Revenue Stream

The most direct revenue stream, where users pay a fee for on-chain operations. These are typically collected by the network's validators or miners.

• Examples: Gas fees on Ethereum, priority fees on Solana.
• Distribution: Often split between block producers and a protocol treasury.

Revenue generated from fees accrued by liquidity pools that are owned and controlled by the protocol's treasury itself.

• Mechanism: The protocol uses its treasury assets (e.g., native tokens) to provide liquidity in DEX pools.
• Value Accrual: Trading fees from these pools flow directly back to the treasury, creating a sustainable revenue base.

Revenue specific to rollups and block builders from ordering transactions and extracting Maximal Extractable Value (MEV).

• Sequencer Fees: Fees for ordering transactions in L2 blocks.
• MEV Auctions: Revenue from selling the right to build or order blocks, which can be captured by the protocol.

Methods for managing collected revenue and influencing token economics.

• Treasury Allocation: Fees are sent to a decentralized treasury for governance-directed spending (grants, development).
• Token Burns: A portion of fees is used to buy and permanently destroy (burn) the native token, creating deflationary pressure.

Revenue shared with network participants who secure the chain via Proof-of-Stake.

• Source: New token issuance (inflation) and/or a share of transaction fees.
• Distribution: Rewards are distributed to validators and their delegators, aligning incentives for network security.

A key distinction in how revenue accrues to different layers of the stack.

• Sovereign Chains (e.g., Ethereum, Solana): All transaction fee value accrues to the base layer's native token and its validators.
• Shared/Sovereign Rollups: May share a portion of sequencer fees or MEV with the underlying L1 (e.g., via a revenue-sharing agreement).

The most direct revenue stream, where users pay a fee to have their transactions processed and included in a block. This includes:

• Gas fees on networks like Ethereum.
• Priority fees for faster inclusion.
• Protocol fees on decentralized exchanges (DEXs) like Uniswap, which take a percentage of each swap.

For Layer 2 rollups, the sequencer (the entity ordering transactions) can capture value through:

• Sequencing fees from users.
• Maximal Extractable Value (MEV) opportunities, such as arbitrage and liquidations. This revenue is a critical consideration for the economic security and decentralization of the rollup.

Protocols like Cosmos or Polkadot generate a revenue stream for validators and delegators through block rewards. This is often funded by protocol inflation, where new tokens are minted and distributed as rewards for securing the network, creating a continuous flow of value to participants.

Many DAOs and protocols direct a portion of all generated fees to a community-controlled treasury. For example:

• Aave directs a share of interest to its Safety Module.
• Compound's COMP token holders vote on fee distribution. This creates a sustainable revenue stream for funding development, grants, and insurance.

In decentralized finance (DeFi), automated market makers (AMMs) generate revenue from the spread between the buy and sell price of assets. This includes:

• The inherent slippage users experience on large trades.
• Fees collected by liquidity providers, a portion of which may go to the protocol treasury.

A robust revenue stream is essential for protocol security. It must sufficiently reward validators/stakers to make attacks costly (security budget) and fund ongoing development. A protocol with negligible or volatile revenue may face long-term sustainability risks and reduced economic security.

The total fees paid by users to access and use a blockchain's core services. This is the gross income before any distributions or burns.

• Examples: Ethereum's gas fees, Uniswap's swap fees, Lido's staking service fees.
• This is the raw inflow of value into the protocol's treasury or fee mechanism.

A governance-controlled mechanism to activate the collection of a portion of protocol fees for the treasury or token holders.

• A key value accrual debate in DeFi: should fees go to LPs or token holders?
• First famously proposed for Uniswap, where it remains a governance topic.
• Represents a potential future revenue stream for governance token holders.

The process by which economic value generated by a protocol's usage flows to and benefits its stakeholders, particularly token holders.

• Mechanisms include token buybacks & burns, staking rewards from fees, and treasury distributions.
• A protocol with high revenue but poor value accrual may not see its token price appreciate.
• Real Yield is a subset focused on distributing actual fee revenue.

The difference between the expected price of a trade and the executed price, often captured as revenue by liquidity providers.

• In AMMs like Uniswap, a portion of slippage (via the price impact) becomes impermanent loss for LPs but trading profit for arbitrageurs.
• For users, it's a cost; for the system, it's a mechanism that ensures liquidity reflects true market prices.

Profit that validators or searchers can extract by reordering, including, or censoring transactions within a block.

• While often seen as a user cost, protocols can capture a portion as revenue.
• Examples: Flashbots Protect relays MEV to validators; CowSwap uses solvers that compete to give users better prices, capturing MEV as improved pricing.
• Represents a complex, often adversarial revenue stream within blockchain mechanics.

A smart contract or set of addresses controlled by governance that holds a protocol's native tokens and accumulated assets (e.g., stablecoins, ETH).

• The primary destination for protocol revenue after activation of a fee switch or other accrual mechanism.
• Treasury management (investing, grants, buybacks) is critical for long-term sustainability.
• A growing treasury from real revenue is a strong health indicator.