Mint Ventures

By Alex Xu, Mint Ventures' research partner & Lawrence Lee, Mint Ventures' researcher

In the previously published first and second parts of “Sifting for Gold: Identifying Long-Term Investment Targets Through Market Cycles (2025 Edition)” we analyzed and introduced projects in the lending sector—Aave, Morpho, Kamino, and MakerDao—alongside staking sector projects like Lido and Jito, and trading sector projects including Cow Protocol, Uniswap, and Jupiter. As the final part of this series, this article will continue to spotlight projects with solid fundamentals and long-term potential for attention.
PS: This article reflects the stage-specific thoughts of the two authors at the time of publication. Their views may evolve over time, are highly subjective, and may contain factual, data-related, or logical errors.
None of the opinions expressed herein constitute investment advice. We welcome critiques and further discussions from industry peers and readers.
4. Crypto Asset Services: Metaplex
Current Business Status
Business Scope
The Metaplex Protocol is a digital asset creation, sales, and management system built on Solana and SVM-compatible (Solana Virtual Machine) blockchains. It provides developers, creators, and enterprises with tools and standards to build decentralized applications. The crypto asset types supported by Metaplex include NFTs, FTs (Fungible Tokens), Real World Assets (RWA), gaming assets, and DePIN assets.
In terms of crypto asset services, Metaplex’s offerings can be divided into two main categories: Digital Asset Standards and Program Library (for asset issuance, sales, and management). The former provides asset issuers with token standards that are highly compatible with the SVM ecosystem and feature low creation/management costs, while the latter offers a suite of tools and services for creators to mint, sell, and manage their assets.
The majority of NFT and FT issuers on Solana are Metaplex users.
Over the past six months, Metaplex has further expanded its business horizontally into other foundational service areas of the Solana ecosystem through its new division, Aura Network, including digital asset indexing and Data Availability (DA) services.

Metaplex’s Product and Service Matrix (Source: Developer Documentation)
In the long term, Metaplex aims to become one of the most critical multi-domain infrastructure service providers within the Solana ecosystem.
Beyond Solana, Metaplex currently also operates on the Sonic and Eclipse blockchains.
Revenue Model
Metaplex’s business model is straightforward: It generates service fees by offering on-chain asset-related services, including asset minting, digital asset indexing, and data availability services.
While Metaplex offers a wide range of services and products, not all are fee-based. A detailed fee schedule for specific services is provided below：

MPL Asset Service Fee Structure (Source: Developer Documentation)

Aura Service Fee Structure (Source: Developer Documentation)
The Aura business line remains in its early stages, with the majority of Metaplex’s current revenue contributed by its asset minting and management services (MPL).
Business Data
We will focus on two core metrics: the number of assets minted through its services and Protocol revenue.
Before presenting and analyzing these two metrics, we will first examine the distribution of asset types issued via the Metaplex protocol.

Data source: Metaplex Public Dashboard, the same below
The chart above illustrates the trend in the proportion of NFT and FT assets utilizing Metaplex’s Metadata (which provides additional data for digital assets, such as images, descriptions, etc., and is used by nearly all assets).
We observed that in early 2024, NFTs still dominated the assets issued via the Metaplex protocol, accounting for approximately 80% of the total. However, starting in April 2023, the share of FT assets surged rapidly and has since become the primary asset category serviced by Metaplex, now representing over 90% of total activity.
Notably, the majority of these FT assets are Meme projects, whose issuers currently constitute Metaplex’s primary client base and revenue contributors.
This indicates that the current boom or decline of Meme projects on Solana directly impacts Metaplex’s business trajectory.
Let’s now examine the specific operational metrics.
Number of Assets Minted (Monthly)

As observed, the number of assets minted via Metaplex began to rebound from its trough in September 2023, peaked at a historic high in January 2024 (with over 2.3 million assets minted), and subsequently declined gradually. By March 2024, the metric had largely retreated to levels seen in June 2023 (approximately 960,000 assets minted). This trend is closely aligned with the activity fluctuations of Meme trading within the Solana ecosystem. The higher the Meme activity, the greater the volume of assets issued through Metaplex.
Protocol Revenue

Metaplex’s protocol revenue mirrors the trend in its asset minting volume, reaching a historic peak of 4.3 million USD in January 2024, followed by a rapid decline. The projected protocol revenue for March 2024 stands between 1.2 million and 1.3 million USD, returning to levels observed in the first half of 2023.
Protocol Incentives
Unlike most Web3 protocols whose operational metrics rely on subsidies, Metaplex’s revenue is entirely organic, driven by genuine demand from asset issuers. However, from January to early March 2024, Metaplex executed a $1 million USD token incentive program in collaboration with Orca, Kamino, and Jito to boost liquidity for its native token MPLX. This program has now concluded.
Competitive Landscape
As the earliest standard-setter for digital assets on Solana, Metaplex currently faces no formidable competitors in the realm of asset standards and their derivative services within the Solana ecosystem.
Competitive Advantages
Metaplex’s competitive edge stems from its role as the creator and maintainer of Solana’s core asset standards, which underpin the ecosystem’s digital assets—ensuring interoperability and liquidity across NFTs, FTs, Real World Assets (RWA), Decentralized Infrastructure (DePIN), gaming assets, and more.
This foundational position implies that asset issuers who build and manage assets using Metaplex would face significant time, technical, and economic costs if attempting to migrate their projects to alternative protocols.
Moreover, new developers and projects prioritizing ecosystem compatibility are incentivized to adopt Metaplex’s asset formats, as doing so guarantees seamless integration with Solana’s infrastructure (e.g., wallets) and products (e.g., DeFi platforms, trading interfaces).
Beyond asset services, Metaplex’s newly expanded offerings—Aura Network, which focuses on data indexing and data availability (DA) services—are poised to become a second growth trajectory for the protocol. Given the high overlap between Aura’s target users and Metaplex’s existing client base, these new services are likely to gain faster adoption among current partners.
Main challenges and risks
The continued cooling of Solana Meme has led to a persistent decline in asset minting volume, resulting in reduced business revenue. This downward trend, which began in January, has shown no signs of reversal as of now.Metaplex’s current revenue model relies on one-time fees charged per asset type created. Projects with fixed or non-diversifying asset types cannot generate sustained recurring revenue for the protocol.
Valuation benchmark
Metaplex’s native protocol token is MPLX, with a total supply of 1 billion.
Currently, the primary utility of MPLX is governance voting. Additionally, since March 2024, Metaplex has announced plans to allocate 50% of protocol revenue to token buybacks (though in practice, the protocol has not strictly adhered to this threshold, with most buybacks ranging between 10,000 and 12,000 SOL). The repurchased tokens are deposited into the treasury to fund ecosystem development.

As of now, monthly buybacks have consistently exceeded 10,000 SOL.
Given the absence of directly comparable projects in Metaplex’s niche, we primarily evaluate its valuation through the market capitalization-to-monthly protocol revenue ratio, using historical benchmarks for context.

As of now, Metaplex’s valuation relative to its Q1 protocol revenue remains at a multi-year low, reflecting the market’s pessimistic expectations for Solana’s asset issuance sector.
5. Hyperliquid: The Embattled Derivatives & L1 Hybrid
Hyperliquid stands out as one of the few functional new projects launched this cycle. Mint Ventures published an in-depth analysis of Hyperliquid in late 2024, which interested readers can refer to for further details.
Current Business Status
Hyperliquid’s operations can be divided into three segments: a derivatives exchange, a spot exchange, and a blockchain (L1). While all three are live, the derivatives exchange remains the core business in terms of trading volume and market influence.
For the derivatives exchange, trading volume and open interest are its key metrics.
Hyperliquid’s derivatives platform soft-launched in June 2023, initiated a points program in November 2023, and saw a surge in trading volume and open interest following its official token airdrop in late November 2023. Since December 2023, Hyperliquid’s daily derivatives trading volume has averaged between 4 billion and 7 billion, peaking at a single-day record of 18.1 billion. Open interest has also risen sharply, fluctuating between 2.5 billion and 4.5 billion since December.

Source: Hyperliquid Official Website
Hyperliquid’s custodial funds began surging in November 2023 and have since fluctuated around 2 billion USD. However, a series of recent attacks caused its custodial fund to stop tumbling from 2.5 billion USD to 1.8 billion USD within a short period.

On the user front, Hyperliquid has seen a rapid surge in its address count, with cumulative trading addresses now approaching 400,000.

Regarding spot trading, Hyperliquid previously supported only native assets on its L1 blockchain, with HYPE dominating the majority of trading volume. However, in February 2024, Hyperliquid launched uBTC, a decentralized BTC spot trading solution tailored for its platform. Despite this addition, Hyperliquid’s BTC spot trading volume remains modest, averaging between 20 million and 50 million daily, which constitutes a relatively small portion of its total daily spot trading volume (approximately $200 million).

Hyperliquid spot trading volume Source：DeFillama
Additionally, Hyperliquid employs a decentralized mechanism (HIP-1) for spot asset listings, allowing public auctions for listing eligibility. The proceeds from these auctions effectively function as Hyperliquid’s “listing fees,” whose volatility is illustrated in the chart below：

historical auction price for Hyperliquid’s spot listing qualification Source: ASXN
As shown, Hyperliquid’s listing fees have experienced significant fluctuations. While they peaked at nearly 1 million USD in December 2023, they have since declined to around 50,000 USD amid waning market enthusiasm for altcoins.
Regarding its EVM integration, Hyperliquid launched HyperEVM in alpha on February 18, 2024, and completed its integration with the existing HyperCore protocol on March 26, 2024. However, due to incomplete infrastructure—such as the absence of critical components like cross-chain bridges, limited deployment of EVM-compatible protocols, and a lack of official incentive programs—HyperEVM’s overall activity remains subdued. Metrics including TVL, trading volume, and transaction count place it roughly 20th among all blockchain networks.

TVL, transaction volume, and TX data of each chain Source: Geckoterminal
Hyperliquid allocates all protocol-generated revenue—including derivatives trading fees, spot trading fees, and proceeds from listing eligibility auctions—to the Assistance Fund (AF) for $HYPE token buybacks after deducting the portion distributed to HLP (Hyperliquid’s liquidity provider program).
Over the past 30 days, Hyperliquid generated $42.05 million USD in revenue, ranking fourth behind Tether, Circle, and Tron, and surpassing major L1 blockchains like Solana and Ethereum, as well as applications such as Pump Fun and Pancakeswap. Notably, except for Tron, the revenue of other top-earning protocols is either unrelated to their native tokens or lacks an associated token entirely.

30-day revenue ranking of all protocols Source：DeFillama
Competitive Landscape
Given that HyperEVM is currently in a “live testing” phase, we will analyze Hyperliquid’s competitive landscape by focusing on its two core segments: the derivatives exchange and the spot exchange.

Transaction volume share of decentralized derivatives exchanges Source：Dune
Hyperliquid has already established itself as the dominant leader in decentralized derivative exchanges.
Compared to leading centralized exchanges, Hyperliquid’s derivatives trading volume is also rising rapidly. The chart below illustrates the ratio of Hyperliquid’s derivatives trading volume to that of Binance, Bybit, OKX, and Gate:

Ratio of Hyperliquid contract transaction volume to that of centralized exchanges Source：Syncracy report
In the spot trading sector, Hyper’s average daily trading volume in the past month was around $180 million, ranking 12th among all Dex.

Top 15 DEX by Spot Trading Volume Source: DeFillama
Hyperliquid’s Competitive Advantages
Hyperliquid’s rapid growth in derivatives trading is underpinned by the following factors:
Adoption of the order book model, widely proven in trading ecosystems, enabling a seamless transition for users migrating from centralized exchanges and facilitating market maker participation.Aggressive contract listing strategy. Hyperliquid pioneered Pre-launch token futures and pure DEX token contracts while swiftly capitalizing on trending assets. This positions Hyperliquid as the exchange with the deepest liquidity for many newly launched tokens.Lower fee structure. Compared to GMX’s ~0.1% all-in fee (including 0.06–0.08% trading fees, slippage, and borrowing costs), Hyperliquid charges only 0.0225% (source: Mint Ventures), offering a significant cost advantage.
These factors have solidified Hyperliquid’s dominance in decentralized derivatives trading. Additionally, its points program (launched November 2023) and generous airdrop strategy further bolstered user loyalty, leaving Hyperliquid with no direct competitors in the decentralized derivatives space.
However, these advantages alone are insufficient to ensure long-term competitiveness, as rivals could replicate Hyperliquid’s mechanisms, listing strategies, and fee models. Currently, Hyperliquid’s sustainable competitive edges lie in:
A lean, agile team with strong execution. Despite a compact team of 10–20 members, Hyperliquid has delivered three major products—a derivatives exchange, spot exchange, and L1 blockchain—within two years. While these products have imperfections, the team’s innovation and delivery capabilities outpace peers.Strong brand equity. Despite recent controversies (e.g., ETH and JELLY contract incidents), Hyperliquid maintains superior brand recognition and remains the go-to platform for on-chain derivatives traders.Network effects. Its market leadership since mid-2024 has entrenched Hyperliquid with deeper liquidity than competitors, creating self-reinforcing network effects.
Notably, full transparency of data—while user-friendly—does not inherently serve as a competitive advantage. In fact, this feature may harm Hyperliquid’s business in both the short and long term, as analyzed in the upcoming JELLY contract case study.
Main challenges and risks
Derivatives Trading Mechanism Risks:
Hyperliquid recently faced two major incidents:
50x Leveraged ETH Long Liquidation: A whale’s highly leveraged ETH long position was liquidated, resulting in a 4 million USD loss for HLP (Hyperliquid Liquidity Pool). The root cause was flawed retained margin rules, which have since been patched.
JELLY Contract Incident: Triggered by improper position size caps for low-market-cap assets. When JELLY launched, its market cap was about 200 million USD, and Hyperliquid applied a standard 30 million USD position cap. However, by the time of the incident, JELLY’s market cap had collapsed to under 10 million USD, yet the cap remained unchanged, creating an exploitable loophole. This led to 15 million USD in peak HLP losses (24% of HLP’s historical profits). Hyperliquid ultimately settled positions at pre-manipulation prices, sparking debates about its decentralization claims.
Both incidents exposed vulnerabilities in Hyperliquid’s core trading mechanics. While post-incident fixes were implemented, fundamental risks persist: Fully transparent on-chain positions (size, liquidation prices) inherent to decentralized derivatives exchanges, combined with HLP acting as the sole counterparty, create theoretically infinite attack vectors. No matter how rules are designed, loopholes may exist and be exploited in blockchain’s “dark forest.” Until these core mechanisms are revised, Hyperliquid remains susceptible to future attacks. This is currently the primary market concern regarding Hyperliquid.
Security Risks
Hyperliquid’s funds are primarily held in its Arbitrum bridge contract and a multi-sig wallet. The security of these components is critical. In December 2023, North Korean hackers probed Hyperliquid’s contracts, causing custodial funds to temporarily plummet from 2.2 billion USD to 1.9 billion USD.
Delayed HyperEVM Progress
A significant portion of $HYPE’s valuation hinges on HyperEVM’s success. However, progress has lagged since its launch. If delays persist: The L1 valuation premium (typically far higher than derivatives exchanges) embedded in $HYPE will erode. As a standalone derivatives exchange, $HYPE’s current valuation appears stretched (see analysis below).
Valuation benchmark
Hyperliquid’s current revenue primarily stems from derivatives/spot trading fees and spot listing fees. The protocol allocates this revenue uniformly: after subsidizing HLP (Hyperliquid Liquidity Pool) returns, 100% of the remaining funds are directed to the Assistance Fund (AF) for HYPE buybacks. Consequently, HYPE’s valuation can be analyzed using both P/S and P/E models since the buyback portion functions as revenue and approximates net profits for token holders.
Hyperliquid’s revenue in the past 30 days was $42.05 million, with an annualized revenue of $502 million. Based on the current circulating market cap of $4.2 billion, its circulating PS is 8.33, while the fully diluted PS is 24.96. When calculated based on circulating PS, Hyperliquid’s valuation is comparable to that of GMX and ApolloX within the derivatives exchange sector. However, compared to Layer 1 protocols, Hyperliquid’s valuation remains relatively low.

By Alex Xu, Mint Ventures' research partner & Lawrence Lee, Mint Ventures' researcher

In our previously published “Sifting for Gold: Identifying Long-Term Investment Targets Through Market Cycles (2025 Edition – Part I)“, we analyzed lending sector projects, including Aave, Morpho, Kamino, and MakerDAO, as well as staking sector projects Lido and Jito. Part II will continue exploring fundamentally strong projects with long-term potential.
PS: This article reflects the authors’ perspectives as of publication date, which may evolve over time. The views expressed are highly subjective and may contain factual, data, or logical errors. None of the content constitutes investment advice. We welcome critiques and further discussions from industry peers and readers.
3. Trading Sector：Cow Protocol、Uniswap、Jupiter
3.1 Cow Protocol
Current Business Status
Product and Mechanism
Cow Protocol is a decentralized trading aggregation protocol. Its core product is the decentralized trading aggregator, CoW Swap. The “CoW” in the name stands for Coincidence of Wants, referring to the matching mechanism that directly aligns the needs of buyers and sellers. CoW Swap uses batch auctions as a price discovery mechanism, consolidating users’ trading intentions (order demands) and settling them collectively in each block.

This mechanism allows users’ orders to be directly matched without needing traditional market makers or liquidity pools. When two parties want to exchange assets that meet each other’s needs, the transaction can be completed directly, avoiding intermediate fees. For orders that cannot be directly matched, CoW Swap routes the remaining orders to decentralized exchanges (DEXs) or other aggregators to obtain liquidity. This design minimizes slippage and fees, while batch matching ensures that all transactions executed in the same batch share the same settlement price, eliminating price unfairness due to transaction order.
Additionally, CoW Swap introduces a Solver bidding mechanism: multiple third-party solvers compete to provide users with the best execution strategy, where the winner gains the right to execute the batch and also covers the on-chain gas fees. Users only need to sign their order intentions offline, without having to pay on-chain fees themselves, and incur no transaction costs if unfilled. This “intention matching + solver bidding” model enhances user experience (no need to worry about gas losses from failed transactions) and provides a degree of MEV (Maximal Extractable Value) protection—since order matching occurs off-chain, solvers must bid to return MEV to the user, making front-running and other MEV attacks less effective.
CoW Swap currently operates on Ethereum, Arbitrum, Gnosis, and Base.
Beyond Cow Swap, another product of Cow Protocol is MEV Blocker, developed in collaboration with CoW DAO, Beaver Build, and Agnostic Relay. By switching the wallet’s RPC to MEV Blocker, users’ transactions are routed through a private searcher network (instead of entering Ethereum’s public mempool visible to all searchers, which leads to MEV attacks), preventing sandwich and front-running attacks from the start.
*The process of regular transactions on the Ethereum network being packaged into blocks: Users initiate transactions, which first enter the public mempool; searchers monitor the mempool for MEV opportunities and package transactions into bundles; builders receive bundles from searchers and construct blocks; validators receive blocks from builders, verify them, and add them to the blockchain.
Revenue Model
Cow Protocol’s revenue sources are broadly divided into two categories:
Surplus from CoW Swap Transactions: This refers to the extra savings CoW Swap provides to users through its bidding network, compared to the initial quote. CoW Swap currently charges a fee of 50% on surpluses across most networks, but this fee does not exceed 1% of the transaction volume. Additionally, for external protocols (partners) integrated with Cow Protocol, Cow Protocol takes 15% of the transaction fees generated by these partners as a service fee, with the percentage defined by the partner but not exceeding 1% of the transaction volume. Lastly, Cow Protocol charges a fee on the total network transaction volume for certain networks like Gnosis and Arbitrum, currently set at 0.1% of the transaction volume (excluding special trades like stablecoins).Revenue from MEV Blocker: A rate of about 10% is deducted from the revenue validators earn through MEV Blocker.
In the income structure of the protocol, the majority of revenue is contributed by the surplus from CoW Swap transactions, so our focus will primarily be on CoW Swap’s business data.
Business Data
We will focus on two key business metrics: the transaction volume of Cow Protocol and its protocol revenue.
Transaction Volume

Data Source：Dune
As an emerging intent matching protocol, CoW Swap has experienced rapid development over the past three years. In 2021, the protocol was still in its early stages, with small transaction volumes. Entering 2022-2023, the CoW Protocol saw its business data improve as demand for MEV protection and efficient aggregated trading grew in the DeFi space. By 2024, transaction volume increased significantly: monthly volumes hit a record high at the end of 2024, with nearly 7.8 billion in December alone and around 6.9 billion in February 2025, far exceeding previous years.
Notably, CoW Swap is increasingly favored by DAOs and professional institutions for providing large, low-slippage trading solutions. In 2023, about one-third of the DAO on-chain transaction volume was completed through CoW Swap, and by February this year, this proportion had risen to 79.5%.

Data Source：Dune
Protocol Revenue

Data Source：Dune
After entering 2024, the Cow Protocol began actively exploring revenue generation, conducting multiple rounds of revenue testing. This resulted in a steady month-by-month increase in income. January 2025 marked the highest revenue month, with 641 ETH earned. Calculated at an average ETH price of 3,328 per month, this amounts to approximately 2.13 million. In February, revenue was 586 ETH, with an average ETH price of 2,668, bringing in 1.56 million.
Protocol Incentives

Data Source: Tokenterminal
Currently, Cow Protocol’s main expenses are token incentives given to network solvers. These solvers receive COW tokens as rewards based on the quality of the trading solutions they provide, specifically the surplus they generate for traders. According to Token Terminal statistics, over the past year, spending on COW token rewards was approximately 7.4 million. In January and February 2025, protocol token incentives were 858,000 and 961,000, respectively, both below the protocol′s revenues of 2.13 million and $1.56 million for the corresponding months.
According to Cow Protocol’s official disclosure of the 2024 project budget in January, excluding development costs, the token rewards given to solvers amounted to about 5.2 million, while the annual protocol revenue was approximately 6 million, meaning revenue has already surpassed the token incentive expenditure.
Competitive Landscape
The main battlefield for Cow Protocol is the decentralized exchange aggregator sector. Initially dominated by 1inch, the landscape has diversified over the past two years. According to The Block’s latest data from March 2025 (excluding UniswapX), 1inch has lost its leading position (following a March 5th attack on its Fusion function, resulting in losses of over $5 million and increasing user concerns about its security), now ranking second with a 22.8% market share. Meanwhile, CoW Swap has taken the lead with 33.85%, marking its first time at the top in monthly data.

Data Source: The Block
In addition to 1inch and CoW, the other top five aggregators include ParaSwap, 0xAPI/Matcha (an aggregation interface provided by the 0x protocol), KyberSwap, and Bebop. These competitors each hold a market share of around 10% or less. ParaSwap and 0x have a longer history and stable user base, while KyberSwap (transitioning from Kyber Network to aggregation) and Wintermute’s Bebop have recently gained incremental users. Overall, competition in the DEX aggregator space remains fierce, with new players continually emerging. Although CoW Protocol has become the new leader, its position is not yet secure.
Beyond traditional aggregation products, two other noteworthy competitors are Uniswap’s UniswapX and Particle Network’s cross-chain trading platform, UniversalX.
Uniswap
UniswapX is a cross-platform aggregation trading feature launched by the Uniswap team in the second half of 2023. Essentially, UniswapX provides users with a similar mechanism of intent orders and fillers. Users submit offline signed orders on the Uniswap front end, and third-party “fillers” in the network can fill these orders and trade on-chain for the users. The process involves fillers providing a quote and enjoying exclusive matching rights for a short period. If the transaction isn’t completed within this time, it enters a Dutch auction phase, allowing more fillers to bid. This model is quite similar to CoW Swap’s solver bidding, both being off-chain matching and on-chain settlement solutions. Leveraging Uniswap’s brand and extensive user base, UniswapX quickly integrated into its front-end interface and went live on the Ethereum network. It’s noteworthy that there were industry accusations of UniswapX “copying” CoW Swap’s intent matching model. Critics, including Curve’s official channels, pointed out that CoW Swap had already pioneered the solver model, suggesting UniswapX was not an original innovation. Despite the controversy, UniswapX swiftly captured substantial trading volume within the Uniswap ecosystem. In early 2024, its share in the EVM aggregation trading market briefly exceeded 10% (compared to CoW Swap’s 14% at that time). However, its market share gradually declined, and according to data disclosed by Cow Protocol in March, UniswapX’s market share in aggregated trading is now around 5.5%.
UniversalX
UniversalX is another highly anticipated new project focusing on cross-chain aggregated trading. Launched by Particle Network, it went live on the mainnet at the end of 2024. The aim is to enable trading of assets across any chain without the need for cross-chain bridges. Its core concept is “chain abstraction,” allowing users to deposit assets from multiple chains into a unified on-chain account. Through the UniversalX platform, users can trade tokens from any chain using a unified balance, with the platform automatically handling cross-chain exchanges and settlements in the background. As a new entrant in the aggregator space, UniversalX targets the cross-chain trading niche, setting itself apart from projects like CoW Protocol, which primarily focus on single-chain aggregation. However, as the multi-chain ecosystem evolves, UniversalX could potentially become a competitor to CoW Protocol. If CoW Protocol expands to more chains or offers cross-chain capabilities, it would enter the competitive domain of UniversalX.
Cow Protocol’s Competitive Advantages
In the face of intense competition, Cow Protocol has been able to rise and grow steadily, and its competitive advantages can be analyzed from two aspects: product and brand.
Product:
Technical and Mechanism Advantages of Trading Products: Cow Swap is the first protocol to apply batch auction matching and solver competition to DEX aggregation, giving it a first-mover advantage. Its unique Coincidence of Wants matching mechanism allows direct trades without relying on traditional liquidity pools, reducing slippage and fees. The unified clearing price mechanism prevents price manipulation due to trade order, enabling heavy traders, particularly institutions, to execute at fair prices. In comparison, later approaches like UniswapX and 1inch Fusion have similar ideas but differ in implementation. For instance, CoW Swap uses sealed bidding every block, where all solutions are submitted simultaneously and executed optimally, minimizing MEV opportunities. This is considered more effective at preventing unfair practices like front-running than UniswapX’s time-limited exclusive fills and Dutch auctions.MEV Protection and Security: The combination of Cow Protocol’s trading services and MEV Blocker further enhances protection against MEV, removing user trades from Ethereum’s public mempool and allowing trusted solvers to batch them before publishing on Ethereum. This effectively reduces the risk of MEV attacks such as front-running and sandwich attacks. The protocol also imposes strict limits on the slippage and execution results of solver quotes, compressing the space for miners and searchers to extract MEV. These measures make Cow Swap one of the most user-protective trading platforms currently available, especially appealing for large trades and DAO treasury managers due to its strong MEV protection.
Brand
Cow Protocol, as the first to introduce batch auction matching and solver competition mechanisms, combined with its MEV-resistant features, has established a strong value proposition of safety and cost savings for traders. It has become the top choice in the minds of large traders, a preference that is unlikely to change easily. This user habit stems from the brand and reputation built on the product’s strengths, which is also the source of the protocol’s eventual profitability.

1inch’s monthly active users over the past year, Data Source：Tokenterminal

Cow Protocol’s monthly active users over the past year, Data Source：Tokenterminal
Main challenges and risks
Intense Competitive Environment
In the fiercely competitive landscape of aggregated trading platforms, established projects like 1inch, Kyber, and DoDo are leading the charge, while new players such as Bebop, backed by Wintermute, join the fray. Additionally, products like CEX and wallets that have closer user proximity, and possess strong entry points and frontend advantages, along with chain-abstract concepts like UniversalX, are continuously exploring trading product innovations and striving for greater user penetration. Over the long term, their relationship with Cow Protocol is more competitive than collaborative. Therefore, even though Cow Protocol has currently surpassed 1inch to become the leader in market share, maintaining this position in such a high-pressure environment is challenging. It directly affects the protocol’s bargaining power with users and suppliers (solvers), creating a clear conflict between the goals of “market share” and “protocol profit.”
Market Cycles
A downturn in the overall market cycle will lead to a contraction in total trading volume, impacting CoW Swap’s transaction volumes significantly, which is self-explanatory. Other trading products are similarly affected, so this point will not be elaborated further.
Ties to the EVMEcosystem
Currently, Cow Protocol only operates within the Ethereum ecosystem. If the Ethereum ecosystem underperforms compared to other blockchains, it will naturally limit Cow Protocol’s potential for development. Uniswap, discussed later, faces a similar risk, so I won’t repeat this point.
Valuation benchmark
COW Token
Cow has a total supply of 1 billion tokens. According to Coingecko, the current circulation rate is about 41.5%, with a projected token inflation rate of 19.61% over the next year.
Currently, the primary use case for Cow tokens is governance. As protocol revenue increases, there may be token buybacks. Previously, there were attempts to reduce fees through Cow staking.
Valuation
Looking at Cow’s valuation over time, its FDV hit a new high in this cycle as business metrics continue to rise. Excluding the initial month’s anomalies due to extremely low token circulation, the peak market cap reached 990 million at the end of December last year but then experienced a sharp decline, now standing at approximately 280 million.
We compare Cow’s Price-to-Sales (PS) ratio by analyzing the FDV in relation to protocol revenue.

The chart shows that despite Cow’s FDV maintaining an upward trajectory over the past year or so, its PS ratio has exhibited a notable decline alongside rising business revenue, making it more valuation-attractive compared to previous levels.
From a horizontal comparison perspective among competitors, within comparable projects in the aggregation protocol sector, 1inch serves as the most direct counterpart. Given that 1INCH currently lacks a direct token value capture mechanism and the protocol does not generate stable, publicly disclosed protocol revenue, we primarily conduct the comparative analysis through the FDV-to-trading volume ratio between the two protocols.

From the chart, we can see that as Cow’s price decreased and business data improved, its market cap to trading volume ratio fell below that of 1inch for the first time since February 2025, offering better relative value.
3.2 Uniswap
Current Business Status
Core Products
Uniswap is the largest decentralized exchange (DEX) on Ethereum. Its main products currently include the DEX protocol (now deployed on the Ethereum mainnet and several scaling chains) and the newly launched Unichain, a dedicated Layer 2 network.
The fee switch for the Uniswap protocol hasn’t been activated yet, so the protocol itself hasn’t generated direct revenue in the past. However, Uniswap Labs does charge a 0.15% interface fee on token trades via its official front end.
With the launch of Unichain in November 2024, there will be a new way to distribute value directly to UNI holders by staking UNI to share in transaction sequencer fees without needing to activate the fee switch.
Business Data
For Uniswap, the key business metrics are trading volume and fees. As for Unichain, we focus on the number of active addresses on the chain, the main ecosystem, and the amount of capital on the chain.
DEX Trading Volume and Fees

Uniswap’s Trading Volume and Fees, Source：tokenterminal
Uniswap’s trading volume has generally continued to grow with the market, hitting all-time monthly highs in March and December of the past year. However, with the market cooling recently, trading volume has noticeably declined.
It’s worth noting that in this cycle, Uniswap’s fee metrics have not surpassed the peak and secondary peak of the previous cycle, indicating that the fee rates are decreasing over time, leading to more intense competition among liquidity providers (LPs).
Multi-Chain Data
Thanks to multi-chain deployment (currently covering 11 EVM chains), especially with Coinbase’s launch of Base, Uniswap’s active users reached a record high of 19 million last October. This growth rate in active users far outpaces the growth in trading volume, highlighting Layer 2’s ability to attract new users.

Multi-Chain Distribution of Uniswap’s Monthly Active Addresses, Source：tokenterminal
Among them, Base is the main contributor to active users, accounting for 82% of Uniswap’s active users across all chains.

Source：tokenterminal
However, in terms of trading volume, Ethereum remains Uniswap’s main battleground, accounting for about 62% of the volume, followed by Arbitrum with 23%, and then Base with 8.4%.

Source：tokenterminal
Unichain’s Business Data
Since its official launch in early February this year, Unichain has grown rapidly. By early March, the number of weekly active addresses reached nearly 120,000, ranking 7th among all L2 projects, ahead of well-known L2s like zkSync, Manta, and Scroll.

Source：tokenterminal
However, the value of assets bridged on Unichain remains low, currently only around $14 million.

Source：tokenterminal
In terms of the ecosystem, Unichain’s official list includes over 80 projects, but most have not yet launched. For example, in DeFi, aside from Uniswap itself, the only notable app currently live is Venus, with total deposits of $5.67 million.
Competitive Landscape
Over the past year, Uniswap has remained a leader in the DEX market within the EVM ecosystem, holding the top market share. However, its overall market share has been declining. The chart below shows the market share trends of all DEXs in the EVM ecosystem (including all EVM L1 and L2).

Source：Dune
The second place is Pancakeswap, and the third is Aerodrome, which are the leading DEXs on Bnbchain and Base, respectively (even though Uniswap has also been deployed on these two chains).

Source：Dune
ETH, Bnbchain, and Base are the three largest chains by transaction volume in the EVM ecosystem, which aligns with the market share rankings of Uniswap, Pancakeswap, and Aerodrome.
As for Unichain, since it’s relatively new, its ecosystem is still quite underdeveloped and is in the early stages of application and funding. Apart from a good growth in active users, its other metrics lag significantly behind mainstream L2s.
Uniswap’s Competitive Advantages
Uniswap’s competitive advantages can be summarized as follows:
Network Effects and Liquidity Depth The largest liquidity pools attract the most traders and vice versa. More traders and transaction volume draw more tokens to deploy liquidity here, creating a self-reinforcing cycle.Brand and User Habit Stickiness As the first project to popularize the AMM model in the DeFi space, Uniswap has unparalleled brand recognition and credibility. It holds a strong position in the minds of traders and liquidity providers. Even with a plethora of DEXs and aggregators available, many users habitually conduct transactions on Uniswap’s front-end, despite it charging an additional transaction fee. Uniswap’s brand has been instrumental in building its L2 platform, attracting many quality projects for testing and joining right from the start, with rapid user growth.Ecosystem Positioning Through Multi-Chain Deployment Uniswap has deployed its products on most major EVM chains, consistently ranking in the top three by transaction volume. This strategy has helped Uniswap maintain its foundational ground in the multi-chain era and laid the groundwork for subsequent multi-chain aggregation features, facilitating easier liquidity interchange across chains.
Main challenges and risks
Intense Competitive Landscape and the Impact of New Models
Despite Uniswap’s relative advantage in market share, it faces significant challenges. On one hand, its traditional Ethereum competitors like Curve are holding their ground. On the other hand, Uniswap’s expansion on other EVM L1 and L2 chains is proving difficult, with strong local competitors on each chain (such as Pancake on BNB Chain, Aerodrome on Base, and Camelot on Arbitrum). Emerging trading models also pose a significant challenge: RFQ (Request-For-Quote) protocols and batch auction matching are on the rise. Projects like CoW Swap allow market makers (solvers) to quote prices directly, improving efficiency for large trades and reducing AMM slippage and MEV. This is particularly favored by professional traders and large holders, significantly diverting trading volume from Uniswap. Although Uniswap introduced a similar mechanism with UniswapX, it hasn’t slowed the growth of projects like CoW Swap. Additionally, products with strong front-end advantages, such as wallets and CEXs, are aggressively entering the trading scene, attempting to influence user behavior upstream. This potential shift relegates Uniswap to a more passive “price taker” role in a fiercely competitive pricing environment.
Community Governance Inefficiency and Lack of Value Pegging for Tokens
Investors who have been following the Uniswap governance forum for a long time will find that, compared to other DeFi projects with higher governance efficiency and better reputations (like Aave), Uniswap’s governance efficiency is quite low. This is specifically manifested in slow decision-making, resource wastage, and insufficient focus on strategic metrics. For example: 1. The community’s most concerned issue, the fee switch, has been discussed repeatedly for nearly three years with no result; 2. Various donations and budgets are provided for research and organizations unrelated to Uniswap’s North Star metric (trading volume), but the outcomes have been of little benefit to the project. The low level of community governance and the neglect and tardiness regarding the value pegging of Uni tokens clearly have a long-term negative impact on the tokens’ price.
Valuation benchmark
Since Uniswap has yet to achieve formal protocol revenue and Unichain’s fees are negligible compared to its market value, we use the ratio of Uniswap’s market value to its fees (PF) for both vertical and horizontal valuation comparisons.

Source：tokenterminal
From a vertical comparison, Uniswap’s PF in February this year was 6.77, at an absolute historical low. Since the issuance of Uniswap’s token, only three months have had a lower PF: May and June of 2022 (due to the Three Arrows Capital crisis) and April 2024 (due to a major altcoin pullback and Uniswap receiving a Wells Notice from the SEC). In March, this indicator rose slightly to 7.26. From this indicator, it is evident that the market is extremely pessimistic about the prospects of the Uni token.

Source：tokenterminal
For horizontal comparison, I chose Pancake and Aerodrome, both of which are DEX projects with market shares second only to Uniswap. I did not choose Curve because it has lending as a main business in addition to being a DEX, which makes it less comparable to the other three.
From the PF indicators of these three, Uniswap’s valuation appears significantly higher than Pancake and Aerodrome. However, we need to consider two additional factors:
Uniswap hasn’t provided any token subsidies, whereas Pancake and Aerodrome are still engaging in large-scale token subsidies. Especially Aerodrome, whose token incentives were as high as $27 million in February (See the chart below)

Uniswap also has Unichain as a second growth curve.Uniswap’s multi-chain ecosystem is better developed. Although Pancake has deployed on multiple chains, its operational performance has a significant gap compared to Uniswap, while Aerodrome is a single-chain DEX.
Overall, even considering the business similarities between Uniswap, Pancake, and Aerodrome, the horizontal valuation comparison (Price-to-Fundamental) of Uniswap is less informative than the vertical comparison.
3.3 Jupiter
Current Business Status
Jupiter started with trade aggregation and has expanded through product development and acquisitions, creating a comprehensive ecosystem around Solana’s on-chain transactions. It is also expanding horizontally to other chains and ecosystems. The main products within the Jupiter system include:
Main site self-operated trading products: These include aggregated trades (Instant), market orders (Trigger), and conditional orders (Recurring). These were Jupiter’s earliest products and remain the most widely used, with a record 57 million trades in a single day on January 20th.

Source: Dune
The main site’s Trenches product, formerly known as Ape.pro, was initially a specialized tool for memes, similar to products like Phonton/GMGN. However, after being integrated into Trenches in late February, its product format became much like Jupiter’s aggregated trading offerings.The main site’s Perps product operates similarly to GMX, providing leveraged long and short positions, as well as yield farming for BTC, ETH, and SOL. The TVL for this segment peaked at over 2 billion, making it a major component of Jupiter′s TVL. During peak times, the average daily trading volume was close to 1 billion, serving as Jupiter’s primary cash flow business in its early stages.

Jupiter Derivatives Exchange’s TVL (left axis) and Trading Volume (right axis) Source: DeFillama
These can be considered Jupiter’s main products at present. In addition, the Jupiter ecosystem also includes the following products:
The meme trading platform Moonshot. In January 2025, Jupiter announced the acquisition of a majority stake in Moonshot, a rapidly emerging meme trading platform in the past six months. Moonshot has attracted numerous users with its seamless fiat deposit system and smooth trading process, creating a “Moonshot effect,” especially during the launch of TRUMP, which was particularly popular.

Trading Volume of Moonshot (Left Axis) and Fees (Right Axis) Source：Dune
The liquidity platform Meteora. Founded by one of Jupiter’s early co-founders, Ben Chow, Meteora is considered an important part of the Jupiter ecosystem, despite not having a clear control relationship with Jupiter. Meteora plans to issue its own token, and while it belongs to the Jupiter ecosystem, its connection with the JUP token is relatively indirect.The LST product jupSOL quickly captured a significant market share after its launch in 2024. Currently, jupSOL ranks fourth after jitoSOL, bnSOL, and mSOL.

Solana LST Market Share (Top Gray Block Represents jupSOL) Source: Dune
Launchpad LFG: Besides the JUP token itself, LFG launched several projects in 2024, including the governance token ZEUS for the cross-chain communication protocol Zeus, the governance token CLOUD for the LST protocol Sanctum, and the governance token DBR for the cross-chain protocol Debridge, along with other meme projects. Although there are fewer projects launched, the quality is relatively high.Investment Portfolio Management Platform Jupiter Portfolio: In January, Jupiter announced the acquisition of the on-chain portfolio tracker Sonarwatch and officially launched Jupiter Portfolio on January 30th.Mobile Wallet Jupiter Mobile: After acquiring Solana’s mobile wallet Ultimate Wallet, Jupiter introduced its mobile wallet.Cross-Chain Network Jupnet: Launched at the end of January this year, Jupnet aims to allow access to all chains, currencies, and assets with one account. However, it does not yet have a user-friendly version for end consumers.Trading Terminal Coinhall: Acquired by Jupiter in September 2024, Coinhall primarily facilitates the trading of Cosmos ecosystem tokens. Through this acquisition, Jupiter gained the capability to build its own trading terminal, which is utilized in its Trenches product. Currently, on-chain trading of Cosmos ecosystem tokens is not very frequent, with daily trading volumes below $10 million.

