Written by: Decentralised.co

Compiled by: Glendon, Techub News

The fear and greed index in the crypto market has reached an all-time low. Not long ago, the profitability of this industry reached unprecedented heights. Since 2018, DeFiLlama has tracked fees generated by crypto-native protocols totaling $74.8 billion. Nearly half of that ($31.4 billion) was generated in the 18 months from January 2024 to June 2025. How does an industry have its best quarter in eight years and still be mired in fear?

In the past two months, twelve projects including Entropy Protocol, Milkyway Protocol, Nifty Gateway, Rodeo, Forgotten Runiverse, Slingshot, Polynomial, Zerolend, Grix Finance, Parsec Finance, Angle Protocol, and Step Finance have been closed down one after another. They were products that had been in operation for many years and were built by passionate founders. In addition, OKX, Mantra, Polygon Labs, Gemini and Binance have also made layoffs.

During this period, event conference attendance dwindled, venture capital firms turned to artificial intelligence, and developers flocked to AI. It can be seen that the pessimism is not groundless. If you’re in the crypto industry, “Transformational AI” has become a mainstream trend.

But should you really turn?

We have been thinking about this question for the past few weeks. When a technology emerges, the market will give it a higher valuation because of its novelty and grand plans. In the 19th century, nearly 6% of Britain's GDP was invested in railways. Capital spending on hyperscale data centers will account for 2% of U.S. gross domestic product by 2026. But as reality hits, the valuation of a technology will become more reasonable. The key is whether the industry can prove its practicality in the process of returning to rationality.

In today’s article, I will detail the historical evolution of cryptocurrency revenue, the stickiness of the funds generated, and the nature of our industry’s “moats.”

Research ledger

Crypto-native businesses have been generating revenue since the inception of the cryptocurrency industry. Exchanges like Bitmex, Binance, Coinbase and others were once highly profitable businesses. They are centralized, owned by a few, and their revenue is not public.

Until the emergence of DeFi native trading platforms, this situation changed, such as exchanges (Uniswap) and lending platforms (Aave). Users can view the daily income of the protocol. The valuation of these tokens also reflects the economic activity enabled by these underlying components.

Decentralized exchanges still accounted for 28.4% of total revenue as of 2022, when total revenue reached $2.27 billion. The situation in the lending space is similar and highly concentrated: Aave and Compound account for 82% of all lending fees. Although there are “leaders” in the industry, long-tail protocols are also expected to gradually occupy market share. Because the technology itself is novel enough, the valuation is high.

Subsequently, the consumer market for cryptocurrency expanded rapidly. NFTs, for example, represent a hopeful vision: culture can be priced on-chain. Celebrities well-known to ordinary people began to change their avatars on Twitter. It's thought this will translate into mass adoption. OpenSea generated $1.55 billion, accounting for 71.7% of the total NFT market revenue. In hindsight, the market's $13 billion valuation seems less ridiculous, and it could have developed into a long-term monopoly.

It's just fate and the market that have other plans. In 2025, NFT revenue will account for less than 1%. The industry also experienced the "Beanie Baby" craze (Beanie Baby, usually refers to a character, doll or avatar with cute, small or cute characteristics), but in the end no physical souvenirs were left.

In contrast, although decentralized exchanges have experienced revenue growth, it has been difficult to achieve valuation increases. Last year, decentralized exchanges generated $5.03 billion in fees and lending platforms generated $1.65 billion. Together they accounted for 22.9% of total fees, down from 33.1% in 2022. Not only do their economic activities account for a smaller share of the larger "pie", but their valuations have also dropped significantly.

So, what aspects have developed? How have cryptocurrency’s native business models evolved since 2022? The image below provides some clues.

In January 2026, stablecoin issuers Tether and Circle accounted for 34.3% of all fees. In other words, for every $1 earned in the crypto industry, $0.34 goes to these two companies. Their revenue will double from $4.95 billion in January 2023 to $9.89 billion in 2025, driven almost entirely by U.S. Treasuries. Notably, Tether’s revenue is almost three times that of Circle. Although these indicators are only equivalent to the level of start-up companies for bank-scale financial products. Their rise is attributed to two factors:

Requirements. Countries in the Global South will always need tools to hedge against local inflation and move money freely. The U.S. dollar (even a digital dollar) fills this gap in a way that local currencies cannot. Capital outflows are a necessity, not a characteristic.

