Original author ：Lucas Campbell
Original translation ：DeFi Road
profits = Gross income - The total cost
Some people think this formula is not applicable to blockchain .“ Blockchain is not an enterprise —— They have no profit margins ”
I think it's wrong .
The profit formula is applicable to blockchain , Just as it applies to families 、 Wealth 500 Strong company 、 Non profit organizations are like nation states .
For long-term sustainability , The network must sell more than it consumes .
But what blockchain sells ？
Blockchain sells blocks ！ This is income .
What is the cost of blockchain ？ Security ！ Issuance and transaction costs .
But it's a dirty little secret ： Blockchain is losing a lot of money . None of them is profitable . At the current level of security , None is sustainable .
But this is the first time in the history of encryption , A chain is about to start making profits . And not just a little profit . But make a lot of money .
So which chain will become the first profitable blockchain , How did it come true ？
The author of this article Lucas In depth study of the data shows us .
The first profitable blockchain
Blockchain business model
The value of the dollar benefits from the dominance of American hegemony .
Visa The Internet is valuable , Because it acts as a track for the financial system connecting billions of economic participants . As crypto aborigines understand , The problem is that they are not in a socio political sense “ Security ”. These centralized institutions provide “ Settlement ” layer , But at the end of the day , The settlement layer is controlled by a centralized organization , Whether it's a government or a company .
Blockchain provides a neutral choice . The business of blockchain is to act as a secure settlement layer of value , At the same time, maintain neutrality through decentralization . Blockchain achieves this by selling blocks , Blocks can settle a limited number of transactions in each block within a certain time interval . for example ：
Bitcoin every 10 Sold once a minute, it can accommodate 1 MB Blocks of trading .
Ethereum every 15 Sell blocks once a second , It can hold 80 KB Transactions （ per 10 minute 4 MB）.
Block processing transactions , Promote the economic activities of users . This can include sending and receiving funds 、 Exchange tokens 、 The loan 、 Collect digital items and anything else of value that can be programmed .
From a business point of view , The product of blockchain is blockspace . The goal is to push value into blockspace and collect revenue through it .
So what drives the value of block space ？ Security .
A less secure blockchain means that transactions can be malicious / Reversal or review of the attacking entity . therefore , Insecure networks are not a viable settlement layer for value , In particular, they handle tens of billions of dollars a day .
source ：Money Movers
The more secure the blockchain is , The more confidence others have in the settlement of transactions , So as to promote the demand for block space . If blockchain wants to become a global settlement layer , Then becoming a secure blockchain is a basic priority .
But for safety , Blockchain needs to pay for this . So , Blockchain issues tokens to motivate a group of participants to allocate resources to the network —— Usually with computer energy (PoW) Or money (PoS) In the form of —— To make it safe and secure from attack .
This makes security the main cost of blockchain .
ad locum , We can deduce the core business model of public blockchain . Blockchain receives revenue from transaction fees , And their cost is what they pay for security through distribution . To put it simply ：
Net profit = transaction cost （ dollar ）- issue （ dollar ）
therefore , We can analyze it by looking at the amount they spend to protect the blockchain and the amount of revenue they bring through transaction fees “ Successful blockchain business ”. If blockchains pay more for security than they earn , Then they will have a deficit .
“L1 economic . Every L1 Chains need to be protected . It costs money .
You can pay for protection in two ways .
1） Inflate your money supply
2) Tax on block space sales
If your inflation costs exceed your tax income , Then you are at a loss . Deficits are unsustainable .”
As a crypto investor , One thing you can do is to find the most profitable blockchain business and invest . The best blockchain sells its blocks at maximum value , Because people are willing to pay for it , This means that it has a settlement layer suitable for the product market .
People are willing to work for iPhone Pay thousands of dollars , Because they believe in iPhone It is a product superior to alternative products . last year ,iPhone It accounts for less than... Of global smartphone revenue 40%, But it accounts for more than 75%.
The same is true of blockchain . As long as the block provides the best products （ Secure economic opportunities ）, The entity is willing to pay higher transaction fees for the block .
The questions we should ask —— Who is apple in blockchain ？
Which blockchains are profitable ？
The fact is that ： Today, no blockchain is profitable .
at present , Each major blockchain network pays more for its distribution than it earns from its transaction costs . They are all running unsustainable businesses .
You can see this in the figure below .
Data sources ：CryptoFees&MoneyPrinter
Every day near Ethereum 1300 Million dollars in transaction costs , Make it the most valuable blockchain measured by this standard . However , On the other hand , To generate these blocks , The network distributes... To miners every day 3600 Thousands of dollars in ETH. therefore , Ethereum's current operating loss is -64%.
In the past 7 Average daily profit margin for days
The closest blockchain to achieving profitability is the coin security smart chain （BSC）, Because it earns... Every day 140 $10000 , Instead, only 174 Million dollar issue . On the face of it , You might think it's amazing .
“ It's time to imitate BNB 了 .”
But this is where this analysis becomes nuanced . in fact , I think it will be like BNB Such chains are excluded from the others Layer 1 The profitability of blockchain is almost reasonable beyond comparison .