Source: Coinhall Official Website
In addition to the consumer-facing products mentioned, Jupiter has also been active in other areas, such as acquiring Solana’s browser, SolanaFM. They are developing a variety of products, including the cross-chain network Jupnet.
From a product layout perspective, Jupiter, as the largest consumer gateway on Solana, covers nearly all business directions except for lending. Even in Solana’s diversified business environment, Jupiter’s reach is extensive. Beyond their own operations, they aggressively expand their business boundaries through acquisitions.
Revenue Model
Currently, Jupiter’s revenue-generating services include:
Aggregated trading services (including Trenches) with fees ranging from 0.05% to 0.1%; spot orders and DCA orders have a fee of 0.1%.Derivatives services are based on GMX’s mechanism. The main fees come from a 0.06% charge when opening and closing positions, as well as borrowing fees, price impact fees, etc. However, not all the derivatives fees go to JupiterDAO; 75% of the fees are allocated to liquidity providers (JLP), and the remaining 25% is taken by JupiterDAO.
Other services are offered without fees.
Token Incentives
Jupiter does not have a regular token incentive program. Its main incentives come from two rounds of retrospective airdrops.
Competitive Landscape
Trading is the core service offered by Jupiter. Other services like LST, Launchpad, and wallet can be seen as ways to leverage traffic brought in by trading. Therefore, we’ll focus on analyzing Jupiter’s competitive situation in aggregated and derivative trading.
Aggregated Trading
In the competitive landscape of Solana trading entry points, Jupiter quickly surpassed Orca and Raydium in the first half of 2024, thanks to its multi-liquidity pool routing capabilities and excellent user experience. By Q2 2024, Jupiter held a dominant position, accounting for 51% of Solana’s trading volume (source: Messari）。
However, with the rise of meme tokens and platforms like Pump.fun, specialized meme trading tools such as Photon, Trojan, Bullx, and GMGN rapidly encroached on Jupiter’s market share. These platforms offered faster trading speeds and comprehensive meme trading support, becoming the preferred “meme trading gateways.” In response, Jupiter launched a similar tool, ape.pro, in October last year, but it failed to gain traction and was eventually integrated into the main site’s Trenches product. As a result, Jupiter’s share of Solana’s trading volume dropped to 38% by Q5 2024 (source: Messari）
During the meme frenzy, meme trading accounted for 90% of Solana’s network volume. The loss of market share in meme trading gateways is Jupiter’s biggest challenge in the realm of aggregated trading.
Derivatives Trading
Jupiter’s derivatives exchange is currently the second-largest on-chain derivatives platform, with trading volume second only to Hyperliquid, which we’ll discuss in the next section. Specifically on the Solana chain, Jupiter has a clear advantage over its main competitor, Drift, with its trading volume being roughly 5 to 10 times that of Drift recently.

Ranking of 7-Day Derivatives Exchange Trading Volume Source：DeFillama
Looking at DAU, the gap between the two over the past month is also roughly an order of magnitude.

Data Source: Dune
In the derivatives trading field, Jupiter’s position on the Solana network is difficult to shake in the short term.
Main challenges and risks
Despite launching Jupnet to expand cross-chain operations, Jupiter’s core business currently remains on Solana. The biggest uncertainty for Jupiter is whether the Solana network can maintain its prosperity and active on-chain trading.
In addition to the aforementioned challenges related to the Meme trading entry competition, other challenges and risks Jupiter faces include:
Overly Aggressive Expansion, Effectiveness in Doubt
Jupiter’s expansion strategy is much more aggressive than most Web3 projects, with ambitious business ideas that have led to frequent acquisitions over the past year to broaden its scope. However, many of these acquisitions have not achieved the expected results, such as the acquisitions of Moonshot and Coinhall.
At its peak, Moonshot had a daily trading volume of 660 million and generated revenues of tens of millions of dollars. Currently, the daily trading volume has dropped to less than 5 million, with revenue not exceeding $10,000. Although Jupiter has not disclosed the acquisition costs or payment details, it’s clear that acquiring Moonshot today would be less expensive for JUP token holders.

Trading Volume of Moonshot (left axis) and Fees (right axis) Source：Dune
The acquisition of Coinhall helped Jupiter build its meme trading product, Trenches. However, in terms of both trading volume and market presence, Trenches still lags significantly behind leading meme trading products like Photon, Bullx, Trojan, and GMGN.
No Proprietary Liquidity Pool
Jupiter does not have its own liquidity pool. Its supported platform, Metrora, has started a rewards program and plans to launch an independent token issuance. This means that JupiterDAO, or the JUP token, cannot capture trading fees from the “token trading in liquidity pools” step, fees that have contributed to Raydium’s revenue of over $22 million this past January.
Untested by Bear Market
In a bear market, many assumptions taken for granted during a bull run might be challenged. For example, users trading memes on the Solana chain currently seem willing to pay Jupiter’s 0.05% fee, as competitor meme tools charge between 0.5% to 1%. However, if trading enthusiasm declines during a bear market, users might become more sensitive to transaction fees, putting Jupiter in a conflict between “market share” and “net profit” objectives.
Moreover, Jupiter’s product lineup includes a wallet, the cross-chain network Jupnet, and the portfolio management tool Jupiter Portfolio—all of which are unlikely to generate significant short-term revenue. Maintaining such an extensive product line during a bear market raises significant questions.
Valuation benchmark
JUP has a total supply of 10 billion, with 3 billion tokens burned following a vote at the end of January, leaving a maximum of 7 billion tokens in circulation. Currently, 2.63 billion are circulating, representing a 38.5% circulation rate. Among the non-circulating tokens, 810 million team tokens will begin vesting over the next 21 months. Additionally, 700 million tokens will be released in a Jupiter airdrop in January next year. With an inflation rate exceeding 40% over the next year, JUP remains a low-circulation, high-inflation token.

Current distribution of JUP tokens, Source：Jupiter Governance Forum
At the end of January, Jupiter announced that 50% of its protocol revenue will be used to buy back JUP, with purchased JUP being locked for three years.
The chart below, sourced from DeFiLlama, shows Jupiter’s protocol revenue since last October. Note that unusual values for Jupiter’s aggregator revenue on February 10th and March 10th may contain errors; however, I couldn’t find alternative data sources for Jupiter’s revenue. It’s evident that Jupiter’s main income currently comes from derivatives trading (blue bars), which is partly due to the significant decline in meme trading enthusiasm since the introduction of fees by the Jupiter aggregator.

Source：DeFillama
Since Jupiter just completed a significant economic model update at the end of January, introducing a transaction fee of 0.05%-0.1%, the P/S data for February and March are more relevant.
According to data collected by DeFiLlama, Jupiter’s revenue for February was 31.7 million, with an annualized revenue of 380 million. This corresponds to a P/S (circulating) of 3.65 and a P/S (fully diluted) of 9.5. As of March 18th, the revenue was 12.25 million, translating to an annualized revenue of 253 million, with a P/S (circulating) of 5.45 and a P/S (fully diluted) of 14.15.

Source：DeFillama
Whether comparing horizontally with CoW Swap or vertically with Jupiter itself, the current valuation of JUP seems relatively low.
Of course, these figures are based on the recent popularity of Solana. As Solana’s hype potentially decreases in a bear market, maintaining such high revenue will be challenging. We’ve already observed this trend when comparing data from March to February.

By Alex Xu, Mint Ventures' research partner & Lawrence Lee, Mint Ventures' researcher
Introduction: Altcoin Bear Market – Fundamental Investing Still Works
Undoubtedly, this bull cycle has witnessed the worst performance of altcoins in crypto history.
Contrary to historical patterns where altcoins surged and Bitcoin’s market dominance rapidly declined after previous bull market initiations, Bitcoin’s dominance has steadily climbed from about 38% in November 2022 (the market bottom) to over 61% today. This trend persists despite the exponential growth in altcoin supply during this cycle, highlighting the unprecedented weakness of altcoin prices.

BTC Dominance Chart Source: Tradingview

The current market trajectory aligns with Mint Ventures’ analysis in Preparing for Primary Wave: My Periodic Strategy on This Bull Market Cycle (March 2024). In that report, we argued that only three of the four key bull market drivers were present:
Bitcoin halving (supply-demand dynamics) ✓Loose monetary policy or dovish expectations ✓Regulatory easing ✓Innovative asset models or business paradigms ✗
Consequently, we advised tempering expectations for legacy altcoin categories—including smart contract platforms (L1s/L2s), GameFi, DePIN, NFTs, and DeFi—and recommended the following strategy:
Increase allocation to BTC and ETH (with a long-term preference for BTC)Limit exposure to legacy altcoin sectors (DeFi, GameFi, DePIN, NFTs)Seek alpha in emerging narratives: Memes, AI, and Bitcoin ecosystem
To date, this strategy has largely proven effective (though the Bitcoin ecosystem has underperformed expectations).
However, it’s worth noting that despite the overall sluggish price performance of most altcoins this cycle, a few altcoin projects have performed significantly better than BTC and ETH over the past year. The best examples are Aave and Raydium, which were highlighted in the Mint Ventures report titled Altcoins Keep Falling, Time to Refocus on DeFi published in early July 2024 during the altcoin market’s lowest ebb.
Starting from early July last year, Aave’s peak increase relative to BTC exceeded 215%, and 354% relative to ETH. Even after substantial price corrections, Aave’s increase relative to BTC is still 77%, with a 251% increase relative to ETH.

AAVE/BTC Exchange Rate Source: Tradingview
Starting from early July last year, Raydium’s peak increase relative to BTC exceeded 200%, and 324% relative to ETH. Currently, despite the overall decline in the Solana ecosystem and the negative impact of Pump.fun’s self-developed DEX, Raydium’s gain relative to BTC remains positive and significantly outperforms ETH.

RAY/BTC Exchange Rate Source: Tradingview

Considering that BTC and ETH, especially BTC, have significantly outperformed most altcoins this cycle, Aave and Raydium have stood out in terms of price performance among altcoins.
This is because, unlike most altcoin projects, Aave and Raydium have stronger fundamentals. Their core business data set new records in this cycle, and they possess unique moats with stable or rapidly expanding market shares.
Even during an “altcoin bear market,” betting on projects with outstanding fundamentals can yield Alpha returns exceeding BTC and ETH, which is the primary goal of our research efforts.
In this report, Mint Ventures will identify quality projects with solid fundamentals from thousands of listed crypto projects. We’ll track their recent business performance and market share, analyze their competitive advantages, assess their challenges and potential risks, and provide some valuation references.
It’s important to emphasize:
The projects mentioned in this article have certain advantages and appeal, but they also face various issues and challenges. Readers might have differing opinions on the same project after reading.Likewise, projects not mentioned in this article do not imply “poor fundamentals” or that “we’re not optimistic about them.” We welcome you to recommend projects you find promising and share your reasons.This article represents the stage-based thoughts of the two authors as of publication. Future changes may occur, and the views are highly subjective, with possible errors in facts, data, or reasoning. All opinions in this article are not investment advice, and we welcome criticism and further discussion from industry peers and readers.
We will analyze the projects from several dimensions, including current business status, competitive landscape, main challenges and risks, and valuation status. Below is the main text.
1. Lending Sector: Aave, Morpho, Kamino, MakerDao
DeFi remains the sector with the best product-market fit in the crypto business world, and lending is one of its most crucial sub-sectors. It features mature user demand and stable business revenue, attracting numerous excellent projects, both new and established, each with its own strengths and weaknesses.
For lending projects, the most critical metrics are active loans and revenue. It’s also important to assess the protocol’s expenses, particularly token incentives.
1.1 Aave: The King of Lending
Aave is one of the few projects that has successfully navigated three crypto cycles, maintaining stable growth. It completed financing through an ICO in 2017 (then called Lend, with a peer-to-peer lending model) and surpassed the then-leader Compound in the previous cycle. Today, it consistently holds the top position in lending volumes. Aave currently offers services across most major EVM-compatible L1 and L2 chains.
Current Business Status
Aave’s primary business model involves operating a pool-based lending platform, generating income from lending interest and liquidation penalties during collateral liquidations. Additionally, Aave’s stablecoin business, GHO, is now in its second year, providing Aave with direct interest income.
Active loans

Aave’s loan volume Data source: Tokenterminal
Aave’s total loan volume has surpassed its previous cycle’s (November 2021) peak of 12.14 billion since November of last year, reaching an all−time high of 15.02 billion in late January 2025. However, as market activity has cooled recently, the loan volume has declined and currently stands at approximately $11.4 billion.
Revenue

Aave’s protocol revenue Data source: Tokenterminal

Similar to its loan volume, Aave’s protocol revenue has consistently exceeded its previous peak from October 2021 since November last year. Over the past three months, Aave’s weekly protocol revenue (excluding GHO interest income) has mostly remained above 3 million. However, recent cooling market sentiment coupled with declining interest rates has driven weekly protocol revenues down to the 2 million+ range over the last fortnight.
Token Incentives

Aave’s token incentive expenses Data source: Aave Analytics

Aave currently maintains substantial token incentives, distributing 822 AAVE daily (worth approximately 200,000 at the current market price of 245 per AAVE). This elevated incentive value stems from Aave’s significant price appreciation over the past six months.
Notably, unlike most protocols that directly tie token incentives to user deposit/borrow activities, Aave’s incentives are allocated to its Safety Module (deposit protection fund). Consequently, Aave’s core lending/borrowing metrics remain driven by organic demand rather than artificial incentives.
However, in our view, Aave’s incentive allocation to its Safety Module remains excessive. The current incentive scale could be reduced by at least 50% without compromising protocol security. This issue will likely resolve organically with the rollout of Aave’s new tokenomics model, particularly the upcoming Umbrella module, which will phase out AAVE-based incentives for the Safety Module.
For a detailed analysis of Aave’s updated tokenomics, refer to Mint Ventures’ 2024 report: Exploring The Updated AAVEnomics: Buybacks, Profit Distribution, and Safety Module Shift
Competitive Landscape
In terms of loan volume (EVM chains), Aave’s market share has remained relatively stable, consistently holding the top position since June 2021. In the second half of 2023, its market share briefly dropped below 50%, but since the beginning of 2024, it has regained momentum and is now stable at around 65%.

Data Source: Tokenterminal

Aave’s Competitive Advantages
Since I analyzed Aave last July, its core competitive advantages have remained largely unchanged, stemming from four main aspects:
Continuous Accumulation of Security Credibility: Unlike many new lending protocols that experience security incidents within their first year, Aave has operated without any security breaches at the smart contract level. This strong track record is a key consideration for DeFi users, especially large-scale “whale” users, in choosing a lending platform. Notably, Justin Sun is a long-term user of Aave.Bilateral Network Effects: Similar to many internet platforms, DeFi lending is a typical two-sided market where depositors and borrowers form the supply and demand sides. Growth in deposits or lending on one side spurs growth on the other, making it harder for new competitors to catch up. Additionally, greater overall platform liquidity results in smoother transactions for both sides, attracting big fund users who further stimulate platform growth.Superior DAO Management: The Aave protocol is fully governed by a DAO, offering more transparent information disclosure and thorough community discussion for important decisions compared to centralized team management. Aave’s DAO includes active participation from professional institutions such as top VCs, university blockchain clubs, market makers, risk management providers, third-party development teams, and financial advisory teams. This diversity and active governance have enabled Aave to balance growth and security, outperforming its predecessor Compound in both product development and asset expansion.Multi-Chain Ecosystem Presence: Aave is deployed on nearly all EVM L1/L2 chains, with its TVL consistently ranking at the top. The upcoming V4 version of Aave will enable cross-chain liquidity, enhancing its advantages in this area. Aave plans to expand further to Aptos (its first non-EVM chain), Linea, and make a return to Sonic (formerly Fantom).
Challenges and Risks
Although Aave’s market share has been steadily increasing over the past year, new competitors like Morpho are growing rapidly.
Unlike Aave, where collateral assets, risk parameters, and oracles are centrally managed by Aave DAO, Morpho offers a more open approach. It provides a foundational lending protocol that allows independent markets to be built without permission, with the freedom to choose collateral assets, risk parameters, and oracles. Morpho also introduces vaults, akin to investment funds, managed by professional third parties like Gaunlet. Users can deposit funds directly into these vaults, and the managing institutions will assess risks and decide where to lend funds to generate returns.
This open and modular model allows Morpho to quickly enter new or niche markets, such as lending markets for innovative stablecoin projects like Usual and Resolv, enabling users to gain project rewards or points through leveraged loans.
Further analysis on Morpho will be provided later.
In addition to competition from within the Ethereum ecosystem, Aave’s development is also influenced by competition between the Ethereum ecosystem and other high-performance L1 chains. If ecosystems like Solana continue to erode Ethereum’s territory, Aave, which is heavily invested in the Ethereum ecosystem, will undoubtedly face limitations in its business potential.
Additionally, the highly cyclical nature of the crypto market directly affects Aave’s user demand. In bear market cycles, speculation and arbitrage opportunities shrink rapidly, leading to a significant decline in Aave’s lending volume and protocol income—common challenges for all lending protocols.
Valuation Reference
In terms of longitudinal valuation, Aave’s current PS ratio (fully diluted market cap to protocol income) is 28.23, sitting in the median range for the past year, still far from the PS values in the hundreds during the peaks of 2021-2023.

Mainstream Lending Protocols PS (Based on FDV) Data Source: Tokenterminal

When compared horizontally, Aave’s PS metric is much lower than that of Compound, Silo, and Benqi, but higher than Venus.
It’s important to consider that DeFi, similar to traditional financial enterprises, has highly cyclical revenue multiples. Typically, PS decreases rapidly during bull markets and increases during bear markets.
1.2 Morpho: The Rising Star
Morpho started as a yield optimization protocol based on Compound and Aave, originally acting as a symbiotic project. However, in 2024, it officially launched the permissionless lending protocol Morpho Blue, becoming a direct competitor to major lending projects like Aave. After its launch, Morpho Blue experienced rapid business growth and was favored by new projects and assets. Morpho currently operates on Ethereum and Base.
Current Business Status
Morpho offers several products, including:
Morpho Optimizers
Morpho’s initial product aimed to enhance capital efficiency for existing DeFi lending protocols like Aave and Compound. It optimized fund usage by depositing user funds on these platforms to earn base yields and matching funds peer-to-peer based on borrowing demand.
As Morpho’s first-generation product, Morpho Optimizers accumulated significant users and funds, helping Morpho Blue avoid a cold start. However, despite still holding substantial funds, the interest rate optimization from its matching feature has become negligible. This product is no longer a focus on Morpho’s development and has stopped allowing new deposits and loans since December last year.

Due to the extremely low matching rate, the interest rate optimization by Optimizers is currently only 0.07% Source: https://optimizers.morpho.org/

Morpho Blue (or simply Morpho)
Morpho Blue is a permissionless lending protocol that allows users to create custom lending markets. Users can freely choose parameters such as collateral assets, loan assets, liquidation ratios (LLTV), oracles, and interest rate models to create independent markets. The protocol’s design ensures that market creators can manage risks and returns based on their assessments without external governance intervention, thus meeting diverse market needs.
After its launch, Morpho Blue’s rapid growth put pressure on lending giant Aave, which subsequently introduced the Merit incentive program. According to the program, users following the incentive rules on Aave receive rewards, while those using Morpho may face reduced incentives.
Before Morpho Blue, most isolated lending markets focusing on niche or new assets, like Euler and Silo, were generally unsuccessful, with most funds still concentrated on centrally managed platforms like Aave, Compound, and Spark, using mainstream blue-chip assets as collateral.
Morpho Blue has successfully paved the way, thanks to several factors:
A long-standing, positive safety record. Before Morpho Blue, Morpho Optimizers managed substantial funds without any issues, earning DeFi users’ trust.Serving only as the underlying protocol for lending markets, it opens parameters such as asset support, asset parameter design, oracle selection, and fund management permissions:This further liberalizes the lending market, allowing for a quick response to market demands. New asset issuers actively build markets on Morpho to offer leverage services, and specialized risk service providers like Gauntlet can create and profit from their own evaluated vaults without relying solely on servicing major platforms like Aave and Compound.It enables further specialization in lending services, where participants focus on their roles, enriching product options. Crucially, “free outsourcing” reduces costs associated with self-operated businesses, such as frequent protocol upgrades, code audits, and services from specialized risk providers.
MetaMorpho Vaults
MetaMorpho Vaults are asset management tools designed to simplify the lending process, providing liquidity and yield opportunities. Users earn returns by depositing assets into vaults managed by professional teams, which are optimized based on unique risk configurations and strategies. Currently, funds from these vaults primarily flow into various lending markets built on Morpho Blue.

The product structure diagram of Morpho

After understanding Morpho’s product situation, let’s take a look at the key business data of Morpho.
Active loans

Morpho’s loan volume Data source: Tokenterminal
Morpho’s highest total loan volume, similar to Aave, was at the end of January, reaching 2.35 billion, and is currently 1.9 billion.
Morpho has not officially initiated protocol fees yet, so there is no protocol revenue. However, we can observe the “Fee” (the total income earned by depositors from the protocol) to estimate the potential revenue Morpho could generate if it decides to implement protocol fees.

Comparison of Fees between Morpho and Aave Data source: Tokenterminal

In February 2025, Aave generated a total fee of 67.12 million, while Morpho generated 15.59 million.
During the same period, Aave created 8.57 million in protocol revenue from the generated 67.12 million fee, indicating an approximate fee retention rate of 12.8% (just a rough calculation).
Since Aave is a lending protocol operated by the Aave Dao, it can direct all income from its lending market to its treasury while covering operational expenses.
On the other hand, Morpho serves as an underlying protocol for lending markets and involves numerous third-party participants, such as market creators and vault operators. Therefore, even if Morpho decides to activate protocol fees in the future, the proportion of revenue it can retain from the generated fees will likely be significantly lower than Aave’s, as it needs to be shared with other service providers. I estimate Morpho’s actual fee retention rate to be 30% to 50% of Aave’s, which is approximately 3.84% to 6.4%.
By calculating (3.84% to 6.4%) * 15.59 million, we can estimate that if Morpho implements protocol fees,its protocol revenue from February′s total fee of 15.59 million would range roughly from 598,700 to 997,800, which is 7% to 11.6% of Aave’s protocol revenue.
Token Incentives
Morpho also uses its own tokens for incentives, but unlike Aave, which incentivizes deposit insurance, Morpho directly incentivizes borrowing and lending activities. As a result, Morpho’s core business data may not be as organically strong as Aave’s.

Morpho’s Token Incentives Dashboard Source: https://rewards.morpho.org/

According to Morpho’s token incentive dashboard, in the Ethereum market, Morpho’s current overall subsidy rate for borrowing is approximately 0.2%, and for deposits, it is about 2%. In the Base market, the borrowing subsidy rate is about 0.29%, and the deposit subsidy rate is approximately 3%.
Morpho has frequently adjusted token incentives. Since December of last year, the Morpho community initiated three proposals to gradually reduce the token subsidies for user borrowing and lending activities.
The latest Morpho incentive adjustment occurred on February 21, reducing the number of reward tokens on ETH and BASE by 25%. Post-adjustment, the annual incentive expenditure of Morpho will be:
Ethereum: 11,730,934.98 MORPHO/yearBase: 3,185,016.06 MORPHO/year
Total: 14,915,951.04 MORPHO/year
Based on today’s Morpho market price (March 3, 2024), the corresponding annual incentive budget is $31.92 million. Given Morpho’s current protocol scale and generated fees, this incentive amount is quite substantial.
However, it is expected that Morpho will continue to reduce incentive expenditures and eventually cease subsidies altogether.
Competitive Landscape

Data Source: Tokenterminal

In terms of market share of total loan amounts, Morpho accounts for 10.55%, slightly higher than Spark, but still significantly behind Aave, placing it in the second tier of the lending market.
Morpho’s Competitive Advantages
Morpho’s moat mainly comes from the following two aspects:
Solid Security History: Morpho’s protocol hasn’t been around for too long; since the launch of its yield optimization product, it has been operational for nearly three years without any major security incidents. This track record has built a solid reputation for security, as evidenced by the increasing volume of funds it attracts, reflecting user trust.Focus on Lending Base Protocol: This approach, previously analyzed, helps attract more participants into the ecosystem, providing a richer and faster selection of lending options, enhancing specialization in different areas, and reducing operational costs.
Challenges and Risks
Morpho faces challenges from competition with other lending protocols, and the ecological impact of L1 competitors like Ethereum and Solana. Additionally, its token will face significant unlock pressures over the next year.
According to Tokenomist data, Morpho’s new token unlocks over the next year will equal 98.43% of its currently circulating supply, resulting in an inflation rate close to 100%. Most of these tokens belong to early strategic investors, early contributors, and Morpho DAO, potentially exerting significant downward pressure on the token price.
Valuation Reference
Although Morpho has not yet activated protocol fees, based on its generated protocol fees, we have estimated potential revenues upon fee activation. Based on its February protocol fee, projected revenue could range between 598,700 to 997,800.
Using today’s (March 3rd) FDV of $2,138,047,873 (Coingecko data) and the estimated income, its PS ratio ranges from 178 to 297, indicating a significantly higher valuation level compared to other mainstream lending protocols.

The PS ratios of mainstream lending protocols (based on FDV) Source：Tokenterminal

However, if calculated based on circulating market cap, Morpho’s circulating market cap as of today (March 3rd) is $481,361,461 (Coingecko data), resulting in a PS ratio of 40.2 to 67. Compared to other lending protocols, this metric is not excessively high.

The PS ratios of mainstream lending protocols (based on MC) Source：Tokenterminal

Of course, using FDV as a market cap reference is a more conservative valuation comparison method.
1.3 Kamino: The Number One Player on Solana
Kamino Finance is a comprehensive DeFi protocol based on Solana, established in 2022. Its initial product launch was an automated management tool for concentrated liquidity. Currently, it has integrated lending, liquidity, leverage, and trading functions. However, lending remains its core business, contributing the majority of the protocol’s revenue. Kamino charges various fees for its services. In the lending sector, these include a commission on interest income, an initial fee charged at the time of borrowing, and liquidation fees. For liquidity management, fees include deposit fees, withdrawal fees, and performance fees.
Current Business Status
Active Loans

Kamino’s Key Data Metrics Source: https://risk.kamino.finance/

Currently, Kamino’s loan size is 1.27 billion, with a peak loan volume of 1.538 billion occurring in late January this year.

Kamino’s Borrowing Volume Trend Source: https://allez.xyz/kamino

Revenue

Kamino Protocol Total Revenue Source: DefiLlama

January was the highest revenue month for the Kamino protocol, reaching 3.99 million. February also performed well, with revenue at 3.43 million.

The revenue of the Kamino protocol comes from lending Source: DefiLlama

In January, for instance, lending accounted for 89.5% of Kamino’s protocol revenue.
Token Incentives
Unlike other lending protocols that directly use token incentives, Kamino employs a new incentive method called the “seasonal points system.” Users earn project points by completing designated activities and receive a share of the total token rewards at the end of the season based on their points.
Kamino’s first season lasted three months and distributed 7.5% of the total token supply as a genesis airdrop. The second season also lasted three months, distributing 3.5% of the tokens.
Based on the current token price, the total 11% of KMNO tokens distributed over these two seasons is valued at $105 million, significantly driving Kamino’s rapid growth over the past year.
Kamino’s third season is currently underway. Unlike previous seasons, it began on August 1st last year and has continued for over six months, with no end yet. This has not slowed Kamino’s growth; if the third season’s airdrop mirrors the second, the incentive could be valued between 30 to 40 million.
Notably, one of the main functions of Kamino’s KMNO token is to accelerate point acquisition through staking, enhancing user engagement and token retention.
Competitive Landscape
On the Solana blockchain, major lending protocols include Kamino, Solend, and MarginFi.
Kamino: Currently holds 70% to 75% of the market share (by loan volume), with its market presence on Solana even stronger than Aave’s on Ethereum.Solend: Led the market from 2022 to 2023 but experienced slowed growth in 2024, reducing its market share to below 20%.MarginFi: Faced a management crisis in April 2024, leading to a mass withdrawal of user assets and dropping its market share to single digits.
Kamino’s total value locked (TVL) has secured a stable position in the top two on Solana, second only to Jito, which focuses on staking. Its lending TVL has also significantly surpassed former competitors like Solend and MarginFi.
Competitive Advantages of Kamino
Rapid Product Iteration and Strong Delivery Capability: Founded in 2022 by members of the Hubble team, Kamino was initially positioned as the first concentrated liquidity market maker optimizer on Solana. This pioneering product met user needs in the concentrated liquidity market making by offering an automated, optimized yield liquidity vault solution. Building on this foundation, Kamino has expanded into lending, leverage, trading, and other modules, forming a full-stack DeFi product suite. Such integrated DeFi projects across multiple scenarios are rare, and Kamino’s team continues to explore new ventures.Proactive Ecological Integration: Kamino has been actively building a network of partnerships both within and outside the Solana ecosystem. A notable example is its integration with PayPal stablecoin—Kamino was the first Solana protocol to launch and support PYUSD lending, taking a leading role in the asset’s expansion. Additionally, its collaboration with Solana staking project Jito resulted in leverage products related to JitoSOL, attracting many SOL stakers to Kamino. With the announcement of Kamino Lend’s V2 upgrade in 2024, plans include introducing order book lending, supporting real-world assets (RWA), and opening modular interfaces for other protocols. These moves will further embed Kamino in Solana’s foundational financial infrastructure, making it harder for competitors to challenge its position as more projects are built on Kamino and new capital prefers to flow into it.Economies of Scale and Network Effects: The DeFi lending space exhibits a noticeable “winner-takes-all” effect, with Kamino’s rapid expansion in 2024 exemplifying this network effect. A high TVL and liquidity mean safer borrowing and lower slippage, boosting confidence for significant investors to enter the platform. This substantial fund scale acts as a competitive barrier: capital typically flows to platforms with the most liquidity, further augmenting the platform’s scale. Kamino benefits from the positive feedback of these network effects through its early accumulation of liquidity and users.Strong Track Record in Risk Management: To date, Kamino has not experienced any major security incidents or large-scale liquidations. In contrast, competitors like MarginFi have faced issues that drove ecosystem users toward Kamino.
Challenges and Risks
Aside from common risks faced by newer lending protocols, such as contract security and asset parameter design, Kamino’s potential issues include:
Token Economy, Inflation Pressure, and Profit Distribution
Kamino employs a points system similar to a Ponzi model, akin to Ethena. If the value of future airdropped tokens falls short of expectations, it may lead to some user attrition (though given its current scale, this is less of a concern for the project’s objectives). Additionally, according to tokenomics data, a significant amount of KMNO tokens will be unlocked over the next year, with an inflation rate of 170% based on the current circulating supply. Furthermore, all current protocol revenue seems to be funneled into the team’s pockets, without distribution to token holders or even being added to the treasury. While it’s typical for decentralized governance to be absent in early stages, if protocol revenue isn’t shifted to a DAO-controlled treasury and lacks transparent governance and financial planning, entirely monopolized by the core team, the expected value of protocol tokens may decline further.
Development of the Solana Ecosystem
Although Solana’s ecosystem development in this cycle has outperformed Ethereum, apart from memes, Solana has yet to see a track type with a clear Product-Market Fit (PMF). DeFi remains Ethereum’s strong point. Solana’s ability to expand asset types and capacity and attract more capital will be crucial for Kamino’s potential growth ceiling.
Valuation Reference

Kamino’s 30-day protocol revenue Data Source: https://allez.xyz/kamino/revenue

Using Kamino’s recent 30-day revenue and its Fully Diluted Valuation (FDV) as benchmarks, we calculate the Price-to-Sales (PS) ratio for its FDV and Market Cap based on data from CoinGecko, resulting in:
FDV PS = 34, MC PS = 4.7. This earnings multiple is relatively low compared to other major lending protocols.
1.4. MakerDAO: Old Roots, New Blossoms?
MakerDAO is one of the earliest DeFi protocols on the Ethereum blockchain, founded in 2015, making it nearly a decade old. With its first-mover advantage, its stablecoin DAI (including its upgraded version USDS) has long been the largest decentralized stablecoin in the market.
In terms of its business model, MakerDAO’s primary revenue comes from the stability fees paid for generating DAI and from the spread of DAI. This model is quite similar to the interest spread in lending protocols: borrowing DAI from the protocol incurs fees; providing excess liquidity to the protocol (sUSDS & sDAI) earns interest.
Moreover, looking at the business process, generating DAI with a CDP (Collateralized Debt Position) by depositing ETH is not much different from depositing ETH into AAVE to borrow USDC. Therefore, in early DeFi analyses, many regarded CDP protocols like MakerDAO as a form of lending protocol. With the brand upgrade to Sky, MakerDAO also launched a standalone lending protocol called Spark, which is why we consider MakerDAO as a lending protocol and analyze it in this section.
Current Business Status
Active Loans
For a stablecoin protocol, the most important metric is the scale of its stablecoin, which corresponds to the loan size for lending protocols.

Source: Sky Official Website

The loan size for MakerDAO is currently close to 8 billion. It is still below the last cycle′s peak of 10.3 billion.
Spark’s loan size is around $1.6 billion, higher than that of the established lending protocol Compound but slightly lower than Mophro mentioned above.

Source: Tokenterminal

Revenue
The concept corresponding to protocol revenue for MakerDAO and lending protocols should be the sum of all revenues, minus the interest costs paid to sDAI and sUSDS. From the chart below, we can see that MakerDAO’s revenue primarily consists of stability fees, totaling $421 million, which constitutes the vast majority of its income. Other contributions such as liquidation fees and price stability module charges are minimal.

Historical Revenue of MakerDAO Source: Sky Official Website

Within stability fees, the DAI issued through Spark is expected to generate an annualized stability fee of 140 million, while DAI directly generated from USDC can yield 125 million in stability fees. These two parts account for two-thirds of the stability fees. The remaining stability fees come from DAI generated by RWA (71.83 million) and crypto asset-collateralized (78.61 million).

MakerDAO’s Liabilities and Annual Revenue Source: Sky Official Website

To incentivize the generation of stability fees at this scale, MakerDAO is expected to pay 246 million annually, MakerDAO′s annual protocol revenue is approximately 175 million, with an average weekly income of $3.36 million.
MakerDAO also reported its protocol operating expenses, totaling 96.6 million annually. After deducting operating expenses from the protocol revenue, the net profit is approximately 78.4 million, which is the main source for MKR and SKY buybacks.
Token Incentives
One reason for MakerDAO’s recent brand upgrade is the lack of additional MKR reserves to incentivize new business growth. Currently, MakerDAO’s token incentives are mainly used to encourage the deposit of USDS. Since the incentive plan’s launch at the end of September 2024, 274 million SKY tokens have been distributed over five months, equivalent to 17.4 million, with an annualized incentive amount of around 42 million.

Source: Sky Official Website

Competitive Landscape
Currently, MakerDAO’s market share in the stablecoin sector is 4.57%. Stablecoins are one of the clearest areas of demand for cryptocurrency. As an established stablecoin, MakerDAO has built certain advantages, such as brand impact and first-mover advantage. This was evident in the previous Curve liquidity battle, where DAI, as part of 3CRV, could naturally benefit from significant incentives released by other stablecoin projects aiming to establish popularity.
However, the competitive situation for MakerDAO in the stablecoin sector is not optimistic. As shown in the market share chart below, MakerDAO’s market share (represented by the pink segment) decreased during this cycle instead of increasing.

Market Share of the Top Ten Stablecoins Source: Tokenterminal

The core factor behind this phenomenon is that DAI, the third-largest stablecoin, has lost (or perhaps never truly had) the function of a settlement tool. Currently, users hold USDT and DAI for entirely different purposes: USDT is primarily used as a settlement tool, while DAI is held for leveraging and yield purposes. Aside from both being pegged to the US dollar, they share few commonalities.
Stablecoins with settlement capabilities have strong network effects, but unfortunately, DAI lacks such functions, making it difficult to develop network effects.
In terms of issuance scale, DAI’s market share is gradually decreasing. DAI still hasn’t returned to its 2021 peak issuance level, while USDT’s issuance continues to rise, having doubled since the end of 2021.
Stablecoins solely as yield tools have limited potential. Growth relies on ongoing yield incentives and various external conditions (such as relatively high US Treasury rates). Achieving long-term organic growth is crucial for MakerDAO to thrive anew in the stablecoin market.
Challenges and Risks
Beyond the challenges we’ve previously analyzed, MakerDAO also faces competition from newcomers.
The new stablecoin player, Ethena, has grown rapidly. In less than a year, its market size is already 60% that of MakerDAO’s. Ethena’s core product focuses on yield-driven stablecoins and has a significant advantage over MakerDAO: its yield base—”arbitrage profits from cryptocurrency perpetual contracts”—is much higher than MakerDAO’s “Treasury RWA yields.” In the medium to long term, if Treasury rates continue to decline, USDE will demonstrate a greater competitive edge over DAI.
Furthermore, MakerDAO’s governance capabilities are concerning. With a team costing $97 million annually, MakerDAO’s governance outcomes are inefficient and opaque. A prime example is the costly rebranding from MakerDAO to SKY, only to later reconsider reverting to Maker—a process that seems almost whimsical.
Valuation Reference
With protocol revenue of $175 million, MKR’s current price-to-sales (PS) ratio is about 7.54, making it relatively cheaper compared to its main competitor, Ethena (22). Historically, MKR’s PS ratio has also been consistently low.

PS Ratios of Stablecoin Projects Excluding MakerDAO Source: Tokenterminal

2. Liquid Staking Sector – Lido and Jito
Liquid staking stands as one of crypto’s native verticals, offering enhanced liquidity and composability compared to native staking mechanisms. This inherent value proposition drives sustained demand and establishes its pivotal role within PoS chain ecosystems. Notably, the protocols commanding the largest TVL on Ethereum and Solana – the two most significant PoS chains – are both liquid staking solutions: Lido and Jito, which we will subsequently analyze.
For liquid staking protocols, the paramount evaluation metric remains staked asset volume (equivalent to TVL in this context). The operational model introduces a third-party dynamic through node operators, necessitating a revenue-sharing arrangement where protocol revenue is partially distributed to these network participants. Consequently, gross profit emerges as a more indicative performance benchmark than raw revenue figures. Concurrently, token incentives – representing protocol expenditure – must be rigorously evaluated to complete the economic assessment framework.
2.1 Lido: Treading Carefully on Ethereum
Current Business Status
Lido launched its operations at the end of 2020 with the opening of ETH staking, and within six months, it secured a leading position in Ethereum network liquid staking. Previously, Lido was the largest liquid staking service provider on the Luna network and the second largest on the Solana network, having expanded its services to nearly all major PoS networks. However, starting in 2023, Lido began a strategic contract, and currently, ETH liquid staking is Lido’s sole business. Its business model is straightforward: Lido stakes users’ ETH through various node operators on Ethereum, taking a 10% share of the staking rewards as protocol revenue.
Assets Staked
Currently, more than 9.4 million ETH are staked in Lido, accounting for about 8% of circulating ETH. This gives Lido a staking asset size (TVL) of over 20 billion, making it the protocol with the largest TVL today. At its peak, Lido′s TVL was nearly 40 billion.

Source: Tokenterminal

The fluctuation in the staked asset size, when measured in ETH, is much smaller. Since 2024, the amount of ETH staked with Lido has remained relatively stable. Most of the changes in Lido’s staked asset size are due to fluctuations in the price of ETH.

Lido’s Staked Asset Size in ETH Source: DeFiLlama
Lido’s staked asset size has continued to grow, primarily due to the gradual increase in Ethereum’s network staking rate (from 0% to 27%). As a leading liquid staking service provider, Lido has benefited from the overall market growth.
Gross Profit
Lido takes 10% of staking rewards as protocol revenue. Currently, this revenue is split, with 50% going to node operators and 50% to the DAO, resulting in a 5% gross profit. As shown in the chart below, Lido’s gross profit has steadily increased. Over the past year, the weekly gross profit of the Lido protocol has fluctuated between 750,000 and 1.5 million.

Source: Tokenterminal

It can be observed that Lido’s protocol revenue is strongly correlated with the size of staked assets, driven by their fee structure. Weekly changes in Lido’s protocol revenue are mainly due to fluctuations in the price of ETH.
Token Incentives
In the first two years after launch (2021-2022), Lido spent a significant amount of LDO tokens to incentivize the liquidity of its stETH and ETH. Over two years, it expended over $200 million in token incentives, which helped ensure ETH liquidity during major market liquidity crises, such as China’s BTC mining ban in May 2021, the LUNA crash in May 2022, and the FTX collapse in November 2022. This resulted in Lido’s leading position in liquid staking on the Ethereum network.
After this, Lido’s spending on token incentives significantly decreased, with expenditures below $10 million in the past year. The primary allocation of these token incentives is towards ecosystem development. Lido maintains its current market share with almost no need for token incentives.

Source: Tokenterminal

Competitive Landscape
In the realm of liquid staking projects on the Ethereum network, few can compete with Lido. Currently, the second-largest liquid staking project, RocketPool, has a staked asset size that is less than 10% of Lido’s.
Among newer projects, the Liquid Restaking project ether.fi poses some competitive pressure on Lido. However, ether.fi’s staked asset size is only about 20% of Lido’s. Additionally, with Eigenlayer’s token issuance, the growth rate of ether.fi’s staked assets have significantly slowed, making it unlikely to challenge Lido’s position in Ethereum staking.

Source： Dune

Over time, Lido has developed a significant moat:
Network Effects from stETH (wstETH) Liquidity and Composability: Beyond the liquidity advantages mentioned earlier, stETH is accepted as collateral by all major lending and stablecoin protocols. This unmatched composability among LSTs can significantly influence new stakers’ choices.Accumulation of Security Credit and Brand Recognition: Since its launch, Lido has not experienced major security mishaps. Combined with its long-standing market leadership, this reputation makes it a key consideration for whale users and institutions when selecting staking service providers. Notable examples include Justin Sun and Mantle, before developing their mETH, who used Lido’s services.
Challenges and Risks
Lido currently faces significant challenges related to the decentralization demands of the Ethereum network.
For PoS chains, stakers determine consensus formation, and the Ethereum ecosystem is particularly dedicated to decentralization among mainstream PoS chains. As a result, concerns about Lido’s scale have been quite “stringent.” When Lido’s staked assets reached 30% of the Ethereum network’s total, there were calls to limit Lido’s growth. The Ethereum Foundation has been actively adjusting its staking mechanisms to prevent any “overly large single staking entity” from emerging.
For dApps, a significant challenge is when their sole underlying blockchain doesn’t support or restricts their business development. This presents a long-term challenge for Lido. Despite recognizing this and focusing entirely on Ethereum by cutting off operations on other chains from 2023, results have been limited.
Moreover, while the current ETH staking rate is below 30% (at 28%), there’s still a notable gap compared to other top PoS chains like Solana (65%), ADA (60%), and SUI (77%). However, the Ethereum team has historically wanted to keep the staking rate under 30%, limiting Lido’s potential market expansion.
Additionally, ETH’s underperformance in this cycle has been challenging for Lido, whose success is closely tied to ETH’s price.
Valuation Reference
Over the past year, LDO’s PS ratio has been at historic lows. In the past six months, it has consistently remained below 20.

