Crypto Apps Now Outearning Their Underlying Blockchains

As the cryptocurrency landscape evolves, we see a significant trend: crypto applications are now generating more revenue than the blockchain networks that support them. This indicates a shift in how value is distributed within the crypto ecosystem.

Key Takeaways

Revenue Shift: Crypto apps are now earning more than the blockchains that power them.
Record Earnings: PumpFun alone generated $724 million in fees over the last year.
Top Performers: Tether is projected to earn $15 billion this year, boasting a 99% profit margin.
Value Creation: The transition from protocols to applications has accelerated revenue generation in the crypto sector.

Crypto Apps Now Outearning the Blockchains That Power Them

In the wake of Ethereum's success with decentralized applications, many protocols have emerged to cater to specialized needs. Now, as the sector develops, fully functional blockchain-based applications are becoming key players in profitability.

A recent report from Delphi Digital reveals that these new crypto applications are starting to yield more revenue than their foundational blockchains.

Crypto Apps Surge Ahead of Blockchains

Crypto apps have shown remarkable growth, with some like PumpFun earning $724 million in fees last year, surpassing the Solana blockchain's earnings. Another app, Hyperliquid, brought in $667 million during the same timeframe. Although Solana itself has recorded $2.8 billion in annual revenue, the rapid growth of these applications is noteworthy; for instance, Hyperliquid captured a staggering 35% of total blockchain revenue in July, despite having just launched one year earlier.

Crypto Apps Now Outearning the Blockchains That Power Them

According to research from Delphi Capital, the boom of stablecoins has created immense profitability opportunities. Tether, the issuer of USDT, is forecasted to earn $15 billion in profits this year, achieving a remarkable 99% profit margin while collecting about $23 million in fees daily. This positions Tether as the most profitable company globally on a per-employee basis, outstripping tech and finance giants such as Apple, Meta, Goldman Sachs, and Nvidia.

Crypto Apps Now Outearning the Blockchains That Power Them

Revenue Dynamics in the Blockchain Space

The rate of revenue generation in the crypto sector has accelerated, as businesses transition from traditional protocols to innovative applications capable of capitalizing on trading, user engagement, and market volatility.

During the early DeFi Protocol Era, platforms like Maker and Aave achieved cumulative revenues of $100 million within just a few years of their inception.

Crypto Apps Now Outearning the Blockchains That Power Them

The DeFi Terminal Era introduced improved trading terminals that hastened revenue capture by enhancing user convenience and discovery. Next, the advent of DeFi Attention Scalers—such as Pump, Axiom, Hyperliquid, and Aster—allowed for more efficient monetization of user attention through rapid product iterations. These platforms have expanded their offerings across various features including spot and leveraged trading, yield farming, new market contracts, and social tools.

Most crypto applications today aim to create an optimal product that harnesses user attention and market volatility. The previous model suggested that blockchain platforms would capture value in accordance with the activity they housed. However, established protocols like Uniswap and Aave have faced challenges in realizing the value they generate for Ethereum. The current economic model may lead to a decreasing profit share for these blockchains unless they adapt to retain more value generated within their ecosystems.

Vitalik Buterin's Perspective on Value Capture

Ethereum co-founder Vitalik Buterin raised similar concerns in September, emphasizing the need for balance between applications that generate needed revenue for the ecosystem and those that maintain the founding principles of Ethereum.

In a blog post titled "Low-risk DeFi can be for Ethereum what search was for Google," Buterin posited that low-risk DeFi could serve as a financial anchor for Ethereum, akin to how ad revenue from Google Search supports Google’s varied subsidiaries.

He argued this model would enable Ethereum to consolidate its economic foundation without sacrificing its core values. “The revenue generator does not have to be the most revolutionary or exciting application of Ethereum,” Buterin stated, “But it must be something that upholds ethical standards.”

Buterin pointed to Aave’s stablecoin lending rates, which offer yields around 5% for reputable stablecoins like USDT and USDC, while higher-risk assets can yield over 10%. He envisions that such returns could provide a stable income source while ensuring the ecosystem remains true to its principles.