Cost structure. The blockchain bears all the operational costs required to run a stablecoin business. Unlike traditional banks or fintech companies, Tether and Circle do not need to hire people in proportion to the number of stablecoins issued on the chain. The marginal cost of issuing the next $1 billion of stablecoins on-chain and moving the next $100 billion of stablecoins between addresses is almost zero.

These two forces work together. On the one hand, people vote with their money, which promotes demand-side growth; on the other hand, the cost curve tends to flatten. The two work together to make stablecoin issuance one of the most capital-efficient businesses in financial history.

However, the stablecoin business needs to build a "moat" in terms of liquidity, compliance and the Lindy effect (things that can withstand the test of time are more likely to continue to exist). The number of publishers that can survive multiple cycles is extremely rare. As a result, Tether and Circle account for almost 99% of all stablecoin issuance revenue.

Why is this? Because both assets benefit from their first-mover advantage. The network effect of multiple exchanges plugging into stablecoins gives them legitimacy in a way that technology cannot. For example, Tether initially launched on the Omni platform as a sidechain. It's slow and slightly clunky, but can be accessed through the usual channels of OTC platforms and exchanges. This is a distribution moat, not a technology moat. This kind of moat is often difficult for founders of cryptocurrency-native projects to replicate with code alone.

We have discussed the concept of "cryptocurrency as a transaction economy" in two articles. One is "Capital Flow" and the other is "Everything is a Market" published last year. What we didn’t anticipate at the time was how quickly trading products built around Telegram trading bots and trading interfaces would grow.

As of January 2025, these two areas alone contributed $575 million in expenses. Considering the needs of consumers, this is not difficult to understand at all. Meme trading and perpetual contracts allow users to make quick profits. In pursuit of quick returns, they are willing to pay high fees. The category's share of total revenue will rise from 1% to just over 15% between 2022 and 2025.

Products like TryFomo and Moonshot focus on the end user and generate millions of dollars in revenue. The products themselves are not technically complex; instead, their strength lies in their ability to aggregate crypto-native functionality and package it to create a better user experience. Thanks to the maturity of tools like Privy, developers no longer need to incentivize users to provide liquidity, nor do they need to worry about wallet management.

The foundational components that excite us in 2022 are now mature and applications (e.g. BullX, Photon) are built on top of them. This area alone generated approximately $1.93 billion in fee revenue between January 2024 and February 2026.

However, Meme assets suffer from a fatal flaw: they are relatively single-function products with strong seasonal characteristics. Does it feel familiar? That’s because NFTs and Web3 games have experienced similar explosive growth and eventual collapse. This seasonality is both a flaw and a feature of our industry. First, let's look at where the revenue is going.

Perpetual contract exchanges (and later prediction markets) represented a new approach to long-term trading. PumpFun democratizes asset issuance through meme coins, but the game isn’t fair.

Eventually, the market realized that Internet meme coins would eventually die. Those who dreamed of becoming millionaires by purchasing a token called "ShibaInuYouShouldShareThisNewsletter" were dashed. What it boils down to is that people don’t want to manage a jumble of random token combinations, they want high-risk assets. And perpetual exchange meets their needs exactly.

They can trade Bitcoin, Solana or Ethereum using extremely high leverage. Market makers and traders who needed an alternative to centralized trading channels flocked to it. The core product of this category is liquidity. Because of this, Hyperliquid dominates as its order book depth is comparable to centralized exchanges. Without this parity, users would have no reason to migrate. Over the past three years, Hyperliquid and Jupiter have accounted for the majority of fees in this category.