It’s also worth noting that there is a possibility of protocol revenue being converted into LDO revenue this year. Starting in 2024, there have been multiple community proposals to allocate protocol revenue (the 5% allocated to the DAO) to $LDO holders. However, the core team, out of caution, has opposed this idea, and several governance votes have not passed. With the regulatory environment becoming significantly more relaxed and the protocol achieving accounting profitability from 2024 onwards (meaning revenue exceeds all expenses, including team salaries), the core team has officially included in their 2025 goals a discussion on “directly linking protocol revenue to LDO.” We might see $LDO beginning to capture staking revenue from the protocol in 2025.

Lido Protocol Economics (the blue-purple line in the chart represents the protocol’s “net profit”) Source: Dune

2.2 Jito: Quietly Profiting on Solana
Current Business Status
Jito is a leading liquid staking service provider on the Solana network and also serves as an MEV infrastructure. In 2024, they began offering restaking services, although the scale is still small, with TVL just exceeding $100 million, and the revenue sources for restaking remain unclear. Jito’s main businesses are still liquid staking services and MEV provisioning.
The liquid staking service that Jito offers on Solana is similar to Lido’s on the Ethereum network, utilizing node operators to stake deposited SOL and extracting 10% from user earnings as protocol revenue.
In terms of MEV, the Jito Labs team previously took 5% of all income. However, with the recent launch of NCN (Node Consensus Networks) and proposals like JIP-8 at the end of January this year, the Jito protocol now obtains 3% of MEV revenue, distributed as follows: 2.7% goes to Jito DAO, 0.15% to stakers in the JTO Vault, and 0.15% to jitoSOL and other LST stakers.
When users conduct transactions on Solana, the gas fee they pay can be divided into three categories: base fee, priority fee, and MEV tip. The base fee is mandatory, while the priority fee and MEV tip are optional, both primarily aiming to increase transaction priority. The difference is that the priority fee boosts the transaction’s priority in the on-chain phase, which is universally set by the Solana protocol and belongs to validators (i.e., stakers). The MEV tip, however, is an independent agreement between the user and MEV service provider, aiming to obtain a higher transaction priority with the MEV provider (a prerequisite for being on-chain), with specific allocation determined by the MEV provider.
Currently, Jito’s MEV service returns 94% of the fees to validators, with 3% extracted by Jito Labs and 3% distributed to the Jito protocol. In the Solana network’s gas fees, the base fee is negligible, while the proportions of the priority fee and MEV tip are similar.

Solana Network’s REV (i.e., total fees paid by users) Source: Blockworks

Compared to Lido on Ethereum, Jito can extract more value from MEV revenue due to its near-monopoly in Solana’s MEV ecosystem (similar to Flashbots’ position in Ethereum).
Next, let’s look at Jito’s specific data:
Assets Staked
Currently, Jito’s staked assets (liquid staking) exceed $2.5 billion.

Data Source: Tokenterminal

In terms of SOL, Jito has staked 15.82 million SOL, which is approximately 3% of the total circulating supply of SOL. Over the past year, the amount of staked SOL has shown a steady linear increase.

Source: Jito Official Website

In the MEV domain, Jito holds a near-monopoly position in Solana. Of the 394 million SOL staked, over 94% utilize Jito’s MEV services.

Source: Jito Official Website

Gross Profit
Jito’s current protocol revenue comes from two sources: they take 10% of the yield generated by liquid staking and 3% of MEV income. Jito currently shares 4% of the liquid staking yield with node operators, resulting in a gross profit of 60% for this part of the revenue. Since I couldn’t find separate data for Jito’s gross profit, we’ll analyze it based on Jito’s revenue situation, as shown in the chart below:

Data Source: Tokenterminal

It can be seen that Jito’s revenue is closely tied to the activity on the Solana network. Starting from October 2024, their revenue increased significantly, exceeding 1 million weekly. There were two notable peaks: on November 20 and January 20, when Jito′s protocol revenue reached 4 million and $5.4 million, respectively, corresponding to major speculative waves on the chain. However, as activity on the Solana chain cooled, their revenue quickly decreased.
Regarding the MEV portion, since MEV revenue sharing was just introduced, I couldn’t find specific statistics on mainstream data sites or Dune. However, we can estimate based on Jito’s total MEV revenue. Below is Jito’s total MEV revenue situation:

Jito’s Total MEV Revenue Source: Jito Official Website

The trend of Jito’s total MEV revenue aligns with their liquid staking income. At its peak on January 20, this year, MEV’s total revenue was 100,000 SOL. After October 2024, the average daily MEV income was around 30,000 SOL, with a minimum of 10,000 SOL.
Using a protocol revenue rate of 3%, we back-calculate this period’s income. The highest single-day income was 3,000 SOL, equivalent to approximately 840,000 at the time. The highest weekly income was 14,400 SOL, about 3.7 million, and the average daily MEV income was 1,000 SOL (approximately 170,000U, For more details, readers can refer to the prediction in the JIP-8 proposal.
Overall, in addition to the current liquid staking revenue, MEV income can roughly increase Jito’s revenue scale by 50%.
From a gross profit perspective, liquid staking revenue generates an average weekly gross profit of around $600,000. The MEV revenue boasts a gross profit margin as high as 95% (with only the 0.15% allocated to jitoSOL not considered gross profit, and the portions entering the DAO and JTO Vault counted as gross profit). The corresponding gross profit is approximately $1,000,000 per week. This could increase Jito’s gross profit by about 150%, with the annualized gross profit reaching approximately $85 million.
It’s important to note that Jito’s revenue and gross profit are strongly related to the activity on the Solana network. As the meme trading frenzy on Solana has faded recently, their daily revenue has dropped to about 10% of its peak, showing significant volatility.
Token Incentives
For both liquid staking and MEV, Jito does not employ token incentives in their operations. The only form of token incentive was a 10% one-time token airdrop at launch.
Competitive Landscape
Restaking has not yet achieved a true product-market fit, so we will focus on Jito’s competitive situation in liquid staking and MEV.
In the Solana liquid staking market, although Jito launched in 2023, it has quickly risen to a leading position. Previously dominant players, Marinade and Lido, once held over 90% of the Solana liquid staking market. However, due to their own reasons, Jito has surpassed them.

Solana Liquid Staking Market Share Source: Dune

Since the end of 2023, the Solana liquid staking market has seen an influx of new players like Blazestake and Jupiter joining the fray. However, Jito’s market share remained unaffected initially. Starting in October 2024, exchange-based SOL liquid staking products (mainly Binance’s bnSOL, as well as Bybit’s bbSOL) caused a dip in Jito’s market share. This shift primarily arises from centralized exchanges’ inherent asset custodial advantage, as they converted their SOL investment products from native staking to liquid staking, offering users a superior experience and thereby quickly increasing their market share. From Figure 1, we also observe that the growth from bnSOL and bbSOL is relatively independent, not encroaching on the share of any specific LST protocols.
Currently, over 90% of Solana’s staking is still native, with less than 10% involving liquid staking. This leaves significant room for growth compared to Ethereum’s approximately 38% liquid staking rate. While participating in Solana’s native staking is much easier for average users than Ethereum’s, Solana’s liquid staking ratio may not eventually match Ethereum’s. Nonetheless, liquid staking offers better liquidity and composability. In the future, Jito is expected to continue benefiting from the overall increase in Solana’s liquid staking scale.

Solana Staking Market Share Source: Dune

In the MEV sector, Jito commands over 90% of the market share with virtually no competition. The potential for this market largely depends on the future activity on the Solana chain.
Overall, Jito has a solid leading edge in both the liquid staking and MEV sectors on the Solana network. This was also underscored when the SEC’s ETP working group consulted Jito on ETF staking issues.
Challenges and Risks
Jito’s current business and income are heavily reliant on the popularity of the Solana network, making this the primary risk they face. After the TRUMP and LIBRA events, interest in Meme coins cooled rapidly, causing a sharp decline in SOL’s price and a resulting decrease in Jito’s revenues. Whether Jito’s business can regain momentum in the future will largely depend on Solana network activity.
In the liquid staking domain, competition from centralized exchanges could impact Jito’s market share.
From an investment standpoint, another potential risk is the circulation rate of the JTO tokens, which is less than 40%. A significant 15% unlock occurred last December, and there will be continuous linear unlocking over the next two years, with an inflation rate of 62% in the next year. The selling pressure from early investors is also a potential risk factor.

Source: Tokennomist

Valuation Reference
With the recent rise in Solana’s popularity, the fully diluted PS valuation of JTO has rapidly decreased, currently down to around 33. This valuation does not yet account for the recently started MEV income. If MEV income is considered, the fully diluted valuation of JTO would decrease to approximately 22.

Source: Tokenterminal

Additionally, JTO might accelerate revenue sharing. Currently, 0.15% of the MEV revenue collected by the protocol is allocated to JTO stakers. As revenue continues to grow, more income will likely be distributed to JTO stakers in the future.

By Lawrence Lee, Researcher at Mint Ventures
1. Introduction
Hyperliquid can be considered one of the biggest highlights in the crypto market recently, aside from AI and Meme trends. Its market-catching strategies—rejecting VC funding, allocating 70% of its tokens to the community, and redistributing all platform revenue back to its users—have drawn widespread attention. Additionally, by using its revenue directly to buy back HYPE tokens, Hyperliquid propelled HYPE’s circulating market cap to quickly surpass UNI, earning a spot among the top 25 cryptocurrencies. At the same time, this approach has driven the explosive growth of the platform’s business metrics across the board.
The purpose of this article is to describe Hyperliquid’s current state of development, analyze its economic model, and assess the current valuation of HYPE, aiming to provide an answer to the question, “Is HYPE overpriced?”
This article represents the author’s perspective at the time of publication. Future developments may lead to updates or changes in views. The opinions expressed here are highly subjective and may contain factual, data-related, or logical errors. Readers and industry peers are encouraged to critique and discuss further. However, the article does not constitute any investment advice.
A significant portion of the content presented here draws reference from the Hyperliquid report published by ASXN in September. This report, in the author’s view, is the most comprehensive and insightful analysis of Hyperliquid to date. Readers interested in a deeper dive into Hyperliquid’s mechanisms are encouraged to consult that report.
The main content of the article follows below.
2. Overview of Hyperliquid’s Business
Hyperliquid’s current business primarily consists of two segments: a derivatives exchange and a spot exchange. They also have plans to launch a general-purpose EVM in the future—HyperEVM.

Hyperliquid Architecture Source: ASXN
2.1 Derivatives Exchange
The derivatives exchange is the first product launched by Hyperliquid and serves as its flagship product, holding a central position within its entire product ecosystem.
At the core product mechanism level for derivatives, Hyperliquid has not adopted alternative innovative product logic (such as GMX or SNX) despite on-chain performance bottlenecks. Instead, it has chosen to stick with the Central Limit Order Book (CLOB), a mechanism widely used by exchanges globally and familiar to both trading users and market makers. Hyperliquid has focused its efforts on improving performance within this familiar framework.
The decentralized derivatives exchange they have built operates on Hyperliquid L1, a PoS blockchain composed of the consensus layer HyperBFT and the execution layer RustVM.
HyperBFT is a consensus algorithm modified by the Hyperliquid team based on the LibraBFT originally developed by Meta’s former blockchain team. It can theoretically support up to 2 million TPS. Supported by this robust underlying performance, Hyperliquid has brought core components of a derivatives exchange, such as the order book and clearing house, on-chain, ultimately forming its decentralized derivatives exchange architecture.
For end users, Hyperliquid’s experience is almost identical to that of centralized exchanges like Binance—not only in terms of trading experience and product structure but also in trading fees and discount rules. The only key difference is that Hyperliquid does not require KYC.

Fee Structure of Hyperliquid
In addition to its trading products, Hyperliquid has offered a Vault feature since the very beginning of its product development. Similar to the “copy trading” feature in centralized exchanges, anyone can allocate their funds into any Vault, where the Vault manager handles investments. 10% of the profits are allocated to the Vault manager as compensation. To ensure alignment of interests, the manager is required to maintain at least a 5% stake in the Vault.

Source: Hyperliquid Official Website
However, based on the current TVL (Total Value Locked), 95% of the TVL is concentrated in the platform’s official Vault HLP.
Unlike typical Vaults, HLP, being the official Vault, serves as the counterparty for a significant portion of trades on the platform. This means HLP earns a share of various platform fees, including trading fees, funding fees, and liquidation fees. From this perspective, HLP is somewhat similar to GMX’s GLP. The key difference lies in the nature of their strategies: GLP acts as the counterparty for all platform trades with a passive and transparent strategy, while HLP’s strategy is non-public. On Hyperliquid, the counterparty for a user’s trade could be either HLP or other users, and HLP’s strategy can be adjusted at any time.
Since its launch in July 2023, HLP has consistently held a net short position, providing liquidity for retail trading. This net short position has allowed HLP to remain profitable during a prolonged bull market. As of now, HLP has a TVL of 350 million and a PNL of 50 million. Based on the overall PNL curve of HLP and the PNL from the three strategy-related addresses, it is evident that the Hyperliquid team is utilizing fees to maintain a relatively positive APR (Annual Percentage Rate) for HLP.

Source: Hyperliquid Official Website
Judging from trading volume and open interest, Hyperliquid has been developing rapidly, especially over the past two months. With the $HYPE airdrop and its price continuously climbing, the platform’s various metrics reached their peak between December 17th and 20th.

Hyperliquid’s trading volume, open interest, and number of traders since 2024
Source: Hyperliquid Official Website
In the decentralized derivatives market, Hyperliquid has maintained a leading position in terms of trading volume since June of this year. Over the past two months, the gap between Hyperliquid and other decentralized derivatives exchanges has widened further, reaching a significant magnitude.

Decentralized Derivatives Exchange Trading Volume Share
Source: Dune

7-day Trading Volume Ranking of Decentralized Derivatives Exchanges
Source: DeFiLlama
From the perspective of valuation and trading volume, Hyperliquid’s most comparable counterparts are currently centralized exchanges.

Screenshot Timestamp: 2024-12-28
Source: Coingecko
The recent data for Hyperliquid shows a noticeable decline (with a peak single-day trading volume of 10.4 billion, but recent daily volumes falling below 5 billion). However, its open interest is still 10% of Binance’s, and its trading volume is 6% of Binance’s. Moreover, its open interest and trading volume are approximately 15% of Bitget and Bybit’s levels. During its peak period of popularity (December 17-20), Hyperliquid’s open interest reached 12% of Binance’s, while its trading volume reached 9% of Binance’s. Both open interest and trading volume approached 20% of Bybit and Bitget’s respective figures.
Overall, Hyperliquid has experienced rapid development as a derivatives exchange. Within the decentralized derivatives exchange space, it has already established a relatively solid leading position. Compared to leading centralized exchanges, the gap has shrunk to within 10x.
2.2 Spot Exchange
Hyperliquid’s spot exchange also operates with an order book model, maintaining consistent product architecture and fee structures with the derivatives exchange.
Currently, Hyperliquid’s spot exchange only supports native assets that conform to the HIP-1 standard of Hyperliquid and does not list tokens from other chains.

Top Market Cap Tokens on Hyperliquid Spot Market
HIP-1 (Decentralized Listing Mechanism)
HIP-1 is the token standard of the Hyperliquid network, similar to Ethereum’s ERC-20 or Solana’s SPL-20. However, unlike ERC-20 or SPL-20, creating a HIP-1 token comes with a significantly higher cost. Successfully creating a HIP-1 token also means it qualifies for listing on Hyperliquid’s spot exchange.
The HIP-1 token standard employs a Dutch auction mechanism for token creation. Specifically: Anyone can participate in the auction.The initial auction price starts at twice the final auction price of the previous round and gradually decreases linearly over a period of 31 hours to 10,000 USDC (this value is adjustable; it was previously lower before recently being revised to 10,000 USDC).The first developer who successfully bids wins the right to create a TICKER. This TICKER is then eligible for listing on Hyperliquid’s spot exchange. Auction payments are made exclusively in USDC.
Recent Auction and Winning Prices:

Source: asxn
Among the notable TICKERs that have been created (sorted by auction price in descending order) are:
GOD: A game project invested in by Pantera.
CREAM: The veteran lending platform Cream, which has been troubled by hacks; associated with the Machibigbrother project.
ANIME: The TICKER for Azuki’s token. Rumored to have been acquired by the AZUKI team, though this has not been officially confirmed.
MON: Issued by the Pixelmoon gaming project.
SWELL: A staking and re-staking protocol in the Ethereum ecosystem.
RIFT: A gaming protocol on Virtual, created by J3ff.
GAME: Rumored to have been acquired for a game project based on Virtual, though there’s no official confirmation yet.
ANZ: A stablecoin protocol built on the Base chain.
SOVRN: Previously known as BreederDAO (a gaming asset platform invested in by a16z and Delphi in the last cycle), soon to launch a game on Hyperliquid.
FARM: An AI pet game native to Hyperliquid, launched via the Hyperfun platform.
ETHC: A mining project associated with Machibigbrother.
SOLV: A staking protocol for the Bitcoin ecosystem, backed by BN Labs, though the token has yet to be issued.
SOLV can be seen as a dividing line for HIP-1 auctions. Prior to SOLV, most auctions revolved around meme tokens and domain or symbolic logic, with the primary focus being the uniqueness of TICKERs within the ecosystem.
However, after SOLV, the focus shifted significantly, with project teams competing to secure ecological niches and listing qualifications. This shift also led to a rise in auction prices, with the highest price, GOD, fetching nearly $1 million. Most projects leaned toward generalized entertainment sectors like gaming and NFTs. However, there were also DeFi projects such as Solv, Swell, and Cream.
As a decentralized exchange, Hyperliquid’s recent month-long spot “listing fee” has stabilized at over $100,000 USD, which is comparable to the listing fees charged by some second-tier centralized exchanges.
Through HIP-1, Hyperliquid has established a transparent “decentralized token listing” mechanism. The payment required for token listing is determined by market participants, eliminating the issues of opaque listing processes seen in centralized exchanges. Moreover, the fees collected from these listings are used for HYPE token buyback and burning, which contributes to the price performance and valuation of HYPE.
HIP-2 (Hyperliquid’s AMM)
Since Hyperliquid operates its spot trading with an order book model, ensuring liquidity for new tokens is a challenge. To address the initial liquidity problem for HIP-1 tokens, Hyperliquid introduced HIP-2.
In simple terms, HIP-2 provides an automated market-making (AMM) system, allowing developers to automatically provide liquidity for HIP-1 tokens. The market-making logic involves linear liquidity provision within a specified price range. Developers can set the upper and lower bounds of the price range as well as the buy/sell dividing point. The system automatically makes markets in increments of 0.3% price changes within the specified range.
Below is an example of an order book created using HIP-2 and its parameter settings:

After the launch of HIP-2, many newly created tokens within the Hyperliquid ecosystem opted to use this AMM mechanism provided by Hyperliquid. Currently, the total USDC volume in HIP-2 has exceeded $25 million.

Hyperliquid’s average daily spot trading volume over the past 30 days is approximately $400 million, ranking it among the top ten DEXs and placing it close to the trading volumes of Curve, Lifinity, and Orca.

Source: DeFiLlama
2.3 HyperEVM
HyperEVM has not yet been launched. According to Hyperliquid’s official documentation, the current derivatives and spot exchange run on RustVM, referred to as Hyperliquid L1, while HyperEVM is simply called EVM. Based on the definitions in the official documentation, HyperEVM is not an independent chain:
Hyperliquid L1 includes a general-purpose EVM as part of its blockchain state. Importantly, HyperEVM is not a standalone chain but is secured by the same HyperBFT consensus mechanism as other parts of L1. This allows the EVM to directly interact with L1’s native components, such as the spot and perpetual order books.
The ASXN report uses the diagram below to illustrate Hyperliquid’s architecture:

Hyperliquid runs two execution layers, RustVM and HyperEVM, on a single consensus layer (HyperBFT). The core functionalities for contracts and spot trading are hosted on RustVM, which focuses on these two core dApps, while other dApps are deployed on HyperEVM.
Based on the team’s documentation, we know the following about HyperEVM:
Unlike RustVM, which currently hosts Hyperliquid’s spot and derivatives exchange, HyperEVM is permissionless, allowing any developer to build applications and issue assets (both fungible tokens [FTs] and non-fungible tokens [NFTs]).HyperEVM is interoperable with Hyperliquid L1. For instance, L1’s native oracles can be used by HyperEVM, and certain asset transfers between the two VMs are possible. However, not all assets are transferable between them because L1 assets are “permissioned,” limited to USDC and assets generated via HIP-1, while HyperEVM accommodates a broader range of assets.HyperEVM will use Hyperliquid’s native token $HYPE as gas, whereas L1 does not require users to pay gas fees.
The author notes that they have not encountered a product architecture like this before in the crypto world. It’s also unclear how such a structure would handle cases of DeFi composability typical on networks like Ethereum — for example, “depositing ETH into Lido to get stETH, then depositing stETH into Aave to borrow USDC, and finally using USDC to buy a meme token like PEPE.” Determining if this is one chain or two chains might depend on whether such composability is possible. From the author’s current perspective, the relationship between HyperEVM and Hyperliquid L1 might be more akin to that of an L2 with some interoperability with L1 or, as seen with centralized exchanges, the relationship between a trading platform and its EVM chain (e.g., Binance and BNB Chain or Coinbase and Base Chain).
Currently, HyperEVM’s testnet is up and running, with numerous validators participating in its testing. Notable participants include Chorus One, Figment, B Harvest, Nansen, among others.

HyperEVM Testnet Validator Node List
Source: ASXN
Since RustVM is not open to all developers, applications developed on Hyperliquid’s RustVM are relatively limited and mostly serve as trading auxiliary tools, such as: Telegram trading bot Hyperfun (token: HFUN), Telegram social trading bot pvp.trade, Trading terminal Tealstreet and Insilico and Derivatives trading aggregator Ragetrade
In contrast, HyperEVM is open to all developers, leading to many planned projects on the platform. Apart from the successful HIP-1 token projects we mentioned earlier, the diagram below and the Hypurr.co website provide a substantial list of upcoming projects.

We still need to wait for the official launch of HyperEVM to gain a clear understanding of its specific mechanisms and its relationship with Hyperliquid L1. As of now, the team has not announced a planned launch date for HyperEVM.
Summary: Hyperliquid’s overall business positioning is similar to that of leading trading groups, with its core focus on trading + L1 operations, making it a direct competitor to top trading groups. While the business model is similar, what sets Hyperliquid apart from existing leading trading groups is its decision to build its trading operations on-chain. Compared to centralized exchanges, which are permissioned and lack data transparency, Hyperliquid’s trading platform offers several key advantages: permissionless access (no KYC required), transparent and verifiable business data, better composability, and lower overall operational costs. This allows Hyperliquid to channel more revenue and profits into its native token, HYPE.
3. Hyperliquid Team, Tokenomics, and Valuation
3.1 Team
Hyperliquid was founded by two co-founders, Jeff Yan and iliensinc, who are Harvard alumni. Before entering the crypto industry, Jeff worked at Google and Hudson River Trading. The Hyperliquid team is relatively lean, with only 10 members according to ASXN’s report in September, five of whom are engineers. This is particularly impressive for a derivatives exchange with a daily trading volume surpassing tens of billions.
From the development process of Hyperliquid’s entire product, especially their dedication to self-funded research and development, building a high-performance chain from scratch to achieve a fully on-chain order book, and their highly innovative HIP-1, the team demonstrates an impressive ability to solve problems based on first principles despite its small size.
3.2 HYPE Tokenomics
The total supply of HYPE is 1 billion tokens, officially launched on November 29, 2024. Since there was no fundraising involved, there is no allocation for investors. The distribution specifics are as follows:
31.0%: Genesis allocation, airdropped to early Hyperliquid users based on their points. Fully liquid.38.888%: Reserved for future emissions and community rewards.23.8%: Allocated to the team, with a 1-year lockup before vesting begins. Most tokens will vest between 2027-2028, with some continuing to vest after 2028.6.0%: Hyper Foundation.0.3%: Community grants.0.012%: HIP-2.
The overall team-to-community token allocation follows a 3:7 ratio. Below is the current token holder distribution:

Excluding community addresses, team addresses, and the foundation addresses, the largest token-holding address currently belongs to the Assistance Fund (AF), which holds 1.16% of the total $HYPE supply and 3.74% of the circulating supply.
At present, there are two primary sources of revenue across the Hyperliquid ecosystem: trading fees and HIP-1 auction fees. Trading fees include spot and derivatives trading fees, derivatives funding fees, and derivatives liquidation fees. Since Hyperliquid’s Layer-1 (L1) does not charge users gas fees and the HyperEVM has not yet been launched, Hyperliquid’s current revenue does not include transaction gas fees.
According to the team’s documentation:
On most other protocols, the team or insiders are the main beneficiaries of fees. On Hyperliquid, fees are entirely directed to the community (HLP and the assistance fund). For security, the assistance fund holds a majority of its assets in HYPE, which is the most liquid native asset on Hyperliquid L1.
All fees are allocated entirely to HLP and AF . However, the team has not explicitly disclosed the exact distribution ratio between HLP and AF.
Fortunately, since Hyperliquid L1 data is publicly accessible, we can refer to the analysis by @stevenyuntcap. Based on their calculations as of early December, Hyperliquid has subsidized HLP with a total of 44 million, while the initial funding allocated to AF for purchasing HYPE was 52 million. This suggests that Hyperliquid’s total cumulative revenue from its launch to early December amounts to $96 million, with the protocol’s revenue split between HLP and AF at a ratio of 46%:54%. (Additionally, using the cumulative trading volume of $428 billion over this period, we can estimate that Hyperliquid’s average derivative trading fee rate is approximately 0.0225%.)
Since AF currently uses all its USDC to repurchase HYPE, we can simplify the revenue model as follows: 46% of Hyperliquid’s perpetual contract trading income is distributed to the supply side (HLP holders), while 54% is used to buy back $HYPE tokens.
Beyond revenue from perpetual contract trading fees, there are two additional income streams in the future that will benefit HYPE holders: HIP-1 auction fees and the USDC portion of spot trading fees. Currently, both revenue streams are fully allocated to AF for HYPE buybacks (this also includes the HYPE portion of trading fees from HYPE-USDC spot transactions, which are directly burned instead of repurchased, with a total of 110,000 HYPE tokens burned to date).
AF’s current strategy remains to periodically use all accumulated USDC to buy back HYPE. Therefore, we can simplify profit tracking by monitoring AF’s USDC inflow data, which reflects Hyperliquid’s profitability and its repurchase pressure on HYPE. According to data from hyperdata.info, AF has accumulated over 77million in USDC inflows, with over 25 million inflows in the past month alone, translating to an average daily buyback of approximately $1 million worth of HYPE.

On December 30, 2024, Hyperliquid officially launched the HYPE staking feature. Currently, the annual staking yield for HYPE is approximately 2.5%. This yield solely includes the fixed reward from the PoS consensus layer, with its consensus-based yield rate modeled after Ethereum’s consensus layer yield mechanism (where the yield rate is inversely proportional to the square of the total amount of staked HYPE). As of now, aside from the 300 million tokens held by the team and the foundation, nearly 30 million user-owned tokens have also been staked.

Looking ahead, the economic model of HYPE still has room for numerous potential adjustments, such as:
Launch of HyperEVM,$HYPE being used as gas for HyperEVM,Allocation of execution layer revenue to HYPE stakers (currently, HYPE staking rewards only include consensus layer rewards),Redistribution of transaction fees to $HYPE holders,Transaction fee discounts for $HYPE stakers.
3.3 Valuation
Below, we will explore two valuation frameworks for Hyperliquid. Before diving in, it is important to note:
Extreme fluctuations in Hyperliquid’s data: Metrics such as market capitalization, TVL, revenue, and user numbers have experienced massive changes recently. For example, in the past month alone, these metrics saw multiple-fold or even tenfold increases, followed by a 50% pullback. The volatility of these indicators far exceeds the comparative valuation parameters listed below. As such, the following valuation frameworks are better suited for long-term reference.Currently, HYPE’s price constitutes the most critical fundamental aspect of Hyperliquid. Much of the sharp growth in metrics is a result of the rise in HYPE’s price, rather than the other way around.
Framework 1: Comparison with BNB
The key thesis for Hyperliquid, as proposed by Messari, is that it could become the “on-chain Binance.”

This analogy is overall quite reasonable and could indeed serve as an appropriate framework. Binance/BNB likely represents the most suitable comparison for Hyperliquid/HYPE:
Core business: Hyperliquid’s core operations focus on derivatives and spot trading, which align with Binance’s primary business model.HyperEVM vs. BNBChain: While HyperEVM has yet to launch, both HYPE and BNB share similarities, as they can be used as gas on their respective EVM chains and staked for rewards.Transaction Fee Benefits: Both HYPE and BNB benefit directly from platform transaction fees.
Below, we will compare Hyperliquid’s derivatives exchange, spot exchange, and EVM layer by dividing its structure into these three components, drawing comparisons to Binance.
Derivatives Exchange
As mentioned earlier, Hyperliquid’s recent metrics for open interest and trading volume reached around 10% of Binance’s corresponding data. Therefore, we can roughly assume that in the derivatives exchange module: HYPE = 10% of BNB.
Spot Exchange
Hyperliquid’s average daily spot trading volume over the past 30 days is approximately 400 million, while Binance′s average daily spot trading volume is about 26 billion.Therefore, in the spot trading market:HYPE = 1.5% of BNB.
EVM
Based on the reasoning above, we conclude that the relationship between HyperEVM and Hyperliquid L1 is akin to the relationship between Binance Exchange and BNBChain.
Although HyperEVM has not yet launched, it’s unclear how much TVL will migrate from RustVM to HyperEVM. However, considering the product architecture and corresponding user experience, the overall logic is still based on migrating Hyperliquid’s existing exchange users to the chain.To provide a comparison, we reference Binance and Coinbase’s data. Considering the market’s enthusiasm for HYPE, we assume 10% of the exchange’s TVL will migrate on-chain (this is an optimistic estimate, especially since most articles using TVL valuation assumptions presume 100% of Hyperliquid’s TVL will migrate to HyperEVM). Based on this calculation: HYPE = 3% of BNB.

Economic Model
In addition to the above, we also need to consider the differences between the economic models of HYPE and BNB.
From the analysis of HYPE’s economic model mentioned earlier, it can be seen that HYPE currently converts 54% of the platform’s gross profit and 100% of its net profit into buybacks or token burns for HYPE.
BNB, on the other hand, previously followed the whitepaper’s guidelines, allocating 20% of Binance’s net profits for BNB buybacks. However, since 2021, after buybacks and burns were decoupled from the platform’s net profit, we can no longer determine the proportion of Binance’s net profits benefiting BNB. Nonetheless, based on the trend of burn data and Binance’s market position during the same period, the proportion of net profits allocated to burns appears to have remained at a similar level.
From the perspective of the economic model benefiting token holders, HYPE is significantly superior to BNB.

Source of BNB Burn Data
It is also worth mentioning that Hyperliquid currently directs 54% of its revenue toward the HYPE token, and this percentage still has room for further growth. Due to the underlying mechanism, since July 2023, during a bull market in which BTC has risen by over 200%, HLP has maintained substantial short positions on cryptocurrency, using USDC as collateral. Although HLP’s strategies have been well-executed and have managed to maintain a rare breakeven, it still incurs an annualized APR of over 30% to retain funds within HLP.

HLP Historical Net Positions
Source：Hyperliquid Official Website
In the future, as the market gradually reaches its peak, the overall trend of crypto users being net long in derivatives is unlikely to change. However, the probability of HLP’s strategy yielding higher returns increases during sideways or bear markets (as observed in the historical returns of GMX’s GLP and GNS’s Vault). As a result, Hyperliquid may no longer need to allocate such a high proportion of its revenue as “rental payments” to HLP. This suggests that Hyperliquid’s net profit margin has room for further growth.
Speaking of net profit margins, while we are unable to determine Binance’s exact net profit margin, we can gain some insights into the operating costs of centralized exchanges from the reports of publicly-listed company Coinbase.

Coinbase quarterly report 24Q3
In 2023, Coinbase’s operating expenses (including R&D, administrative, sales, and transaction fees) averaged over $600 million per quarter, which was roughly equivalent to its total revenue, leaving its net profit margin near 0%. In 2024, as the market experienced a boom, Coinbase’s net profit margin improved significantly but still remained below 30%.
From the above numbers, we can clearly observe the relative advantage of Hyperliquid’s profit margin (economic model) compared to centralized exchanges. This can also be illustrated through a specific example: the handling process of token listing.
For centralized exchanges, the token listing process typically involves a dedicated team. This team is responsible for tracking market trends and negotiating with project teams, enabling the exchange to charge listing fees and/or receive project tokens. Centralized exchanges must also cover the substantial salaries and bonuses of the listing team, in addition to paying internal control teams tasked with monitoring and mitigating potential conflicts of interest during the token listing process.
In contrast, Hyperliquid’s HIP-1 token listing process, as previously mentioned, runs entirely via pre-programmed code. This automation drives the operating cost for new token listings almost to $0, allowing the listing revenue (e.g., “listing fees”) to be fully distributed to HYPE token holders.
To summarize, as of the end of December 2024, we have the following comparisons:
Derivative Trading: HYPE = 10% of BNB
Spot Trading: HYPE = 1.5% of BNB
EVM (Estimated): HYPE = 3% of BNB
Economic Model: HYPE significantly outperforms BNB
Circulating Market Cap: HYPE = 9% of BNB
Fully Diluted Market Cap: HYPE = 27% of BNB
Since derivative trading is currently Hyperliquid’s primary business, it should carry more weight in valuation comparisons. In the author’s view, although HYPE’s current market cap cannot be considered cheap, it is also not overpriced.
Framework 2: PS HYPE incorporates a token buyback and burn mechanism, both directly impacting the HYPE token itself. Therefore, the PS ratio can be used for valuation. The specifics are as follows:
Derivative Trading Fees:
Using an average contract trading fee of 0.0225%, with profits distributed between HLP and AF in a 46:54 split, projections are made as follows:
The monthly derivative trading revenue for Hyperliquid is: 154.7 billion USD×0.0225%=34.8 million
Out of this, 54% (approximately 18.79 million USD) enters the AF fund to buy back HYPE. This translates into an annualized net profit of 225.5 million USD.
HIP-1 Auction Fees:
Over the past month, the HIP-1 auction fee revenue was 6.1 million USD. Based on the 46:54 split between HLP and AF, this corresponds to an annualized net profit of 39.5 million USD.
Spot Trading Fees:
The fee structure for Hyperliquid’s spot trading is the same as for derivative trading, with the USDC portion of fees being distributed similarly—46% to HLP and 54% to AF. In spot trading, fees for other tokens (e.g., in HYPE-USDC trading, where HYPE buyers pay USDC fees and HYPE sellers pay HYPE fees) are directly burned.
Therefore, the net profit from spot trading fees contributing to HYPE can be divided into two parts:
HYPE Portion: This can be directly queried through a blockchain explorer. It has been exactly 30 days since the HYPE token’s TGE, during which 110,490 HYPE tokens were burned. Annualizing this, the burn amount would be 1,325,880 tokens, which, at the current price, is approximately 37 million USD.
USDC Portion: Over the past 30 days, Hyperliquid’s spot trading volume reached 11.5 billion USD. The portion of spot trading fees used to buy back HYPE equals: 11.5 billion USD×0.0225%×54%=1.397 million. Annualizing this, the net profit amounts to 16.77 million USD.
Combining the above three sources of revenue and calculating annualized values based on the past month’s data, the total amount used for HYPE buybacks is 318.77 million USD.
Using the circulating market cap, HYPE’s P/S ratio is 29.4. Using the fully diluted market cap, HYPE’s P/S ratio is 88.
Finally, we’ve compiled the P/S ratios for some crypto projects that are somewhat comparable to Hyperliquid.

It can be observed that the P/S valuation of L1 is significantly higher than that of applications, while the P/S valuation of Hyperliquid is noticeably lower compared to other comparable L1s.
The following outlines two frameworks for evaluating HYPE. It is important to emphasize the following points:
Hyperliquid’s data is highly volatile—key metrics such as its market capitalization, TVL (Total Value Locked), revenue, and user data have experienced several-fold or even tenfold growth in the past month, only to subsequently see a 50% retracement. The dramatic fluctuations of its metrics far exceed the comparisons shown in the valuation indicators outlined below. Therefore, the valuation frameworks discussed above are more suitable as long-term valuation references.The current price of HYPE is the most significant fundamental factor for Hyperliquid. The surge in its various metrics is more a result of HYPE’s price increase, rather than an indication that “Hyperliquid achieved such impressive data, which then led to this price.”
4. Risks
Hyperliquid currently faces the following risks:
Capital Risk: At present, all of Hyperliquid’s funds are stored in the Arbitrum network bridge. The security of this smart contract, as well as the safety of the 3/4 multi-signature system managing all the funds, is absolutely critical.Code Risk: This includes risks associated with both its current L1 infrastructure and HyperEVM. Hyperliquid utilizes innovative architecture and consensus mechanisms. While its decision not to open source its L1 at this stage reduces the likelihood of attacks, as Hyperliquid scales and HyperEVM goes live, the potential risks of attacks or code vulnerabilities will increase.Oracle Risk: Oracle risks are an inherent challenge faced by all derivatives exchanges.Regulatory Risk Leading to Loss of Competitive Advantage: The absence of KYC requirements is currently one of Hyperliquid’s key advantages compared to centralized exchanges. However, as the platform continues to grow, it may encounter regulatory demands, such as anti-money laundering compliance, which could erode its comparative advantage.
References
https://hyperfnd.medium.com/hype-genesis-1830a4dc2e3f
https://newsletter.asxn.xyz/p/hyperliquid-the-hyperoptimized-ord
https://data.asxn.xyz/dashboard/hl-auctions
https://hypurrscan.io/stats
https://hypurrscan.io/token/0x0d01dc56dcaaca66ad901c959b4011ec
https://www.hypeburn.fun/
https://www.prestolabs.io/research/hyperliquid-the-hype-begins#4.1-Decentralization
https://x.com/0xak_/status/1871051318267445562
https://x.com/Darrenlautf/status/1869961681671184629
https://x.com/stevenyuntcap/status/1863643385002652044
https://hyperdata.info/

By Alex Xu, Research Partner at Mint Ventures
Introduction
If we were to name the Layer 1 blockchain that has seen the most significant business growth in this bull market cycle, most people would likely answer: Solana.
Whether it’s the number of active addresses or transaction fee revenue, Solana’s market share among Layer 1s has expanded rapidly:
Active addresses: Solana’s share of active addresses has grown from 3.48% to 56.83%, a year-on-year increase of 1533%.

Monthly active address market share for L1s
Data source: Token Terminal
Fees: Solana’s fee revenue share grew from 0.62% to 28.92%, representing a year-on-year increase of 4564%.

Monthly Fee Revenue Market Share for L1s
Data source: Token Terminal
The rapid growth of Solana’s core metrics during this cycle has been largely driven by the Meme wave. Besides Solana, other projects like Raydium, a decentralized exchange (Dex), have also benefited significantly from this trend. The surge in Meme-related trading activity has contributed enormous transaction volumes and protocol revenue to these platforms. As a result, Raydium’s token price recently hit a new high for this cycle.
In this article, I will focus on another project that has also greatly benefited from the massive asset issuance on Solana: Metaplex.
This piece will discuss and analyze the following four questions:
What is Metaplex’s business positioning and business model? Does it have a competitive moat?What do Metaplex’s business metrics look like, and how is its business developing?What are Metaplex’s team background and funding situation, and how can the project team be evaluated?What is Metaplex’s current valuation level, and does it offer a margin of safety?
This article represents my thoughts as of the time of publication. These views may change in the future and are highly subjective. It is also possible that there are errors in facts, data, or reasoning logic. Criticism and further discussion from industry professionals and readers are welcome. However, this article does not constitute any investment advice.
Below is the main body of the article.
Metaplex’s Business Positioning and Business Model
The Metaplex protocol is a system built on Solana and other blockchains that support the SVM (Solana Virtual Machine), designed for the creation, sale, and management of digital assets. It provides developers, creators, and businesses with the tools and standards needed to build decentralized applications. Metaplex supports various types of crypto assets, including NFTs, FTs (fungible tokens), real-world assets (RWA), gaming assets, and DePIN assets.
Recently, Metaplex has also expanded its business horizontally into other foundational service areas within the Solana ecosystem, such as data indexing (Index) and data availability (DA) services.
In the long term, Metaplex is expected to become one of the most important multi-domain foundational service projects within the Solana ecosystem.
Metaplex Product Matrix
Metaplex, as a system for asset issuance, management, and standardization, supports both NFTs and fungible tokens (FTs) as its target asset types. The following products form a comprehensive matrix designed to serve assets within the Solana ecosystem.
Core
Core is the next-generation NFT standard on the Solana blockchain. It utilizes a “single account design,” which significantly reduces minting costs and computational power requirements. Additionally, it supports advanced plugins and enforces royalty payments.
Background Knowledge: Solana Account Model
To understand the advantages of the “single account design”, it’s essential to first comprehend Solana’s account model and the way traditional NFTs are stored.
On the Solana blockchain, all state storage (e.g., token balances, NFT metadata, etc.) is associated with specific accounts. Each account can store a limited amount of data due to its size constraints, and maintaining these stored data requires paying “rent.” Therefore, efficiently managing on-chain accounts and storage is a critical issue that developers on Solana must address.
Traditional NFT Design
In traditional NFT design, each NFT typically involves multiple accounts to store different types of information. For example, a typical NFT might involve the following accounts:
Main Account: Stores ownership information of the NFT (e.g., who the current holder is).Metadata Account: Stores metadata for the NFT (e.g., name, description, image links, etc.).Royalty Account: Stores information related to royalties for the creator.
While this multi-account design offers flexibility, it also brings some challenges in practice:
Complexity: Managing and interacting with multiple accounts increases complexity, especially when frequent querying and updating of data are required.Costs: Each account requires “rent” to maintain its storage state. More accounts mean higher costs.Performance: Since multiple accounts are involved, operations may require more blockchain resources, impacting performance and transaction speed.
Advantages of the “Single Account Design”
Metaplex Core introduces the “single account design” standard to address the above issues. This approach consolidates all NFT-related information (such as ownership, metadata, royalties, etc.) into a single account. Simplifying the account structure reduces account costs, improves interaction efficiency, and enhances the scalability of NFTs.This design is particularly well-suited for large-scale NFT projects (such as games or DePIN applications) on high-performance, low-cost blockchains like Solana.
Bubblegum
Bubblegum is a program developed by Metaplex for creating and managing compressed NFTs (cNFTs). Through compression technology, creators can mint a massive number of NFTs at an extremely low cost—minting 100 million NFTs costs just 500 SOL (reducing costs by over 99% compared to traditional minting methods). This provides unprecedented scalability and flexibility. Thanks to the introduction of Bubblegum technology, large-scale, low-cost NFT minting has become possible. Projects like Render and Helium within the DePIN ecosystem have begun migrating to Solana, and innovative NFT platforms like DRiP have emerged as a result. Below is a table listing how these three representatives utilize Bubblegum technology.

Token Metadata
The Token Metadata program allows attaching additional data to fungible and non-fungible assets on Solana. While Token Metadata is naturally essential for data-rich NFTs, it is also widely used by fungible token projects on Solana.
What most people don’t know is this: The largest meme token issuance platform on Solana, Pump.fun, uses Metaplex’s Metadata service for all tokens created on the platform. Currently, the primary demand for Token Metadata doesn’t come from NFTs but from the vast number of meme token projects being issued.
For meme projects, the benefits of using the Token Metadata program when issuing tokens are very clear:
First, it ensures standardization and compatibility for the issued tokens. By utilizing Metaplex’s Metadata service, these tokens can be more easily recognized by mainstream wallets (such as Phantom and Solflare). Their names, icons, and other additional details can also be correctly displayed on trading platforms and seamlessly integrated with other Solana applications.Secondly, it provides on-chain storage and transparency. The Metaplex Metadata service stores the token’s metadata on-chain, making the token’s information and data easier to verify and safeguarding it from tampering.Additional details, such as images and text, offer multi-dimensional materials for meme speculation. This elevates memes beyond just a name and a contract, providing rich resources for meme dissemination, secondary creation, and storytelling.

New meme tokens are constantly refreshing on pump.fun Source: pump.fun
As the meme token craze on Solana continues to heat up, more than 90% of Metaplex’s protocol revenue has already been contributed by fungible tokens (memes). This reality sharply contrasts with the public perception that “Metaplex is a foundational NFT protocol within the Solana ecosystem,” revealing a significant gap in understanding.
Candy Machine
Metaplex’s Candy Machine is the most commonly used NFT minting and distribution program on Solana. It enables efficient, fair, and transparent launches of NFT collections.
Other Product Portfolio
Metaplex also offers the following services:
MPL-Hybrid: A hybrid NFT storage and management solution designed to combine the advantages of both on-chain and off-chain storage. It provides an efficient and cost-effective way to store NFTs, especially for large files (such as high-resolution media) or NFT projects that require dynamic updates.
Fusion: An NFT merging feature that allows users to combine multiple NFTs into a new one. This can enhance user interaction and offer more creative use cases for NFT projects. It is applicable in areas like gaming, collectibles, and art projects.
Hydra: A high-performance and scalable large-scale NFT minting solution specifically designed for projects that need to mint massive quantities of NFTs, such as games, social platforms, or loyalty programs.
……
Metaplex’s Current Product List (Asset Services):

Image Source: Metaplex Developer Documentation
Aura
In addition, in September, the Metaplex Foundation officially announced the launch of Metaplex Aura—a decentralized indexing and data availability network designed to serve Solana and SVM. With the indexing and data availability services provided by Aura, Solana and other blockchain projects adopting the SVM standard can read asset data more efficiently and support batch operations at significantly lower costs, reducing operational expenses by over 99%. See the image below for reference:

After adopting Aura, a cost comparison of large-scale asset operations (before and after)
Source: Metaplex official Twitter
When the product preview was released, Metaplex also outlined partnership agreements supporting the product. Many of these are well-known projects within the Solana ecosystem, and they are likely to become potential users of Aura in the future.

Source: Metaplex Official Twitter
From asset service systems to data indexing and data availability service agreements, as its horizontal service offerings expand, Metaplex is evolving into a full-stack foundational service platform for the Solana ecosystem.
Metaplex’s Business Model
Metaplex’s business model is straightforward: it charges for providing services related to on-chain assets. Some services in the product lineup mentioned above are free, while others come with a fee.
Although Metaplex’s direct collaborators are other projects on Solana—essentially operating as a B2B expansion model—the majority of its revenue actually comes from smaller projects or retail users utilizing the services enabled by these larger B2B projects. This includes project teams creating various types of fungible tokens as well as individuals minting NFTs.
In my opinion, compared to charging large-scale B2B collaborators (such as Pump.fun), charging decentralized users is a better business model for several reasons:
Smaller project teams or retail users tend to make decisions based more on emotion and are less price-sensitive than B2B clients. Since Metaplex’s service fees only account for a small portion of their total costs, the absolute amount a single small user pays isn’t high. However, when aggregated across a large number of such users, the total revenue can become substantial.Large B2B projects can serve as distribution channels for Metaplex’s services, helping to extend the reach of its offerings to a wider pool of decentralized users. This allows Metaplex to avoid additional expenditure or effort on marketing and distribution.With a dispersed and decentralized user base, it is difficult for users to collectively bargain with foundational service providers like Metaplex. This enables Metaplex to maintain its profit margins, and it might even afford the opportunity to raise prices when appropriate.
Specifically, the pricing standards for Metaplex’s products on Solana are as follows:

Image Source: Metaplex Developer Documentation
As we can see, the absolute cost for users to invoke Metaplex’s product services individually is not expensive. For instance, the cost for a user to mint an NFT is only 0.0015 SOL; if a meme token issuer wants to add text and image descriptions to their project by using Token Metadata, it costs just 0.01 SOL per use. Such costs are negligible, or virtually insignificant, compared to the expected returns for users.
Of course, it’s important to point out that the large-scale issuance of homogenous tokens, especially meme tokens, has a dual impact on Metaplex. On one hand, it generates revenue for the platform; on the other hand, the sustainability of the meme craze remains uncertain, which could affect the long-term stability of Metaplex’s income. Even a strong ecosystem like Solana is no exception to the volatility of meme token activity. For instance, during the “coldest” week in September, the number of new tokens listed on DEXs was only about one-third of what it was during May’s peak. By mid-November, that number had increased tenfold again.

Number of New Tokens Listed Weekly on Solana DEXs
Source: Dune
The Moat of Metaplex
In the world of business, a company’s or project’s “moat” can stem from various advantages, such as cost advantages driven by scale or geographic location, value accumulation through network effects, high user stickiness and premium pricing enabled by brand recognition, or competitive barriers established by regulatory licenses and patents.
Projects with a strong moat are characterized by their resilience in a competitive landscape. When new competitors enter the same market, they find it very difficult to catch up, or the overall cost of catching up is so high that it far exceeds their expected returns. As a result, the number of competitors in that field tends to stay relatively low. Financially, such projects often demonstrate steadily growing profitability and maintain low ratios of marketing and development costs relative to their revenue.
In the world of Web3, projects with a strong moat are relatively few. Examples include Tether in the stablecoin space and Aave in the centralized lending sector.
In my view, Metaplex also qualifies as a project with a strong moat. Its moat is built upon two core factors: “high switching costs” and “setting the standard.”
Firstly, When developers and users become deeply reliant on Metaplex’s tools and protocols for asset issuance and management, transferring these assets to another protocol for management in the future will inevitably involve significant time, technical, and economic costs.
Secondly, When Metaplex’s asset formats (including NFTs and FTs) become the de facto standard within the Solana ecosystem, forming a common compatibility consensus among the ecosystem’s foundational infrastructure and applications, this will naturally make Metaplex the first choice for new developers and projects when selecting an asset service platform, as its asset formats offer superior ecosystem compatibility.
Thanks to this moat, the Solana ecosystem currently lacks projects capable of competing with Metaplex on the same level, ensuring Metaplex’s strong profitability—a point that will be analyzed in the next section.
Beyond its asset services, Metaplex is currently testing data indexing and data availability services, which could potentially create a second growth curve for the platform in the future. Considering that the target audience for these services highly overlaps with Metaplex’s existing customer base, this new business expansion is likely to be more easily accepted and experienced by its current partner clients.
Metaplex Business Data: Strong Product-Market Fit (PMF) and Robust Growth in Key Metrics
Metaplex’s current core business focuses on providing asset-related services. We can evaluate its performance by analyzing several key metrics, including the number of active users, the number of projects minting assets, and protocol revenue.
Metaplex Monthly Active Users
Metaplex’s monthly active users refer to the unique wallet addresses that have conducted transactions with the Metaplex protocol within a given month.

Metaplex Monthly Active Addresses
Data source: Metaplex Public Dashboard, same for the following data.
As of the writing of this article (November 30, 2024), the latest monthly active user count for Metaplex has reached 844,966, setting a new all-time high for a single month and representing a year-over-year growth of 253%.
Number of Assets Minted via the Protocol
The number of assets minted via the protocol refers to the types of assets minted through the Metaplex protocol.

Number of Monthly Asset Minting Types on Metaplex
As of the writing of this article (November 30, 2024), Metaplex has also set a new historical record in this metric, with the total number of asset types minted in November exceeding 1.44 million.
What’s even more noteworthy is that 94% of these assets are fungible tokens (FTs), while only 6% are NFTs. Back in January of this year, the split was 18.6% FTs versus 81.4% NFTs. This means that, In terms of business volume, Metaplex’s primary business has now shifted to fungible token services rather than NFT services. Moreover, a significant portion of these fungible tokens were minted as part of the ongoing Meme trend.

Proportion of Metaplex Monthly Asset Minting Types
Protocol Revenue
Protocol revenue refers to the fees Metaplex earns through providing services.

Metaplex Monthly Protocol Revenue
As of the time of writing (November 30, 2024), Metaplex’s monthly protocol revenue has reached an impressive $3.3 million, marking a new all-time high.
It is worth noting that, unlike many projects in the Web3 world that rely on token subsidies to drive product demand—essentially exchanging project tokens for protocol revenue—Metaplex’s business revenue is exceptionally organic. The project does not rely on direct token subsidies and is a typical example of achieving PMF (Product-Market Fit).
From the data in this section, we can observe the following:
As an underlying asset protocol, Metaplex directly benefits from the growth of the Solana ecosystem. Its core metrics rise in sync with Solana’s key indicators, particularly its protocol revenue.Metaplex benefits from activity in both NFTs and FTs, meaning it is not just an “NFT asset service protocol.” Looking beyond the Meme wave, if Solana fosters more active verticals such as DePIN, gaming, or RWA, the potential demand for Metaplex could expand even further.Metaplex’s business demand is organic—its revenue is not reliant on token subsidies.
Next, let’s take a look at the team behind the Metaplex project and the status of its project tokens.
The Metaplex Team: EcosystemOG Close to Solana’s Core Circle

Stephen Hess
Metaplex was founded by Stephen Hess, who also serves as the Chairman of the Metaplex Foundation. He established Metaplex Studios in November 2021.
As a graduate of Stanford University’s Symbolic Systems program (a field focused on the design of human-computer interaction systems), Stephen Hess was also one of Solana’s earliest employees, joining the company just a year after its launch. It was Solana co-founder Raj who invited him to join, where he took on the role of Head of Product. During his tenure, Hess participated in key initiatives such as Solana Stake Pools (Solana’s staking system), the SPL governance system, and the development of Wormhole. He was also part of the team that built the first version of the Solana NFT standard, which eventually evolved into Metaplex.
Shortly after its creation in January 2022, Metaplex secured 46 million in strategic investment from notable firms such as Multicoin, Jump, and Alameda. Based on the 10.2% allocated to the strategic financing round in the token distribution table, Metaplex’s 46 million funding at the time implies a valuation of approximately 450 million. This was a remarkably high first-round valuation, even during the bull market period.
Just as Metaplex was nearing its one-year anniversary in November 2022, FTX collapsed dramatically due to massive financial mismanagement. Although Metaplex’s financial health was not directly impacted by the FTX meltdown, Stephen Hess quickly announced a layoff decision on Twitter, preparing in advance for the impending downturn in the Solana ecosystem. In hindsight, his approach proved to be remarkably prudent, demonstrating a clear vision of the future. Unlike many Web3 teams that spend lavishly, Hess emphasized cost control.
According to Metaplex’s current Linkedin profile, the team consists of just over 10 members, remaining lean and efficient. However, judging by the monthly project progress reports released by the company, this compact team exhibits strong execution capability and a proactive approach to product work. They demonstrate high efficiency in both product iterations and the development of new products.

Metaplex’s monthly project progress reports
Source: The Official blog
Looking back at the professional backgrounds of Metaplex’s founders and the project’s development history, Metaplex largely aligns with my vision of the key elements that make up an excellent Web3 team:
Core team members possess education, skills, and professional experience directly relevant to their entrepreneurial venture, with no history of credit issues or misconduct.They are closely connected to the core circles of their blockchain ecosystem, maintain clear communication channels, and have product philosophies recognized by the blockchain’s community.They exhibit strong product intuition (avoiding unnecessary detours), work diligently, and deliver results consistently.They have a strong sense of cost control and avoid wasteful spending.They have secured investment from top-tier industry VCs and possess excellent overall business resources.
Additionally, on September 9, 2024, The Block revealed that leading institutions such as Pantera Capital and ParaFi Capital purchased a substantial amount of Metaplex (MPLX) tokens earlier this year from Wave Digital Assets. These tokens were originally held by FTX, and it is said that the aggregate purchase cost was approximately 0.2–0.25 per token (with certain lock-up terms attached).
MPLX: Token Utility and Valuation Levels
Basic Token Information
Metaplex’s protocol token is MPLX, with a total supply of 1 billion.

Image Source: Project Whitepaper
Details of Token Allocation:
Creators and Early Supporters (21.9%): 50% distributed via airdrop within the first year (initial airdrop started in September 2022). The remaining 50% is released monthly over the following year; fully unlocked.Metaplex DAO (16%): No lock-up period; distributed according to DAO proposals.Metaplex Foundation (20.31%): No lock-up period.Strategic Round (10.2%): 50% unlocked one year after the initial airdrop (September 2022). The remaining 50% was released monthly over the following year. fully unlocked.Partner Everstake (10%): Locked for two years. Released linearly over one year;fully unlocked.Metaplex Studios (9.75%): Locked for one year . Released linearly over two years; fully unlocked.Community Airdrop (5.4%): Released immediately.Founder Advisors (3.34%): Locked for one year. Released linearly over one year; fully unlocked.Founding Partners (3.1%): Locked for one year. Released linearly over one year; fully unlocked.
Based on the current circulation data provided by the official source, MPLX’s circulation rate is 75.6%, with the majority already in circulation. Investor shares, in particular, have largely been unlocked and are now circulating. As a result, the unlocking-related sell pressure is relatively low.
The “non-circulating” portion of the total supply primarily comes from the shares controlled by Metaplex DAO and Metaplex Foundation, tokens held in the treasury.
Token Utility
Currently, the primary utility of MPLX is governance voting. In addition, starting from March 2024, Metaplex announced that 50% of the protocol’s revenue (including historically accumulated revenue) will be used for token buybacks. The repurchased tokens will be moved into the treasury to support the development of the protocol ecosystem.
The protocol officially began token buybacks in June 2024, and since then, it has consistently spent 10,000 SOL per month on MPLX buybacks. This process has continued for 5 months to date.
With the rapid growth of protocol revenue, starting next month, Metaplex will increase the monthly buyback amount from 10,000 SOL to 12,000 SOL.
Beyond governance and buybacks, MPLX’s next key utility will be tied to the Aura feature mentioned earlier. Once the Aura functionality officially launches, MPLX is expected to serve as the staking asset for Aura nodes, capturing the yield generated by Aura.
Protocol Valuation
When evaluating the valuation of Metaplex, we still use the comparative valuation method. However, considering that there are no directly comparable projects within the same niche on Solana, the author ultimately chose Raydium—a project also within the Solana ecosystem—as the benchmark for comparison. Like Metaplex, Raydium has seen a significant increase in protocol revenue this year, fueled by the Meme trend, and it also features a buyback mechanism, making it a suitable reference point for valuation.

From the perspective of comparing protocol revenue and market capitalization, Metaplex’s valuation is relatively higher.
However, it is important to emphasize that while the two projects share some similarities, they operate in two entirely different tracks within the same ecosystem, with vastly different business focuses. Therefore, the above valuation comparison should only be considered as a rough reference.
Potential Growth Drivers and Risks
Overall, Metaplex has several clear advantages:
Strategic position upstream in the asset servicing track, holding control over asset standard-setting, and directly benefiting from the prosperity of the Solana ecosystem.Product-market fit (PMF) has been fully validated, enabling the project to achieve positive cash flow without relying on token subsidies. It also possesses a clear and defensible business moat.On the foundation of its current business, the team is actively pursuing a second growth curve.A strong and capable team with a close connection to the core of the ecosystem. They are diligent, enterprising, and cost-conscious.The token has a buyback mechanism, and the project’s total valuation is relatively low (current circulating market cap: 260M+, FDV: 350M+), meaning it’s relatively “light” in scale.
Potential drivers for Metaplex’s future market cap growth include:
Expansion into new vibrant tracks within the Solana ecosystem beyond the current Meme trend, further enlarging the market for asset issuance. This could include DePIN, gaming, RWA, or even the long-dormant NFT sector.Listing on larger trading platforms, such as Binance or Coinbase, which would significantly enhance liquidity and valuation premiums. Considering the project’s quality and its relatively low market cap, the author believes Metaplex is a strong candidate for such listings. Projects with real business demand and positive cash flow are rare and highly valued in the market.Directly increasing service fees. Currently, the project’s pricing base is low, giving it clear room to raise fees. Even a 100% price increase would make minimal difference to users, as asset creation costs paid to Metaplex remain negligible for them.
Of course, Metaplex also faces some potential risks and challenges:
The decline of the Solana Meme trend could lead to a sharp drop in asset minting numbers and reduced revenue.Metaplex’s income is currently based on one-time fees tied to the type of assets created. For projects with more fixed asset types, this model cannot generate sustainable, long-term revenue for Metaplex.
Conclusion
Contrary to the common perception that “Metaplex is just an NFT asset protocol,” the reality is that Metaplex is a foundational protocol for all types of assets within the Solana ecosystem. It has also been a direct beneficiary of the ongoing Meme trend that began earlier this year.
If you remain optimistic about the future of the Solana ecosystem, then Metaplex, which occupies the upstream niche of “asset issuance and management,” is a project worth long-term attention.

By Lawrence Lee, researcher at Mint Ventures
After securing two consecutive funding rounds, including a $12 million investment led by Polychain and funding from Binance Labs, Solayer, a restaking project on the Solana chain, has emerged as one of the few highlights in the DeFi space recently. Its TVL has been steadily increasing, now surpassing Orca and ranking 12th in TVL on the Solana chain.

Solana Project TVL Rankings
Source: DeFiLlama
As a core crypto-native subsector, the staking sector boasts the largest Total Value Locked (TVL) among all crypto industries. Yet, despite its prominence, the representative tokens of major staking projects, such as LDO, EIGEN, and ETHFI, have struggled significantly in this cycle. Aside from the inherent factors tied to the Ethereum network, are there any additional reasons behind these challenges?
How competitive are staking protocols and restaking protocols in the broader staking ecosystem, particularly when centered on user staking behaviors?What are the differences between Solayer’s restaking model and Eigenlayer’s restaking?And ultimately, is Solayer’s restaking approach a promising business model?
This article seeks to address these questions by first exploring staking and restaking in the context of the Ethereum network.
Competitive Landscape and Development of Liquid Staking, Restaking, and Liquid Restaking on Ethereum
In this section, we will focus on analyzing three key projects:
Lido: The leading liquid staking protocol on the Ethereum network
Eigenlayer: The most prominent restaking protocol
Etherfi: A top representative of liquid restaking protocols
Lido: Business Logic and Revenue Model
The business logic of Lido can be summarized as follows:
Due to Ethereum’s commitment to decentralization, its PoS mechanism imposes soft limitations on the staking capacity of a single node. A single node achieves optimal capital efficiency by staking a maximum of 32 ETH. At the same time, Ethereum staking requires relatively high levels of hardware, network infrastructure, and technical expertise, which creates a high entry barrier for the average user. Under these conditions, Lido pioneered and popularized the LST concept. While the liquidity advantages of LST were somewhat weakened after Shapella’s upgrade, which allowed for withdrawals, their strong benefits in terms of capital efficiency and composability remain. These advantages form the foundation of business logic for LST protocols represented by Lido. In the liquid staking sector, Lido dominates the market, maintaining a nearly 90% market share and leading the way by a significant margin.

Liquid Staking Participants and Market Share
Source: Dune
Lido’s revenue primarily comes from two sources: consensus layer rewards and execution layer rewards. The so-called consensus layer rewards refer to the staking rewards issued by Ethereum’s PoS system. For the Ethereum network, these expenditures are designed to maintain network consensus, which is why they are referred to as consensus layer rewards. This portion of revenue is relatively stable (represented by the orange section in the chart below). The execution layer rewards include priority fees paid by users and MEV (For more analysis on execution layer rewards, readers can refer to previous articles by Mint Ventures for additional insights.). This portion of the revenue is not paid by the Ethereum network but by users during transaction execution (either directly or indirectly). This revenue fluctuates significantly as it depends on the level of on-chain activity and network demand.

Lido Protocol APR
Source: Dune
Business Logic and Revenue Composition of Eigenlayer
The concept of Restaking was introduced by Eigenlayer last year and has since become a rare new narrative within the DeFi sector and even the broader market over the past year. This narrative has led to the emergence of a series of projects with FDV exceeding $1 billion at launch (besides EIGEN, there are ETHFI, REZ, and PENDLE), as well as numerous restaking projects yet to launch (such as Babylon, Symbiotic, and Solayer, which we will discuss in detail later). The market enthusiasm is undeniable (Mint Ventures conducted research on Eigenlayer last year, and interested readers can check it out).
According to its definition, Eigenlayer’s Restaking allows users who have already staked ETH to restake their previously staked ETH on Eigenlayer (thus earning additional rewards), which is why it is called “Re”Staking. Eigenlayer refers to the services it provides as AVS (Actively Validated Services), which can offer security services for various protocols with security requirements. These include sidechains, DA layers, virtual machines, oracles, bridges, threshold cryptography schemes, trusted execution environments, and more. EigenDA is a typical example of a protocol utilizing Eigenlayer’s AVS services.

Protocols Currently Using Eigenlayer AVS
Source: Eigenlayer Official Website
The business logic of Eigenlayer is relatively simple. On the supply side, they gather assets from ETH stakers and compensate them with fees. On the demand side, protocols require AVS pay to utilize their services. Eigenlayer acts as a “protocol security marketplace,” facilitating matchmaking and earning a portion of the fees in return.
However, looking at all current restaking projects, the only tangible revenue still comes from the tokens (or points) of the associated protocols. It’s uncertain whether restaking has truly achieved PMF: From the supply side, everyone enjoys the additional rewards that restaking provides. But on the demand side, things remain murky: will there truly be protocols willing to pay for economic security services? And if so, how much demand will there be?

Kyle Samani, the founder of Multicoin, raises questions about the business model of restaking. Source: X
Looking at the target users that Eigenlayer has issued tokens for, including oracles (LINK, PYTH), bridges (AXL, ZRO), and DA (TIA, AVAIL), we can see that staking tokens to maintain protocol security is already a core use case for their respective tokens. Choosing to purchase security services from Eigenlayer would severely weaken the rationale behind these protocols issuing their own tokens. Even for Eigenlayer itself, when explaining its EIGEN token, it uses vague and abstract language to convey the idea that “using EIGEN token to maintain protocol security” is a primary use case.
Survival Strategy for Liquid Restaking (Etherfi)
Eigenlayer supports two methods for participating in restaking. Firstly, Using LST. To participate via LST, users simply deposit ETH into an LST protocol to mint their LST, then deposit the LST into Eigenlayer. This approach is relatively simple. However, there are long-term caps on the LST pool for Eigenlayer. For users who still want to participate despite the caps, they need to go through native restaking, which follows the steps below:
Users need to independently complete the entire ETH staking process on Ethereum, including preparing funds, configuring execution and consensus layer clients, and setting up withdrawal credentials.They then create a contract account within Eigenlayer, known as an Eigenpod.Finally, users must assign the withdrawal private key of their Ethereum staking node to the Eigenpod contract.
Eigenlayer’s restaking approach adheres closely to the principles of “re”staking. Whether users deposit LST or engage in native restaking, Eigenlayer never directly manages or interacts with users’ staked ETH (Eigenlayer doesn’t issue any form of LRT). However, native restaking workflow is essentially a more complex version of native staking. This means it requires similar levels of capital, hardware, network resources, and technical knowledge, creating significant barriers for average users.
Projects like Etherfi quickly stepped in to address these challenges by introducing Liquid Restaking Tokens (LRTs). The operation process for Etherfi’s eETH works as follows:
Users deposit ETH into Etherfi, and Etherfi issues eETH to the users.Etherfi then stakes the ETH it receives to generate the base staking rewards.Simultaneously, Etherfi follows Eigenlayer’s native restaking process by assigning the withdrawal private keys of nodes to an Eigenpod contract account, enabling users to earn restaking rewards from Eigenlayer (and $EIGEN、 $ETHFI).
For ETH holders seeking to earn rewards, Etherfi’s service is clearly the most optimal solution. On the one hand, the eETH token is easy to use, offers liquidity, and provides a user experience similar to Lido’s stETH. On the other hand, depositing ETH into Etherfi’s eETH pool enables users to earn: around 3% base ETH staking rewards, potential AVS rewards from Eigenlayer, token incentives (points) from Eigenlayer, and token incentives (points) from Etherfi.
eETH accounted for 90% of Etherfi’s TVL, contributing over 6 billion in TVL at its peak and reaching an FDV of up to 8 billion. This made Etherfi the fourth-largest staking entity in just six months.

Etherfi TVL Distribution
Source: Dune

Staking Volume Rankings
Source: Dune
The long-term business logic of the LRT protocol lies in helping users participate in both staking and restaking in a simpler and more accessible manner, thereby achieving higher yields. Since it does not generate any revenue itself (apart from its own token), the overall business logic of the LRT protocol is more akin to a specific yield aggregator for ETH. Upon closer analysis, its business logic depends on the following two premises:
Lido cannot provide liquid restaking services. If Lido were to make its stETH similar to eETH, Etherfi would struggle to match Lido’s long-term advantages in branding, security credibility, and liquidity.Eigenlayer cannot provide liquid staking services. If Eigenlayer were to directly absorb users’ ETH for staking, this would significantly weaken Etherfi’s value proposition as well.
From a purely business logic perspective, as the leader in liquid staking, Lido providing liquid restaking services could offer users a broader range of revenue opportunities. Similarly, Eigenlayer directly accepting user funds for staking and restaking would be a more convenient and viable approach. So, why doesn’t Lido offer liquid restaking, and why doesn’t Eigenlayer provide liquid staking?
The author believes this restraint is determined by Ethereum’s unique context. In May 2023, during a period of intense market discussions after Eigenlayer completed a new $50 million funding round, Ethereum founder Vitalik Buterin specifically penned an article titled “Don’t Overload Ethereum’s Consensus”. In this article, he provided detailed examples to explain his views on how Ethereum’s consensus mechanism should (or should not) be repurposed—essentially addressing “how we should be doing restaking”.
On the Lido side, since its scale has long accounted for roughly 30% of Ethereum’s staking, voices within the Ethereum Foundation calling for restrictions on its influence have been persistent. Vitalik himself has written multiple articles discussing the centralization risks associated with staking, which has forced Lido to align its business priorities with Ethereum’s broader goals. This alignment has led Lido to progressively shut down activities on all chains outside of Ethereum, including Solana, and focus exclusively on Ethereum. Additionally, the facto leader, Hasu, published an article in May this year, confirming the abandonment of any potential for Lido to directly engage in restaking activities. Instead, Lido has chosen to confine its business to staking while supporting restaking protocols like Symbiotic through investments. Lido has also established a Lido Alliance to respond to competition from LRT protocols like Eigenlayer and Etherfi that threaten its market share.
Reaffirm that stETH should stay an LST, not become an LRT.Support Ethereum-aligned validator services, starting with preconfirmations, without exposing stakers to additional risk.Make stETH the #1 collateral in the restaking market, allowing stakers to opt into additional points on the risk and reward spectrum.
Lido’s position on matters related to restaking Source
On the Eigenlayer side, Ethereum Foundation researchers Justin Drake and Dankrad Feist were recruited as advisors by Eigenlayer early on. Dankrad Feist stated that his primary purpose for joining was to “align Eigenlayer with Ethereum,” which might also explain why Eigenlayer’s native restaking process significantly compromises user experience.
In a sense, Etherfi’s market potential arises from the Ethereum Foundation’s “distrust” towards Lido and Eigenlayer.
Analysis of the Ethereum Staking Ecosystem Protocols
By analyzing Lido and Eigenlayer, we can identify three main sources of long-term revenue generated from staking activities on current PoS chains, aside from token incentives provided by affiliated projects:
PoS Base Rewards: These are native tokens paid by the PoS network to maintain network consensus. The yield from this source primarily depends on the chain’s inflation policy. For example, Ethereum’s inflation policy is tied to the staking ratio — the higher the staking ratio, the slower the inflation rate.Transaction Ordering Rewards: These are earnings validators can collect during the process of packaging and ordering transactions, including user-paid priority fees and MEV rewards. The yield from this source largely depends on the level of activity within the network.Revenue from Renting Staked Assets: This involves lending staked assets to other protocols in need, in exchange for fees paid by those protocols. The yield from this source depends on how many protocols with demand for Additional Validation Security (AVS) are willing to pay fees to obtain enhanced protocol security.
On the Ethereum network, staking-related activities currently involve three types of protocols:
Liquid Staking Protocols represented by Lido and Rocket Pool. These protocols can only capture the first and second types of revenue mentioned above. While users can use their LST to participate in restaking, as protocols themselves, their revenue share is limited to the first and second categories.Restaking Protocols represented by Eigenlayer and Symbiotic. These protocols can only capture the third type of revenue.Liquid Restaking Protocols represented by Etherfi and Puffer. In theory, they can acquire all three types of revenue but are more akin to “LST that aggregate restaking revenue.”
Currently, Ethereum’s PoS base rewards yield an annualized return of approximately 2.8%, which gradually decreases as the staking ratio of ETH increases.
Transaction ordering revenue has significantly declined following the implementation of EIP-4844 and has been around 0.5% over the past six months.
The revenue base for staking asset rental remains relatively small and cannot yet be annualized. Most of the incentives in this category rely on token rewards from Eigen and related LRT protocols, which make this sector appear more lucrative.
For LST protocols, their revenue base is calculated as the staking amount multiplied by the staking yield. Currently, the staking ratio of ETH is approaching 30%. Although this figure is still significantly lower than that of other PoS chains, the Ethereum Foundation, from the perspectives of decentralization and economic bandwidth, does not aim for too much ETH to be staked (as referenced in Vitalik’s recent blog post, where the Ethereum Foundation once discussed capping ETH staking at 25% of the total supply). Meanwhile, staking yields have been consistently declining. From late 2022, when yields were stable at around 6%, with occasional short-term APRs reaching approximately 10%, they have now decreased to only 3%, with no foreseeable catalysts for recovery.
For the governance tokens of the aforementioned protocols, in addition to being constrained by the declining performance of ETH itself:
The market cap ceiling for Ethereum LSTs has become increasingly apparent, which may explain the poor price performance of governance tokens like LDO and RPL.
For EIGEN, other PoS chains, including the Bitcoin network, are seeing a growing number of emerging restaking protocols, effectively confining Eigenlayer’s business to the Ethereum ecosystem. This further limits the potential size of the AVS market, which was already unclear to begin with.
The unexpected emergence of LRT protocols, such as ETHFI, which at its peak reached an FDV of over $8 billion — surpassing the historical peak FDVs of both LDO and Eigen — has further “diluted” the value of these two categories within the staking ecosystem.
For protocols like ETHFI and REZ, in addition to the aforementioned factors, the unrealistically high initial valuations driven by market hype during launch periods have become a more significant factor negatively impacting their token prices.
Staking and Restaking on Solana
The operational mechanism of Solana network’s liquid staking protocols, represented by Jito, is fundamentally no different from those on the Ethereum network. However, Solayer’s restaking differs from Eigenlayer’s restaking. To understand Solayer’s restaking, we must first become familiar with Solana’s swQoS mechanism.
Solana’s swQoS (stake-weighted Quality of Service) mechanism officially came into effect following a client version upgrade this April. The swQoS mechanism aims to enhance the network’s overall efficiency, as Solana experienced prolonged network congestion during the meme craze in March.
In simple terms, after the activation of swQoS, block producers prioritize transactions based on the staking amount of stakers. Stakers holding x% of the total staking amount in the network are allowed to submit up to x% of the network’s transactions. (For a detailed explanation of the specific mechanics of swQoS and its profound impact on Solana, readers can refer to Helius’ article.) After the implementation of swQoS, the transaction success rate on the Solana network improved significantly.

Solana Network’s Successful and reverted TPS Source: Blockworks
The swQoS mechanism prioritizes transactions from larger stakers by effectively “overwhelming” the transactions of smaller stakers when network resources are limited. This ensures that the rights of larger stakers are protected during periods of congestion, mitigating attacks on the system by malicious transactions. To some extent, the idea that “the more you stake, the more privileges you enjoy” aligns with the logic of PoS blockchains. Staking a larger proportion of the native tokens contributes more to the chain’s stability and the ecosystem, so earning additional privileges seems reasonable. However, the centralization issues stemming from this design are also evident: larger stakers naturally benefit from more transaction privileges, which in turn attract more staking, reinforcing the advantages of top stakers. Over time, this cyclical advantage could lead to oligopolies or even monopolies. This trend contradicts the ideals of decentralization that blockchain technology champions. That said, this is not the focus of this discussion. From Solana’s consistent development trajectory, it is clear that Solana adopts a pragmatic “performance-first” approach when it comes to the issue of decentralization.
Under the context of swQoS, the target users of Solayer’s restaking are not oracles or bridges but rather protocols that require transaction finality and reliability, such as DEX. Consequently, Solayer refers to the AVS provided by Eigenlayer as Exogenous AVS, as these services typically cater to systems outside the Ethereum mainnet. On the other hand, Solayer refers to its own services as Endogenous AVS, since its target systems are directly located on the Solana mainnet.

Differences Between Solayer and Eigenlayer
Source
It can be observed that, although both Solayer and Eigenlayer aim to “re-stake” staked assets by leasing them to other protocols in need, the core services provided by Solayer’s Endogenous AVS and Eigenlayer’s Exogenous AVS are fundamentally different. Solayer’s Endogenous AVS essentially functions as a “transaction finality leasing platform,” targeting platforms (or their users) that require transaction finality. In contrast, Eigenlayer serves as a “protocol security leasing platform.” The foundation of Solayer’s Endogenous AVS lies in Solana’s swQoS mechanism. As Solayer states in its documentation:
We did not fundamentally agree with EigenLayer’s technical architecture. So we re-architected, in a sense, restandardized restaking in the Solana ecosystem. Reusing stake as a way of securing network bandwidth for apps. We aim to become the de facto infrastructure for stake-weighted quality of service, and eventually, a core primitive of the Solana blockchain/consensus.
Of course, if there are other protocols on the Solana chain that require staked assets, such as for protocol security purposes, Solayer can also lease its SOL to these protocols. In fact, by definition, any lending or reuse of staked assets can be referred to as restaking and is not necessarily limited to security needs. Due to the existence of Solana’s swQoS mechanism, the scope of restaking services on the Solana chain is broader than that on the Ethereum chain. Moreover, judging from Solana’s recent surge in on-chain activity, the demand for transaction finality is far more rigid than the demand for security.
Is Solayer’s restaking a good business?
The business process for users participating in Solayer’s restaking is as follows:
Users deposit SOL directly into Solayer, and Solayer issues sSOL to the users.Solayer stakes the received SOL, earning basic staking rewards.Meanwhile, users can delegate their sSOL to protocols that require transaction throughput, thereby earning fees paid by these protocols.

The current sources of Solayer’s AVS
Source
It is evident that Solayer is not just a restaking platform but also a restaking platform that directly issues LST. From the perspective of its business process, it is similar to Lido on the Ethereum network, which supports native restaking.
As mentioned earlier, there are three sources of income related to staking activities. On the Solana network, these three sources of income are as follows:
PoS Base Rewards: These are rewards in SOL paid by the Solana network to maintain network consensus. This part provides an annualized yield of approximately 6.5% and is relatively stable.Transaction Ordering Rewards: These are fees earned by nodes during the process of transaction batching and ordering. They include priority fees paid by users to expedite their transactions and tips paid by MEV searchers. Together, these provide an annualized yield of about 1.5%, though this number is highly variable and depends on the level of on-chain activity.Revenue from Renting Staked Assets: These are earned by leasing staked assets to protocols that require them (for purposes such as transaction throughput, protocol security, or other use cases). Currently, this revenue stream has not yet scaled significantly.

Total APY for SOL Liquid Staking (e.g, JitoSOL) and Sources of MEV Rewards
Source
If we carefully compare the aforementioned three types of rewards on Ethereum and Solana, we can see that while SOL’s market capitalization is still only 1/4 of ETH’s, and the market capitalization of staked SOL is only about 60% of staked ETH’s, Solana’s staking-related protocols have, in fact, a larger current market and an even greater potential market compared to Ethereum’s staking-related protocols. This is due to the following reasons:
PoS Base Rewards: The network issuance rewards paid by SOL have already surpassed those of ETH since December 2023, and the gap continues to widen. For both ETH and SOL staking, this accounts for over 80% of the staking yield, which establishes the revenue baseline for all staking-related protocols.

The token issuance rewards for Ethereum and Solana (i.e., the network’s PoS base rewards)
Source：Blockworks
2. Transaction Ordering Rewards: Blockworks uses transaction fees and MEV tips to reflect the REV （Real Economic Value) of a chain. This metric approximately represents the maximum potential transaction ordering rewards a chain can capture. While the REV of both chains fluctuates significantly, Ethereum’s REV has declined sharply following the Cancun upgrade, whereas Solana’s REV has shown an overall upward trend and has recently surpassed that of Ethereum.

The REV of Solana and Ethereum
Source：Blockworks
In terms of staking asset rental yields, compared to the Ethereum network, which currently only offers security yields, Solana’s swQoS mechanism enables additional transaction throughput rental demand.Furthermore, Solana’s staking-related protocols can expand their business operations based on commercial logic. Any liquid staking protocol can conduct restaking operations, as demonstrated by Jito. Similarly, any restaking protocol can issue LSTs (Liquid Staking Tokens), such as Solayer and Fragmetric.More importantly, we currently see no possibility of a reversal in these trends. This suggests that the advantages of Solana’s staking protocols over Ethereum’s staking protocols may continue to widen in the future.
From this perspective, although we cannot yet definitively say that Solana’s restaking has achieved PMF, it is clear that staking and restaking on Solana offer better business opportunities compared to those on Ethereum.

By Alex Xu, Research Partner at Mint Ventures
Data valid through October 30, 2024
Introduction
Ethena stands out as a rare phenomenon in the current cycle of DeFi projects, with its token once achieving a circulating market capitalization exceeding 2 billion (corresponding to an FDV surpassing 23 billion.) However, since April of this year, the token’s price has experienced a swift decline, with Ethena’s circulating market cap retreating over 80% from its peak and the token price plummeting as much as 87%.
Since September, Ethena has accelerated its collaborations with various projects, expanding the use cases for its stablecoin, USDE. The stablecoin’s scale has also started to recover from its low point, with its circulating market cap rebounding from a September low of approximately 400 million to around 1 billion currently.
In my article published in early July, titled “As Altcoins Keep Falling, It’s Time to Reassess DeFi,” I discussed Ethena, expressing the view that:
“…Ethena’s business model—a public fund focused on perpetual contract arbitrage—still exhibits notable limitations. The substantial expansion of its stablecoin (which had reached a scale of $3.6 billion at the time) heavily relies on secondary market participants being willing to purchase its ENA tokens at inflated prices, thereby providing generous yield subsidies for USDE. This somewhat Ponzi-like structure is susceptible to negative spirals in both business performance and token price during periods of poor market sentiment. The pivotal moment for Ethena’s business transformation hinges upon whether USDE can, at some point, evolve into a stablecoin with a significant number of ‘natural holders,’ thereby completing the shift from a public arbitrage fund to a stablecoin operator.”
Subsequently, the price of ENA fell further by 60%, and even though it has recently rebounded by nearly 100% from its low, it still remains over 30% below the previous price at that time.
I am reassessing Ethena at this juncture and will focus on the following three key questions:
1. Current business performance: The essential operational metrics of Ethena, including scale, revenue, overall costs, and real profit levels.
2. Future business outlook: The promising narratives and potential developments for Ethena.
3. Valuation level: Is the current price of ENA situated in an undervalued strike zone?
The following represents my current-stage reflections up until the time of publication, which may evolve in the future. The views presented here are highly subjective and may contain factual errors, data inaccuracies, or flawed reasoning. I welcome critique and further discussion from peers and readers. This article does not constitute any investment advice.
The main content follows below.
Business Performance: Ethena’s Current Core Business Situation
Ethena’s Business Model
Ethena positions itself as a synthetic dollar project with “native yields.” In essence, it operates within the same realm as MakerDAO (now SKY), Frax, crvUSD (Curve’s stablecoin), and GHO (Aave’s stablecoin) —— the stablecoin sector.
In my view, the business models of current stablecoin projects in the crypto sphere tend to be quite similar:
1. Raising funds by issuing debt (stablecoins), thereby expanding the project’s balance sheet.
2. Utilizing the raised funds for financial operations to secure financial returns.
When the yields generated from the operational funds surpass the total costs associated with fundraising and project management, the project becomes profitable.
Taking Tether, the centralized stablecoin issuer of USDT, as an example: Tether raises dollars from users, issues a debt certificate (USDT) in return, and invests the gathered funds in treasury bonds, commercial papers, and other interest-bearing assets to gain financial returns. Given the widespread utility of USDT, which users perceive to hold equivalent value to the dollar, yet affords capabilities that traditional dollars do not (such as instant cross-border transactions), users are inclined to provide their dollars to Tether in exchange for USDT without compensation. Additionally, redeeming USDT from Tether often incurs a redemption fee.
As a later entrant in the stablecoin market, Ethena clearly faces disadvantages in network effects and brand trust compared to established projects like USDT and DAI. This disadvantage manifests in higher fundraising costs, as users are only willing to exchange their assets for USDE if they anticipate significantly high returns. To raise capital, Ethena incentivizes users by offering its native token, ENA, and yield from the stablecoin (derived from the project’s financial revenue).
Core Business Metrics of Ethena
USDE Issuance Scale and Distribution
Data Source：https://app.ethena.fi/dashboards/solvency
Following a peak issuance of USDE at 3.61 billion in early July 2024, the scale has steadily declined to 2.41 billion by mid-October, before gradually recovering to approximately 2.72 billion as of October 31.
Of this 2.72 billion, 64% of USDE is currently staked, with a corresponding APY of 13% (according to official data).
Data Source：https://dune.com/queries/3456058/5807898
It is evident that the primary motive for most users holding USDE is to generate investment income, with a 13% APY representing the “risk-free return” of USDE, as well as the financial cost Ethena incurs to attract user funds.
During the same period, the yield on short-term U.S. Treasury bonds was 4.25% (as of October 24), while the deposit rates for USDT on the largest DeFi lending platform, Aave, stood at 3.9%, and USDC at 4.64%.
Thus, it is clear that Ethena continues to maintain a relatively high cost of capital in order to expand its fundraising base.
USDE is not only issued on the Ethereum mainnet but is also being extended across multiple L2 and L1 networks. Currently, the issuance of USDE on other chains amounts to 226 million, accounting for approximately 8.3% of the total supply.
Data Source：https://dune.com/hashed_official/ethena
Additionally, Bybit, as an investor and key collaborative platform for Ethena, not only supports the use of USDE as collateral for derivatives trading but also offers a yield of up to 20% on USDE deposited with Bybit (which has since been adjusted to a maximum of 10% in September). Consequently, Bybit stands as one of the largest custodians of USDE, currently holding 263 million, down from a peak exceeding 400 million.
Data Source：https://dune.com/hashed_official/ethena
Protocol Revenue and Distribution of Underlying Assets
Ethena’s current sources of protocol revenue are threefold:
1. Returns generated from staked ETH among the underlying assets;
2. Funding rates and basis income derived from derivatives hedging and arbitrage;
3. Investment income: holdings in stablecoins to earn interest or incentive subsidies, such as rewards from Coinbase’s loyalty program, which offers cash incentives for USDC at an annualized rate of approximately 4.5%; as well as holdings in sUSDS (formerly sDAI) on Spark.
According to data validated by Ethena and analyzed by Token Terminal, Ethena’s revenue has rebounded from last month’s trough, with October’s protocol revenue reaching 10.63 million USD, reflecting a month-on-month growth of 84.5%.
Data source: Tokenterminal, Ethena protocol revenue and the income allocated to USDE (cost of revenue)
A portion of the current protocol revenue is allocated to USDE stakers, while another portion is directed into the protocol’s Reserve Fund, intended to cover expenditures during periods of negative funding rates and various risk events.
The official documentation states that “the amount of protocol revenue allocated to the Reserve Fund must be determined through governance.” However, the author could not find any specific proposals regarding the distribution ratio of the Reserve Fund in the official forum; such changes were initially announced only in their official blog. The reality is that the distribution ratio and logic of Ethena’s protocol revenue have undergone multiple adjustments since its launch. During this process, while the team initially considered community feedback, the final distribution plan remains subjectively decided by the team without formal governance procedures.
As evidenced by the data from Token Terminal in the diagram above, the division of Ethena’s income between USDE stakers (represented by the red bars indicating the cost of revenue) and the Reserve Fund has been quite volatile.
During the early stages of the project, when protocol revenue was relatively high, a significant portion of the revenue was allocated to the Reserve Fund, with 86.7% of the protocol income distributed to the Reserve Fund account during the week of March 11. However, as April commenced and the price of ENA began to decline rapidly, the returns from ENA tokens proved insufficient to stimulate demand for USDE. To stabilize the scale of USDE, the allocation of Ethena’s protocol revenue began to tilt towards USDE stakers, with the majority of income directed to USDE stakers. Only in the past two weeks has Ethena’s weekly protocol revenue started to significantly exceed the expenditures allocated to USDE stakers (excluding ENA token incentives).
The underlying asset status of Ethena, data source: https://app.ethena.fi/dashboards/transparency
At present, the underlying assets of Ethena indicate that 52% are allocated to BTC arbitrage positions, 21% to ETH arbitrage positions, 11% to ETH staking asset arbitrage positions, and the remaining 16% comprises stablecoins. Thus, Ethena’s principal source of revenue derives from BTC-centric arbitrage positions. The once-prominent ETH staking returns contribute negligibly, given their limited asset proportion.

The quarterly average return rate of BTC and ETH perpetual contract arbitrage
data source: https://app.ethena.fi/dashboards/hedging
From the perspective of the average return rate trend of BTC perpetual contract arbitrage, the average return for the fourth quarter has already emerged from the stagnant range of the third quarter, returning to the levels observed in the second quarter of this year. To date, this quarter’s average annualized return exceeds 8%. Notably, even during the subdued market conditions of the third quarter, the overall average annualized return for BTC arbitrage remained above 5%.
Similarly, the annualized return rate for ETH perpetual contract arbitrage mirrors that of BTC and has also returned to above 8%.
Now, let’s examine Sol’s market contract scale, which is set to become a part of Ethena’s underlying assets. Despite a significant increase in Sol’s contract holdings this year due to rising prices, currently reaching 3.4 billion, there remains a considerable gap compared to ETH′s 14 billion and BTC’s $43 billion (not including CME data).
The trend of SOL’s contract holdings, data source: Coinglass
Regarding Sol’s funding fees, when examining the largest positions on Binance and Bybit, the recent annualized funding rate is comparable to that of BTC and ETH, with the current annualized funding rate hovering around 11%.
Current annualized funding rates for mainstream cryptocurrencies
Data source: https://www.coinglass.com/zh/FundingRate
In other words, even if Sol is subsequently included as a contract arbitrage target in Ethena, it currently lacks a distinct advantage in both scale and yield compared to BTC and ETH, and is unlikely to generate significant incremental revenue in the short term.
Ethena’s Protocol Expenditures and Profit Levels
Ethena’s protocol expenditures are divided into two categories:
1. Financial Expenditures: Paid in USDE, directed towards USDE stakers, with the source of earnings derived from Ethena’s protocol income (including derivatives arbitrage, ETH staking, and stablecoin investment).
2. Marketing Expenditures: Paid in ENA tokens, directed towards users participating in various growth activities (Campaigns) within Ethena. These users earn points through their participation (different stages of the Campaign have varying point names, such as initially called Shards and later referred to as Sats), which can be exchanged for corresponding ENA token rewards after each season’s activities conclude.
The financial expenditures are relatively straightforward; for users staking USDE, there are clear expectations of returns. The official website prominently displays the current yield for USDE:
The current yield for staked USDE stands at 13%. Source: https://ethena.fi/
The complexity lies in the continuous array of marketing campaigns launched since Ethena’s inception, each with distinct rules and incentivizing user behavior through points, combined with a weighting mechanism that involves comprehensive calculations across multiple partnered platform activities.
Let us briefly review the series of growth activities since Ethena’s launch:
1. Ethena Shard Campaign: Epoch 1-2 (Season 1)
Duration: February 19, 2024 – April 1, 2024 (just under one and a half months)
Primary Incentive Actions: Providing stablecoin liquidity for USDE on Curve.
Secondary Incentive Actions: Minting USDE, holding sUSDE, depositing USDE and sUSDE into Pendle, and holding USDE across various partnered L2s.
Scale Growth: During this period, the scale of USDE expanded from under 300 million to 1.3 billion.
ENA Distributed for Marketing Expenses: A total of 750 million, accounting for 5%. Of this, the top 2,000 wallets can immediately claim 50%, with the remaining 50% distributed linearly over the next six months. Other smaller wallets face no unlocking restrictions. According to the Dune dashboard created by @sankin, nearly 500 million ENA was claimed before June, with ENA prices peaking at approximately $1.50 and dipping to around $0.67, yielding an average price of about $1. Following early June, ENA rapidly declined from $1 to around $0.20, averaging around $0.60, with the remaining 250 million ENA largely claimed during this period.
Rough Estimation: The value corresponding to 750 million ENA is approximately 5×1+2.5×0.6, totaling around $650 million.
Essentially, the scale of USDE increased by approximately 1 billion in less than two months, with marketing expenditures reaching an impressive 650 million, excluding the financial costs paid for USDE.
Of course, as ENA’s first airdrop, the marketing expenditure at this stage is particularly significant due to the unique nature of this phase
2. Ethena Sats Campaign: Season 2
Duration: April 2, 2024 – September 2, 2024 (5 months)
Primary Incentive Actions: Locking ENA, providing liquidity for USDE, using USDE as collateral for lending, depositing USDE into Pendle, participating in restaking protocols, and depositing USDE on Bybit.
Secondary Incentive Actions: Locking USDE on the official platform, holding and utilizing USDE on partnered L2s, and using sUSDE as collateral, among others.
Scale Growth: During this time, the scale of USDE grew from 1.3 billion to 2.8 billion.
ENA Distributed for Marketing Expenses: Similar to the first season, the second season rewards also total 5%, equating to 750 million ENA (with the top 2,000 wallets facing a 50% TGE and subsequent unlocking over six months). Based on the current ENA price of 0.35$, the value of 750 million ENA is approximately 260 million.
3. Ethena Sats Campaign: Season 3
Duration: September 2, 2024 – March 23, 2025 (just under 7 months)
Primary Incentive Actions: Locking ENA, holding USDE within designated partner protocols (primarily DEXs and lending), and depositing USDE into Pendle.
Scale Growth: As it currently stands, despite plans for the third season, the growth of USDE’s scale has hit a bottleneck, with the scale at approximately 2.7 billion, slightly below 2.8 billion at the start of the third season.
ENA Distributed for Marketing Expenses: Given that the duration of the third season is close to 7 months, slightly longer than the second season, and that ENA incentives are expected to continue declining, the total ENA reward for the third season is likely to remain at 5%, or around 750 million.
By this point, we can roughly calculate the total protocol expenditure for Ethena from its launch up to October 31:
Financial Expenditures (paid in stablecoins to USDE stakers): $81.647 million
Marketing Expenditures (paid in ENA tokens to participating users): 650 million+260 million = 910 million (this does not yet include potential expenditures post-September).
The quarterly revenue and financial expenditure trends of Ethena, source: Token Terminal
During the same period, the total protocol revenue was $124 million.
This indicates that, contrary to the popular perception of “Ethena being highly profitable,” the reality is that after deducting financial and marketing expenses, Ethena’s net loss has reached a staggering $868 million as of the end of October this year. This figure does not take into account the ENA token expenditures from September to October, so the actual loss may be even greater.
An 868 million net loss is the price paid for achieving a market capitalization of 2.7 billion for USDE within a year.
In fact, similar to many DeFi projects from the last cycle, Ethena has adopted a strategy of subsidizing tokens to enhance its core business metrics and increase protocol revenue. However, Ethena has implemented a unique point system this time, delaying token issuance and incorporating more partners as channels for participation, making it difficult for users to intuitively assess their financial returns from engaging with Ethena. This, in a sense, has enhanced user retention.
Future Business Outlook: Promising Narratives and Developments for Ethena
In the past two months, ENA has rebounded nearly 100% from its low, even amid the opening of Season 2 rewards in early October. This period has also been rich in news and positive developments for Ethena, such as:
October 28: The on-chain options and perpetual contracts project Derive (formerly Lyra) included sUSDE as collateral.
October 25: USDE was integrated as collateral for OTC trading by Wintermute.
October 17: Ethena proposed to integrate its liquidity and hedging engine into Hyperliquid.
October 14: The Ethena community initiated a proposal to incorporate SOL as a base asset for USDE.
September 30: The first project on the Ethena ecosystem, the derivatives exchange Ethereal, promised a 15% token airdrop for ENA users. Subsequently, Ethena Network announced it would release more information on product launches and new ecosystem applications based on USDE in the coming weeks.
September 26: Plans were announced to launch USTB—a new stablecoin purportedly in collaboration with BlackRock. However, USTB is actually a stablecoin backed by the on-chain treasury bond token BUILD issued by BlackRock, with only limited direct relations to BlackRock.
September 4: In collaboration with Etherfi and Eigenlayer, the first stablecoin AVS collateral asset—eUSD was launched, allowing users to receive it by depositing USDE into Etherfi. eUSD went live on September 25.
It can be said that in these past two months, the scenarios for USDE and sUSDE have increased significantly, although the demand stimulation for USDE may not be immediately apparent. For instance, the AVS collateral asset eUSD, launched in collaboration with Etherfi and Eigenlayer, currently has a scale of only a few million.
In reality, what truly propelled this surge in ENA prices was a strong endorsement from renowned trader and crypto KOL Eugene @0xENAS, who published a powerful article on Ethena titled “Ethena: The Trillion Dollar Crypto Opportunity” on October 12.

This article, which garnered nearly 400 shares, over 1,800 likes, and more than 700,000 views, propelled ENA’s price from $0.27 to $0.41 within four days, marking an increase of over 50%.
In his piece, Eugene not only reflected on several features of Ethena’s products but primarily emphasized three reasons. However, in my view, aside from the first reason, the remaining two are riddled with shortcomings:
1. The decline in U.S. interest rates have led to a decrease in global risk-free rates, making USDE’s APY appear more attractive, thereby drawing in more capital.
2. The newly launched USTB stablecoin, purportedly in partnership with BlackRock, is described as an “absolute gamechanger,” significantly enhancing the adoption of USDE because, when the market’s perpetual arbitrage returns are negative, the underlying assets can be switched to USTB, allowing for risk-free returns from Treasury bonds.
Shortcoming: USTB is underpinned by BUILD, which doesn’t mean it is a stablecoin jointly launched by BlackRock and Ethena. Just as Dai has a substantial amount of USDC as its underlying asset, it is not a stablecoin co-launched by Circle and MakerDAO. To secure Treasury bond returns during periods of negative perpetual yields, USDE can directly switch to holding Build or sDAI, or convert to USDC and earn a 4.5% annualized yield on Coinbase, making the issuance of USTB entirely unnecessary. USTB appears more as a gimmick to leverage BlackRock’s visibility, and labeling such a lackluster product as an “absolute gamechanger” raises doubts about the author’s understanding or motivations.
3. The rate of ENA emissions is set to decrease, which should alleviate selling pressure more rapidly than before.
Shortcoming: The actual Season 2 rewards still include 5% of ENA’s total supply, equating to 750 million tokens incentivized for circulation over the next six months, which is not significantly lower than the total incentive from the previous season. Furthermore, in March of next year, a massive unlocking is anticipated for both the team and investors, casting a pessimistic outlook on ENA’s inflation in the coming six months.
However, Ethena still has promising narratives to look forward to in the upcoming months to year.
Firstly, as expectations rise for Trump’s potential return and the Republican Party’s victory (By the time this article is published, the Republican Party and Trump have already claimed victory), the warming crypto market may benefit the perpetual arbitrage yields and scales of BTC and ETH, increasing Ethena’s protocol revenue.
Secondly, with the emergence of more projects in the Ethena ecosystem following Ethereal, ENA’s airdrop revenue is likely to rise.
Thirdly, the launch of Ethena’s own public chain could attract attention to ENA and create nominal use cases for staking, although I anticipate this will occur after the accumulation of more projects mentioned in the second point.
Nevertheless, what remains most crucial for Ethena is the widespread acceptance of USDE as collateral and a trading asset by leading CEX.
Among prominent exchanges, Bybit has already established a deep partnership with Ethena.
Coinbase is focused on operating its own USDC, and given its status as a domestic U.S. company, the complexities of regulation render the likelihood of it supporting USDE as collateral and for stablecoin trading pairs virtually nonexistent.
In the case of Binance and OKX, the possibility of OKX incorporating USDE into stablecoin trading pairs and contract collateral does exist, as it participated in two rounds of financing for Ethena, suggesting some financial alignment. However, such a possibility remains low, as this move could expose OKX to operational and reputational risks associated with Ethena. Comparatively, Binance, which only participated in one round of investment into Ethena, is even less likely to adopt USDE for trading pairs and collateral, especially since it already supports its own stablecoin project.
Eugene viewed USDE becoming a margin asset for contracts across major exchanges as a reason for his optimism toward Ethena, but I remain skeptical.
Valuation Level: Is ENA’s Current Price Within an Undervalued Striking Range?
We will analyze ENA’s current valuation from both qualitative and quantitative perspectives.
Qualitative Analysis
Favorable events that could positively influence ENA’s token price in the coming months, with a high likelihood of occurrence, include:
The rise in arbitrage gains due to a recovering crypto market, reflected in improved protocol revenue expectations, leading to an increase in ENA’s price and growth of USDE’s scale.The inclusion of SOL as an underlying asset, which could attract the attention of SOL ecosystem investors and projects.The potential for the Ethena ecosystem to see the launch of more projects similar to Ethereal in the coming months, resulting in more airdrops for ENA holders.Before the next substantial ENA unlock, the project team has an incentive to support ENA’s price, fostering an upward spiral for both business and token value.
Additionally, based on Ethena’s performance over the past six months, the project’s team has demonstrated exceptional business acumen, arguably outpacing many stablecoin projects in external partnership expansion and being more proactive and efficient than leading stablecoin project MakerDAO.
Conversely, factors detrimental to ENA’s token valuation, suppressing its price, include:
ENA lacks true monetary yield distribution, primarily providing speculative staking scenarios (such as acting as AVS collateral for Ethena’s multi-chain security) and self-mining operations.The project’s actual profitability remains subpar, with massive subsidies implemented to open markets leading to significant net losses, which ultimately burden ENA token holders.ENA continues to face considerable inflationary pressure in the next six months, stemming from the expenditures associated with marketing activities and the upcoming massive unlocks for core team members and investors in late March next year. According to Tokenomist data, ENA token holders may face an inflationary pressure of 85.4% relative to the current circulating supply over the next six months.
Data source: https://tokenomist.ai/
Quantitative Comparison
Ethena’s business model is fundamentally similar to that of other stablecoin projects, with its innovation lying in the utilization of raised assets, specifically profiting through perpetual contract arbitrage.
Therefore, we will use MakerDAO (currently referred to as SKY), the largest stablecoin project by circulating market capitalization, as a benchmark for valuation comparison.

It is evident that, compared to the established protocol MakerDAO, the token ENA from Ethena lacks cost-effectiveness in terms of protocol revenue and profitability at its current price.
Summary
While many refer to Ethena as a highly representative innovative project in this cycle, its core business model is not distinct from other stablecoin projects; all aim to raise funds for financial operations and strive to promote the usage and acceptance of their bonds (stablecoins) to minimize fundraising costs.
At this stage, Ethena, still in the early promotional phase of stablecoins, is experiencing immense losses and is not, as many influencers suggest, a “highly profitable project.” Its valuation is not underestimated when compared to the leading stablecoin project MakerDAO.
However, as a new player in this arena, Ethena has demonstrated remarkable business development capabilities, being more aggressive than other projects. Similar to many DeFi projects from the previous cycle, rapid scalability, and increased project adoption can elevate the optimistic expectations of investors and analysts regarding the project, subsequently pushing up the token price. Rising prices will lead to higher APYs, further boosting the scale of USDE, and creating a self-reinforcing upward spiral.
Eventually, such projects reach a critical point where people begin to realize that growth is driven by token subsidies, and the rise in the price of newly minted tokens seems to rely solely on optimistic sentiment, lacking a fundamental value connection.
At this point, a game of ‘Run Fast’ has begun.
Ultimately, only a handful of projects can rise from such a downward spiral. The previous star stablecoin Luna (UST issuer) has already perished, Frax’s business has significantly shrunk, and Fei has ceased operations.
As a product that exhibits a clear Lindy effect (the longer it exists, the stronger its vitality), Ethena and its USDE will require more time to validate the stability of its product architecture and its survivability post-subsidy decline.
References and Data Sources
Asset Prices: https://www.coingecko.com/
Token Unlock Information: https://tokenomist.ai/
Financial Data: https://tokenterminal.com/
Project Dashboard: https://app.ethena.fi/dashboards/transparency
Official Announcements: https://mirror.xyz/0xF99d0E4E3435cc9C9868D1C6274DfaB3e2721341
Influencer Eugene’s Commentary: https://x.com/0xENAS/status/1844756962854212024

By Lydia Wu, Researcher at Mint Ventures

Data valid through October 8, 2024
TL; DR
In a narrow sense, prediction markets typically exclude traditional gambling and sports betting. They focus more on information discovery and assisting public decision-making.Prediction markets cannot always be “accurate.” Failures often occur because people tend to treat the probabilities given by prediction markets as established facts.Cryptocurrencies have introduced freer transaction amounts and a more frictionless payment experience to prediction markets.The user profile of Polymarket is quite different from that of NFT traders, memecoin players, and other crypto-native users. Polymarket users tend to be older, less focused on maximizing risk-reward ratios, and more driven by strong motivations for information gathering and analysis.The key competitive factors for prediction market products lie in how they curate better-quality events and attract rational traders (content creators). Polymarket’s competitive edge stems from the attention (liquidity) it has garnered from its ability to break out into the mainstream.Polymarket is extremely cautious about incentivizing trading volumes and introducing more complex trading functions. New projects trying to enter the prediction market from a derivative trading angle may suffer from mismatched functionality and face challenges in gaining traction.After the election on November 5, Polymarket is expected to face a large withdrawal of liquidity. Public assessments of Polymarket’s performance during the election, as well as its next strategic steps, could have significant implications for the future of prediction markets.
The Rise of “That Prediction Market”
Polymarket is currently the largest “2024 U.S. Election Prediction Market.” Users have collectively placed nearly 1.5 billion dollars in bets on whether Harris or Trump will be the final winner. This figure leaves its Web2 competitors, PredictIt and Smarkets, far behind — with trading volumes for the same issue reaching 37 million and 9 million dollars, respectively.

Polymarket 2024 U.S. Election Interface
Conceptual Analysis of Prediction Markets
Broadly speaking, prediction markets evolved from gambling and betting markets, referring to markets where people invest money in the expected outcome of an event with the hope of receiving a return.
In a narrower sense, prediction markets usually exclude traditional gambling and sports betting, instead focusing on a broader range of political, economic, and cultural events. These markets emphasize the function of information discovery and may provide reference points for policy-making or public decisions. The concept of such prediction markets can be traced back at least to the early 16th century, during the papal elections. One of the earliest modern electronic prediction markets is the Iowa Electronic Markets, introduced during the 1988 U.S. presidential election.

Are Crypto Prediction Markets Equal to Truth Machines?
Vitalik Buterin may be the most influential advocate of prediction markets in the Web3 world. As early as 2014, he discussed prediction markets as a practical example of Futarchy (a form of future governance Robin Hanson envisioned using betting markets to make policy decisions). In a 2020 article exploring mechanisms for “credible neutrality,” he again used prediction markets as a case study, even proposing a design where prediction markets could be tied to highly improbable events. In 2021, he published a systematic discussion of the value behind prediction markets and their decentralized advantages. In this current cycle, he has frequently expressed optimism about prediction markets and even participated in Polymarket’s Series B fundraising round in May.

How Different Minds Understand Prediction Markets
To understand the underlying principles of prediction markets, as well as the ambitious expectations crypto enthusiasts have for them, we can start by addressing three key questions:
What do the prediction results represent?How accurate are prediction markets?What has cryptocurrency brought to prediction markets?
Due to space limitations, I will provide brief answers to these three questions.
What do the prediction results of a prediction market represent? Are they the truth?
The notion of a “Truth Machine” is controversial. Prediction markets capture participants’ interpretations of symbolized events and use these interpretations as the basis for estimating future objective outcomes. However, this process does not generate the truth. Instead, it generates a probability estimate based on participants’ views about the event’s possible outcome. Even when predictions align with the actual result, this alignment is merely post hoc verification.
How accurate are prediction markets?
The legitimacy of prediction markets can typically be traced back to thinkers like Hayek, the Bayesian Theorem, Futarchy, the Efficient Market Hypothesis, etc. In essence, it can be summarized in the following way: although knowledge is dispersed throughout human society, if there are enough market participants who continuously update their views based on new evidence, it can lead to the formation of an effective market where asset prices reflect all publicly available information, thereby helping to inform decision-making.
Supporters of prediction markets often cite examples such as the 2008 U.S. elections and Polymarket’s performance during the COVID-19 pandemic in 2020. However, the disappointing performance of prediction markets during the 2016 Brexit referendum and U.S. elections has weakened this argument. According to post-event reflections, one reason for this “failure” is that traders viewed the probabilities provided by the prediction markets as foregone conclusions, abandoning timely updates based on external information, which led to overly stable prices. This also hints at the reflexivity of prediction markets—where trust in them undermines the very foundation of their reliability.

The betting odds for the 2016 election consistently showed Hillary Clinton maintaining a commanding lead
What role has cryptocurrency played in the long history of prediction markets?
From the conceptual and practical perspective of prediction markets, decentralized prediction markets typically do not have any betting limits (compared to PredictIt’s betting cap of $850). This allows participants to more freely assign monetary weight to their opinions based on their level of confidence, potentially capturing market trends more accurately.
From an operational perspective, the use of cryptocurrency not only enables more instantaneous payment processing but also greatly reduces the proportion of customers requesting chargebacks through credit card companies (i.e., chargeback fraud). For instance, the well-known online gambling platform Stake only accepts cryptocurrency payments.
The Rise of Polymarket
A common question is: given that the concept and practice of prediction markets have been around for quite some time, and their combination with cryptocurrency is nothing new, why has it been Polymarket that emerged as a major player, competing successfully in the existing market to the point where it has almost become synonymous with “prediction market”?
First, it’s worth mentioning that 2024 is an exceptional year in terms of global elections. According to incomplete statistics, in 2024, 76 countries/regions will hold elections, covering a population of 4.17 billion. Among them, the U.S. election undoubtedly drew the most attention, and the twists and turns caused by Biden’s withdrawal and Trump’s assassination added even more drama to the process.
Additionally, global events like the opening of the Paris Summer Olympics, the Federal Reserve’s rate-cut decisions, crises in geopolitics, and the advancements in artificial intelligence received widespread coverage and attention. In the Web3 space, Bitcoin halving, together with Bitcoin and Ethereum ETFs, created even more buzz—without a doubt, this is a “golden era” for prediction markets.
Polymarket’s success is often attributed to its smoother UX/UI compared to previous generations of products, its more seamless experience in depositing and withdrawing funds, and its more transparent mechanisms, as well as its fee-free design, standing in contrast to its Web2 competitors. Coupled with favorable market conditions, Polymarket quickly soared, becoming a major force in the space.

The number of events created on Polymarket saw a noticeable increase in 2024

The influx of new users quickly boosted Polymarket’s user base

Polymarket’s trading volume significantly expanded in 2024
The changes in the current landscape, accumulation within the industry, and Polymarket’s own product iterations are certainly important. However, this article aims to focus on a lesser-discussed aspect—Polymarket’s market strategy, and potential misconceptions we may have about Polymarket.
Misconception: “Event Trading Platform”
To clarify, rather than viewing Polymarket as a utopian “prediction market” or a narrow “event trading platform,” a more accurate and de-hyped description of the current Polymarket might be a “crypto media/creator economy platform/information platform.”
News Readers
In September, Polymarket reached a new milestone of 90,000 monthly active users (MAU), with daily active users (DAU) consistently staying above 10,000. However, Polymarket’s website traffic in the same month reached 15 million visits, resulting in a visits-to-MAU ratio of over 166.
By comparison, Opensea had 110,000 monthly active users in September, with about 9,000 daily active users, numbers similar to Polymarket’s. Opensea’s website traffic in September was 4.5 million, with a traffic-to-MAU ratio of approximately 41.
When adding pump.fun into the comparison—another standout product in its respective space—it becomes more evident that Polymarket not only has higher traffic but also a significantly higher share of visitors coming from mobile devices in comparison to the other two platforms. This likely reflects the existence of a distinct cohort behind Polymarket —— one different from NFT traders and meme enthusiasts—what could be described as a group of “news readers.”

Polymarket’s monthly active user (MAU) and daily active user (DAU) data

Opensea’s monthly active user (MAU) and daily active user (DAU) data

Website Data Comparison of Polymarket, Opensea, and Pump.fun (Source: SimilarWeb)
In fact, the founder of Polymarket, Coplan, has frequently used terms such as “alternative news source” and “the future of media” on X to describe his product and has often referenced Polymarket’s ranking in the App Store’s news section. Data shows that while Polymarket’s website traffic is only 3% of that of The New York Times, it performs quite well in metrics like page duration and bounce rate.
Additionally, by integrating with platforms like Substack and Bloomberg, Polymarket has also taken on the role of a “reverse oracle,” delivering more diverse opinions and sentiments from the Web3 world.

Coplan believes that Polymarket is the news.

Comparison of data between Polymarket and The New York Times’ website
Source: Similarweb
Special Traders
Polymarket doesn’t need a large editorial team, the core content production is carried out by traders who put real money on the line. These individuals are Polymarket’s intellectual assets. The concept of prediction markets and their historical failures both highlight the importance of market participants. Their rational analysis and continuous re-evaluation of new information form the foundation of the market’s ability to be “accurate.”
A 2022 study on online horse race betting behavior involving over 40,000 Finnish residents showed that individuals with higher numerical IQs (i.e., those who perform better in tasks measuring arithmetic reasoning, problem-solving in mathematics, and quantitative analysis) displayed a significantly higher willingness to engage in skill-based gambling (as opposed to luck-based gambling). The study also found that approximately 9% of players had net gains compared to their losses. In Polymarket, this proportion is 11.5%.

(a): Composite IQ is positively correlated with the willingness to participate in horse race betting
(b): Numerical IQ is significantly positively correlated with the willingness to participate in horse race betting
(c): Spatial logic IQ is significantly negatively correlated with the willingness to participate in horse race betting
(d): Verbal IQ is not correlated with the willingness to participate in horse race betting

Polymarket players’ P&L situation
The sources of Polymarket’s ad traffic also reveal some strategies regarding “what kind of people they are attracting and converting.”
The top-ranked source, electionbettingodds.com, is a well-known election prediction market aggregator, which consolidates data from five prediction markets, including Polymarket.Citizenfreepress.com is a U.S. political news aggregation site with a conservative slant, where half of the users are American males over the age of 55.Natesilver.net is the Substack of statistician, writer, and poker player Nate Silver. Nate developed an election forecasting system that successfully predicted the outcomes in 49 out of 50 states in the 2008 U.S. presidential election, and in June of this year, he joined Polymarket as an advisor.Among the top 10 traffic sources, only Coindesk and DappRadar are primarily focused on crypto-native users.Compared to platforms like Opensea and Pump.fun, Polymarket’s user age distribution is more balanced, with a significantly higher proportion of users over the age of 35.

The top 10 websites drive traffic to Polymarket through ads

The gender and age distribution of users on citizenfreepress.com

The age composition of users on Polymarket, Opensea, and pump.fun.
Source: Similarweb
We’ve rarely heard stories of “legendary traders” on Polymarket. This is determined by the nature of prediction markets—where the odds are controlled within a reasonable range to prevent outcomes from deviating significantly from the actual probabilities of events.
The data from Polymarket’s leaderboard supports this. Currently, only 3 users have total profits exceeding 1 million, while on pump.fun, there are 197 addresses with total profits of over 1 million, Considering that Polymarket’s active users in September amounted to 14% of pump.fun’s and that Polymarket was founded in 2020, the likelihood of getting rich via Polymarket seems much smaller.

Polymarket Leaderboard
Correspondingly, Polymarket’s trading features are relatively restrained. Aside from deposit and withdrawal options, it only offers the most basic market and limit order features. Although it open-sourced its lending protocol Polylend in June, which allows users to collateralize assets to borrow USDC, Polymarket made it clear that this feature would not be used in production and is mainly for the community to build on. Moreover, Polymarket has not carried out large-scale liquidity incentives. Polymarket seems to believe that overly complex trading features could distract users from their main focus, while market-making and liquidity incentives could distort the market’s effectiveness.
Although it’s difficult to estimate the actual conversion rate from ‘reading the news’ to ‘trading,’ we can still sketch a rough profile of the ideal Polymarket user base — this is a relatively rational and mature group, likely with limited prior knowledge of cryptocurrencies. They are typically more economically stable, not chasing extreme risk-reward ratios, but rather enjoying the satisfaction of proving themselves right through analysis and sound judgment. This profile falls far from the typical image of a crypto degen and is a group that most Web3 products currently struggle to reach.
Stalling: The Critical Month of November
In aviation terms, “stalling” refers to a situation where the angle of an aircraft’s wing against the airflow becomes too great, failing to generate enough lift, causing a rapid loss in altitude. Pilots must lower the nose and increase thrust to restore lift and regain control of the aircraft.
Polymarket’s rapid ascent and its “flagship product” strategy around the election have raised concerns within the market about its ability to maintain momentum—what will happen after the U.S. election on November 5, when the dust settles? After all, Polymarket is not short of fierce competitors, ambitious new entrants, and vocal critics.

The trading volume related to elections on Polymarket reached 70%, while the user base increased by 60%
Polymarket’s Strategic Moves
For Polymarket, the results of this election are of utmost importance. The outcome will affect the credibility of the prediction market itself, as well as determine whether Polymarket can successfully separate the political biases of its team and investors, and truly “represent the public opinion.”

Unlike Trump’s recent overtaking on Polymarket, another prediction market Kalshi, has consistently shown Harris in the lead.

The founder of Founders Fund, which led the investment in Polymarket, Peter Thiel, “strongly supports Trump”
After the election, in response to declining trading volume and a loss of users, the discussed strategies for Polymarket (which are also areas that new entrants are eyeing) can be broadly categorized into three types:
Expanding into sports betting
Sports currently represent the second-largest category of events on Polymarket, only behind elections. However, the trading volume in sports still lags behind elections by a significant margin, possibly due to spillover traffic from election topics. Whether this traffic can be retained long-term after the election remains uncertain.

Sports-related events like the Super Bowl and the English Premier League have made it into Polymarket’s top 8 in terms of trading volume
Let’s set aside the fact that sports betting is an extremely fragmented and saturated market and that it isn’t a core area for prediction markets in the first place. Fans often place bets driven by emotions, seeking instant gratification and to enhance the viewing experience, rather than aiming for long-term profits. This is fundamentally at odds with the filtering logic of a prediction market.
Expanding Derivatives Trading
This is also a saturated market and would undoubtedly be playing to Polymarket’s weaknesses rather than its strengths.
Becoming the “Pump.fun of Events”
This has been a popular idea, envisioning an open market where anyone can create an event and make predictions. It seems to address a key limitation of Polymarket, where users cannot freely create markets, and the team must centrally curate and list events. However, if we break down the most popular election-related events, we will notice that elections themselves have certain key characteristics:
Wide-reaching impact → adequate liquidityLong duration with multiple intermediate events → ensures full dissemination of informationDefinitive timeline and binary outcome → clear settlement
Likewise, Polymarket’s event listing criteria consider factors such as:
Whether there’s sufficient trading demand to produce accurate probabilitiesWhether the event’s probability outcome has social or news valueWhether the event will yield a clear result within a defined time frame
For most people, coming up with a clearly defined binary question, expressing it in unambiguous yet accessible language (without being too technical), and setting a clear point and standard for settlement—all while ensuring that the outcome holds some societal significance—is much more difficult than simply uploading a picture and launching memecoins.
Even Polymarket has faced controversies, such as with issues related to “ETF approval” or “Did Trump’s son participate?” where the criteria were unclear. If Polymarket became a fully open market, the risks of abuse (e.g., events like “Will Trump say a certain word at his next speech”) and disputed rulings (e.g., how to define whether Trump participated or not) would place a huge burden on the platform.
Thus, we can see that these three seemingly relevant directions for Polymarket’s transformation are far from straightforward. The core issue lies in the fact that Polymarket finds it difficult — and shouldn’t attempt — to strengthen its trading and speculation attributes. Even with rumors of issuing its own token, Polymarket must be cautious with how it uses incentives, focusing more on rewarding high-quality questions and correct outcomes rather than sheer trading volume.

The “transformation strategy” for election prediction differs from the existing business in terms of the characteristics of events and their time cycles
Regulation in the Room
Before the regulatory landscape becomes more clear, Polymarket’s token might not arrive as quickly as expected.
Markets tied to betting have always been subject to strict regulation. In 2022, Polymarket was ordered by the CFTC (Commodity Futures Trading Commission) to pay a 1.4 million fine and cease U.S. operations. This May, the CFTC released a proposed rule aimed at banning all derivatives trading related to U.S. elections. Also, in May, during the announcement of a 70 million funding round, Polymarket stated its mission is to provide the public with more accurate and real-time event predictions as a public service.
Good news arrived in the final weeks before the election. Following the ruling last month by the District Court of Columbia in favor of election prediction markets, a federal appeals court also rejected the CFTC’s request to block election betting. Previously, the CFTC had issued a warning stating that “the use of such contracts could negatively impact the integrity of elections or the public’s perception of election fairness.”
Once again, the market’s focus shifts back to the results Polymarket is about to deliver.

By Lawrence Lee, Researcher at Mint Ventures
Introduction
The crypto economy has grown significantly, leading to sophisticated on-chain infrastructure. Despite these advancements, the user experience still needs to be improved. Enhancing user interaction is crucial as it could attract more participants into the blockchain ecosystem. This would likely stimulate further infrastructure development and diversify business models, creating a dynamic where progress in one area spurs growth in another—a phenomenon we might describe as a “ladder-like stepping effect.” The “1995 moment” of crypto may depend on the emergence of a user-oriented killer application or operating system.
The intent-based Network is actively working towards a major paradigm shift by moving from a system that assumes all users are experts to one that assumes every user is a beginner. This involves simplifying complex operations and presenting a streamlined, secure user interface. Furthermore, integrating AI could seamlessly translate user intentions into actions.
This article features dappOS, an intent execution network supported by leading institutions.
Intent: From Usable to User-Friendly—Enhancing the On-Chain Experience
Boosting the Experience for Crypto Users
The “DeFi Summer” of 2020 ignited large-scale commercial activities on blockchain platforms. Since then, on-chain commercial activity has flourished. Beyond financial services, vibrant developments in NFTs, gaming, and social platforms have brought new dimensions to blockchain engagement. Currently, over $90 billion in assets (excluding NFTs) remain active on major blockchains, with peak values nearing $200 billion during the last bull market. Recent daily trading volume has surged past $5 billion, with spikes reaching $10 billion in March—nearly half the trading volume of the Hong Kong Stock Exchange.

Source: Defillama

Market participants effectively vote with their wallets, and the blockchain, which offers “greater freedom and more affordable trust”  (as discussed in “How to Invest in Web3 with its Fundamental Value“), is continuously proving its potential as a robust infrastructure for a broad spectrum of commercial activities.
Despite its impressive expansion, the blockchain space is in an early phase, with less than seven years in formation and less than four in genuine business operations. Signs of its emergent nature are evident, such as when the leading blockchain, Solana, experienced a 30-hour downtime in February this year. Furthermore, mainstream blockchain wallets still require that users maintain backups of lengthy seed phrases or private keys. Additionally, on-chain applications on the blockchain that have sustainable business models currently focus primarily on crypto-native assets, the integration of purely off-chain businesses with blockchain still needs to be explored.
In recent years, smart contract blockchains like Ethereum and Solana have seen significant growth in market value and expanded their capabilities to support a wide range of business activities. Regarding the resolution of “Availability” issues, there is now a clear strategy and achievable roadmap: Ethereum has adopted a strategy focused on scalability and efficiency, embracing Rollups and evolving towards a modular framework, with Layer2 solutions like Arbitrum and Base thriving, and a proliferation of dedicated layer2 and layer3 appchains.  Conversely, Solana has pursued a different path, focusing on maximizing performance on a single chain, with an average TPS (transactions per second) exceeding 2,000, and a steady influx of new users and assets.
However, the “usability” of blockchain remains a significant challenge. The current on-chain experience, although adequate for the few million daily active addresses (with actual active users being fewer), is not yet capable of supporting the onboarding of hundreds of millions or even billions of individuals.  To achieve “massive adoption” of blockchain, a transformative improvement in user experience is imperative.
In July 2023, Paradigm introduced the “intent-centric” concept, enhancing the Web3 user experience with what is now known as the Intent Network.
In simple terms, “intent” refers to a user’s specific need or goal. For example, if someone wants to “buy $1000 $BRETT (a memecoin),” this statement outlines their intent. Realizing this intent typically requires multiple transactions, especially when additional constraints lead to an increased number of transactions associated with fulfilling one intent.
In the given example, if my holdings of stablecoins are insufficient on the Base chain and are primarily on the Ethereum network, fulfilling the stated intent would involve the following steps:
Consider a scenario where a user needs to execute the intent of buying $BRETT but lacks the necessary stablecoins on the Base chain, with their funds primarily in Ethereum. The steps to fulfill this intent would include:
Convert 1005 USDC into ETH on the Ethereum mainnet, because USDC cannot be used as gas fee on Base.Bridge $ETH from Ethereum to Base.Swap $ETH to $BRETT.
Executing these three steps demands a substantial amount of underlying knowledge. For example, consider the steps needed to buy Meme Coin $BRETT: First, I must identify and select the most efficient and cost-effective bridge between Ethereum and Base for transferring assets. Second, I need to find the Base chain’s RPC details and learn to add Base network to my wallet. Furthermore, it’s essential to know whether there is an effective trading aggregator on Base chain to secure the best pricing. If not, I need to identify which decentralized exchange primarily supports liquidity for $BRETT. For veterans accustomed to on-chain operations, these tasks may seem straightforward due to their familiarity and experience. However, for beginners, this process can be quite challenging. They often need detailed tutorials to work through each step of the process methodically.
In many ways, today’s on-chain experience mirrors the user interactions with computers before Windows 95 was introduced. Back then, computers were powerful tools capable of complex computations and sophisticated file management, yet they primarily operated through the CMD command prompt. This interface was highly efficient for those well-versed in computer logic and experienced in command-line operations—a preference that persists among many technology enthusiasts to this day. However, for most newcomers, this mode of interaction was overwhelmingly complex, often described as a “nightmare.” To navigate these systems, users were typically provided with a hefty manual, which was essential for mastering the various operations required to effectively use their computers.
However, the situation changed completely with the release of the Windows 95 operating system in 1995. Upon startup, computers directly entered a graphical user interface (GUI), where users could execute tasks with simple mouse clicks. The emergence of browsers also reduced the complexity of accessing the internet. For some, the shift from command-line to graphical user interfaces was seen as a minor enhancement in user experience; the graphical interface was merely a user-friendly packaging of underlying command-line operations. Unlike hardware advancements such as faster processors, which improved performance, Windows 95 made technology truly accessible to the masses. It lowered the barriers for average users, driving the widespread adoption of personal computers. Increased sales of personal computers led to reductions in the cost of Intel CPUs, which in turn enhanced both the performance and experience of PCs.  This development triggered a “stepping effect,” where progress in one area spurred advancements in another, boosting global computer and internet penetration and setting the stage for the Internet Boom.

Internet Penetration Rate

Looking back, it’s clear that what seemed like a modest improvement fundamentally transformed everyday life for individuals and propelled companies like Microsoft, Apple, Google, and NVIDIA to greatness over the last thirty years. This pivotal change is often celebrated as the “1995 moment” in the evolution of personal computers and the internet, a phrase that marks the beginning of a technological explosion.
Despite the smooth approval of the Bitcoin ETF, which gained positive governmental recognition for the cryptocurrency industry and attracted a lot of new users, most people still only hold their cryptocurrencies on centralized exchanges, using blockchain technology merely for basic transactions. Considering the adoption of on-chain applications, the “1995 moment” for cryptocurrency has yet to arrive. It may wait for a game-changing application or operating system tailored for end-users. Projects within the Intent concept stand a good chance of bringing about this pivotal moment. 
Intent: The Best AI+Crypto Use Case
AI has advanced swiftly in recent years, with many believing that 2023 will be the “1995 moment” for AI, as ChatGPT and other chatbots powered by large language models have started to become a part of everyday life, and both the capital market and the general public’s attention to AI reaches an all-time high. The improvement of large language modeling capabilities is still far from seeing a bottleneck, leaving us uncertain about the limits of AI’s capabilities and its potential impacts. Furthermore, with the launch of GPT-4o, it seems the arrival of AI in our daily lives has been significantly accelerated. 
The integration with AI has been one of the significant topics within the cryptocurrency space over the past year, with related concept tokens experiencing a price surge. From a commercial standpoint, blockchain-based AI agents represent one of the most potent use cases for AI + Crypto and this will make it possible to realize intentions more easily.
This is because the rules on the blockchain are determined, with clear boundaries and no black boxes.
As said in our report in April 2024, AI thrives within blockchain systems, fundamentally because the rules of the crypto economy are explicitly defined, and the system allows for permissionlessness. Operating under clear guidelines significantly reduces the risks tied to AI’s inherent stochasticity. For example, AI’s dominance over humans in chess and video games stems from the fact that these environments are closed sandboxes with straightforward rules. Conversely, advancements in autonomous driving have been more gradual. The open-world challenges are more complex, and our tolerance for AI’s unpredictable problem-solving in such scenarios is markedly lower.
In this case, as long as there is enough information input, AI will “identify the optimal solution more quickly than humans” in solving specific problems, thus helping people realize their intentions more easily and quickly.
An Analysis of dappOS
Business Overview
dappOS is an intent execution network, that simplifies the way users interact with decentralized applications (dApps) and public blockchains. Here’s how it works: Users simply communicate their desires—such as wanting to “buy $1000 worth of $BRETT”—directly to dappOS. From there, dappOS takes over, managing all the necessary interactions with various dApps and public blockchains to execute the transactions required to fulfill the user’s intent.
The ambition behind the name dappOS is clear—they aim to become the operating system for dAPPs, much like Windows 95 did for personal computers.
dappOS has established an open dual-marketplace within its ecosystem. On the demand side are the developers who create user-facing applications, and on the supply side are the service nodes that execute these user intents. To maintain a high standard of service, dappOS utilizes an Optimistic Minimum Staking (OMS) mechanism.

Framework of dappOS Network

Key roles and their functions within the dappOS ecosystem are defined as follows:
Users: They publish intent tasks based on the framework provided by dappOS.Service Providers: These entities execute the intent services. After depositing a specific amount of dappOS tokens as collateral, they can start accepting intents from users and generate revenue.Execution Validators: Tasked with overseeing the performance of service nodes. Validators have the authority to impose penalties on any service node that fails to fulfill its duties as required.Matchers: Responsible for matching users with suitable service providers

Workflow of dappOS Network

During the execution process, users interact with the system through a frontend interface to submit their intents to matchers. The matchers then approach the relevant service providers to gather quotes for these intents and present them to the users. If the users deem the quotes acceptable, they can select their preferred service provider to carry out the task. After making their selection, users will authorize the intent by signing it and transferring the necessary resources to the service provider, who then executes the intent as specified.
After the specified task duration, numerous validators verify whether the task has been successfully executed. If anyone identifies that the task was not completed, a challenge can be raised within the network. The validators will then use PoS voting to reach a consensus. If it is agreed that the task was not executed as required, the service provider is obligated to use their deposited collateral to compensate the user.
In addition to its core functionalities, dappOS implements an Optimistic Minimum Staking (OMS) mechanism. This approach requires service nodes to stake an amount slightly above the total value of the intents they are tasked with, enabling them to provide services with financial commitment (minimal). It also permits service nodes to continue executing tasks before verification (optimistic). If the service outcomes are validated successfully by the validators, the service nodes are entitled to their revenue from the tasks. However, if a task is found to be unsuccessful, the system imposes penalties on the service nodes, and the users are compensated as previously agreed.
The OMS mechanism aims to strike a balance between task efficiency, capital efficiency, and overall system security. Its goal is to ensure that user tasks are completed successfully while reducing the financial burden on service providers as much as possible. Additionally, through the intent execution network, ordinary users can benefit from the cost and efficiency of execution that professional service organizations provide. For instance, professional service providers have access to unique channels such as VIP accounts on exchanges with very low fees, the ability to aggregate multiple transactions to conserve gas, and superior capabilities for combating MEV on the blockchain. Moreover, competitive dynamics among service providers ensure that service costs are driven down to the most favorable levels, directly benefiting users. The dappOS intent execution network enables even ordinary users to enjoy the same level of service quality and cost-effectiveness that large institutions do.
dappOS currently provides three distinct intent frameworks:
Intent Trading: This framework is tailored to optimize spot trading by helping users secure the most favorable costs.Intent Assets: Within the dappOS ecosystem, this framework treats a series of equivalent assets in a fungible way, addressing the yield-generating and trading properties of the assets.  Intent-based dAPP Interaction: This framework serves as a practical tool for specific activities, like the “buying $1000 $BRETT” example. It streamlines the process of interfacing with dAPPs and efficiently facilitates asset bridging.
The Intent Assets framework smooths out the variations between different blockchains and different fungible assets, thus eliminating much of the work involved in cross-chain or fungible asset exchanges and enhancing user experience. We will take stablecoins and $ETH, which are currently the most universally utilized crypto assets, as examples. 
In the case of stablecoins, users have the option to deposit USDT or USDC from any blockchain into their dappOS account to mint intentUSD. Once minted, intentUSD can be invested in various stablecoin projects that generate interest automatically, with the liquidity of funds transparent and visible to the user, ensuring both earnings and transparency. This setup also simplifies transactions: for instance, when users wish to transfer USDT into a centralized exchange, they can directly use intentUSD. Similarly, if users need to deposit USDC into GMX as collateral, they can conveniently withdraw intentUSD for this purpose.In the case of $ETH, when users convert their deposits into intentETH, it similarly begins to accrue interest automatically. Additionally, intentETH grants the flexibility to purchase assets across any blockchain. For instance, users can readily swap intentETH to $QUICK on the Polygon network, or $JOE on the Avalanche network. Similarly, intentETH can be deposited into Aave on the Arbitrum chain for lending or borrowing services, or as gas on the Ethereum and Layer2 networks, depending on user demand.

It’s clear that intent assets have advantages:
It strikes a balance between profitability and convenience. For instance, while sDAI provides stable returns from real-world assets (RWAs), its liquidity is insufficient for large transactions. Conversely, commonly used assets like USDT and USDC, despite their widespread adoption, do not accrue earnings. intentUSD effectively bridges these gaps, offering both liquidity and returns.They eliminate the slippage between similar assets. For example, intentETH allows for a cost-free bridge among ETH on mainnet, ETH on Arbitrum, stETH, and aETH.
Intent assets also demonstrate advantages over other traditional yield-bearing assets:
LST or LRT Assets: Unlike these assets, intentETH doesn’t need to be locked up, thus providing better liquidity.sDAI or RWA-based Stablecoins: Unlike these stablecoins, intentUSD is always available for trading.Flexible Earn Products on Centralized Exchanges: Intent assets can be easily used across dApps.Lending Protocols and DeFi Yield Platforms: Intent assets offer the unique capability to move seamlessly across blockchains, available for immediate use in trading.
Overall, the experience offered by Intent Assets closely mirrors services like money market fund products, providing an excellent experience with a new trade-off between the profitability, usability, and convenience of assets.
Enhanced user experiences are important in onboarding hundreds of millions, perhaps even billions, of users to the crypto economy. The crypto economy is still in its early stages and as pioneers, we have grown accustomed to using multiple stablecoins, such as USDT and USDC, and can efficiently exchange between them at minimal costs, choosing the right asset for different situations. However, in the physical world, no one thinks we should accept “JPMorgan dollars” and “Citibank dollars” simultaneously, despite their close similarities. For newcomers to the crypto economy, grasping technical details such as “the differences between L1 and L2” or “how to execute cross-chain transactions” might not be necessary, much like how most people are unaware of the intricacies of interbank clearing systems. They simply require a more straightforward method to meet their needs. Bridging this gap in user experience is precisely the goal of Intent execution projects.
Business Partnership
dappOS operates with a unique business model that heavily relies on collaborative efforts with other dAPPs. dappOS has successfully forged partnerships with a wide array of dAPPs.
In January 2023, dappOS formed a partnership with the perpetual platform GMX.  As part of this collaboration, dappOS launched a specialized website, gmx.dappOS.com. This integration allows GMX users to streamline their trading operations directly through dappOS. Key benefits of this partnership include a substantial 20% reduction in trading costs and the added convenience of paying gas fees with any token. During the first quarter of 2024, weekly active users peaked at over 6,000, and more recently, the figure has consistently been around 1,000. The platform also achieved a trading volume of nearly $150 million, with daily trading highs of over $10 million.

Source: Dune

dappOS has established partnerships with Kyberswap, a dex, and Benqi, a lending protocol on the Avalanche network. These collaborations have resulted in substantial engagement, with dappOS weekly unique users registered via Kyberswap over 3,000 and Benqi maintaining around 1,000.

Source: Dune
Moreover, dappOS has also forged partnerships with major public blockchains including Avalanche, zkSync, and Polygon, alongside collaborations with DeFi protocols such as Quickswap, MakerDAO, and Frax.

Source: dappOS
Financing Backgroud
dappOS has completed three funding rounds. 
It was selected for the fifth season of the Binance Labs Incubation Program in November 2022, and subsequently secured Pre-Seed funding from Binance Labs on June 20, 2023. The details of the funding amount, however, have not been publicly disclosed.
On July 21, 2023, dappOS closed its seed funding round at a valuation of $50 million. This round was led by IDG Capital and Sequoia China. Other notable participants included OKX Ventures, HashKey Capital, KuCoin Ventures, TronDao, Gate Labs, Taihill Ventures, Symbolic Capital, Foresight Ventures, BlueRun Ventures, Mirana Ventures, Leland Ventures, among others.
On March 28, 2024, dappOS finalized its Series A funding round, raising $15.3 million at a valuation of $300 million. Polychain led this round, with participation from Nomad Capital, IDG, Flow Traders, IOBC, NGC, Amber Group, Uphonest, Taihill, Waterdrip, Bing Ventures, Metalpha, Spark Digital Capital, Web3Port Foundation, and Satoshi Lab, among other participants.

Overall, dappOS has a robust investment background and has recently finished a well-funded $15.3 million funding round.
Summary 
The Intent execution project is focused on improving the user experience in the Web3 industry, aiming to catalyze Web3’s “1995 moment” and foster massive adoption. Over the past year, it has also emerged as a popular trend for venture capital investment, with many projects converging around the concept of intent.
However, the intent execution network is still budding, with most projects lacking gp-to-market products and clear business models. Specifically, the majority of products and mechanisms associated with dappOS, as discussed in this article, are yet to be launched. Consequently, there remains considerable uncertainty about the future trajectory of both the track and the projects within it.
For projects that may lack short-term deliverables but possess substantial potential for long-term value, two critical indicators stand out: the quality of investment backing and the capacity for commercial expansion.
dappOS is supported by a lot of famous investors, including top exchanges, traditional venture capitalists, and crypto VCs, showcasing an impressive roster of backers. Moreover, its successful partnerships with notable DeFi projects like GMX highlight dappOS’s robust commercial capabilities. 
As dappOS continues to develop and expand its role in leading the Intent Execution, we will maintain a close watch on its progress.

By Lydia Wu, Researcher at Mint Ventures

If you found yourself baffled upon your first encounter with the “chain abstraction” concept, you’re not alone. 
It appears significant, with numerous projects, and extensive funding, all claiming to be the standard… yet its practical use still needs to be discovered. Is “chain abstraction” just another buzzword in the pipeline of new Web3 concepts? 
This article will start with the concept, return to the fundamental questions, and aim to make something out of nothing.
TL; DR:
The purpose of abstraction is to hide complexity, and the levels of abstraction in the Web3 context are often higher than in Web2, making it more challenging.Modularity simplifies the process of building blockchains. Meanwhile, chain abstraction involves restructuring the relationships among chains and enhancing the experience for both users and developers.Analyzing cross-chain asset transfers, cross-chain communication, interoperability, and chain abstraction: A conceptual hierarchy centered on coordinating state changes (transactions) across different chains, though these concepts often blur into one another in practice.Intent-based chain abstraction solutions are becoming a popular architecture, with many component-based products potentially coming together like puzzle pieces to gradually shape the final form of chain abstraction.Current discussions and efforts around chain abstraction have yet to break free from an infrastructure-centric orthodoxy. The validity of chain abstraction as a real issue depends on active on-chain engagement, advancements in modularity, and the influx of new users and developers. The future of chain abstraction is not a straightforward journey; it requires an evaluation of its impact on long-tail chains and an exploration of non-DeFi applications.
What exactly is chain abstraction?
Is chain abstraction a real problem?What kind of problem does chain abstraction belong to?What is the difference between cross-chain, interoperability, and chain abstraction?
Is Chain Abstraction A Real Problem?
—Not necessarily. A problem’s validity depends on its context. Imagine asking someone 500 years ago for their opinion on an energy crisis.
So, where does the discussion of chain abstraction come from?
The answers vary but often touch on key terms such as the Ethereum roadmap, modularity, intent, and mass adoption… At present, the most compelling perspective seems to be that chain abstraction represents the latter stages of modularity. 
A clear definition of chain abstraction is essential to grasp this perspective.
In computer science, “abstraction” is the process of extracting high-level operations and concepts from the backend processes, intended to simplify comprehension by masking complexity. For example, most Web2 users merely need to be familiar with browsers and ChatGPT, remaining oblivious to the underlying complexities or even the notion of abstraction itself.
Similarly: 
Account Abstraction: Facilitates seamless account functionality by hiding internal details like addresses, private keys, and mnemonic phrases, to facilitate a seamless user experience. Chain Abstraction: Ensures seamless operation across chains by hiding internal specifics such as consensus mechanisms, gas fees, and native tokens.
In traditional software development, abstraction, and modularity are interconnected and critical concepts. Abstraction outlines the system’s structural hierarchy, whereas modularity is the practice of implementing this structure. Each module symbolizes a level of abstraction, and the interactions between modules hide their internal complexities, which aids in code extension, reuse, and maintenance. Without abstraction, the demarcations between modules would be intricate and challenging to manage.

Lecture 3 Scribe Notes: Abstraction and Modularity
It’s important to recognize that Web2 products often perform abstraction and modularity within closed or semi-closed ecosystems, concentrating abstraction layers within a single platform or application in controlled environments, typically devoid of cross-platform or systemic compatibility concerns. In contrast, within the Web3 framework, driven by the commitment to decentralization and open ecosystems, the dynamics between modularity and abstraction are considerably more complex.
Although modularity can help deal with abstraction issues within single chain and reduce the barriers to chain development, it has not entirely addressed the abstraction of user and developer experiences in a multi-chain context. There’s a noticeable “island effect” among various chains and ecosystems, particularly evident in the fragmentation of liquidity, developers, and users. The introduction of chain abstraction involves redesigning the relationships among different chains to facilitate their interconnectivity, integration, and compatibility, as demonstrated in an article released by Near in January of this year.
We can argue that the urgency of chain abstraction as a legitimate concern is intimately tied to the evolution of the following factors:
On-chain activity: Whether the presence of diversified dAPPs leads to increased user engagement on chain.Progress in Modular Blockchain: Whether heightened on-chain activities encourage the development of more rollups and appchains.Barriers for New Users and Developers: To what extent does the current blockchain environment inhibit the entry of newcomers and developers (referring to the friction in a rising trend, rather than frustration in a stagnant state)?
What Kind of Problem Does Chain Abstraction Belong to?
Chain abstraction itself is an abstract concept that operates at a high-dimensional level within the Web3 narrative. This may partly explain why it presents as both all-inclusive and somewhat perplexing. Specifically, chain abstraction is not a solution but an instructive philosophy.
Similar to how Bitcoin today, after several halvings, dramatic price fluctuations, and the introduction of ETFs, has transcended its original identity as a technology solution or an asset. It has transformed into a timeless ideology and a crypto totem that embodies core cryptographic values and will continue to steer industry innovation and development well into the future.

Differences and Connections: Cross-chain, Interoperability, and Chain Abstraction
These concepts can be understood on a spectrum from concrete to abstract. They represent a conceptual hierarchy centered on coordinating state changes (transactions) across different chains, yet often involve a great deal of grey area in practical use.

Cross-chain applications and protocols can broadly be divided into two main categories:
Cross-chain Asset Transfer: Such as cross-chain bridges, cross-chain Automated Market Makers (AMMs), and cross-chain aggregators.Cross-chain Communication: Protocols such as Layerzero, Wormhole, and Cosmos IBC, etc.
Asset transfer also relies on message passing. In cross-chain asset transfer applications, the message layer typically involves a set of on-chain smart contracts and state update logic. Abstracting this message-passing functionality into a universal, protocol-layer solution is what defines a cross-chain communication protocol.
Cross-chain communication protocols can handle complex operations across blockchains, including governance, liquidity farming, NFT trading, token issuance, and gaming interactions. Interoperability protocols extend these capabilities further, delving into deeper data processing, consensus, and validation to ensure consistency and compatibility between different blockchains. In practice, however, these two concepts are often two sides of the same coin and can be used interchangeably depending on the context.
The essence of chain abstraction includes blockchain interoperability but also introduces an additional layer focused on enhancing the experiences of users and developers. This aspect is closely linked to the intent narrative that has gained attraction in this cycle. The integration of intent with chain abstraction will be further detailed in the subsequent sections.
What specific issues are involved in chain abstraction?
How can chain abstraction be achieved?Why is the integration of intent with chain abstraction significant?
How can chain abstraction be achieved?
Different projects have distinct interpretations and entry points concerning chain abstraction. We can classify these into two schools: the Classical School, which emerged from interoperability protocols and focused on developer-side abstraction, and the Intent School, which incorporates new intent architectures and concentrates more on user-side abstraction.
The roots of the Classical School can be traced back to Cosmos and Polkadot, well before the advent of the chain abstraction concept. Newer entrants like Optimism Superchain and Polygon Agglayer are now focusing on liquidity aggregation and interoperability within the Ethereum L2 ecosystem. Cross-chain communication protocols such as Layerzero, Wormhole, and Axelar are expanding to additional chains and striving for greater adoption to amplify their network effects.
Within the Intent School, L1 projects like Near and Particle Network are devoted to offering comprehensive chain abstraction solutions. Additionally, component-based strategies that tackle specific challenges are prevalent, especially within DeFi protocols, exemplified by UniswapX, 1inch, and Across Protocol.
For both the Classical and Intent schools, the fundamental design principles emphasize secure and fast cross-chain functionalities along with intuitive user interactions. Key features include unified user interfaces, seamless cross-chain functionality for dAPPs, as well as the management and subsidy of gas fees.

Why is the integration of intents with chain abstraction significant?
“Intent-based protocols” are emerging in abundance, and this section will explore why they have become a popular architectural choice and their potential implications. 
Similar to abstraction and modularity, intent is not a native concept in Web3. Intent recognition has been a significant aspect of natural language processing for decades and has been extensively studied in human-computer dialogues.
When discussing intent research in Web3, it’s impossible to ignore the famous paper by Paradigm. While similar design principles have already been implemented in products like CoWSwap, 1inch, and Telegram Bots, it was this paper that formally articulated the essence of intent architecture: users simply define what they want to achieve and leave the complexities of the process to be handled by third parties. This philosophy aligns with the focus of chain abstraction on enhancing user experience, providing a distinct and practical solution approach.
The market features a diverse range of frameworks for chain abstraction, with the CAKE framework (Chain Abstraction Key Elements) from Frontier Research being particularly prominent. This framework, which incorporates intent architecture, organizes the various technologies and solutions of chain abstraction into distinct layers: permission layer, solver layer, and settlement layer. Other frameworks have fine-tuned this approach, such as Everclear, which added a liquidation layer between the solver layer and settlement layer.

Source: Frontier Research

Specifically:
Permission Layer: Central to this layer is account abstraction, acting as the portal for dAPP users to request intent quotes. Solver Layer: This is generally an off-chain third-party solver layer tasked with fulfilling user intents.Settlement Layer: Once users approve transactions, tools such as oracles and cross-chain bridges come into play to guarantee the execution of transactions.
In the Solver Layer, solvers are third-party off-chain entities known by various titles—such as solvers, resolvers, searchers, fillers, takers, and relayers—in different protocols. These solvers are generally required to stake assets as collateral to be eligible to compete for orders.
The process of using intent-based products is similar to filling a limit order. In cross-chain scenarios, to quickly satisfy user intents, solvers often advance funds and collect a risk premium upon settlement. This arrangement is similar to a short-term loan where the loan duration is equivalent to the blockchain state syncing time, and the interest is akin to a service fee.
The comprehensive solutions represented by Near, which hopes to combine permission, solver, and settlement layers into a unified infrastructure, are in the early stages of proof-of-concept, making it difficult to observe and evaluate its utility.
Conversely, component-based solutions, particularly those in cross-chain DeFi protocols, have demonstrated advantages over traditional cross-chain solutions. Across Bridge, the flagship product of Across Protocol, utilizes an intent-centric architecture to offer higher speed, lower price, and stronger fee-generating capability among EVM-compatible cross-chain bridges, with its benefits being particularly pronounced in smaller transactions.

The bridge speed and fees of different cross-chain products in Jumper

Bridge speed and fees of L2-L1 chains on Across Protocol and Stargate

Across Protocol has a higher fee-generating capability, Source: DefiLlama
According to the roadmap, Across Protocol plans to launch a modular settlement layer to facilitate cross-chain intents in its third phase. Uniswap Labs and Across Protocol have co-proposed ERC-7683, which seeks to simplify the entry process for solvers by standardizing intent expressions and creating a universal network for solvers. 
Intent-based chain abstraction solutions will likely become a popular architecture, with many components potentially assembling the ultimate standard of chain abstraction like pieces of a puzzle.
What challenges exist in our understanding and implementation of chain abstraction?
What issues stem from an infrastructure-centric perspective? What other concerns related to chain abstraction are worth further exploration?
What issues stem from an infrastructure-centric perspective? 
As leading interoperability protocols, Layerzero has raised a cumulative $290 million and Wormhole $225 million, yet the substantial FDV and low market cap have led their tokens to become symbols of the much-criticized VC tokens of this cycle, undermining market confidence in the chain abstraction.
Returning to the cartoon at the beginning, it is apparent that chain abstraction projects, despite their unique technology stacks and token standards, are often branded as “useless infrastructure” due to the stagnant external market growth. Additionally, the downturn in metrics before and after Layerzero’s airdrop has intensified doubts regarding the market demand for “cross-chain communication.”

Significant decline in metrics following the airdrop by Layerzero
On the ERC-7683 forum page, developers discussed the role of the ERC standard itself in response to criticism that cross-chain asset transfer functionality is too minor, not universal enough. Proponents of minimalist ERCs argue that tool-level standards are sufficient to address existing problems and can be combined with existing standards, making adoption relatively easier.
Given that the design philosophy of intent architecture is largely application-focused, “universal, full-stack, and compatible” protocol standards can sometimes become “too vague to be meaningful” or “too complex to address real-world problems.” This leads to an ironic phenomenon: the chain abstraction protocols, which are born to solve fragmentation issues, end up providing fragmented solutions themselves.

ERC-7683: Cross Chain Intents Standard
What other concerns related to chain abstraction are worth further exploration?
Similar to how globalization affects underdeveloped regions, chain abstraction makes it more difficult to maintain TVLs for new and long-tail chains. What effect will this have on the adoption of chain abstraction?A study by Variant suggests that UniswapX may lead to a new situation where long-tail tokens are directed towards AMMs, while mainstream tokens are increasingly filled by off-chain solvers. Is this the future trend for DEXs? Will there be a global solver layer stacked on top of the global liquidity layer in the future?Besides DeFi protocols, what other forms might intent-based product architectures take?Will chain abstraction become the next big trend after modularity, or will it turn out to be a major bubble

By Alex Xu, Research Partner at Mint Ventures

Aave has long been on my radar, and just a few days ago, its governance team, ACI, unveiled a draft of Aave’s upgraded tokenomics on the governance forum. This proposal details expected enhancements in key areas, including the token value capture of Aave and improvements to the protocol’s safety modules.
For more insights on Aave, read my recent research Altcoins Keep Falling, Time to Refocus on DeFi, where I thoroughly evaluate its current status, competitive edges, and token valuation.
This article delves into the significantly impactful new proposal, specifically answering the following four key questions:
What are the main points of the proposal?The potential impacts associated with these points.The scheduled timeline and prerequisites for the proposal’s activation.The potential long-term effects of this proposal on the valuation of $AAVE token.
You can read the proposal here.
The Main Points of the AAVEnomics Proposal 
The proposal, titled “[TEMP CHECK] AAVEnomics Update”, is currently in the preliminary “temperature check” phase of community proposals and was posted on July 25th. The initiator of the proposal is ACI, which can be interpreted as the governance arm of the official Aave team and the central coordinator for community governance. ACI’s major proposals are usually fully communicated with other governance representatives and professional service providers before release, resulting in a high likelihood of approval.
The main points of the [TEMP CHECK] AAVEnomics Update include:
Overview of Aave’s Robust Operational Health and Strong Financial Reserves
Aave continues to lead the DeFi lending space, with revenues substantially outstripping expenses. With reserves mostly in $ETH and stablecoins, there is a timely opportunity to update the tokenomics and begin the distribution of protocol revenues.
Bad Debt Management Update: Transition From the Old Safety Module to The New “Umbrella” System
Aave has established reserves known as the “Safety Module” to address potential bad debts within the protocol. These reserves consist of:
Staked $AAVE, with a current market value of $275 millionStaked GHO, which is a native stablecoin of Aave, holds a current market value of $60 millionStaked $AAVE-$ETH LP tokens, a significant source of on-chain liquidity for Aave, currently valued at $124 million
The proposed Umbrella safety system is set to replace the traditional safety module. Specifically: 
The bad debt reserves within the system will be administered by the innovative aToken module, which is funded by user-initiated voluntary deposits. Depositors not only continue to accrue their usual interest but will also receive an additional security subsidy, which will come from Aave’s protocol revenue.
The Evolving Role of Aave Tokens and Initiation of Protocol Revenue Distribution
The Aave staking module remains operational, yet its role has evolved beyond serving as a risk reserve. It now fulfills two vital functions:
Stakers are eligible to receive distributions from the protocol’s profit surplus, beyond what is necessary for operations. This distribution is managed by Aave treasury, which executes periodic buybacks of $AAVE on the secondary market based on community governance proposals, benefiting the stakers.Staked $AAVE yields “Anti-GHO,” which can be used either to repay GHO debts or directly deposited into the GHO staking module, thereby enabling $AAVE stakers to also benefit from the profits generated through GHO.
Modifications to the GHO Staking Module 
Initially, the GHO staking module was responsible for bad debts across the entire Aave protocol. However, following recent changes, its coverage is now specifically limited to bad debts associated with GHO liabilities alone.
Other Updates 
The liquidity of $AAVE is no longer dependent on the Aave – ETH staking incentives but is now operated by the ALC (Aave Liquidity Committee). The swap from the initial protocol token, $LEND, to $AAVE will be discontinued, with any tokens not exchanged by the deadline being allocated to the treasury.
The following graph visibly depicts Aave’s new tokenomics:

Effects of the Proposal
There are two primary effects:
Aave tokens now exhibit a more defined capture of value, with a corresponding reduction in sell pressure, which further aligns with the protocol’s robust development.The value capture originates from buybacks funded by protocol net revenues plus GHO interest profit.The decrease in sell pressure is due to the phasing out of the staking module, implying that Aave will utilize stablecoins and ETH from protocol revenues for expenditures, instead of issuing new $AAVE tokens. This shift will reduce Aave’s market pressure and enhance its scarcity.The introduction of the Umbrella system will enhance the flexibility of the protocol structure and optimize incentive distribution, elevating the ceiling for safety governance and raising higher governance requirements.Previously, the Aave safety module is fully incentivized by $AAVE token emissions, which offered limited flexibility. In contrast, the Umbrella safety module, similar to Eigenlayer’s AVS model, is a modular system that allows for customized incentives based on asset type, duration, and capacity. Moreover, this change means that Aave’s risk team must now consider an additional set of metrics when evaluating and establishing risk parameters, beyond market size, interest rate curves, and loan-to-value ratios.
Timeline and Prerequisites for Implementation 
ACI said that the rollout of the plan will occur in a phased approach, contingent upon specific prerequisites. It will be structured into three stages, each corresponding to a separate governance proposal, to execute the outlined measures.
Phase I: Staking Module and GHO Update
Staked GHO(StkGHO) will solely cover the bad debt associated with GHO liabilities. The Aave and AAVE-ETH staking modules will be transitioned to “Legacy Safety Modules,” maintaining their guarantee roles until they are phased out. The cooldown period for withdrawing staked $AAVE has been eliminated.
Prerequisites: Met 
Timing of Implementation: The proposal is set to move forward once it receives sufficient community input and BGD Labs, Aave’s primary community developer, has approved the Umbrella upgrade.
Phase II: $AAVE Token Utility Upgrade and Introduction of New Tokenomics
The functionality that allowed for GHO borrow rate discount through AAVE staking will be discontinued.The Anti-GHO feature will be introduced, enabling AAVE stakers to obtain Anti-GHO.The swap from Lend to Aave tokens will be ended.
Prerequisites:
The market size of GHO must reach $175 million, up from the current level of approximately $100 million.GHO’s market liquidity needs to support a $10 million trading depth affecting the price by less than 1%. Currently, a trading of about $2.1 million is sufficient to move the GHO price by 1%.
Phase III: Activation of Fee Switch and Initiation of Buybacks
Turn off the legacy security module.Activate the aToken mode of the Umbrella Security Module, enabling users to back the system with their deposits and earn extra rewards.Aave’s financial service provider manages the governance-driven buyback of $AAVE tokens and distributes them to Aave stakers, progressively transitioning to an automated process.
Prerequisites: 
The average net asset value in Aave’s revenue pool over the last 30 days must be adequate to cover the operational costs of current service providers for the next two years.
* As of now, Aave’s treasury, excluding AAVE tokens, holds assets valued at approximately $67 million, with 61% in stablecoins, 25% in Ethereum, and 3% in Bitcoin. The forecasted expenses for 2024 are about $35 million, according to the head of ACI. Assuming similar expenses for 2025, the combined expenses for the two years would be around $70 million. Given Aave’s consistent weekly revenue of $1-2 million in 2024, the threshold is nearly met, and it is projected that this level could be achieved within a month.

Asset Type of Aave’s Treasury

Aave’s Protocol Revenue

The annualized revenue from the Aave protocol for the past 90 days must account for at least 150% of the total protocol expenses in 2024, which includes the allocations for $AAVE token buybacks and the funding for the Umbrella safety module.
*Budgets are defined, allocated, and adjusted quarterly by the Aave Finance service provider.
Overall, Phase I is ready for deployment. Phase II could take a few more months, contingent upon the Liquidity Committee’s dedication to and budget for GHO liquidity. The rollout of Phase III is more challenging to forecast due to its dependence on specific budgetary allocations, market dynamics, and revenue streams. Nonetheless, given Aave’s robust revenue performance, meeting the necessary criteria is likely manageable.
Long-Term Impact of the Proposal on $AAVE Token Prices
Over the long term, this proposal establishes a direct connection between the progression of the Aave protocol and the $AAVE token for the first time. It introduces a buyback support mechanism that underpins the token’s floor price while providing token holders with a stream of profit. This strategy is expected to positively influence the token price.
However, given that the implementation of the proposal requires time and will be executed in phases, combined with the fact that the proposal was only released recently and there is still a need for discussion and revision on specific terms, the value capture of the $AAVE tokens will be a gradual and long term process.
However, should the proposal be successfully executed, Aave, one of the leading DeFi projects, may further captivate the interest of value-oriented investors due to its robust, transparent governance and rewarding approach towards token holders. Such interest is likely to extend beyond the crypto community, attracting newcomers to Web3 from the traditional financial sectors.

By Alex Xu, Research Partner at Mint Ventures & Lawrence Lee, Researcher at Mint Ventures
Introduction
Despite being one of the most mature sectors in the crypto space, DeFi projects have shown disappointing performance in this bull run. Over the past year, the DeFi sector has seen a modest increase of 41.3%, significantly lagging behind the average market growth of 91% and Ethereum’s 75.8% rise.

Source: artemis
Focusing on the data from 2024 alone, the performance of the DeFi sector is hard to say positive, with an overall decline of 11.2%.

Source: artemis

However, from my perspective, in the unusual market context where altcoin prices have collectively dropped following BTC’s new high, some leading DeFi projects may have reached the optimal time for strategic investment. 
In this article, I aim to clarify the current value of DeFi by exploring the following questions:
The reasons behind altcoin’s significant underperformance compared to BTC and Ethereum in this cycleWhy now is the best time to focus on DeFiSome DeFi projects worth paying attention to, along with their sources of value and associated risks
This article does not aim to cover all DeFi projects with investment potential in the market. The DeFi projects mentioned are merely analysis examples and are not financial advice.
Please note that this article reflects my current thinking and may evolve. The opinions here are subjective and may be facts, data, and logical reasoning errors. Feedback and discussions are welcomed.
The Enigma of the Steep Decline in Altcoin Prices
In my view, the disappointing performance of altcoin prices in this cycle can be attributed to three main internal factors within the crypto industry:
Insufficient Demand Growth: There is a lack of attractive business models, and most crypto sectors are far from achieving product-market fit (PMF).Supply-Side Overgrowth: With the infrastructures becoming more robust and entry barriers lowering, new projects have been excessively issued.Persistent Token Unlocking: The continuous unlocking of tokens from low-circulation, high FDV (Fully Diluted Valuation) projects has led to significant selling pressure.
Let’s look at each of the three reasons in detail.
Insufficient Demand Growth: The First Bull Market Lacking Innovative Narratives
In my early March article, “Preparing for Primary Wave: My Periodic Strategy on This Bull Market Cycle,” I pointed out that this bull market lacks the scale of business innovation and narratives seen in the DeFi boom of 2021 and the ICO surge of 2017. Hence, the strategy should be to overweight BTC and ETH (benefiting from the influx of funds from ETFs), and to control the allocation to altcoins.
To date, my observation has proven to be accurate.
The absence of new business stories has reduced the influx of entrepreneurs, investments, users, and funds. More importantly, this has dampened investors’ overall expectations for industry growth. When the market lacks compelling stories like “DeFi will disrupt traditional finance,” “ICO is a new paradigm for innovation and financing,” and “NFTs are revolutionizing the content industry ecosystem,” investors naturally gravitate towards sectors with new narratives, such as AI.
However, I do not support overly pessimistic views. Although we have not yet seen attractive innovations in this cycle, the infrastructure is continuously improving:
The cost of block space has significantly decreased across both Layer 1 (L1) and Layer 2 (L2) solutions.Cross-chain communication solutions are becoming more comprehensive, offering a wide array of options.Wallets upgraded their experiences to become more user-friendly. For example, Coinbase’s smart wallet supports keyless quick creation and recovery, direct calling of CEX balances, and eliminating the need to top up gas, providing users with a better product experience.Solana’s Actions and Blinks features allow interactions with the Solana blockchain to be published in any common internet environment, further shortening the user journey.
These infrastructure is like real-world water, electricity, coal, and roads. They are not the result of innovation but are the soil from which it springs.
Excessive Supply Growth: Over-Issuance of Projects and Continuous Token Vesting of High-Market-Cap Projects
In fact, looking from another angle, although the prices of many altcoins have hit new lows for the year, the total market capitalization of altcoins relative to BTC has not suffered as severely.

Trading view, June 25, 2024
BTC’s price has fallen by approximately 18.4% from its peak, while the total market cap of altcoins has only decreased by 25.5%.
Note: Altcoins’s market cap refers to the total crypto market cap excluding BTC and ETH, namely “Total3” in the Trading View system.

Trading view, June 25, 2024

The limited decline in the total market cap of altcoins occurs against a backdrop of significant expansion in the total quantity and market cap of newly issued altcoins. The chart below clearly illustrates that during this bull market, the growth trend in new tokens is the most rapid in history.

New Tokens by Blockchain
It is important to note that the above data only includes newly-issued tokens on EVM chains, with over 90% issued on the Base chain. In reality, even more new tokens have been issued on Solana. Whether on Solana or Base, most of the newly issued tokens are memecoins.
Among the high market cap memecoins that have emerged in this bull market are:
MemecoinsCirculating Market Cap ($million)Dogwifhat2,040Brett1,660Notcoin1,610DOG•GO•TO•THE•MOON630Mog Coin560Popcat470Maga410
In addition to memecoins, a large number of infrastructure concept tokens are or will be issued on the exchange this year.
Layer2 Solutions
L2 SolutionsCirculating Market Cap ($billion)FDV ($billion)Starknet0.937.17ZKsync0.613.51Manta Network0.331.02Taiko0.121.9Blast0.482.81
Cross-chain Services
Cross-chain ServicesCirculating Market Cap ($billion)FDV ($billion)Wormhole0.633.48Layerzero0.682.73Zetachain0.231.78Omni Network0.1471.42
Modular Blockchains
Modular BlockchainsCirculating Market Cap ($billion)FDV ($billion)Altlayer0.291.87Dymension0.31.59Saga0.141.5
*The market cap is sourced from Coingecko as of June 28, 2024.
Additionally, many tokens listed on CEXs are facing substantial vesting. These tokens commonly have low circulation ratios, and high FDVs, and have undergone early VC funding rounds, resulting in low token costs for institutions.
The combination of weak demand and narratives, along with over-issuance on the supply side, is an unprecedented situation in the crypto cycle. Despite manual efforts to sustain valuations by further reducing the token circulation ratio at the time of listing – from 41.2% in 2022 to 12.3% in 2024 – and gradually selling to secondary investors, the convergence of these factors has led to an overall downward shift in the valuation of these crypto projects. In 2024, only a few concepts, such as Memecoins, CEX, and DePIN, have managed to maintain positive returns.

MC/FDV of Newly-launched tokens
However, from my perspective, the valuation collapse of high market cap VC Token is a normal market response to various crypto anomalies:
Duplicate creation of Rollups, leading to the ghost-town phenomenon that high-TVL projects are filled with bots but lack authentic usersRaising funds by rebranding terms while providing essentially similar solutions, especially among cross-chain communication servicesLaunching projects based on trends rather than actual user needs, such as numerous AI+Web3 projectsProjects fail to find profitable models and their tokens with no ability to capture value
​​The overall decline in the valuation of these altcoins is a result of the market’s self-correction. It is a healthy process of the bubble bursting, where funds vote with their feet, leading to a market clearing and self-rescue. 
The reality is that most VC coins are not entirely without value; they were simply overpriced, and the market has finally adjusted them to their rightful positions.
The Right Time to Focus on DeFi: PMF Products Emerging from the Bubble
Since 2020, DeFi has officially become a category within the altcoin ecosystem. In the first half of 2021, the Top 100 crypto market cap rankings were dominated by DeFi projects, with a dizzying array of subcategories, all aiming to replicate every existing business model in traditional finance on the blockchain. 
During that year, DeFi was the fundamental module of public chains, and DEXs, lending platforms, stablecoins, and derivatives became the essential components for any new public chain.
However, with the over-issuance of similar projects, numerous hacker attacks or insider jobs, and the rapid collapse of TVL obtained by relying on Ponzi schemes, the once soaring token prices spiraled down to zero.
As we enter the current bull market cycle, the price performance of most surviving DeFi projects has been unsatisfactory, and primary investments in the DeFi sector have dwindled. As is typical at the start of any bull market, investors are most attracted to the new narratives emerging in this cycle, and DeFi does not fit into that type.
However, it is precisely for this reason that DeFi projects, surviving from the bubble, are beginning to look more attractive than other altcoin projects. Specifically:
Business Overview: They have mature business models and profit models, and leading projects have competitive edges
DEXs and derivatives earn trading fees, lending platforms generate income from interest spreads, stablecoins collect stability fees, and staking projects charge fees for their services. These sectors have clear profit models. Leading projects in each sector have organic user demand, have largely moved past the subsidy phase, and some have achieved positive cash flow even after accounting for token emissions.

