User engagement is a raw commodity. Every transaction, signature, and data query creates value for the network, but the application capturing that engagement receives zero direct revenue from the underlying infrastructure.
the-creator-economy-web2-vs-web3
Blog
The Hidden Revenue in Your Unmonetized Engagement
Web2 platforms capture value from user engagement. Web3 protocols like Lens and Farcaster enable creators to directly monetize likes, shares, and comments through verifiable data ownership, micro-payments, and portable reputation.
introduction
THE UNMONETIZED FLOW
Introduction
Blockchain applications generate immense, untapped value through user engagement that current infrastructure fails to capture.
Protocols monetize your users. Layer 2s like Arbitrum and Optimism generate millions in sequencing fees, while RPC providers like Alchemy and Infura profit from your application's data requests, creating a fundamental misalignment.
The revenue is already there. The MEV supply chain—searchers, builders, and validators—extracts value from user intent on platforms like Uniswap, with the application acting as a free lead generator.
Evidence: In Q1 2024, Arbitrum generated over $50M in sequencer revenue, a direct product of application-level user activity it does not share.
key-trends
THE HIDDEN REVENUE IN YOUR UNMONETIZED ENGAGEMENT
The Web2 Engagement Trap: Three Structural Flaws
Your daily clicks, posts, and searches generate immense value, but the underlying architecture ensures you never see a dime.
01
The Data Siphon: You Are the Product
Your engagement is harvested as behavioral data, a raw material refined into targeted ads. The value chain is opaque and you are excluded from the profit pool.
- Value Capture: Ad tech intermediaries like The Trade Desk capture ~40% of every ad dollar.
- User Payout: $0. Your data's value is extracted, not shared.
$0
User Payout
40%
Intermediary Take
02
The Platform Lock-In: Walled Gardens Win
Network effects and proprietary APIs (Facebook Graph, Twitter API) create captive audiences. Your social graph and content are non-portable assets you don't own.
- Switching Cost: Rebuilding a network on a new platform has an effective cost of thousands of hours of engagement.
- Platform Cut: App Store and Play Store enforce a 30% tax on any creator monetization, stifling innovation.
30%
Platform Tax
1000s hrs
Switching Cost
03
The Attention Auction: Engagement ≠Equity
Algorithms optimize for maximum time-on-site, not user benefit. This creates addictive, low-value engagement (doomscrolling) that is easy to monetize but hard to convert into user-owned capital.
- Valuation Metric: Platforms are valued on Daily Active Users (DAU), not on value returned to users.
- Monetization Rate: Less than 0.1% of users become direct revenue sources via subscriptions or creator funds; the rest are just ad inventory.
DAU
Primary Metric
<0.1%
Creator Monetization
DATA CAPTURE & MONETIZATION
The Engagement Value Gap: Web2 vs. Web3
A comparison of how user engagement is tracked, valued, and monetized across dominant Web2 platforms versus the emerging Web3 paradigm.
| Engagement Metric / Feature | Web2 Platform (e.g., Meta, Google) | Web3 Protocol (e.g., Farcaster, Lens) | Web3 User (via Wallets & Data Vaults) |
|---|---|---|---|
Primary Revenue Model | Sell user attention & data to advertisers | Protocol fees, token incentives, premium features | Direct monetization via content, staking, airdrops |
User Data Ownership | |||
Revenue Share to User | 0% | Varies by protocol (e.g., 0-15%) | 100% of direct earnings |
Data Portability | Walled garden; export limited to platform | Open social graph (e.g., Farcaster FIDs) | Full custody via self-custodied wallets |
Ad Revenue Capture by User | 0% | Possible via tokenized attention (e.g., Brave BAT) | User-controlled ad auctions |
Average CPM for User Attention | $5 - $50 (platform keeps ~100%) | N/A (model differs) | User sets price (e.g., $0 - $100+ via Earn) |
Engagement Tracking & Analytics | Centralized, opaque, used for targeting | On-chain, transparent, composable | User-controlled via privacy tools (e.g., Nym, Aztec) |
Monetizable Actions | Likes, shares, clicks (value captured by platform) | Mints, collects, tips, governance (value flows to creator/curator) | Any on-chain interaction (value accrues to user/DAO) |
deep-dive
THE DATA
The On-Chain Primitive: From Data to Direct Revenue
On-chain user data is a direct revenue primitive, not a passive byproduct.
On-chain data is capital. Every transaction, swap, and approval creates a structured, verifiable asset. This asset is not a marketing signal; it is a direct revenue primitive that protocols can programmatically monetize.
