pegged to the US dollar, primarily backed by ETH and stETH deposits. The difference, however, lies in how USDe yields are generated. USDe yields come from a delta hedging strategy that exploits the difference in funding rates between CEX and DEX perpetual futures markets. When the funding rate on a CEX is positive, Ethena earns funding fees through its short positions on that exchange. At the same time, Ethena pays funding fees through its long positions on DEXs with negative funding rates. These simultaneously held positions allow USDe to maintain its peg regardless of ETH's directional headwinds.

Ethena currently does not charge any protocol fees. Currently, its main revenue comes from staking ETH deposited by users to earn network issuance and MEV capture. According to TokenTerminal, Ethena is the fifth largest revenue generator today, with annual revenue of $93 million. After accounting for costs paid in sUSDe earnings, Ethena's earnings are $41 million, making it the most profitable dapp so far this year.

However, it is worth noting that Ethena’s business is designed to excel in bull markets, which cannot last forever. Ethena’s successful points campaign is also unsustainable. With each wave of ENA unlocked, people’s interest and confidence in Ethena continue to be weakened. To cope with this situation, Ethena has tried to introduce utility into ENA in two ways: locking ENA in Season 2 to obtain the highest points, and more recently, using the vault on Symbiotic to obtain re-staking income.

[4] Solana

For a blockchain that was almost declared dead less than a year ago, Solana is doing pretty well. Solana’s resurgence has been fueled by a combination of factors: memecoin trading, its “state compression” update (which helped attract DePIN founders) and a resurgence in NFT trading, as well as the much-lauded JTO airdrop in December 2023, which triggered a huge capital inflow into Solana.

Solana is currently ranked fourth in terms of revenue generation, with $135 million in annual revenue year-to-date. This is the share of transaction fees that users pay to validators for using the network. However, if we factor in token issuance (costs), Solana does not appear to be profitable, having paid out $311 million in token rewards in the last 30 days alone. This brings us to the thorny issue of L1 business valuation. Solana supporters may argue that assessing the profitability of L1 blockchains on the “Revenue - Cost = Profit” basis described above is irrelevant. This criticism argues that network issuance is not a cost because L1 token holders on PoS chains can access these value streams by staking on popular liquidity staking platforms, such as Jito on Solana or Lido on Ethereum.

[3] Maker

Maker was launched in late 2019 with a simple and easy to understand business model - issuing the DAI stablecoin against crypto collateral that charges an interest rate on the protocol. However, behind the scenes, Maker’s inner workings are quite complex.

Since its initial inception, Maker has gone through many changes. To stimulate demand for DAI, Maker incurred costs through the “DAI Savings Rate” (DSR), which is the collateral yield for locking up DAI. To survive the bear market, Maker established a core division focused on purchasing real-world assets such as US Treasury bills. To scale, Maker has sacrificed decentralization by relying on USDC stablecoin deposits through its pegged stability module since 2022.

Today, the total supply of DAI is 5.2 billion, down 55% from its all-time high of around 10 billion during the 2021 bull run. The protocol has generated $176 million in revenue so far this year. According to Makerburn, the protocol has an annualized revenue of $289 million. A large portion of the revenue in recent months (14.5%) is due to the DAO’s controversial decision in April to allow DAI loans to be issued against USDe collateral on Ethena in Morpho’s vaults. RWA revenue is also quite substantial, with an annualized revenue of $74 million, accounting for 25.6% of total revenue.

How much money does Maker make? As mentioned above, one of the ways Maker tries to incentivize demand for DAI is through the DSR, which is the yield paid to users who stake DAI. Not every DAI holder can take advantage of the DSR, as it is also used for various purposes in DeFi. Assuming a DSR of 8% and a staking rate of 40%, Maker's cost is approximately $166 million. Therefore, after deducting another $50 million in fixed operating costs, Maker's annualized revenue can be estimated to be approximately $73 million.

[2] Tron

The second largest revenue generator in Web3 is the L1 Tron network, which has generated approximately $852 million in revenue so far this year, according to TokenTerminal.

Tron’s success is largely due to the large amount of stablecoin activity on its network. In an interview with David Uhryniak, Head of Ecosystem Development at Tron DAO, Artemis said that most of this stablecoin traffic comes from users in developing economies such as Argentina, Turkey, and African countries. According to the chart below, we can see that Tron is often tied with Ethereum and Solana for the highest stablecoin transfer volume.  

Tron’s primary use case as a stablecoin network is also reflected in its stablecoin supply of 50-60 billion, second only to Ethereum.

[1] Ethereum

Finally, let’s take a look at the highest-earning business in Web3 today: Ethereum. On a year-to-date basis, Ethereum has revenue of approximately $1.42 billion.

So how profitable is Ethereum? When we subtract the inflation rewards paid to PoS validators from the transaction fees paid by users using the Ethereum mainnet, we can see from the figure below that the network was profitable in Q1, but lost money in Q2. The Q2 loss was likely due to most transaction activity moving to Ethereum rollups to take advantage of lower gas costs. However, as with other L1s, the “revenue minus profit” framework for assessing blockchain profitability obfuscates the true value flow to ETH stakers, as users can earn a percentage of network issuance by staking on liquid staking platforms.

Eight Big Money Trees in the Cryptocurrency Market So Far This Year

To summarize all of the above, we get the following table: