Rainmakers of the Crypto Market: A Review of Top Fee Protocols

Original Title: 《The Rainmakers of the Crypto Market》

Author: TokenTerminal

Compiled by: Mars Finance, MK

Introduction

This issue of the newsletter focuses on analyzing the protocols that generate the most significant fees (including blockchains and decentralized applications). The reasons we focus on these protocols include:

Which protocols are users more inclined to pay service fees for? What types of services do these protocols offer, and what are their business models? What is the total amount of fees that users actually pay? Which specific market sectors are more popular compared to others? Are there protocols that dominate certain market sectors? Through analyzing a detailed chart, we will delve into the industry trends of the cryptocurrency market.

Let’s explore in detail!

1. Focus on Top Fee-Generating Protocols in Blockchain

The protocols of focus include: Ethereum, Tron, Bitcoin, Solana, BNB Chain, and Base.

Major Fees Come from General Blockchains

Among the top 20 protocols, 5 are Layer 1 (L1) blockchains, and only 1 belongs to Layer 2 (L2) blockchains.

In the past 30 days, Ethereum generated the highest fees, reaching approximately $180 million. Although Base's average transaction fee is relatively low, at about $0.03 (compared to Ethereum L1's $4.5), it successfully entered the top 20 due to increased user activity on the L2 layer.

Apart from L1 and L2 blockchains, all other protocols in the top 20 belong to the decentralized finance (DeFi) category.

2. Top Fee-Generating Protocols, Focus on Lido Finance and Jito

Key protocols: Lido Finance and Jito.

Lido Leads in Fee Generation Among All Crypto Applications

Jito operates two different businesses: liquid staking (JitoSOL) and maximizing extractable value (MEV) markets. The former profits through asset under management (AUM) based management fees, while the latter profits by charging MEV tips to validators (this chart only includes MEV tips).

In contrast, Lido focuses solely on liquid staking, earning commissions from staking rewards charged to depositors. Compared to Jito, Lido generates fees that are about twice as much, but Jito is growing at a faster pace.

Lido manages $3.35 billion in staked assets, while Jito has $160 million. Lido's fully diluted market cap reaches $190 million, while Jito's is $250 million.

3. Top Fee-Generating Protocols, Focus on Decentralized Exchanges (DEX)

Key protocols: Uniswap, PancakeSwap, Aerodrome, Uniswap Labs, and GMX.

Uniswap DAO Dominates the DEX Category with Monthly Fees Approaching $100 Million

In the DEX space, Uniswap DAO generates the highest fees. Notably, Uniswap Labs is considered as an independent entity, profiting by charging users who access the Uniswap protocol through the official Uniswap Labs frontend application.

Compared to other DEXs in the top 20, Uniswap DAO's fee generation is about twice that of its competitors.

Aerodrome, a DEX based on Base, generates fees that are double that of its underlying L2 blockchain.

4. Top Fee-Generating Protocols, Focus on MakerDAO and Ethena

Key protocols: MakerDAO and Ethena.

Ethena Has the Potential to Surpass MakerDAO in Fees

MakerDAO and Ethena dominate the decentralized stablecoin issuer space. The largest stablecoin issuers in the market, such as Tether (USDT) and Circle (USDC), are not included as their fees and revenues are primarily generated off-chain.

Ethena is expected to launch in November 2024, while MakerDAO has been live since November 2017.

5. Top Fee-Generating Protocols, Focus on Lending Protocols

Key protocols include: Aave, Morpho, Compound, and Venus.

Aave is the Fourth Largest Fee Generator in the Cryptocurrency Space.

In the lending category, Aave stands out, with a fee gap of up to $30 million between it and the second-ranked Morpho.

Although both Compound and Aave launched in 2020, Aave has successfully surpassed Compound in active loans and fee generation.

While Aave leads in the overall lending space, Venus has a significant advantage in the lending market on the BNB Chain, with approximately 90% of its fees coming from its operations on the BNB Chain.

6. Top Fee-Generating Protocols; Chain Segmentation

This section mainly introduces the blockchains where applications are deployed.

Most Top Fee-Generating Applications Choose to Deploy on Multiple Blockchains.

In the crypto space, most of the top 20 fee-generating applications are deployed on Ethereum (including L1 and L2).

It is worth mentioning that asset issuers (such as stablecoin issuers and liquid staking providers) mostly adopt a single chain management approach, with their core products (stablecoins or LSTs) serving as bridge assets across multiple other chains.

Among the top 20, Aerodrome is the only application that originates from an L2 blockchain (Base).

Frequently Asked Questions

What are fees?

Fees refer to the total amount paid by end users for the protocol's services.

Different market sectors adopt different fee structures, as each sector's protocols have their unique business models:

• Blockchain L1 and L2 = Charge transaction fees by selling block space
• Liquid Staking = Earn rewards by investing users' staked assets
• Exchanges (DEX, derivatives) = Exchange assets for trading fees
• Lending = Provide loan services with interest
• Stablecoin Issuers = Generate income by providing interest-bearing dollars or investing user deposits for returns
• Asset Management = Generate returns by investing users' deposits

What is the difference between fees and revenue?

• Revenue is calculated based on the protocol's fee collection rate (%).
• This collection rate can vary between 0% and 100%.
• Currently, the adoption rate for Uniswap DAO and Bitcoin is 0%, while Ethereum's is typically around 80%.

What is the difference between revenue and profit?

• Profit is obtained by subtracting token incentives and operational expenses from revenue.
• Token incentives refer to the protocol's expenditures on user acquisition, calculated at the dollar value of the protocol's native tokens.
• Operational expenses include the manpower and infrastructure investments made by the protocol during development, maintenance, and optimization.
• Please note that most protocols do not publicly disclose their operational expenses on-chain, which is why many protocols have yet to introduce this metric.

When should one consider fees, revenue, or profit?

Based on experience, investors should focus on fees in the early stages when the protocol has not yet begun monetization, and on revenue and/or profit in the stages where monetization has begun:

• Early Stage: Focus on fees, indicating that the protocol has paying customers.
• Later Stage: Focus on revenue, indicating that the protocol can monetize its paying customers.
• Mature Stage: Focus on profit, reflecting that the protocol can create value for its token holders.

Additionally, the following ratios should be monitored:

• Revenue / Fees = Ideally shows that the protocol has significant influence over suppliers (LPs) and can charge higher fees.
• Profit / Revenue = Ideally indicates that the protocol has low user acquisition costs and operational expenses, allowing it to retain a higher proportion of revenue as profit.