Current models leak value. Protocols like Uniswap and Aave generate billions in fees but cede user intent data to off-chain indexers like The Graph or centralized analytics firms. This creates a revenue asymmetry where core protocol value is extracted by third parties.
The primitive is programmable monetization. Protocols can embed direct data monetization into their smart contracts. This transforms engagement into a native revenue stream, bypassing traditional ad-tech intermediaries and capturing value at the source.
Evidence: Arbitrum sequencer fees, a direct data monetization mechanism, generated over $100M in 2023. This proves on-chain activity is a sellable commodity when the protocol controls the settlement layer.
protocol-spotlight
FROM LURKER TO LIQUIDITY
Protocols Monetizing Engagement Today
Idle user activity is a stranded asset. These protocols capture and financialize attention, data, and network effects.
01
EigenLayer: The Staked Security Marketplace
The Problem: New protocols need billions in capital to bootstrap security (trust). The Solution: Restake idle ETH staking yields to secure other networks (AVSs).
- $16B+ TVL in restaked assets, creating a new yield layer.
- Enables rapid bootstrapping for networks like EigenDA, AltLayer.
$16B+
TVL
40+
AVSs
02
The Graph: Indexing as a Revenue Stream
The Problem: DApps burn engineering cycles on custom, broken indexers. The Solution: A decentralized marketplace for querying blockchain data.
- Indexers earn query fees and inflation rewards for serving data.
- Delegators earn a share of rewards for staking GRT to back indexers.
~1B
Queries/Day
800+
Subgraphs
03
Helium: Physical Work for Digital Tokens
The Problem: Building wireless infrastructure is capital-intensive and slow. The Solution: Users deploy hotspots, earn HNT/MOBILE/IOT for providing 5G/LoRaWAN coverage.
- ~1M hotspots globally, creating a user-owned telecom.
- Nova Labs (operator) captures value via data transfer fees on the network.
1M+
Hotspots
$3B+
Network MCAP
04
LayerZero & Axelar: The Messaging Tollbooths
The Problem: Cross-chain apps need secure, generic messaging but don't want to build it. The Solution: Charge a fee for every inter-chain message and proof relay.
- Relayers & Oracles earn fees for submitting transaction proofs.
- Protocols like Stargate, Radiant pay for omnichain liquidity.
70+
Chains
$10B+
Msg Volume
05
Galxe & RabbitHole: Onboarding as a Service
The Problem: Protocols need targeted, high-intent users, not empty airdrop farmers. The Solution: Curate credential-based quests; users earn tokens for completing on-chain actions.
- Protocols pay for verified engagement and community growth.
- Users monetize their learning and onboarding effort.
18M+
Users
4,000+
Campaigns
06
Pendle: Yield-Trading as a Product
The Problem: Future yield is illiquid and trapped in DeFi vaults. The Solution: Tokenize yield streams into tradable PT (principal) and YT (yield) tokens.
- LPs earn fees from a $1B+ TVL yield-trading marketplace.
- Users monetize their yield outlook by selling YT tokens for immediate cash.
$1B+
TVL
10x
Volume Growth
counter-argument
THE INCENTIVE MISMATCH
The Cynic's Corner: Why This Might Not Work
Monetizing user engagement creates a fundamental conflict between protocol revenue and user experience.
The MEV tax is real. Every monetized engagement action creates a new extractable value surface. Aggregators like Jito and Flashbots will capture this value, not the protocol or the user, creating a hidden tax on every interaction.
User experience degrades under extraction. Protocols like EigenLayer and Across rely on economic security from staked capital, not user loyalty. Optimizing for revenue introduces latency and complexity that directly harms the seamless UX required for mass adoption.
The data proves the trade-off. Layer 2s like Arbitrum and Optimism prioritize low-cost, fast transactions to drive growth, explicitly subsidizing users. Their revenue models focus on sequencer fees and eventual L1 settlement, not on-premium engagement features.
risk-analysis
THE HIDDEN REVENUE IN YOUR UNMONETIZED ENGAGEMENT
Execution Risks and Bear Case Scenarios
Blockchain protocols and applications leave significant value on the table by failing to capture and monetize user engagement data.
01
The MEV-Awareness Gap
Most dApps treat user transactions as atomic events, ignoring the extractable value they signal to the network. This creates a data arbitrage opportunity for searchers and builders who front-run intent.
- Problem: Your protocol's user flow leaks predictable transaction patterns.
- Solution: Integrate with Flashbots Protect RPC or BloxRoute to internalize and monetize backrunning opportunities.
- Result: Convert leaked value into protocol revenue or user rebates.
$1B+
Annual MEV Extracted
0%
Protocol Capture
02
The Loyalty Token Illusion
Protocols issue governance tokens as engagement rewards, but these often lack cash flow rights and dilute existing holders. This is a missed monetization event.
- Problem: Airdrops and points create mercenary capital, not sustainable revenue.
- Solution: Model after Frax Finance's sFRAX or Lido's stETH—embed a native yield asset.
- Result: Token accrues value via direct fee sharing, turning engagement into a yield-bearing asset.
>90%
Airdrop Sell Pressure
Sustainable Yield
Alternative Model
03
The On-Chain Data Firehose
Protocols generate petabytes of valuable on-chain data—wallet graphs, trading signals, liquidity flows—but outsource this value to Nansen, Dune Analytics, and Arkham.
- Problem: You own the data but not the insights or the revenue from selling them.
- Solution: Build a dedicated data arm or partner with Goldsky/The Graph to offer premium analytics feeds.
- Result: Create a high-margin B2B revenue stream from your own activity logs.
$100M+
Market Cap (Nansen)
Zero
Your Share
04
The Cross-Chain Engagement Silos
User engagement fragments across Ethereum, Solana, Base, and Arbitrum, but protocols monetize only on their home chain. This is a fragmented identity problem.
- Problem: A user's lifetime value is trapped in isolated state.
- Solution: Implement a cross-chain identity layer using EigenLayer restaking or Polygon ID to track and reward aggregate engagement.
- Result: Unified user scoring enables targeted incentives and premium service tiers across the multichain ecosystem.
5+
Avg. Chains Per User
1
Chains Monetized
future-outlook
THE UNLOCK
The 24-Month Outlook: Aggregation and Abstraction
The next wave of protocol revenue will be captured by abstracting user complexity and aggregating fragmented liquidity.
Aggregation is the new moat. Protocols that own the user's routing decision, like UniswapX or CowSwap, monetize the spread between the best available price and the price they secure. This creates revenue streams independent of on-chain settlement fees.
Abstraction creates user lock-in. By simplifying complex multi-step actions—like cross-chain swaps via Across or LayerZero—protocols become the default interface. The value accrues to the abstraction layer, not the underlying execution venues.
The evidence is in the data. UniswapX now facilitates over $2B in weekly volume by aggregating off-chain intents, demonstrating that the intent-based architecture is the dominant model for capturing value from user engagement.
takeaways
THE UNMONETIZED ENGAGEMENT STACK
Key Takeaways for Builders and Investors
User engagement is the most valuable on-chain asset, yet most protocols fail to capture its economic value beyond simple transaction fees.
01
The MEV-Aware Revenue Model
Standard fee models ignore the value of order flow. Intent-based architectures like UniswapX and CowSwap demonstrate that capturing and efficiently settling user intent creates a new revenue layer.\n- Revenue Source: MEV recapture and routing efficiency.\n- Builder Action: Integrate with solvers or become a solver to monetize flow.\n- Investor Signal: Protocols that own their order flow are defensible.
$500M+
Annualized MEV
10-30%
Revenue Uplift
02
The Loyalty & Data Moat
Engagement data (session keys, social graphs, transaction patterns) is siloed and wasted. Projects like CyberConnect and Rarible show that tokenizing social capital creates powerful network effects.\n- Revenue Source: Premium features, data licensing, and governance power.\n- Builder Action: Implement non-transferable soulbound tokens (SBTs) for reputation.\n- Investor Signal: Valuation tied to active, identifiable user base, not speculative TVL.
100x
LTV Increase
Zero-Fee
Acquisition Cost
03
The Cross-Chain Engagement Sinkhole
Bridging fragments user identity and loyalty. Omnichain smart accounts (via LayerZero, Polyhedra) and intent bridges (Across) allow protocols to own the user relationship across any chain.\n- Revenue Source: Capture full user journey, not single-chain gas fees.\n- Builder Action: Build with account abstraction standards (ERC-4337) and universal messaging.\n- Investor Signal: Protocol with omnichain users has a ~5x larger TAM than a single-chain competitor.
$20B+
Bridged Monthly
5x TAM
Market Expansion
ENQUIRY
Get In Touch
today.
Our experts will offer a free quote and a 30min call to discuss your project.
NDA Protected
Confidentiality24h Response
Time to ValueDirectly to Engineering Team
No Sales Fluff10+
Protocols Shipped
$20M+
TVL Overall