Perpetual contract exchanges and trading platforms have also completely demystified cryptocurrencies, clearly demonstrating that charging small fees from high-speed transactions is the only way to make money. Meme trading platforms and perpetual contract exchanges are dopamine machines that package and sell risk. And some of these technologies will also grow into core financial infrastructure components—the ones the world will use to trade commodities, stocks, and digital assets over the weekend.

Put simply, blockchain-native applications replicate what Robinhood and Binance have long provided: access to venture capital.

Hungry "Fat Agreement"

Notice I haven't mentioned the protocol yet? That base layer that records all the magical money flows on the Internet? That's because their stories are completely different (but equally important). They are victims of the novelty premium, which is gradually fading.

Let me explain: In January 2023, Optimism's price-to-fee ratio (PF) was 465x, Solana's was 706x, and Arbitrum and BNB were around 206x. Today, Solana trades at 138x, Arbitrum trades at 62x, and OP trades at 37x. Polygon is close to 20x the size of fintech companies. Tron underpins the stablecoin ecosystem with a PF of 10.2x. Individually, Optimism, Solana, Arbitrum, and Polygon each deliver more sophisticated products. They each have more users, better liquidity, and a more sophisticated suite of financial applications built on top of them.

Individually, Optimism, Solana, Arbitrum, and Polygon have implemented more sophisticated products in recent years. They have more users, better liquidity, and more sophisticated suites of financial applications. However, the degree of discount presented by their price-to-fee ratio reflects the market's evaluation.

Historically, L1 and L2 tokens have traded at significantly higher prices than standalone infrastructure or venture capital. If invested correctly, this premium could have spawned new economies and funded developers to build applications that would be truly valuable to users outside of our industry. However, the open source nature of the product and the ease of tokenization resulted in us having fifty copies of the same product across thirty networks with broken interoperability.

This would have been fine because we have cross-chain bridges, we have cross-chain messaging and countless other mechanisms for transferring funds. However, the value of all these mechanisms is declining today.

Take DeFi basic projects as an example. The lack of investor choice and novelty kills valuations, even if these foundational projects do drive more economic activity. These markets are highly fragmented and investors have numerous options to bet on. However, the novelty of “decentralization” or blockchain-based technology has long since worn off. As a result, projects such as Kamino, Euler, Fluid, Meteora, and PumpSwap have emerged, but their price-to-fee ratios are all below the level of the 2022 protocol. As shown in the TokenTerminal chart below, decentralized exchange price-to-fee multiples will decline significantly between 2023 and 2025. Price-to-sales ratios are now as low as 1 on some exchanges.

In other words, the market values them below the fees they will incur over the next year. However, a strange paradox emerges: while the valuations of the underlying protocols (whether DeFi primitives or L1 itself) are trending downward, applications built on top of these protocols are generating higher revenue in a shorter period of time.

The number of teams generating over a million dollars in revenue each quarter has grown steadily since the early 2020s and now exceeds one hundred. In 2020, deals that took 24 months to reach $10 million in annual revenue were considered fast-growing. By 2024, a deal to reach this standard would only take about 6 months. Pump.Fun launched in early 2024 and hit $10 million in revenue in just about two months, setting a record for the fastest growth rate.

This acceleration reflects both the maturation of the underlying infrastructure (faster chain speeds, lower transaction costs) and the expanding pool of on-chain funds seeking both yield and entertainment. There are currently close to 900 protocols generating revenue in the crypto space, with each protocol competing for a smaller share of revenue, but the overall trend is towards more teams generating more revenue. For reference, the number of revenue-generating agreements has increased nearly eightfold from 116 to 889, and the median monthly income has dropped to $13,000.

When studying the revenue sources of blockchain-native enterprises, three types of moats have emerged:

First-mover advantage: The network effects that Tether and Circle gain from their early advantages are difficult to replicate. They have gone through multiple cycles and despite the emergence of new players, they have remained established duopolies. Currently these businesses are non-tokenized and highly financialized. Tether is a centralized entity and its revenue comes mainly from U.S. Treasury bonds.

Liquidity moat: In an industry where capital has historically been driven by profit, Aave has maintained liquidity depth through different cycles. Hyperliquid replicates this, but it's too early to tell. These protocols have incentives to return capital to liquidity providers and align tokens for governance.

