Like most startups, many DeFi projects were originally designed for growth rather than profit. But some projects are now profitable - an analysis. Because of the bear market, the basic data, especially the basic data in the DeFi field, are increasingly becoming the focus of investors. When investors focus on TVL and the number of agreements such as Uniswap, Maker, sushiswap and Co. in 2020, they ignore whether these projects are truly profitable. Therefore, the following are the profitability of various DeFi agreements. What does it mean to make a profit from the DeFi project?

Profitability of DeFi agreement

When users use their services (token exchange, conversion...), all DeFi projects generate revenue (users or their own agreements). However, the percentage of log retention varies from log to log.

In addition, it is important to know that many DeFi projects encourage users to use their platforms through token incentives. For example, users of decentralized exchange transactions will receive the token configuration in dYdX (DYDX) DYDX.

But this token incentive has its drawbacks. As a result, the total supply of tokens for the DeFi project has increased, which may have a negative impact on the course. Therefore, the high agreement assumption itself does not determine whether the DeFi project is cost-effective.

Therefore, the problem is always to disperse the cost of income generated by financial projects. Like ordinary enterprises, DeFi protocol also needs to spend (tokens) to make money.

In general, token issuance (tokens issued by DeFi projects to attract more users to their platforms) is the most expensive.

Protocol assumptions and token release

The profit of DeFi agreement can be defined as follows:

Profit=Agreement Assumptions - Token Emissions

Other analysis This analysis focuses on the agreement assumptions related to the income directly flowing to the agreement token holder, and focuses on the available income of the DeFi project (token holder+DAO) community after spending.

Therefore, the profit includes all available revenues of the DeFi project, whether the profit is directly paid to the token holder or flows into the cash pool managed by the agreement community (DAO).

Who are they? Token transmission refers to the expenditure of distributing protocols to its platform users in the form of tokens (for example, b. attract more users to its platform through liquidity mining, transaction incentives or reference schemes.

Although this definition does not include all the costs of the DeFi project, it provides a good impression of how the project is profitable.

Defi: Are makers, Lido and Uniswap profitable?

The following is an overview of the gains and losses recorded by DeFi Protocol Maker (MKR), Lido (LDO) and Uniswap (UNI) from April 17 to October 12.

1. lending maker (mkr) protocol

Maker earns income through its agreement by charging interest from the borrower and retaining a certain share when settling frozen assets on its platform.

Total revenues of $15.1 million were generated in the past six months. From this revenue, 100% goes to the DAOs of MKR token holders, because the makers do not currently use token emissions.

Therefore, the Maker Agreement is one of the few DeFi projects that have achieved profitable economy and organic growth today.

2. Read Liquid Storage Protocol (LDO)

This is what liquid stasis logs have been read to generate revenue by retaining 10% of their verifier's Staking rewards.

The total revenue of Lido in the past six months was 154.1 million dollars, of which about 15.4 million dollars directly flowed into Lido.

However, in recent months, Lido also spent a total of $46.5 million on LDOs. Among other things, it encouraged the establishment of different liquidity pools in decentralized exchanges such as Curve or CyberNetwork.

Therefore, in the past six months, Cipher Weight Lido has been losing $31.1 million.

3. DeFi Stock Exchange Uniswap (UNI)

In the past six months, liquidity providers of trade pairs (such as ETH/USDT or wbtc/uscs) have received US $349.1 million on Uniswap.

However, as the DeFi Stock Exchange has not activated "", no money has gone to the university token holder or Uniswap DAO. However, if most university token holders choose to take this step, they can immediately earn 10% to 25% of the total income generated by the liquidity provider.

In the past six months, Uniswap has made 34.91 million US dollars with 10% profit.

However, it is unclear how changes in fees will affect Uniswap's liquidity. The decrease in the income of liquidity providers may lead them to flow to other decentralized exchanges. This may reduce the efficiency of Uniswap transactions and reduce the volume of Uniswap transactions.

However, it is worth noting that Uniswap is one of the few DeFi protocols that does not use token emissions to encourage the use of its platform.

Therefore, if university token holders decide to retain part of the income earned by liquidity providers on their platforms, Uniswap will immediately benefit. This may also be the reason why the current uni token is 6.3 billion dollars.

Some may be surprised to find that there are few DeFi projects for sustainable economy.

However, it should be taken into account that the DeFi sector is still at a very early stage of development. Therefore, it is not surprising that almost all DeFi protocols now invest a lot of money in their expansion, similar to the traditional startup of ups.

Amazon, Google, Uber and Co. also took losses in the first few years to win market share and eliminate competitors.

summary

However, the stable issuance of tokens is certainly not a sustainable strategy. It will even cause great damage to the long-term price of DeFi tokens. Money is not unlimited. Many token incentive systems have lost their power and effectiveness due to the continuous sales pressure exerted on DeFi project tokens. In addition, the sales pressure of issuing tokens often deprives the survival basis of the agreement, because the funds available for further development of the agreement continue to depreciate. The replacement competition in the DeFi industry makes the DeFi agreement unlikely to significantly improve the profit margin. If you choose to do so, you risk losing market share of your competitors. Therefore, in order to improve profitability, most DeFi projects inevitably need to reconsider their revenue sources if they want to survive for a long time.