Here's why ：
Think about it , When transaction settlement must exist , Blockspace becomes valuable . And this certainty costs money .
Coin security smart chain （BSC） Only by 21 A verifier protects . This is a closed 、 Licensed entity group . let me put it another way , Centralized BSC The chain is profitable , Because it didn't pay for its security . this 21 It's easy for two verifiers to collude , Make anyone's deal irrelevant , Thus, the value of blockchain is much lower than that of the network that maximizes decentralization and anti censorship .
If BSC Really pay for high security , Its cost will certainly be higher . by comparison , Bitcoin every day in 100 Ten thousand miners spent 3475 Thousands of dollars , And Ethereum is in 276,000 Spend on a verifier 3600 Million dollars to protect the beacon chain （ Before the merger ！）.
It is also worth emphasizing that , There have been reports BSC Suffered from false transactions and spam transactions , This may disproportionately report higher income .（ Of course , There are also refutations to these claims —— It's hard to classify the truth ）.
But the fact remains , Except Ethereum and BSC（ It's really the first 1 Tier? ？）, Almost all major third 1 The layers are in the order of 90% Or worse .
Every L1 Have established impressive 、 Scalable infrastructure layer , At the same time, billions of dollars are issued every year to protect the block —— But what is the demand for blocks ？
Again , It's a trade-off . stay Avalanche or Solana Trading on is much cheaper than bitcoin or Ethereum , But the affordability of such transactions comes at a price . These chains do not generate enough revenue to exceed their expenses .
How do you evaluate your demand for products ？ Product sales revenue .
How do you evaluate your need for blockchain ？ Revenue from block space sales .
Revenue is the real test of the demand for block space . Not the number of blocks sold .
Although circulation has been decreasing over the past decade —— Bitcoin halved three times —— The bitcoin network is still in -98% Running at a loss . Although the network plans to effectively rely on transaction costs by the end of the century （ In the 5 After halving times ,95% The above BTC Will be mined ）, But the network is not even close to breakeven . these years , As circulation tends to zero , And the network only pays its income for security , This is noteworthy .
The reality is clear ： It is difficult to establish a profitable blockchain business .
Even the Ethereum blockchain with the most valuable blocks , Nor can it maintain profitability in its current state , Bitcoin is even worse —— With the alternative 1 The layers are equal .
Why doesn't it matter （ temporary ）
Blockchain as a technology is still too early . Large scale adoption has not yet been achieved , The technology itself still has a lot of room for optimization , Therefore, it makes sense that blockchain is not profitable at present —— They are still self reliant .
This is related to 90 Internet companies in the s are very similar . Amazon was founded in 1994 year , But it was not until the 2001 It was only in , It was from 10 $billion in revenue 500 Ten thousand dollars in profits .
The company, now worth trillions of dollars, spent 7 It took years to make a profit .
In terms of context , Bitcoin already exists 12 year , Ethereum will be this year 7 May celebrates its founding 7 Anniversary of the . It's like the blockchain 2000 year .
This raises a question …… Will the blockchain be profitable within the same time frame as Amazon ？
The road to profit
So what is the path of blockchain profitability ？
There are two main levers ：
Increase transaction revenue
Reduce security costs
1、 Increase transaction revenue
The main way for blockchain to increase transaction revenue is to increase block utility ; Increase the value of what can be done in each block . This can be done by building valuable applications on top of the network 、 Increase the possible surface area on the network and the utilities available to users .
for example , In Ethereum , Anyone in the world can be in Uniswap Admiral 100 Thousands of dollars in ETH Switch to 100 Thousands of dollars in DAI. This can be very valuable to someone . They are happy to pay 10 A fee of US $to settle the transaction . in fact , Maybe they are willing to pay up to 1,000 dollar . Maybe in times of stress and volatility , They may be willing to pay 10,000 Dollars to deal with their transactions immediately . A rational participant is willing to pay a slightly higher price for a block than the value they can extract from the block .
As the application layer becomes more active , Blocks become more valuable , Because of the application （ Think DeFi、NFT） Economic opportunities are created within the block .
Blockspace revenue is almost directly related to the number of valuable applications on the network and the opportunities they have .
When we look at bitcoin , This is more obvious . Bitcoin actually has only one application —— Mobile bitcoin . therefore , It is difficult to generate a large amount of block space revenue , Like -98% The profit margin of .
A use case can only generate so much revenue .
With the help of smart contract platform , You can build an unlimited number of applications , This allows blockspace revenue to expand beyond a single application specific blockchain .
We can now see that this is happening , Because the fee income of multiple smart contract platforms has exceeded bitcoin , Including several Ethereum applications . Compared with transferring bitcoin , The market is willing to pay more for exchanging tokens on Ethereum .
The key point here is that the revenue of block space increases with the utility of block space ; More options . With more space for tokens 、 Expand with more applications and more active ecosystems .
All this depends on the decentralization and security of the network .
As mentioned earlier , If the transaction can be reversed or reviewed , Then block space is not so valuable , And fewer applications will build a long-term home in such a network .