Distribution moat: Seasonal applications, such as meme coin trading platforms, rely on the speed of capital turnover and consumer demand. Web3 games and NFTs also fall into this category. AI-driven productivity gains mean small, lean teams can now deliver consumer-facing products faster. So where does the advantage come from? Ultimately, it comes down to how to attract and retain as many users as possible when the market is hot.

Products built around a distribution moat can be extremely valuable, but they are the exception, not the rule. Traditionally, the value of a startup lies in the replicability of its experience. Y Combinator’s success is partly due to the “Lindy Effect” of its philosophy. Cryptocurrencies are developing too fast to replicate this “Lindy Effect” experience. This partly explains why we rarely see founders replicate their success in consumer products into the cryptocurrency space. Additionally, the seasonal factors that helped companies achieve scale in the first place may not return.

This is not to suggest that founders should not seize these opportunities. Segments such as prediction markets or data providers of agent economic products may generate significant cash flows in the short term. But it's important to note that these are high-volatility, short-term plays that may not last. The pitfall of this type of product category is that they may raise venture capital unnecessarily or hold on to unissued tokens long after the metasystem that originally underpinned the product has died.

So, what makes a tokenized business valuable? Are they reasonably valued? The data provides some clues.

Questioning governance

In 1999, many technology companies were trading at price-to-sales (P/S) ratios of 10 to 20 times. Content delivery network company Akamai’s price-to-sales ratio is as high as 7,434 times. By 2004, Akamai's price-to-sales ratio had fallen to 8x. Price-to-sales ratios for many companies plummeted from 30x to 50x to below 10x. The dot-com bubble burst, wiping out trillions of dollars in speculative value. However, many companies survived because their business itself was real. Amazon's stock price fell 94% from the peak of the dot-com bubble, but ended up becoming one of the most valuable companies in history.

Cryptocurrencies are going through the same "compression" process, but faster. In 2020, when DeFi was still in its experimental stage, total annual revenue from cryptocurrencies was around $21 million. At the time, price-to-sales ratios for all tracking protocols were as high as 40,400 times. The entire market was looking to the future: “What will cryptocurrency look like?” By 2021, as DeFi summer turned protocol revenue into real numbers, the price-to-sales ratio plummeted to 338x. Today, all tracking protocols have annual revenue of $18 billion and a price-to-sales ratio of about 170 times. It only took five years to go from 40,400x compression to 170x.

However, there is a problem. When Visa trades at a multiple of 18x, shareholders can receive dividends and buybacks. They have a legal claim to the company's earnings and a seat on corporate governance under securities laws. And when Aave trades at a multiple of 4x, token holders have governance rights, but until recently, they had no direct economic claim to the returns. Hyperliquid uses its bailout fund to conduct buybacks, making HYPE holders the closest thing to equity holders in the DeFi space. Aave previously approved an annual $50 million buyback program through 2025.

These initiatives are significant, but they are exceptional. In the broader market, most protocols lack mechanisms to return value to token holders. These multiples may seem low, but the equity associated with these multiples is weaker than anything in traditional markets. These multiples are made possible because the industry generates revenue at a scale and efficiency unmatched by traditional business models.

The protocols that are compressing cryptocurrency price-to-sales ratios are not large organizations with thousands of employees, but small teams operating the global financial infrastructure at near-zero marginal cost and without the need for a physical office. How low can these costs get? How much trust can holders have in the ability of these teams to use protocol revenue?

Segmenting the market by industry can provide a clearer understanding of the market conditions. Aave, the largest lending protocol in DeFi, trades at about 4x price-to-sales ratio. Hyperliquid controls about 80% of the decentralized perpetual futures market and trades at a price-to-sales ratio of about 7x. These are not bubble multiples. Arguably, they are lower than their closest traditional peers. Coinbase, the only major publicly traded cryptocurrency exchange, trades at a price-to-sales ratio of about 9 times. CME Group, the world's largest derivatives exchange, trades at about 16 times sales. Visa, the gold standard in payments infrastructure, trades at about 15 times sales.