Rankings of Profitable Crypto Projects

According to statistics from Token Terminal, as of 2024, 12 of the top 20 most profitable protocols are DeFi projects. By category, they include:
Stablecoins: MakerDAO, EthenaLending: Aave, VenusStaking Services: LidoDEX: Uniswap Labs, PancakeSwap, Thena (earning from trading fees)Derivatives: dYdX, Synthetix, MUXYield Aggregators: Convex Finance
These projects have various competitive advantages, which can derive from multi-sided or bilateral network effects, user habits and brand recognition, or unique ecosystem resources. However, the leading DeFi projects in their respective sectors share some common traits: stabilizing market share, fewer later competitors, and service pricing power.
We will analyze thesel DeFi projects in detail later.
Supply Side: Low Emissions, High Circulation Ratio, Minimal Token Unlocking
In the previous section, we noted that one of the main reasons for the continuous decline in the current cycle of altcoin valuation is the high emissions from many projects based on inflated valuations, coupled with the negative expectations from the large-scale unlocking of tokens.
In contrast, leading DeFi projects, due to their earlier launch dates, have mostly passed their peak token emission periods, and institutional tokens have largely been released, resulting in minimal future selling pressure. For example, Aave currently has a token circulation ratio of 91%, Lido’s is 89%, Uniswap’s is 75.3%, MakerDAO’s is 95%, and Convex’s is 81.9%.
This is partly an indication of low future dumping pressure, but it also means that whoever wants to gain control of these projects will have to buy tokens from the market.
Valuation Analysis: Divergence Between Market Attention and Business Metrics, Valuation Levels at Historical Lows
Compared to new concepts like Meme, AI, DePIN, Restaking, and Rollup services, DeFi has gained very little attention in this bull market, and its price performance has been mediocre. However, the core business metrics of leading DeFi projects, such as trading volume, lending scale, and profit levels, have continued to grow. This divergence between price and business metrics has resulted in the valuation levels of some leading DeFi projects reaching historical lows.
Take the lending protocol Aave as an example. While its quarterly revenues (referring to net income, not overall agreement fees) have surpassed the highs of the last cycle and hit all-time highs, its PS ratio (circulating market cap/annualized revenue) has hit an all-time low and is currently at just 17.4x.

Tokenterminal

Regulation: The FIT21 Act is favorable for DeFi compliance and may trigger potential M&A
FIT21, the Financial Innovation and Technology for the 21st Century Act, aims to establish a clear federal regulatory framework for the digital asset market, enhance consumer protection, and promote U.S. leadership in the global digital asset market. Proposed in May 2023 and passed by a wide margin in the House of Representatives on May 22 of this year, this Act clarifies the regulatory framework and rules for market participants. Once officially passed, it will facilitate investment in DeFi projects for both startups and traditional financial entities. Given traditional financial institutions like BlackRock’s recent embrace of crypto assets, such as promoting ETF listings and issuing bond assets on Ethereum, DeFi is likely to be a major focus area for them in the coming years. For traditional financial giants, mergers and acquisitions could be one of the most convenient options, and any sign of relevance, even mere acquisition intentions, will trigger a Defi leading project’s revaluation.
I will analyze the business conditions, competitive advantages, and valuations of selected DeFi projects as the examples. 
Given the multitude of DeFi projects, I will prioritize those with better business development, significant competitive advantages, and more attractive valuations.
Notable DeFi Projects
Lending Protocol: Aave
Aave stands out as one of the most established DeFi projects, having secured its initial funding round in 2017. Post-funding, Aave evolved from a peer-to-peer lending framework (formerly known as Lend) to a sophisticated peer-to-pool model. During the previous bull market, Aave outperformed Compound, a major competitor in its space, and now leads the lending protocols in both market share and market cap 
The core business model of Aave revolves around capturing the spread between borrowing and lending rates. In 2023, Aave introduced its stablecoin, $GHO, which is designed to bolster its interest income. Managing GHO, however, means additional operational costs including marketing and liquidity incentives.
Business Overview
For lending protocols, the active loan volume is a pivotal indicator, serving as the primary revenue stream for such projects. 
The chart below illustrates Aave’s market share in terms of active loan sizes over the last year. Aave’s proportion of active loans has been on an upward trajectory for the past six months, now claiming a significant 61.1% market share. It’s important to note that this percentage might be understated. The graph inadvertently includes a double count of the loan volumes attributed to Morpho’s optimizers which operate on both Aave and Compound.

Tokenterminal

Another vital metric is the protocol’s profitability or its profit margins. Here, profits are calculated as the protocol’s revenue minus token incentives. As illustrated in the subsequent graph, Aave’s protocol profitability has distanced itself from other lending protocols. Aave effectively abandoned the Ponzi model of relying on token subsidies to fuel operations, a strategy still employed by others such as Radiant (indicated by the purple segment in the chart).

Tokenterminal

Competitive Advantages
Aave has four foundational strengths:
1. Ongoing Accumulation of Security Credit: Many new lending protocols face security breaches within their first year of operation. However, Aave has maintained a flawless record with no incidents at the smart contract level since its inception. This track record of safe and stable operations is a crucial factor for DeFi users when selecting a lending platform, particularly for high-volume investors or “whales.” Justin Sun, for instance, is a notable long-term user of Aave.
2. Bilateral Network Effect: Similar to many online platforms, DeFi lending operates as a classic bilateral market where depositors and borrowers form the respective sides of supply and demand. An increase in activity on one side—whether in deposits or loans—naturally boosts activity on the other, setting a high barrier for new entrants. Moreover, the greater the overall liquidity of the platform, the smoother the transitions for both deposits and withdrawals become, and the more likely to be favored by whales, which in turn stimulates the growth of the platform business.
3. Exceptional DAO Governance: Aave has transitioned to a fully decentralized DAO-based governance system, providing greater transparency and deeper community engagement in decision-making compared to centralized management. The Aave DAO boasts a vibrant ecosystem of governance participants, including top venture capitalists, university blockchain clubs, market makers, risk management firms, third-party developers, and financial advisors. These participants are diverse and actively engaged in governance. From the operational results of the project, Aave, as a latecomer to peer-to-peer lending services, has managed to balance growth and security effectively in product development and asset expansion and realized its overtaking of the industry leader Compound. The DAO governance has played a crucial role in this process.
4. Strategic Positioning in the Multi-Chain Ecosystem: Aave has established a strong presence across nearly all EVM-compatible Layer 1 and Layer 2 networks, consistently ranking at the top in terms of Total Value Locked (TVL) on each. The upcoming Aave V4 will enhance multi-chain liquidity integration, amplifying the benefits of cross-chain liquidity flows. The following chart provides more details.

In addition to EVM-compatible chains, Aave is actively assessing other networks like Solana and Aptos, considering potential deployments on these networks in the future.
Valuation Insights
As per Tokenterminal data, Aave has seen its valuation metrics dip to historical lows due to a steady increase in protocol fees and revenues, along with a persistently low token price. The Price to Sales (PS) ratio, which compares the circulating market cap with protocol revenue, stands at 17.44x, while the Price to Fees (PF) ratio, comparing market cap to protocol fees, is at 3.1x.

Tokenterminal

Risks and Challenges
Although Aave has been successfully expanding its share in the lending market, it faces emerging competition from Morpho Blue, a noteworthy modular lending platform. Morpho Blue offers a flexible suite of modular protocols to third parties aiming to establish their own lending markets. This platform allows for the customization of collaterals, borrowing assets, oracles, and risk parameters, enabling the creation of tailored lending environments.
This modular approach has facilitated the entry of numerous new players into the lending space, who have begun to offer lending services. For instance, Gauntlet, previously a risk manager for Aave, opted to sever ties with Aave in favor of launching its own lending market on Morpho Blue.

Morpho BLue

Morpho Block Analytics
Since its launch more than half a year ago, Morpho Blue has experienced rapid growth, now ranking as the fourth-largest lending platform by TVL, just behind Aave, Spark (a MakerDAO-launched copy of Aave v3), and Compound. 
Its expansion on Base has been particularly swift, achieving a TVL of $27 million in less than two months, while Aave’s TVL on Base stands at approximately $59 million.

Morpho Block Analytics
Decentralized Exchanges: Uniswap & Raydium
Uniswap and Raydium are key players within the Ethereum EVM and Solana ecosystems, respectively. Uniswap debuted on the Ethereum mainnet with its V1 version in 2018, but it was the introduction of its V2 in May 2020 that catapulted the platform to prominence. Raydium, on the other hand, made its entry on the Solana network in 2021.
The rationale behind highlighting two distinct entities in the decentralized exchanges sector is their affiliation with the two most populous Web3 ecosystems: the EVM ecosystem, centered around Ethereum—the leading public blockchain—and the fast-expanding Solana ecosystem. Both projects boast unique advantages and face specific challenges. Let’s delve into a detailed analysis of each.
Uniswap
Business Overview
Since its V2 release, Uniswap has maintained its position as the leading decentralized exchange (DEXs) in terms of trading volume across the Ethereum mainnet and other EVM-compatible chains. We focus primarily on two key metrics: trading volume and trading fees.
The chart below illustrates the monthly trading volume share of Uniswap V2 from its launch, excluding trading volumes on non-EVM chains:

Tokenterminal
From the launch of its V2 in May 2020, Uniswap’s market share reached a peak of 78.4% in August 2020 and then declined to a bottom of 36.8% during the most fierce DEX wars in November 2021. It has since rebounded to a stable 56.7%, evidencing its ability to withstand tough competition. 

Tokenterminal
This trend is also mirrored in its share of trading fees; after bottoming out at 36.7% in November 2021, Uniswap’s market share in fees has steadily climbed, now standing at 57.6%.
Remarkably, Uniswap has largely refrained from subsidizing liquidity with tokens, except for brief periods in 2020 on the Ethereum mainnet and at the end of 2022 on the Optimism mainnet. This restraint stands in stark contrast to most other DEXs, which continue to rely on liquidity incentives to this day.
The chart below illustrates the monthly incentives of major DEXs. It can be observed that Sushiswap, Curve, Pancakeswap, and Aerodrome, a project adopts ve(3,3) model and built on Base, all of which at one point had the largest subsidy amounts. However, none of them have managed to secure a higher market share than Uniswap.

Tokenterminal

One persistent critique of Uniswap is that despite not engaging in token incentives, its tokens still lack utility, as the protocol has not activated $UNI as gas fee.
In late February 2024, Erin Koen, a Uniswap developer and governance lead in Uniswap foundation, submitted a proposal to upgrade the protocol. This would introduce a fee structure to benefit $UNI holders who have approved and delegated their tokens, leading to significant community debate. Although the vote was initially planned for May 31, it has been postponed and remains pending. Despite these delays, Uniswap has taken initial steps toward enabling fees and enhancing the utility of $UNI tokens, with the revised contract already developed and audited. Uniswap will have a separate revenue stream from the protocol in the near future.
Additionally, Uniswap Labs started implementing a swap fee in October 2023 for users trading through the official Uniswap website and the Uniswap wallet. The fee is set at 0.15% and involving ETH, USDC, WETH, USDT, DAI, WBTC, agEUR, GUSD, LUSD, EUROC, and XSGD. However, it is important to note that swap between stablecoins and wraps between ETH and WETH are excluded from this fee.
Simply initiating a fee structure on Uniswap’s interface has positioned Uniswap Labs as one of the highest revenue-generating teams within the Web3 space.
With the anticipated activation of protocol layer fees and based on the annualized fees from the first half of 2024, Uniswap could generate around $1.13 billion annually. If the protocol charges a 10% fee ratio, this would translate to an annual protocol revenue of approximately $113 million. 
Additionally, the expected launches of Uniswap X and V4 later this year are set to potentially boost its market share in trading volumes and fees even further.
Competitive Advantages
The competitiveness of Uniswap are underpined by the three key factors:
1. Reputation Among Users: There was considerable skepticism when Uniswap first implemented interface fees last year. Many thought users would swiftly migrate their swaps to aggregators like 1inch to avoid extra fees. Contrary to these expectations, interface fee revenue continued to grow and even outpaced Uniswap’s fee growth for the entire protocol.

Tokenterminal

This data is a strong indication proving the power of user habits on Uniswap. Many users are not caring about this 0.15% fee expense and choosing to stick with their familiar trading routines.
2. Bilateral Network Effect: Uniswap functions as a classic two-sided market. On one side are the traders, and on the other, the liquidity providers (LPs). The more vibrant the trading at a given platform, the more it attracts LPs to offer liquidity, creating a cycle of mutual reinforcement. The other dimension of this bilateral effect involves the traders and the teams deploying initial token liquidity. To ensure their tokens are easily discoverable and tradable, these teams often prefer to establish initial liquidity on well-known DEXs like Uniswap rather than on lesser-known, smaller platforms. This strategy not only enhances the visibility of new tokens but also reinforces trader habits to first seek out Uniswap for new investments, thereby strengthening the two-sided market dynamic between “blockchain projects” and “traders.”
3. Multi-Chain Deployment: Like Aave, Uniswap has been actively expanding its presence across multiple blockchain networks. It is visible on all major EVM chains, consistently ranking among the top decentralized exchanges in terms of trading volume on those networks. 

With the upcoming introduction of Uniswap X, which will enhance support for tradings across different chains, Uniswap’s competitive edge in multi-chain liquidity is poised to grow even stronger.
Valuation Insights
The primary measure for assessing Uniswap’s value is the Price to Fees (PF) ratio, which compares its circulating market cap to its annualized fees. Presently, $UNI tokens are valued within a historically high percentile, likely influenced by market anticipation of the upcoming fee switch upgrade.

Tokenterminal

As for market valuation, Uniswap currently boasts a circulating market cap of nearly $6 billion and a fully diluted valuation of approximately $9.3 billion, indicating a reasonable valuation.
Risks and Challenges
Regulatory Risk: In April 2024, Uniswap was served a Wells Notice by the SEC, signaling potential forthcoming enforcement actions. While the progressive advancement of the FIT21 bill may eventually offer DeFi projects like Uniswap a clearer and more predictable regulatory framework, but given that it will still take a long time for the bill to be voted on and put into place, and the lawsuit from the SEC will put pressure on Uniswap’s operational activities and token prices in the medium term.
Position in DeFi Ecosystem: DEXs are the fundamental layer of liquidity. Traditionally, the upstream entities above DEXs are aggregators (e.g., 1inch, Cowswap, Paraswap), which offer users comparative pricing across chains to identify optimal trading routes. This model to a certain extent inhibit the downstream DEX of the user trading behavior of the charges and pricing ability. With the development of blockchain, wallets with built-in trading functions have emerged as higher-level infrastructure. With the adoption of ‘intent-based’ models, DEXs are expected to serve as invisible sources of liquidity, possibly diminishing the direct use of platforms like Uniswap in favor of a comprehensive “comparison shopping mode.” Aware of these dynamics, Uniswap is making concerted efforts to ascend within the ecosystem, notably through promoting its own wallet and launching Uniswap X to become more aggregated, aiming to enhance its strategic positioning.
Raydium
Business Overview
We will closely analyze Raydium’s trading volume and fees. Raydium has a significant advantage over Uniswap due to its early implementation of protocol fees, resulting in robust cash flows. Consequently, Raydium’s protocol revenue will also be a major focus of our analysis.
Reviewing Raydium’s trading volume, which have surged since October 2023 due to the thriving Solana ecosystem, we see a peak in March when volume reached $47.5 billion—about 52.7% of Uniswap’s trading volume for the same month.

Flipside
In terms of market share, Raydium’s trading volume on the Solana has consistently increased since September 2023 and now represents 62.8% of all trading volume within the Solana ecosystem. Raydium’s dominance in Solana even exceeds Uniswap’s influence within the Ethereum ecosystem.

Dune Analytics

Raydium’s impressive ascent in market share, rising from less than 10% during a slump to over 60%, can largely be attributed to the sustained Meme hype in this bull cycle. Raydium utilizes two types of liquidity pools: standard AMMs and CPMMs. The standard AMM model, similar to Uniswap V2, features evenly distributed liquidity suitable for assets with high volatility. In contrast, the CPMM model, akin to Uniswap V3, allows liquidity providers to set specific ranges for their liquidity, resulting in a system that is more flexible yet more complex.
Raydium’s competitor, Orca, opts for a concentrated liquidity pool model similar to Uniswap V3, but Raydium’s standard AMM model proves more conducive for memecoins who need to provide and allocate liquidity in large volumes every day. This has made Raydium the go-to liquidity platform for memecoins.
Additionally, Solana has become the leading incubator for memecoins during this bull market, witnessing the creation of thousands of new memecoins each day since November. These memecoins have become the driving force behind the thriving Solana ecosystem, significantly boosting Raydium’s business expansion.

Dune Analytics
As indicated by the chart, in December 2023, Raydium introduced 19,664 new tokens within a week, in stark contrast to 89 new tokens on Orca. Theoretically, Orca’s concentrated liquidity mechanism could emulate traditional AMMs by setting liquidity to span “the full range.” However, this method lacks the simplicity of Raydium’s standard pool model. 
This is further evidenced by Raydium’s trading data, which shows that 94.3% of its trading volume stems from standard pools, largely driven by memecoins.
Additionally, Raydium operates as a bilateral market similar to Uniswap, catering to both projects and individual users. The more retail traders on Raydium encourages memecoins to establish their initial liquidity on the platform. This dynamic spurs users and user-support tools (like various memecoin-tracking bots on telegram) to conduct their trading through Raydium, establishing a self-perpetuating cycle that significantly extends Raydium’s lead over Orca. 
Regarding swap fees, Raydium accrued about $300 million in the first half of 2024, which is 9.3 times the fees it collected throughout all of 2023.

Flipside
Raydium’s standard AMM pools charge a swap fee of 0.25%, with 0.22% of that fee distributed to liquidity providers (LPs), and the remaining 0.03% allocated for the buyback of $Ray, the native token of Raydium. In the CPMM pools, the fee ratio are customizable and can be freely set at 1%, 0.25%, 0.05%, or 0.01%, with the LP receiving 84% of the trading fees and the remaining 16% is split between buying back Ray tokens (12%) and contributing to the treasury (4%).

Flipside
In the first half of 2024, Raydium used about $20.98 million of its protocol revenue to buy back $Ray tokens, an amount 10.5 times the total spent on buybacks in 2023.
Besides trading fees, Raydium charges for creating new pools: 0.4 SOL for a standard AMM pool and 0.15 SOL for a CPMM pool. Raydium’s daily earnings from these pool creation fees average around 775 SOL. Calculated at the $SOL on June 30th, 2024, the total revenue should be $108,000. These funds are directed towards protocol development and maintenance, serving as operational income for the team, rather than being deposited into the treasury or used for $Ray buybacks.

Flipside

Similar to most decentralized exchanges, Raydium continues to offer incentives for liquidity providing. While there is no data available for the amounts of these incentives, one can estimate the current value of the incentives being provided to active liquidity pools by analyzing the data available on Raydium’s official liquidity interface.

Based on current Raydium incentives for liquidity, there is roughly $48,000 worth of incentive spending per week, primarily in Ray tokens. This expenditure is considerably lower than the protocol’s weekly revenue, which nears $800,000 (not including revenue from creating pools). This disparity underscores that Raydium is operating with a positive cash flow.
Competitive Advantages
Raydium holds the distinction of being the DEXs with the highest market trading volume on Solana. Its primary strength lies in the bilateral network effects. Same as Uniswap, these effects are amplified by the symbiotic relationships between traders and liquidity providers, as well as between project initiators and traders. The impact of these network effects is especially significant within memecoins.
Valuation Insights
Due to the lack of historical data before 2023, the valuation is based on a comparison between Raydium’s valuation data from the first half of 2024 and the full year of 2023.

With the spike in trading volume this year, despite a rise in the price of Ray tokens, Raydium’s valuation relative to last year has noticeably declined. Furthermore, when compared to other DEXs such as Uniswap, Raydium’s Price to Fees (PF) ratio is still relatively low.
Risks and Challenges
Although Raydium has demonstrated robust growth in trading volume and revenue in the past half year, its future development is fraught with uncertainties and challenges.
Ecosystem Position: Raydium struggles with its positioning within the ecosystem. In the Solana ecosystem, aggregators such as Jupiter wield greater influence, with their trading volumes significantly outstripping those of Raydium. In June 2024, Jupiter’s total trading volume in was $28.2 billion, compared to Raydium’s $16.8 billion. Moreover, memecoin-focused platforms like Pump.fun are gradually overtaking Raydium as the go-to launchpad for projects, with more memecoins choosing to launch via Pump.fun instead of Raydium, despite their ongoing collaboration. Pump.fun is increasingly diminishing Raydium’s influence among projects, and Jupiter has overtaken Raydium in capturing trader engagement. Should this trend continue unaddressed, and should top-tier entities like Pump.fun or Jupiter develop their own DEXs or pivot to competitors, Raydium could face significant challenges.
Shifts in Market Trends: Before the memecoin craze swept through Solana, Orca’s share of trading volume was seven times larger than that of Raydium. This cycle, due to Raydium’s standard pools being more friendly to memecoins, Raydium managed to recapture some of its lost market share. Yet, the longevity of the memecoin craze within Solana remains uncertain, as does the future dominance of memecoins on the blockchain. Predicting these trends is challenging. Should the market’s preference for types of crypto assets shift, Raydium’s regained market share could be at risk once again.
Token Emission: The circulating ratio of $RAY is 47.2%, relatively low when benchmarked against other DeFi projects. This could mean potential downward pressure on prices as more tokens become unlocked. However, given Raydium’s robust cash flow, selling off these tokens isn’t the sole strategy available. The team could opt to burn the yet-to-be-released tokens, a move that could help mitigate worries about oversupply.
Centralization Concerns: Raydium has not initiated a governance system driven by $RAY tokens, leaving the project’s evolution solely in the hands of the core team. This centralization may hinder the distribution of profits that should be attributed to the holders. For instance, decisions on the allocation of buybakced $RAY have yet to be clarified, leaving a critical issue pending.
Staking: Lido
Lido is the leading liquidity staking within the Ethereum ecosystem. The Beacon Chain’s initiation at the close of 2020 signaled Ethereum’s transition from Proof of Work (PoW) to Proof of Stake (PoS). Initially, the absence of a withdrawal feature for staked assets resulted in a loss of liquidity for staked ETH. Notably, it was not until the Shapella upgrade in April 2023 that withdrawals from the Beacon Chain were enabled, leaving early ETH stakers without liquidity for over two and a half years.
Lido was the first to introduce the liquidity staking concept. When users deposit ETH into Lido, they will receive stETH as proof of their stake. Lido facilitated a robust stETH-ETH liquidity pool on Curve, marking the first time users could reliably participate in ETH staking to earn rewards while retaining the flexibility to withdraw their ETH at any time. This breakthrough fueled rapid growth, establishing Lido as the frontrunner in Ethereum’s staking landscape.
Regarding its business model, Lido retains 10% of the staking revenue it generates, allocating 5% to staking service providers and managing the remaining 5% through its DAO.
Business Overview
Lido’s primary operation revolves around providing ETH liquidity staking services. In the past, Lido held the position of the top liquidity staking provider on the Terra network and was the second-largest on the Solana network. It also ventured into expanding its services across other blockchains, including Cosmos and Polygon. Nevertheless, Lido prudently scaled back its operations, choosing to concentrate exclusively on Ethereum network staking. Today, Lido stands as the market leader in ETH staking and boasts the highest TVL among all DeFi protocols.

DeFiLlama
With the substantial stETH-ETH liquidity created by extensive $LDO incentives, and with investment support from institutions like Paradigm and Dragonfly in April 2021, Lido surpassed its main competitors—centralized exchanges such as Kraken and Coinbase—by the end of 2021, positioning itself at the forefront of the Ethereum staking landscape.

Source: Dune Analytics
However, this led to concerns about whether Lido’s prominent position could undermine Ethereum’s decentralization. The Ethereum Foundation is considering measures to cap any single entity’s staking share at 33.3% to preserve the network’s decentralized nature. After hitting a high of 32.6% in May 2022, Lido’s market share has oscillated between 28% and 32%.

The market share of ETH staking

Competitive Advantages
Lido’s business strength consists of two main points:
Lido’s enduring leadership in the market has cultivated stable expectations, positioning it as the go-to platform for whales and institutions interested in ETH staking. Notable figures like Justin Sun, and Mantle before launching their LST, and many big investors are among Lido’s clientele.Network effects from a wide range of stETH use cases. stETH was fully supported by the head DeFi protocol as early as 2022. And subsequently, DeFi protocols have developed and found ways to integrate with stETH, evidenced by the traction gained by projects like LSTfi in 2023, and others such as Pendle and various LRT initiatives. This extensive adoption has solidified stETH’s role as a foundational yield-generating asset within the Ethereum network.
Valuation Insights 
Despite a modest dip in market share, Lido’s staking volume has continued to expand, propelled by an increasing overall staking rate of $ETH. Valuation-wise, Lido’s Price to Sales (PS) and Price to Fees (PF) ratios have recently hit all-time lows. 

Token Terminal
With the successful rollout of the Shapella upgrade, Lido has cemented its position in the market. The profitability indicators, reflecting the “revenue/token incentive” metrics, have shown impressive results, with Lido generating $36.35 million in profits over the last year.

Token Terminal

This situation has led to anticipation within the community for potential adjustments to the $LDO tokenomics. However, Lido’s de facto leader, Hasu, has repeatedly expressed that the current revenue from the community treasury does not suffice to cover all of Lido DAO’s ongoing expenses over the long haul. He emphasizes that discussions on revenue distribution are premature given the financial landscape.
Risks and Challenges
Lido faces the following risks and challenges:
Competition from newcomers. Lido’s market share has been on the decline since the release of Eigenlayer. New projects equipped with significant token marketing budgets pose a threat to established leaders like Lido, particularly as Lido’s tokens are almost fully circulated.Members of the Ethereum community, including several from the Ethereum Foundation, have long harbored reservations about Lido’s dominant market share in staking. Vitalik Buterin has addressed these concerns directly, publishing an article that explored potential solutions, yet he refrained from endorsing any particular option. For those interested in a deeper dive, you can read our previous analysis: Evaluating Vitalik’s Proposals on Ethereum Staking.On June 28, 2024, the SEC’s allegations against Consensys explicitly classified LST as a security.  The act of minting and buying stETH by a user was characterized by the SEC as “Lido’s issuance and sale of unregistered securities.” Furthermore, Consensys faced accusations for issuance and sale of unregistered securities by providing users with the ETH staking service.
Perpetual Exchange: GMX 
GMX is a decentralized perpetual exchange, first going live on Arbitrum in September 2021 and subsequently launching on Avalanche in January 2022. The platform functions as a two-sided market: on one side are traders, who can open positions with leverage up to 100x; on the other side are liquidity providers, who supply the liquidity of their assets for trading purposes and serve as counterparties to the traders.
In terms of business model, GMX’s revenue streams primarily come from trading fees, which vary between 0.05% and 0.1%, in addition to funding and lending fees charged to traders. GMX distributes 70% of all its revenue to liquidity providers, while the remaining 30% is allocated among $GMX token stakers.
Business Overview
The field of perpetual trading platforms is characterized by frequent new entrants like Aevo, Hyperliquid, Synfutures, and Drift, which often offer traceable airdrops, and established platforms that provide trade-mining incentives, such as dYdX, Vertex, and RabbitX. Given these factors, trading volume data may not fully reflect the true competitive landscape. Therefore, we will utilize metrics such as Total Value Locked (TVL), Price to Sales (PS), and profits to provide a comparative analysis of GMX alongside its competitors.
GMX currently holds a leading position in terms of TVL. Nonetheless, other significant players in the space, such as the established derivatives protocol dYdX, Jupiter Perp with its substantial traffic gateway on Solana, and the forthcoming Hyperliquid, are also showcasing TVL figures that are comparable to GMX’s.

DeFiLlama

When considering the PS ratio, GMX stands out for its relatively low valuation in the segment of projects that have issued their tokens, focus on perpetual trading and have an average daily trading volume of over $30 million. The only competitor with a lower PS ratio is Vertex, which continues to engage heavily in trade mining incentives.

Looking at profit metrics, GMX recorded profits of $6.5 million in the past year, which are less than those of competitors such as dYdX, GNS, and SNX. However, it is critical to understand that this figure was significantly impacted by GMX’s decision to release all 12 million $ARB tokens rewards during the Arbitrum STIP event from November 2023 to March 2024. These tokens had an estimated value of $18 million, based on ARB’s average price at the time, which notably diminished the reported profits. Despite this, the trend in profit accumulation proves GMX’s robust ability to generate profits.

Competitive Advantages
Relative to the other DeFi projects mentioned, GMX has a comparatively weaker competitive edge. the frequent emergence of new programs on derivatives exchanges in recent years has largely impacted GMX’s trading volume and the marketplace remains congested. Despite these challenges, GMX maintains several key strengths:
Robust Support from Arbitrum: GMX, as a native project within the Arbitrum ecosystem, was responsible for nearly half of Arbitrum’s TVL during its peak periods. At that time, virtually every new DeFi project on Arbitrum was tailored to “cater to GLP,” which not only provided significant exposure from the Arbitrum official channels but also resulted in GMX receiving a substantial amount of ARB tokens through various incentive events—including an initial airdrop of 8 million and an additional 12 million from STIP activities. This substantial token accumulation greatly enriched GMX’s treasury and provided crucial marketing resources for GMX, whose tokens are already fully circulated.Established Leadership and Strong Reputation: GMX significantly shaped the “Real DeFi Yield” narrative from late 2022 through early 2023, a rare bright spot in the DeFi space during that bearish market period, and GMX took the opportunity to build a strong brand reputation and attract a dedicated and loyal user base.Economies of Scale Advantage: GMX, as the leading perputual trading platform, is a beneficiary of this scale effect. When liquidity providers (LPs) are large enough, they can accommodate larger trading orders and higher open positions, which in turn generate higher returns for LPs. For example, Andrew Kang, a renowned trader, frequently opened long and short positions worth tens of millions of dollars on GMX. At that time, GMX was almost the only option for placing such large orders on-chain.
Valuation Insights
GMX has reached full circulation. As highlighted in our earlier cross-industry comparison, GMX presently has the lowest valuation among leading perpetual exchanges. 
In a longitudinal comparison with its historical data, GMX’s revenue has demonstrated consistent stability and its PS ratio has tended to fall within a moderately low range

Risks and Challenges
Intense Competitive Landscape: GMX faces formidable competition not only from well-established DeFi protocols like Synthetix and dYdX, which continue to innovate and drive activity, but also from rising newcomers, such as AEVO, specializing in token swaps, and Hyperliquid, which has not yet issued its tokens, have both gained significant attention and trading volume over the past year. Jupiter Perp, leveraging its substantial access to Solana’s traffic, has managed to match GMX’s TVL and even surpass its trading volumes using a nearly identical mechanism to GMX. GMX is currently gearing up to roll out their V2 version on Solana, yet the overall competitive environment remains highly intense, lacking a defined pattern like the other DeFi tracks. Additionally, the prevalent trade mining incentives lower barriers to user migration, generally leading to lower user loyalty.GMX relies on oracle prices as the price basis for trading and liquidation, which introduces a vulnerability to oracle attacks. In September 2022, GMX suffered a loss of $560,000 due to an oracle attack on AVAX. Despite this, the costs associated with executing such attacks (i.e., manipulating the CEX prices of the tokens involved) are typically prohibitive relative to the gains. To further protect against these risks, the GMX V2 update has introduced measures like segregated pools and adjustments for trading slippage.
Other Noteworthy DeFi Projects
Beyond the DeFi projects previously discussed, our research has identified other compelling projects within the space, including the well-established stablecoin MakerDAO, the rising star Ethena, and the foremost oracle solution Chainlink. Unfortunately, space constraints prevent a comprehensive presentation of these projects in this document. Moreover, each of these projects encounters its own set of challenges, including:
While MakerDAO continues to lead in the decentralized stablecoin sector and boasts a significant base of natural holders—who treat DAI similarly to how they would USDC or USDT—the size of its stablecoin has not advanced, remaining at roughly half of its previous peak in terms of market cap. Furthermore, its reliance on off-chain dollar assets for collateral is progressively eroding the decentralized trust associated with its token.
Ethena’s stablecoin, $USDe, sharply contrasts with MakerDAO’s DAI, having surged from zero to $3.6 billion within approximately six months. Despite this impressive growth, Ethena’s business model, which centers on a public fund dedicated to perpetual arbitrage, inherently faces limitations. The substantial scale-up of its stablecoin hinges on secondary market participants’ willingness to purchase its $ENA token at elevated prices, a strategy that underpins the high-yield subsidies necessary to sustain USDe expansion. This slightly Ponzi-like design becomes highly vulnerable during times of poor market sentiment, potentially leading to a downward spiral in both business and token prices. A pivotal moment for Ethena could arise if USDe can genuinely establish itself as a decentralized stablecoin embraced by a substantial base of ‘natural holders,’ thereby shifting from being a public arbitrage fund to a stablecoin operator. However, given that the underlying assets of USDe are largely tied to arbitrage positions on centralized exchanges, it faces significant hurdles related to both ‘decentralized censorship resistance’ and ‘robust institutional endorsement.’ This makes it extremely challenging for USDe to replace DAI and USDT.
After making its mark in the DeFi sector, Chainlink is gearing up for an under-the-radar yet potentially massive shift in narrative, driven by financial behemoths like BlackRock that have progressively embraced Web3 technologies. This shift focuses on the integration of Real World Assets (RWA). Apart from advocating for BTC ETF and ETH ETF, one of BlackRock’s standout initiatives this year was the tokenization of a U.S. Treasury bond fund, named ‘Build,’ on Ethereum,  which amassed over $380 million in just six weeks. The experimentation with financial products on blockchain by traditional financial giants will continue, inevitably grappling with issues like the tokenization of off-chain assets and enhancing both on-chain and off-chain communications and interoperability. 
Chainlink’s explorations in blockchain interoperability are quite advanced. For instance, in May of this year, Chainlink completed a “Smart Asset Net Worth” project with the Depository Trust and Clearing Corporation (DTCC) and several major U.S. financial institutions. This pilot project aims to establish a standardized process for aggregating and disseminating fund net asset value (NAV) data on private or public blockchains using Chainlink’s interoperability protocol, CCIP. Additionally, in February, asset managers Ark Invest and 21Shares announced the validation of position data by integrating with Chainlink’s Proof of Reserve platform. However, Chainlink still faces challenges with its business value being detached from its tokens. The lack of value capture and rigid application scenarios for $LINK tokens raises concerns that holders will find it difficult to benefit from the growth of Chainlink’s business.
Conclusion
As with many transformative products, DeFi has traced a distinctive trajectory since its inception. It started with the narrative building of its ‘Genesis Year’ in 2020, followed by a rapid bubble in 2021, and then moved into a phase of disillusionment following the bubble’s burst in the 2022 bear market. Now, with its Product-Market Fit (PMF) robustly established, DeFi is climbing out of the trough of narrative disillusionment, and building its intrinsic value with a solid business.

I am convinced that DeFi, characterized by its mature business models and expanding market potential, is worthy of sustained focus and investment.

By Lydia Wu, Researcher at Mint Ventures

Please note: As Quilibrium’s mainnet has not yet launched, and public information is limited, the descriptions of its incentive mechanisms, tokenomics, financing, and roadmap are based on public resources and may change in the future. This article is intended for research and educational purposes and should not be taken as investment advice. We welcome any feedback.
Key Insights 
Theses
Quilibrium aims to bridge the gap between the computational capabilities of the traditional internet and the decentralized nature of blockchain, establishing a unique decentralized cloud computing architecture. This synthesis offers a balanced approach, leveraging strengths from both worlds.Quilibrium has developed a database-driven operating system that resonates with the workflows of traditional software development, potentially attracting mainstream software developers. This system also supports Web3 developers in crafting sophisticated crypto applications, providing a versatile foundation for diverse development needs.The design of Quilibrium’s architecture places a strong emphasis on security and privacy, appealing to enterprises seeking to adopt cryptographic technologies while protecting sensitive data. For individual users, the early success of Farcaster showcases the potential of decentralized applications to engage users and drive profitability.Cassie Heart, the Founder and CEO of Quilibrium, is a former senior engineer at Coinbase and developer of Farcaster, leading a team recognized for its profound expertise, consistent performance, and innovative approach.
Risks 
The project is in its early stages, with its mainnet yet to be launched. Additionally, the complexity of the project means that both its technological feasibility and market demand remain untested.In the short term, Quilibrium could encounter competitive challenges from the more established Arweave AO, particularly in terms of user perception and developer engagement.Furthermore, the lack of clearly defined tokenomics and the possibility of fluctuations in the token release rate present significant risks for investors.
Valuation
Given that Quilibrium is in its early stages, an accurate valuation is not currently feasible. However, when examining the circulating and fully diluted market cap, Quilibrium appears competitively valued compared to other market players with similar concepts.
Business Analysis
Quilibrium defines itself as a “decentralized internet layer protocol, providing the creature comforts of Cloud without sacrificing privacy or scalability,” and as a “decentralized Platform-as-a-Service(PaaS) solution.” This section explores Quilibrium’s business model by addressing the following key questions:
What issues exist with traditional internet cloud computing? Why is there a need for new decentralized computing platforms? What makes Quilibrium unique compared to other popular blockchain architectures?

Cassie Heart on Farcaster

Business Positioning
Start with Computing
In both Web2 and Web3, “computing” is a vital concept, acting as the catalyst for the development, execution, and scaling of applications. 
In traditional Internet frameworks, computing tasks are usually handled by centralized servers. The emergence of cloud computing has improved the scalability, accessibility, and cost-efficiency of these tasks, increasingly becoming the dominant form of computing.
Cloud services offered by major providers are generally categorized into three main types: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS). Each category meets different user needs and capabilities, offering varying levels of resource control. While SaaS is most familiar to end-users, PaaS and IaaS are primarily targeted at developers.

Made by Lydia@MintVentures

Data source: S2 Lab, Made by Lydia@Mint Ventures

In mainstream blockchains like Ethereum, computing is handled by decentralized nodes. This approach operates without central servers, with each node executing tasks locally and ensuring data accuracy and consistency through a consensus mechanism. However, the capability and speed of decentralized computing often fall short compared to traditional cloud services. 
Quilibrium aims to balance the robust computing power and scalability of the traditional internet with the decentralization of blockchain, paving the way for new possibilities in application development.

Cassie Heart’s Live Streaming

Centralization in Computer Systems
For most end users, the centralization of computer systems is not easily perceivable, as they mainly interact with the hardware layer. PCs, smartphones, and other devices are distributed globally and run independently under individual control, giving the impression that hardware-level systems are not centralized.
However, in contrast to this hardware dispersion, computer systems are significantly more centralized at the network architecture and cloud computing service levels. In the first quarter of 2024, Amazon AWS, Microsoft Azure, and Google Cloud collectively held over 67% of the cloud service market share, far outpacing newer entrants.

Source: Synergy Research Group
Moreover, benefiting from the AI boom, cloud service providers continue to grow stronger. Microsoft Azure, as the exclusive cloud provider for OpenAI, has reversed its previous slow performance, now showing accelerated growth. In Microsoft’s fiscal third quarter of 2024 (the first calendar quarter of 2024), Azure and other cloud services saw a revenue increase of 31%, surpassing market expectations of 28.6%.

Data Source: Microsoft, Made by Lydia@MintVentures

In addition to market competition, privacy and security concerns related to centralized computing systems are increasingly in the spotlight. Each outage at major cloud service providers has a widespread impact. Between 2010 and 2019, AWS experienced 22 sudden outages, averaging 2.4 outages per year. These disruptions not only affected Amazon’s e-commerce business but also impacted the online services of companies reliant on AWS, including Robinhood, Disney, Netflix, and Nintendo.
Introduction of Decentralized Computing
In this context, the need for decentralized computing is increasingly emphasized. As centralized cloud service providers move towards distributed architectures—by replicating data and services in multiple locations to prevent single points of failure and enhancing performance through edge storage—the focus of decentralized computing narratives has shifted towards data security, privacy, scalability, and cost-efficiency. 
Let’s explore several concepts of decentralized computing proposed by various projects, all aiming to disperse data storage and processing to create a globally distributed computing platform that supports the development of decentralized applications:
World Computer: This generally refers to Ethereum, which provides a global smart contract execution environment. Its key functionalities include decentralized computing and the uniform execution of smart contracts worldwide.Internet Computer: Typically refers to the ICP developed by the Dfinity Foundation, with its goal of enhancing the Internet’s capabilities to enable decentralized applications to operate directly on the Internet.Hyper Parallel Computer: Generally refers to the AO protocol introduced by Arweave, a distributed computing system built on the Arweave network, noted for its high parallelism and fault tolerance.
It’s important to note that ICP, AO, and Quilibrium are not traditional blockchains in the usual sense. They do not rely on a linear block structure but maintain fundamental principles like decentralization and data immutability. They can be seen as natural expansions of blockchain technology. Although ICP has not yet fully achieved its ambitious goals, the advent of AO and Quilibrium has opened up new possibilities that could influence the future of Web3.
The table below contrasts the technical features and application focuses of the three platforms, helping readers evaluate “whether Quilibrium might follow in ICP’s footsteps” and highlighting the differences between Quilibrium, another pioneering solution in decentralized computing, and AO, often dubbed the “Ethereum killer.”