2. Reduce security costs
Increasing the utility of block space must occur organically to a great extent . You need developers 、 Applications and users . You can only motivate the use of inorganic for a long time .
therefore , The main way of sustainable development of blockchain will be to reduce circulation over time , So as to reduce the cost of the network .
When you reduce circulation , The biggest tradeoff is that you spend less on security . Unless prices rise , Otherwise, every time the network reduces its circulation , Verifier / Miners will have less incentive to continue to operate , The network will become less secure . This doesn't happen every time , But if the network demand is not balanced , There will be risks .
Blockchain must deal with the trade-off between distribution and block size . Many alternatives 1 Layer blockchain selects a larger block size , To support more total transactions , The cost of each transaction is lower . Increasing the supply of blockspace in the chain will reduce its price , And so far, it has proved difficult to generate considerable revenue for the chain .
Besides , The tradeoff of increasing throughput at the base layer tends to create a more centralized system , This reduces the confidence behind the original currency premium of the chain .
Blockchains must balance the supply of blockspace they produce with the subsequent distribution . With faster block time / Larger blocks （ Basically more throughput ） The block must issue more money to achieve security on this scale .
If you want a bigger scale , You have to pay for higher security .
You can see this effect in the circulation rate of the smart contract chain ：
The etheric fang ：4.20% Inflation
An avalanche ：26.6% inflation
Here's an important note ： Ethereum is currently a proof of workload , This is a capital intensive security mechanism . Ethereum will become a proof of interest later this year , A new issue ETH Will reduce 90%, Bring the annual inflation rate to about 0.4%.
Let's talk about ……
The first 2 layer （Layer2）
When increasing the net revenue of blockchain ,Layer 2 s (L2 s) Can play an important role .
stay CryptoFees.info On , You will notice Ethereum L2 Create for yourself in block space sales every day 5 Wan to 10 Million dollars in revenue . This is a L2 Primary income , from L2 Operators collect （ In the future, it may be through native L2 The democratization of tokens ）.
It is important to ,L2 To Ethereum L1 Blockspace generates its own needs .L2 Must consume L1 Blockspace can be connected with the main blockchain “ Settlement ”. You can go to UltraSound.Money Of ETH Find... On the destruction leaderboard Arbitrum、Polyon、Optimism.
L2 s The key part is that they don't need to issue tokens to pay for security . They came from their settlement L1 Inherited their security . This makes deployment L2 Become a trivial thing , Because most of the problems about blockchain sustainability are through the use of L1 Resources to solve .
L2 It works like solar panels for economic activities . They provide users with low cost , And bundle user transactions into a package , For batch deployment to L1. This is it. L2 Use to convert to L1 Where space needs to be , Also full of vitality L2 The ecosystem is promising L1 The reason for the cost .
The bull case of Ethereum's scalability roadmap is , It doesn't sell blockspace to users , But sold to other blockchains （ The first 2 layer ）. Although individual users find the cost of Ethereum unbearable , but L2 Blockchain right L1 Of gas Price is not sensitive , And as more and more users join , It consumes block space .
The first profitable blockchain is coming
Ethereum was the first to pass The Merge Blockchain on the road to sustainable economic development . Later this year , May be in 6 month /7 month , The network will turn to proof of interest and reduce its circulation 90%.
The Merge And the interesting part of Ethereum transformation is , It's not just pure distribution reduction .
While improving safety and efficiency ,“ Security budget ” There has been a fundamental change in the way we use . In view of the transformation of consensus algorithm and its improvements , Proof of interest makes Ethereum safer , At the same time, it allows the network to reduce the distribution .
As Internet circulation decreases 90%, Ethereum will allocate less than... To the pledgor every day 400 Thousands of dollars in ETH. The important part to note is ETH The cost will not change with the merger —— They remain the same .
That means later this year , The network will allocate... Every day 400 Circulation of $million , At the same time produce 1300 Million dollars in revenue , produce 900 A net profit of $million and +72% Profit margin .
The etheric fang , The first profitable blockchain ！
It is worth emphasizing that ,ETH Three asset arguments have also been completed through consolidation , And completely transition to interest bearing assets .
All transaction costs incurred by the network will be through EIP 1559（ buy-back ） And pledge （ dividend ） Pay to ETH holder . therefore ,ETH Pledge yields will soar to double-digit APY, As investors compete to absorb these yields , Drive more demand for the asset , At the same time, the network has become more secure due to increased shares .
Ethereum is expected to become the first profitable blockchain .
It will happen in a few months , Not for a few years . As we wrote before …… This is not priced .
Will other chains follow Ethereum ？
This largely depends on the quality of the products they sell .
How much will the market pay for their block ？
When contemporary monetary incentives dry up , Will they still buy ？ When transaction costs increase , Will they still buy ？
The first 1 How will the tier compete with the third tier that doesn't have to pay billions of dollars a year for security through token issuance 2 Layer competitive profitability ？
We will find the answer in the coming months and years .
In the long run , Only profit can survive .