Will Clemente mentioned in our podcast that cryptocurrencies are the purest form of capitalism. In no other industry have successful businesses reached anywhere near the $100 million in profits per employee that Tether has. To put this number into perspective, let’s compare: Nvidia’s revenue per employee is $5.2 million, Apple’s is $2.4 million, and Google’s is $2 million. Tether has 125 employees and annual revenue of about $12.5 billion, a size that suggests its profits per employee may be the highest in corporate history.

Despite a price-to-sales ratio of 170x, the market is not irrational for protocols that actually generate revenue, pricing them at or below traditional financial infrastructure.

This leads to the next question - what exactly are tokens used for? In many fields, tokens are powerful tools for pooling capital toward a shared vision. At the current stage, a common scenario in the crypto space is that there are two dominant monopolies. In traditional finance, founders must borrow (collateralized by equity) or raise capital to inject capital into a financial product. And platforms like Hyperliquid, Uniswap, Jupiter, and Blur are proving that with token incentives, individuals will invest money in new products. When tokens come with governance rights, the contributions of these individuals can be even more significant. From this perspective, tokens may develop a dual function.

First, it is necessary to integrate capital and resources from appropriate individuals;

Secondly, give them the power to govern the protocol.

Individual tokens no longer have value by themselves. Even stocks are now tokenized. These tools need to have claims over economic activities and the ability to guide governance. Many Tier 1 and Tier 2 tokens fail to succeed in either of the above areas. Teams and VCs often hold the majority of tokens, leaving holders in disarray. This leaves marginalized individuals with little reason to pay attention to newly listed digital assets.

Today, these experiments are divergent. For example, MetaDAO allows investors to receive a full refund of their investment if the team makes misrepresentations. There are currently no large-scale agreements on the platform. The core idea of ​​cryptocurrencies is that tokens traditionally give holders few rights. Today’s protocols are trying to answer an age-old question: Why would anyone hold these instruments in the first place? In a subsequent article, we will explore the connection between holder rights and valuation.

Crossroads

Over the past two decades, capital markets have become increasingly interconnected. This is largely due to advances in technology. We can trade commodities, foreign indices, digital assets and, in the near future, even computing power (GPUs). Blockchain technology makes it possible for transactions in these markets to be conducted globally and anytime and anywhere. Nasdaq and the New York Stock Exchange are now moving toward around-the-clock trading, an example of how technology is changing the zeitgeist.

We live in a highly financialized world, and it’s ironic that news of the war has us scrambling to figure out which prediction markets are the best to bet on. For founders, this means rethinking what they build and how they build it. If the article data shows anything, it’s that all blockchain products ultimately achieve profitability through two core principles.

By taking a small cut from high-frequency trading;

Take a large cut from transactions where verifiability and trust assumptions are critical.

The advantage is either speed or verifiable transparency. The profit motive is the purest incentive for capital market participants. The core belief is that markets eventually move toward extreme efficiency. We can see this phenomenon with some industry leaders. For example, 70% of several market segments are in the hands of two key players. This is the cold reality that we all have to face, and it is also the cruelty of market operation.

What this means for founders is that funds originally invested in their tokens are now reallocated into assets that are riskier or have a higher return on capital. The long-term capital is there and may even command a premium, but only if it fairly values ​​the underlying business. Investors in Google and Amazon don't need to rush looking for exits because the underlying businesses are highly valuable.

In today's context where the value of software itself is in doubt, applications developed based on blockchain must find new ways to realize value. We can redesign tokens. Perhaps, we could even trade equity stakes in startups on the blockchain. But this is not just a token issue, it is also a business model issue. Most long-tail blockchain applications — such as Web3 social, identity, and gaming products — struggle to scale or significantly differentiate from traditional products. That’s not to say those experiments don’t have value, but it’s just that we struggle to commercialize them effectively.

The infrastructure era of cryptocurrency has passed, and the next stage will be its integration with the Internet. People no longer talk about "online" business, business just exists on the Internet; no one is called "mobile app developer" anymore, they are developers.