Consensus Mechanism
In traditional blockchains, the consensus mechanism functions at a fundamental and abstract level, determining how the network achieves consensus, processes and verifies transactions, and executes other activities. The selection of different consensus mechanisms influences key aspects of the network such as security, speed, scalability, and decentralization.
Quilibrium’s consensus mechanism, known as “Proof of Meaningful Work” (PoMW), mandates that miners engage in genuinely beneficial tasks for the network, including data storage, data indexing, and network maintenance. The design of the PoMW consensus mechanism integrates multiple fields such as cryptography, multi-party computation, decentralized systems, database architecture, and graph theory. It aims to lessen dependence on single resources like energy or capital, preserve the network’s decentralized nature, and uphold security and scalability as the network expands.
The incentive mechanism is crucial for the efficient functioning of the consensus mechanism. Quilibrium’s incentive allocation is dynamic, adjusting based on network conditions to align incentives with current demands. Additionally, Quilibrium introduces a multi-proof mechanism, allowing a node to verify multiple data segments, ensuring the network remains operational even with a shortage of nodes and core resources.
To help your understanding, we can use a simplified formula to calculate the ultimate earnings or miners, where the unit reward adjusts dynamically with the network size.
Earnings = Score × Unit Reward
The score is calculated based on various factors, and the formula is as follows:

The parameters are defined as follows:
Time in Mesh for Topic: Longer engagement and greater stability yield a higher score.First Message Deliveries for Topic: A higher number of initial message deliveries increases the score.Mesh Message Delivery Rate/Failures for Topic: Nodes with higher delivery rates and fewer failures receive higher scores.Invalid Messages for Topic: Fewer instances of delivering invalid messages lead to a higher score. 
The weighted sum of these four parameters is subject to a topic cap (TC), which serves to keep the score within a certain range and prevent unfair scoring due to excessively high individual parameters.
Application-Specific Score: Defined by the particular application.IP Collocation Factor: Higher scores are awarded to nodes with fewer others sharing the same IP address.

Quilibrium Dashboard

Quilibrium currently operates over 60,000 nodes, and the actual earnings of these nodes may vary due to the differing parameter weights between versions. From version v1.4.19 onwards, miners can view their earnings in real-time, although the earnings can only be claimed once the mainnet goes live.
Network Architecture
Quilibrium’s core business is its decentralized PaaS solution, characterized by a network model that includes communication, storage, data querying and management, and operating systems. This section highlights the distinctive aspects of its design compared to other blockchains. Readers interested in technical specifics and methodologies can refer to the official documents and whitepaper.
Communication
Communication serves as the foundational component of the Quilibrium network and consists of four parts:
a. Key Generation
Quilibrium introduces a key generation mechanism called PCAS (Planted Clique Addressing Scheme), based on graph theory. Like traditional blockchain technology, PCAS utilizes asymmetric encryption: each user possesses a public key and a private key. The public key is used for encrypting messages or verifying signatures and can be made public, while the private key is used for decrypting messages or creating signatures and is kept private. The main differences lie in the methods of key generation, forms, and application scenarios.

b. End-to-End Encryption
End-to-end encryption (E2EE) is a vital component that ensures secure communication between nodes. With E2EE, only the parties directly involved in the communication can view the plaintext data. Systems or intermediaries that assist in message delivery are unable to read the contents.
Quilibrium utilizes an end-to-end encryption method known as Triple-Ratchet, which provides enhanced security over traditional ECDH schemes. Unlike traditional schemes that use a single static key or periodically update the key, the Triple-Ratchet protocol updates the key after each communication session. This ensures forward secrecy, post-compromise security, deniability, and replay protection, and supports out-of-order message delivery. This method is particularly suited for group communications, although it is relatively more complex and computationally costly.
c. Shuffled Lattice Routing
Mixnets function as a black box that receives messages from senders and forwards them to recipients, ensuring that external attackers, even with access to information outside the black box, cannot correlate senders with recipients.
Quilibrium utilizes Random Permutation Matrix (RPM) technology, which forms a shuffled network architecture that is complex in structure and resistant to both external and internal attacks, thereby providing enhanced anonymity, security, and scalability.
d. Peer-to-Peer Communication
GossipSub is a peer-to-peer messaging protocol that operates on a publish/subscribe model, extensively employed in blockchain technologies and decentralized applications (DApps). Quilibrium’s BlossomSub protocol enhances the traditional GossipSub framework, focusing on improving privacy safeguards, increasing resilience against Sybil attacks, and enhancing overall network performance.
Storage
Most traditional blockchains use cryptographic hash functions for foundational data integrity verification and rely on consensus mechanisms to maintain network consistency. This method presents two primary limitations:
There is no built-in verification for the duration of storage, lacking direct defenses against timestamps or computational capability-based attacks.The separation between storage and consensus mechanisms can result in challenges related to data synchronization and consistency.
Quilibrium’s storage strategy employs a Verifiable Delay Function (VDF) to create a timestamp-dependent chain structure that integrates storage with consensus mechanisms. This approach has several key features:
Input processing: Utilizing hash functions like SHA256 and SHAKE128 to process inputs ensures that minor data variations result in substantial changes in hash values, enhancing resistance to tampering and facilitating easier verification.Delay Assurance: The computation is deliberately designed to be lengthy, with each task relying on the results of the previous step and unable to be hastened by increased computing power. This ensures outputs are based on consistent timestamp calculations. As the process is non-parallelizable, any attempts to recompute or alter the publicly disclosed VDF outcomes would take significant time, allowing network participants to detect and react.Quick verification: Verifying a VDF result takes less time than generating it, requiring only a handful of mathematical tests or some supplementary data to confirm its validity.

Quilibrium Whitepaper
This timestamp-based proof chain structure operates independently of block generation in traditional blockchains, theoretically reducing the incidence of MEV attacks and front-running behaviors.
Data Query and Management
Traditional blockchains primarily employ straightforward key-value storage or Merkle Trees for data management, which generally restricts their capability to represent complex relationships and facilitate advanced queries. Additionally, most existing blockchain systems lack inherent privacy safeguards during query execution by nodes, setting the stage for the development of privacy-enhancing technologies like zero-knowledge proofs.
​​Quilibrium has introduced “Oblivious Hypergraph”, integrating hypergraph structures with Oblivious Transfer technology, which facilitates complex querying capabilities while preserving data privacy. Specifically:
Hypergraph Structure: This allows for edges that connect multiple vertices, significantly improving the ability to depict complex relationships. It can directly map various database models, enabling the representation and querying of any type of data relationship.Oblivious Transfer Technology: This ensures that nodes processing the data remain unaware of the actual content being accessed, thereby enhancing privacy during the querying process.
Operating System
The operating system is not a native concept in the blockchain space. Most traditional blockchains focus on consensus mechanisms and data immutability, often lacking complex operating systems. For instance, while Ethereum supports smart contracts, its operating system functions are quite basic, primarily limited to transaction processing and state management.
Quilibrium has engineered an operating system that leverages its hypergraph database and has implemented regular operating system primitives such as file systems, schedulers, IPC mechanisms, message queues, and control key management. This integration directly with the database enhances the capability to develop sophisticated decentralized applications.

Quilibrium Whitepaper

Programming Languages
Quilibrium has chosen Go as its primary programming language, augmented by Rust and JavaScript. Go is favored for its robust capability in handling concurrent tasks, straightforward syntax, and vibrant developer community. According to the Tiobe index, Go has climbed significantly in popularity, reaching the 7th position in the latest June rankings. Other notable blockchain projects that utilize Go for core development include Ethereum, Polygon, and Cosmos.

Quilibrium

Tiobe
Project Overview
Development Path and Roadmap
Quilibrium released its white paper in December 2022, outlining a roadmap that is segmented into three distinct phases: Dusk, Equinox, and Event Horizon.
Currently, in its early stages, Quilibrium development team conducts network updates and iterations bi-weekly. The network is now on version v1.4.20, with plans to skip the 1.5 phase of the roadmap, transitioning directly from version 1.4 to 2.0. Version 2.0, marking the mainnet release, concludes the Dusk phase and is slated for official release in late July, enabling the bridging of $QUIL tokens.
According to provisional plans, the Equinox and Event Horizon phases will facilitate more sophisticated applications, such as streaming services and AI/ML model training.
Team Members and Funding
Cassie Heart, the founder and CEO of Quilibrium, brings a robust background with over 12 years of experience in software development and blockchain technology, previously holding a position as a senior software engineer at Coinbase. 
Her disapproval of centralized social media platforms has led her to choose Farcaster as the primary platform for both her personal and Quilibrium’s official communications. On Farcaster, Cassie’s profile has attracted over 310,000 followers, including prominent individuals such as Ethereum’s founder, Vitalik Buterin. She is also an active contributor to Farcaster’s development.
The Quilibrium project, initiated in April 2023, has shown consistent progress. According to the development dashboard, the team consists of 24 developers, under Cassie Heart’s leadership.
The founder and CEO of Quilibrium, Cassie Heart, previously served as a senior software engineer at Coinbase, bringing over 12 years of experience in software development and blockchain technology. 
Due to her disapproval of centralized social media platforms, both her personal and Quilibrium’s official project accounts are predominantly active on Farcaster. Cassie’s Farcaster profile boasts over 310,000 followers, including notable figures like Ethereum’s founder, Vitalik. Additionally, Cassie contributes to the development of Farcaster.
According to the development dashboard for Quilibrium, the project started in April 2023 and has progressed steadily ever since. The dashboard lists 24 developers, led by Cassie Heart.

Quilibrium

The Quilibrium team has not publicly disclosed its financial backing or the investors involved.
Tokenomics
$QUIL is the native token of Quilibrium, with a completely fair launch. All tokens are generated through node operations. According to Cassie, the team manages a small fraction of the nodes, yet holds less than 1% of the total tokens.
$QUIL operates without a fixed tokenomics and has no cap on the total supply. However, the supply is dynamically adjusted based on the rate of network adoption—more tokens are released as incentives for node operation as the network expands; conversely, if growth slows, the rate of token release is reduced accordingly.
The following table outlines projections made by both the team and community members regarding the token emissions schedule. Currently, 340 million tokens are in circulation, with the anticipated final supply expected to converge at around 2 billion, subject to the ecosystem’s evolution.

Source: @petejcrypto
Risks
At this stage, Quilibrium faces several potential risks:
The project is in its early stages, with its mainnet yet to be launched. Additionally, the complexity of the project means that both its technological feasibility and market demand remain untested.In the short term, Quilibrium could encounter competitive challenges from the more established Arweave AO, particularly in terms of user perception and developer engagement.Furthermore, the lack of clearly defined tokenomics and the possibility of fluctuations in the token release rate present significant risks for investors.
Valuation
Valuing public-blockchain-type infrastructures is inherently complex, considering multiple factors like TVL, active on-chain addresses, dApps, and the developer community. Quilibrium remains in its early stages, and the token $AO of Arweave AO is not open for trading, preventing us from determining an accurate valuation.
For reference, we list the circulating market value and fully diluted market value of projects with some conceptual overlap with Quilibrium (data as of June 23, 2024).

Source: CoinGecko, Last updated time: June 23th, 2024
References and Acknowledgments
This report is greatly supported by the reviews and feedback from @PleaseCallMeWhy, @ImDavidWeb3, and Connor.
Reading List
https://quilibrium.com/quilibrium.pdfhttps://paragraph.xyz/@quilibrium.comhttps://dashboard.quilibrium.com/https://www.youtube.com/watch?v=Ye677-FkgXE&ab_channel=CassandraHearthttps://dune.com/cincauhangus/quilibriumhttps://source.quilibrium.com/quilibrium/ceremonyclient/-/graphs/main?ref_type=headshttps://www.tiobe.com/tiobe-index/https://www.blocmates.com/meal-deal-research-reports/quilibrium-crypto-not-blockchain-long-live-the-internethttps://www.statista.com/chart/18819/worldwide-market-share-of-leading-cloud-infrastructure-service-providers/https://s2-labs.com/admin-tutorials/cloud-service-models/https://medium.com/@permadao/%E5%8E%BB%E4%B8%AD%E5%BF%83%E5%8C%96%E4%BA%91%E6%9C%8D%E5%8A%A1%E8%BF%9B%E5%8C%96%E5%8F%B2-%E4%BB%8E-dfinity-ic-%E5%88%B0-arweave-ao-839b09b4f3ffhttps://www.microsoft.com/en-us/investor/earnings/FY-2024-Q3/press-release-webcasthttps://x.com/perma_daoCN/status/1798565157435830416https://x.com/Pow2wer/status/1802455254065402106

By Alex Xu，Research Partner at Mint Ventures

Introduction
This cycle of the crypto bull market has been the most uninspiring in terms of commercial innovation. Unlike the previous bull market, which saw phenomenal trends like DeFi, NFTs, and GameFi, this cycle lacks significant industry hotspots. Consequently, there has been sluggish growth in user base, industry investment, and developer activity.
This trend is also evident in the price of crypto assets. Over the entire cycle, most altcoins, including ETH, have consistently lost value relative to BTC. The valuation of smart contract platforms is largely driven by the prosperity of their applications. When innovation in application development stagnates, it becomes challenging for the valuation of public chains to rise.
However, artificial intelligence (AI), as a relatively new sector in the crypto business landscape, could benefit from the explosive growth and ongoing hotspots in the broader commercial world. This gives AI projects within the crypto space the potential to attract significant incremental attention.
In the IO.NET report published by Mint Ventures in April, the necessity of integrating AI with crypto was thoroughly analyzed. The advantages of crypto-economic solutions—such as determinism, efficient resource allocation, and trustlessness—could potentially address the three major challenges of AI: randomness, resource intensity, and the difficulty in distinguishing between human and machine.
In the AI sector of the crypto economy, I want to discuss and explore several critical issues in this article, including:
Emerging or potentially explosive narratives exist in the crypto AI sector.The catalytic paths and logical frameworks of these narratives.Crypto + AI Projects.The risks and uncertainties involved in the development of the crypto + AI sector.
Please note that this article reflects my current thinking and may evolve. The opinions here are subjective and there may be errors in facts, data, and logical reasoning. This is not financial advice, but feedback and discussions are welcomed.
The Next Wave of Narratives in the Crypto AI Sector
Before diving into the emerging trends in the crypto AI sector, let’s first examine the current leading narratives. Based on market cap, those with a valuation exceeding $1 billion include:
Computing PowerRender Network ($RNDR): holding circulating market cap of $3.85 billion, Akash: with a circulating market cap of $1.2 billionIO.NET: recently valued at $1 billion in its latest financing round.Algorithm NetworksBittensor ($TAO): Boast a circulating market cap of $2.97 billion.AI AgentsFetch.ai ($FET): reaches a pre-merger circulating market cap of $2.1 billion
*Data Updated Time: May 24, 2024.
Beyond the fields mentioned above, which AI sector will produce the next project with a market cap exceeding $1 billion?
I believe this can be speculated from two perspectives: the “industrial supply side” narrative and the “GPT moment” narrative.
Examining The Opportunities in The Energy and Data Field from The Perspective of Industrial Supply Side
From the perspective of the industrial supply side, four key driving forces behind AI development are:
Algorithms: High-quality algorithms can execute training and inference tasks more efficiently.Computing Power: Both model training and inference demand substantial computing power provided by GPU hardware. This requirement represents a major industrial bottleneck, with the current chip shortage driving up prices for mid-to-high-end chips.Energy: AI data centers require significant energy consumption. Beyond the electricity needed for GPUs to perform computational tasks, substantial energy is also needed for cooling the GPUs. In large data centers, cooling systems alone account for about 40% of total energy consumption.Data: Enhancing the performance of large models necessitates expanding training parameters, leading to a massive demand for high-quality data.
Regarding the four industrial driving forces mentioned above, the algorithm and computing power sectors already have crypto projects with circulating market cap exceeding $1 billion. However, the energy and data sectors have yet to see projects reach similar market caps.
Actually, shortages in the supply of energy and data may soon emerge, potentially becoming the next industry hotspots and driving the surge of related projects in the crypto space.
Let’s begin with energy part.
On February 29, 2024, Elon Musk remarked at the Bosch ConnectedWorld 2024 conference, “I predicted the chip shortage more than a year ago, and the next shortage will be electricity. I think next year you will see that they just can’t find enough electricity to run all the chips.”
According to specific data, the Stanford University Institute for Human-Centered Artificial Intelligence, led by Fei-Fei Li, publishes the “AI Index Report” annually. In their 2022 report on the AI industry for 2021, the research group estimated that AI energy consumption that year accounted for only 0.9% of global electricity demand, putting limited pressure on energy and the environment. However, in 2023, the International Energy Agency (IEA) summarized 2022 by stating that global data centers consumed approximately 460 terawatt-hours (TWh) of electricity, accounting for 2% of global electricity demand. They also predicted that by 2026, global data center energy consumption will be at least 620 TWh, potentially reaching up to 1050 TWh.
In reality, the International Energy Agency’s estimates remain conservative, as numerous AI projects poised to launch will demand significantly more energy than anticipated in 2023. 
For example, Microsoft and OpenAI are planning the Stargate project. This ambitious initiative is set to commence in 2028 and be completed around 2030. The project aims to build a supercomputer equipped with millions of dedicated AI chips, providing OpenAI with unprecedented computing power to advance its research in artificial intelligence, particularly large language models. The estimated cost of this project exceeds $100 billion, which is 100 times the cost of current large data centers.
The energy consumption for the Stargate project alone is expected to reach 50 TWh.
As a result, OpenAI’s founder Sam Altman stated at the Davos Forum this January: “Future artificial intelligence will require energy breakthroughs, as the electricity consumed by AI will far exceed expectations.”
Following computing power and energy, the next major shortage in the rapidly growing AI industry is likely to be data.
In fact, the shortage of high-quality data necessary for AI has already become a reality.
Through the ongoing evolution of GPT, we have largely grasped the pattern of enhancing the capabilities of large language models—by expanding model parameters and training data, the capabilities of these models can be exponentially increased. This process shows no immediate technical bottleneck.
However, high-quality and publicly available data are likely to become increasingly scarce in the future. AI products may face supply-demand conflicts similar to those experienced with chips and energy.
Firstly, there is an increase in disputes over data ownership.
On December 27, 2023, The New York Times filed a lawsuit against OpenAI and Microsoft in the U.S. District Court, alleging that they used millions of its articles without permission to train the GPT model. The New York Times is seeking billions of dollars in statutory and actual damages for the “illegal copying and use of uniquely valuable works” and is demanding the destruction of all models and training data that include its copyrighted materials.
At the end of March 2024, The New York Times issued a new statement, expanding its accusations beyond OpenAI to include Google and Meta. The statement claimed that OpenAI had used a speech recognition tool called Whisper to transcribe a large number of YouTube videos into text, which was then used to train GPT-4. The New York Times argued that it has become common practice for large companies to employ underhanded tactics in training their AI models. They also pointed out that Google is engaged in similar practices, converting YouTube video content into text for their model training, essentially infringing on the rights of video content creators.
The lawsuit between The New York Times and OpenAI, dubbed the first “AI copyright case,” is unlikely to be resolved quickly due to its complexity and the profound impact it could have on the future of content and the AI industry. One potential outcome is an out-of-court settlement, with deep-pocketed Microsoft and OpenAI paying a significant amount in compensation. However, future disputes over data copyright will inevitably drive up the overall cost of high-quality data.
Furthermore, Google, as the world’s largest search engine, has been reported to be considering charging fees for its search services—not for the general public, but for AI companies.

Source: Reuters

Google’s search engine servers hold vast amounts of content—essentially, all the content that has appeared on web pages since the 21st century. AI-driven search products, such as Perplexity and Kimi and Meta Sota developed by Chinese companies, process the data retrieved from these searches through AI and then deliver it to users. Introducing charges for AI companies to access search engine data will undoubtedly raise the cost of obtaining data.
Furthermore, AI giants are not just focusing on public data; they are also targeting non-public internal data.

Photobucket, a long-established image and video hosting website, once boasted 70 million users and nearly half of the U.S. online photo market share in the early 2000s. However, with the rise of social media, Photobucket’s user base has significantly dwindled, now standing at only 2 million active users, each paying a steep annual fee of $399. According to its user agreement and privacy policy, accounts inactive for more than a year are reclaimed, granting Photobucket the right to use the uploaded images and videos. Photobucket’s CEO, Ted Leonard, disclosed that their 1.3 billion photos and videos are extremely valuable for training generative AI models. He is currently negotiating with several tech companies to sell this data, with prices ranging from 5 cents to 1 dollar per photo and more than 1 dollar per video. Leonard estimates that Photobucket’s data could be worth over 1 billion dollars.
The research team EPOCH, which specializes in AI development trends, published a report titled “Will we run out of data? An analysis of the limits of scaling datasets in Machine Learning.” This report, based on the 2022 usage of data in machine learning and the generation of new data, while also considering the growth of computing resources, concluded that high-quality text data could be exhausted between February 2023 and 2026, and image data might run out between 2030 and 2060. Without significant improvements in data utilization efficiency or the emergence of new data sources, the current trend of large machine learning models that depend on massive datasets could slow down.
Considering the current trend of AI giants buying data at high prices, it seems that free, high-quality text data has indeed run dry, validating EPOCH’s prediction from two years ago. 
Concurrently, solutions to the “AI data shortage” are emerging, specifically AI-data-as-a-service.
Defined.ai is one such company that offers customized, high-quality real data for AI companies. 

Examples of Data Types on Defined.ai

The business model of Defined.ai works as follows: AI companies specify their data requirements, such as needing images with a certain resolution quality, free from blurriness and overexposure, and with authentic content. Companies can also request specific themes based on their training tasks, like nighttime photos of traffic cones, parking lots, and signposts to enhance AI’s night scene recognition. The public can accept these tasks, upload their photos, which are then reviewed by Defined.ai. Approved images are paid for, typically $1-2 per high-quality image, $5-7 per short video clip, and $100-300 for a high-quality video over 10 minutes. Text is compensated at $1 per thousand words, with task completers earning about 20% of the fees. This approach to data provision could become a new crowdsourcing business akin to “data labeling.”
Global task distribution, economic incentives, data asset pricing, circulation, and privacy protection, with everyone able to participate, sound very much like a business model suited to the Web3 paradigm.
Analyzing The Crypto + AI Projects from The Perspective of Industrial Supply
The attention generated by the chip shortage has extended into the crypto industry, positioning decentralized computing power as the most popular and highest-valued AI sector to date. 
If the supply and demand conflicts in the AI industry for energy and data become acute in the next 1-2 years, what narrative-related projects are currently present in the crypto industry?
Let’s start with energy-concept projects. 
Currently, energy projects listed on major centralized exchanges (CEX) are very scarce, with Power Ledger and its native token $POWR being the sole example.
Power Ledger was established in 2017 as a blockchain-based comprehensive energy platform aimed at decentralizing energy trading. It promotes direct electricity trading among individuals and communities, supports the widespread adoption of renewable energy, and ensures transaction transparency and efficiency through smart contracts. Initially, Power Ledger operated on a consortium chain adapted from Ethereum. In the second half of 2023, Power Ledger updated its whitepaper and launched its own comprehensive public chain, based on Solana’s technical framework, to handle high-frequency microtransactions in the distributed energy market. Power Ledger’s primary business areas currently include:
Energy Trading: Enabling users to buy and sell electricity directly in a peer-to-peer way, particularly from renewable sources.Environmental Product Trading: Facilitating the trading of carbon credits and renewable energy certificates, as well as financing based on environmental products.Public Chain Operations: Attracting application developers to build on the Power Ledger blockchain, with transaction fees paid in $POWR tokens.
The current circulating market cap of the Power Ledger is $170 million, with a fully diluted market cap of $320 million.
In comparison to energy-concept crypto projects, there is a richer variety of targets in the data sector.
Listed below are the data sector projects I am currently following, which have been listed on at least one major CEX, such as Binance, OKX, or Coinbase, arranged by fully diluted valuation (FDV) from low to high:
1. Streamr ($DATA )
Streamr’s value proposition is to build a decentralized real-time data network where users can freely trade and share data while retaining full control over their own information. Through its data marketplace, Streamr aims to enable data producers to sell data streams directly to interested consumers, eliminating the need for intermediaries, thus reducing costs and increasing efficiency.

Source: https://streamr.network/hub/projects

In real-world applications, Streamr has collaborated with another Web3 vehicle hardware project, DIMO, to collect data such as temperature and air pressure through DIMO hardware sensors installed in vehicles. This data is then transmitted as weather data streams to organizations that need it.
Unlike other data projects, Streamr focuses more on IoT and hardware sensor data. Besides the DIMO vehicle data, other notable projects include real-time traffic data streams in Helsinki. Consequently, Streamr’s token, $DATA , experienced a significant surge, doubling its value in a single day during the peak of the Depin concept last December. 
Currently, Streamr’s circulating market cap is $44 million, with a fully diluted market cap of $58 million.
2. Covalent ($CQT)
Unlike other data projects, Covalent focuses on providing blockchain data. The Covalent network reads data from blockchain nodes via RPC, processes and organizes it, and creates an efficient query database. This allows Covalent users to quickly retrieve the information they need without performing complex queries directly on blockchain nodes. Such services are referred to as “blockchain data indexing.”
Covalent primarily serves enterprise customers, including various DeFi protocols, and many centralized crypto companies such as Consensys (the parent company of MetaMask), CoinGecko (a well-known crypto asset tracking site), Rotki (a tax tool), and Rainbow (a crypto wallet). Additionally, traditional financial industry giants like Fidelity and Ernst & Young are also among Covalent’s clients. According to Covalent’s official disclosures, the project’s revenue from data services has already surpassed that of the leading project in the same field, The Graph.
The Web3 industry, with its integrated, transparent, authentic, and real-time on-chain data, is poised to become a high-quality data source for specialized AI scenarios and specific “small AI models.” Covalent, as a data provider, has already started offering data for various AI scenarios and has introduced verifiable structured data tailored for AI applications.

Source: Solutions on Covalent

For instance, Covalent provides data for the on-chain smart trading platform SmartWhales, which uses AI to identify profitable trading patterns and addresses. Entendre Finance leverages Covalent’s structured data, processed by AI technology for real-time insights, anomaly detection, and predictive analytics.
Currently, the main application scenarios for Covalent’s on-chain data services are predominantly in the financial field. However, as Web3 products and data types continue to diversify, the use cases for on-chain data are expected to expand further.
The circulating market cap of Covalent is $150 million, with a fully diluted market cap of $235 million, offering a noticeable valuation advantage compared to The Graph, a leading project in the blockchain data indexing sector.
3. Hivemapper ($Honey)
Among all data types, video data typically commands the highest price. Hivemapper can provide AI companies with both video and map information. Hivemapper is a decentralized global mapping project that aims to create a detailed, dynamic, and accessible map system through blockchain technology and community contributions. Participants capture map data using dashcams and add it to the open-source Hivemapper data network, earning $HONEY tokens as rewards for their contributions. To enhance network effects and reduce interaction costs, Hivemapper is built on Solana.
Hivemapper was founded in 2015 with the original vision of creating maps using drones. However, this approach proved difficult to scale, leading the company to shift towards using dashcams and smartphones to capture geographic data, thereby reducing the cost of global map creation.
Compared to street view and mapping software like Google Maps, Hivemapper leverages an incentive network and crowdsourcing model to more efficiently expand map coverage, maintain the freshness of real-world map data, and enhance video quality.
Before the surge in AI demand for data, Hivemapper’s main customers included the autonomous driving departments of automotive companies, navigation service providers, governments, insurance companies, and real estate firms. Today, Hivemapper can provide extensive road and environmental data to AI and large models through APIs. By continuously updating image and road feature data streams, AI and ML models will be better equipped to translate this data into enhanced capabilities, enabling them to perform tasks related to geographic location and visual judgment more effectively.

Source: Hivemapper Blog

Currently, the circulating market cap of $Honey, the  native token of Hivemapper, is $120 million, with a fully diluted market cap of $496 million. 
Besides the aforementioned projects, other notable projects in the data sector include:
1. The Graph ($GRT ): With a circulating market cap of $3.2 billion and a fully diluted valuation (FDV) of $3.7 billion, The Graph provides blockchain data indexing services similar to Covalent.
2. Ocean Protocol ($OCEAN): Ocean Protocol has a circulating market cap of $670 million and an FDV of $1.45 billion. The project aims to facilitate the exchange and monetization of data and data-related services through its open-source protocol. Ocean Protocol connects data consumers with data providers, ensuring trust, transparency, and traceability in data sharing. The project is set to merge with Fetch.ai and SingularityNET, with the token converting to $ASI.
The Reappearance of the GPT Moment and the Advent of General Artificial Intelligence
In my view, the “AI sector” in the crypto industry truly began in 2023, the right year ChatGPT shocked the world. The rapid surge of crypto AI projects was largely driven by the “wave of enthusiasm” following the explosive growth of the AI industry.
Despite the continuous upgrades in capabilities with models like GPT-4 and GPT-turbo, and the impressive video creation abilities demonstrated by Sora, as well as the rapid development of large language models beyond OpenAI, it’s undeniable that the technological advancements in AI are causing diminishing cognitive shock to the public. People are gradually adopting AI tools, and large-scale job replacements have yet to materialize.
Will we witness another “GPT moment” in the future, a leap in development that shocks the public and makes them realize that their lives and work will be fundamentally changed?
This moment could be the arrival of general artificial intelligence (AGI).
AGI, or artificial general intelligence, refers to machines that possess human-like general cognitive abilities, capable of solving a wide range of complex problems, rather than being limited to specific tasks. AGI systems have high levels of abstract thinking, extensive background knowledge, comprehensive common-sense reasoning, causal understanding, and cross-disciplinary transfer learning abilities. AGI performs at the level of the best humans across various fields and, in terms of overall capability, completely surpasses even the most outstanding human groups.
In fact, whether depicted in science fiction novels, games, films, or through the public’s expectations following the rapid rise of GPT, society has long anticipated the emergence of AGI that surpasses human cognitive levels. In other words, GPT itself is a precursor to AGI, a harbinger of general artificial intelligence.
The reason GPT has such a profound industrial impact and psychological shock is that its deployment and performance have far exceeded public expectations. People did not anticipate that an AI system capable of passing the Turing test would arrive so quickly and with such impressive capabilities.
In fact, artificial general intelligence (AGI) may once again create a “GPT moment” within the next 1-2 years: just as people are becoming accustomed to using GPT as an assistant, they may soon discover that AI has evolved beyond merely being an assistant. It could independently tackle highly creative and challenging tasks, including solving problems that have stumped top human scientists for decades.
On April 8th of this year, Elon Musk was interviewed by Nicolai Tangen, the Chief Investment Officer of Norway’s sovereign wealth fund, and he discussed the timeline for the emergence of AGI. 
Musk stated, “If we define AGI as being smarter than the smartest humans, I think it is very likely to appear by 2025.”
According to Elon Musk’s prediction, it would take at most another year and a half for AGI to arrive. However, he added a condition: “provided that electricity and hardware can keep up.”
The benefits of AGI’s arrival are obvious.
It means that human productivity will make a significant leap forward, and many scientific problems that have stumped us for decades will be resolved. If we define “the smartest humans” as Nobel Prize winners, it means that, provided we have enough energy, computing power, and data, we could have countless tireless “Nobel laureates” working around the clock to tackle the most challenging scientific problems.
However, Nobel Prize winners are not as rare as one in hundreds of millions. Their abilities and intellect are often at the level of top university professors. However, due to probability and luck, they chose the right direction, persisted, and achieved results. Many of their equally capable peers might have won Nobel Prizes in a parallel universe of scientific research. Unfortunately, there are still not enough top university professors involved in scientific breakthroughs, so the speed of “exploring all the correct directions in scientific research” remains very slow.
With AGI, and given sufficient energy and computing power, we could have an unlimited number of “Nobel laureate-level” AGIs conducting in-depth exploration in any potential direction for scientific breakthroughs. The speed of technological advancement would increase exponentially. This acceleration would lead to a hundredfold increase in resources we currently consider expensive and scarce over the next 10 to 20 years, such as food production, new materials, medicines, and high-quality education. The cost of acquiring these resources would decrease dramatically. We would be able to support a larger population with fewer resources, and per capita wealth would increase rapidly.

Global GDP Trend Made by World Bank

This might sound somewhat sensational, so let’s consider two examples. These examples were also used in my previous research report on IO.NET:
In 2018, Nobel Laureate in Chemistry, Frances Arnold, said during her award ceremony, “Today we can for all practical purposes read, write, and edit any sequence of DNA, but we cannot compose it. ” Fast forward five years to 2023, a team of researchers from Stanford University and Salesforce Research, an AI-focused startup, made a publication in “Nature Biotechnology.” Utilizing a large language model refined from GPT-3, they generated an entirely new catalog of 1 million proteins. Among these, they discovered two proteins with distinct structures, both endowed with antibacterial function, potentially paving the way for new bacterial resistance strategies beyond traditional antibiotics. This signifies a monumental leap in overcoming the hurdles of protein creation with AI’s assistance.Before this, the artificial intelligence algorithm AlphaFold predicted the structures of nearly all 2.14 billion protein types on Earth within 18 months—a milestone that amplifies the achievements of structural biologists throughout history by several magnitudes.
The transformation is on the way, and the arrival of AGI will further accelerate this process.
However, the arrival of AGI also presents enormous challenges.
AGI will not only replace a large number of knowledge workers, but also those in physical service industries, which are currently considered to be “less impacted by AI.” As robotic technology matures and new materials lower production costs, the proportion of jobs replaced by machines and software will rapidly increase.
When this happens, two issues that once seemed very distant will quickly surface:
The employment and income challenges of a large unemployed populationHow to distinguish between AI and humans in a world where AI is ubiquitous
Worldcoin and Worldchain is attempting to provide solutions by implementing a universal basic income (UBI) system to ensure basic income for the public, and using iris-based biometrics to distinguish between humans and AI.
In fact, UBI is not just a theoretical concept; it has been tested in real-world practice. Countries such as Finland and England have conducted UBI experiments, while political parties in Canada, Spain, and India are actively proposing and promoting similar initiatives.
The advantage of using a biometric identification and blockchain model for UBI distribution lies in its global reach, providing broader coverage of the population. Furthermore, the user network expanded through income distribution can support other business models, such as financial services (DeFi), social networking, and task crowdsourcing, creating synergy within the network’s commercial ecosystem.
One of the notable projects addressing the impact of AGI’s arrival is Worldcoin ($WLD), with a circulating market cap of $1.03 billion and a fully diluted market cap of $47.2 billion.
Risks and Uncertainties on Crypto AI Narratives
Unlike many research reports previously released by Mint Ventures, this article contains a significant degree of subjectivity in its narrative forecasting and predictions. Readers should view the content of this article as a speculative discussion rather than a forecast of the future. The narrative forecasts mentioned above face numerous uncertainties that could lead to incorrect assumptions. These risks or influencing factors include but are not limited to:
Energy Risk: Rapid Decrease in Energy Consumption Due to GPU Upgrades
Despite the surging energy demand for AI, chip manufacturers like NVIDIA are continually upgrading their hardware to deliver higher computing power with lower energy consumption. For instance, in March 2024, NVIDIA released the new generation AI computing card GB200, which integrates two B200 GPUs and one Grace CPU. Its training performance is four times that of the previous mainstream AI GPU H100, and its inference performance is seven times that of the H100, while requiring only one-quarter of the energy consumption of the H100. Nonetheless, the appetite for AI-driven power continues to grow. With the decrease in unit energy consumption and the further expansion of AI application scenarios and demand, the total energy consumption might actually increase.
Data Risk: Project Q* and “Self-Generated Data”
There is a rumored project within OpenAI known as “Q*,” mentioned in internal communications to employees. According to Reuters, citing insiders at OpenAI, this could represent a significant breakthrough on OpenAI’s path to achieving superintelligence or artificial general intelligence (AGI). Q* is rumored to solve previously unseen mathematical problems through abstraction and generate its own data for training large models, without needing real-world data input. If this rumor is true, the bottleneck of large AI model training being constrained by the lack of high-quality data would be eliminated.
AGI Arrival: OpenAI’s Concerns
Whether AGI will truly arrive by 2025, as Musk predicts, remains uncertain, but it is only a matter of time. Worldcoin, as a direct beneficiary of the AGI narrative, faces its biggest concern from OpenAI, given that it is widely regarded as the “shadow token of OpenAI.”
In the early hours of May 14, OpenAI presented the latest performance of GPT-4o and 19 other versions of large language models in comprehensive task scores at their Spring New Product Launch. According to the table, GPT-4o scored 1310, which visually appears significantly higher than the others. However, in terms of total score, it is only 4.5% higher than the second-place GPT-4 turbo, 4.9% higher than Google’s Gemini 1.5 Pro in fourth place, and 5.1% higher than Anthropic’s Claude3 Opus in fifth place.

Since GPT-3.5 first stunned the world, only a little over a year has passed, and OpenAI’s competitors have already closed the gap significantly (despite GPT-5 not yet being released, which is expected to happen this year). The question of whether OpenAI can maintain its industry-leading position in the future is becoming increasingly uncertain. If OpenAI’s leading advantage and dominance are diluted or even surpassed, then the narrative value of Worldcoin as OpenAI’s shadow token will also diminish.
In addition to Worldcoin’s iris authentication solution, more and more competitors are entering the market. For instance, the palm scan ID project Humanity Protocol has recently completed a new funding round, raising $30 million at a $1 billion valuation. LayerZero Labs has also announced that it will operate on Humanity and join its validator node network, using ZK proofs to authenticate credentials.
Conclusion
In conclusion, while I have extrapolated potential future narratives for the crypto AI sector, it is important to recognize that it differs from native crypto sectors like DeFi. It is largely a product of the AI hype spilling over into the crypto world. Many of the current projects have not yet proven their business models, and many projects are more like AI-themed memes (e.g., $RNDR resembles an NVIDIA meme, Worldcoin resembles an OpenAI meme). Readers should approach this cautiously.

By Alex Xu, Research Partner at Mint Ventures
Introduction
In our last report, we mentioned that compared to the previous two cycles, the current cryptocurrency bull run is missing the new business models and asset narratives. Artificial Intelligence (AI) is one of the novel narratives in the Web3 space this cycle. This article delves into the hot AI project of the year, IO.NET, and organizes thoughts on the following two questions:
The necessity of AI+Web3 in the commercial landscapeThe necessity and challenges of deploying a decentralized computing network
I will organize key information about the representative project in the decentralized AI computing network: IO.NET, including product design, competitive landscape, and project background. I will also speculate on the project’s valuation metrics.
The insights on The Business Logic Behind The Convergence of AI and Web3 part draw inspiration from “The Real Merge” by Michael Rinko, a research analyst at Delphi Delphi. This analysis assimilates and references ideas from his work, highly recommended for further reading The Real Merge.
Please note that this article reflects my current thinking and may evolve. The opinions here are subjective and there may be errors in facts, data, and logical reasoning. This is not financial advice, but feedback and discussions are welcomed.
The Business Logic Behind The Convergence of AI and Web3
2023: The “Annus Mirabilis” for AI
Reflecting on the annals of human development, it’s clear that technological breakthroughs catalyze profound transformations – from daily life to the industrial landscapes and the march of civilization itself.
In human history, there are two significant years, namely 1666 and 1905, which are now celebrated as the “Annus Mirabilis” in the history of science.
The year 1666 earned its title due to Isaac Newton’s cascade of scientific breakthroughs. In a single year, he pioneered the branch of physics known as optics, founded the mathematical discipline of calculus, and derived the law of gravitation, which is a foundational law of modern natural science. Any one of these contributions was foundational to the scientific development of humanity over the next century, significantly accelerating the overall progress of science.
The other landmark year is 1905, when a mere 26-year-old Einstein published four papers in quick succession in “Annalen der Physik,” covering the photoelectric effect, setting the stage for quantum mechanics; Brownian motion, providing a pivotal framework for stochastic process analysis; the theory of special relativity; and the mass-energy equivalence, encapsulated in the equation E=MC^2. Looking back, each of these papers is considered to surpass the average level of Nobel Prize-winning work in physics—a distinction Einstein himself received for his work on the photoelectric effect. These contributions collectively propelled humanity several strides forward in the journey of civilization.
The year 2023, recently behind us, is poised to be celebrated as another “Miracle Year,” thanks in large part to the emergence of ChatGPT.
Viewing 2023 as a “Miracle Year” in human technology history isn’t just about acknowledging the strides made in natural language processing and generation by ChatGPT. It’s also about recognizing a clear pattern in the advancement of large language models—the realization that by expanding model parameters and training datasets, we can achieve exponential enhancements in model performance. Moreover, it seems boundless in the short term, assuming computing power keeps pace.
This capability extends far beyond language comprehension and conversation generation; it can be widely applied across various scientific fields. Taking the application of large language models in the biological sector as an example: 
In 2018, Nobel Laureate in Chemistry, Frances Arnold, said during her award ceremony, “Today we can for all practical purposes read, write, and edit any sequence of DNA, but we cannot compose it. ” Fast forward five years to 2023, a team of researchers from Stanford University and Salesforce Research, an AI-focused startup, made a publication in “Nature Biotechnology.” Utilizing a large language model refined from GPT-3, they generated an entirely new catalog of 1 million proteins. Among these, they discovered two proteins with distinct structures, both endowed with antibacterial function, potentially paving the way for new bacterial resistance strategies beyond traditional antibiotics. This signifies a monumental leap in overcoming the hurdles of protein creation with AI’s assistance.Before this, the artificial intelligence algorithm AlphaFold predicted the structures of nearly all 2.14 billion protein types on Earth within 18 months—a milestone that amplifies the achievements of structural biologists throughout history by several magnitudes.
The integration of AI models promises to transform industries drastically. From the hard-tech realms of biotech, material science, and drug discovery to the cultural spheres of law and the arts, a transformative wave is set to reshape these fields, with 2023 marking the beginning of it all.
It’s widely acknowledged that the past century has witnessed an exponential rise in humanity’s ability to generate wealth. The swift advancement of AI technologies is expected to accelerate this process.

Global Total GDP Trend, Data Source: World Bank Group

Merging AI and Crypto
To grasp the inherent need for the fusion of AI and crypto, it’s insightful to look at how their distinct features complement each other.
The Symbiosis of AI and Crypto Features
AI is distinguished by three main qualities:
Stochasticity: AI is stochastic, with its content production mechanism being a difficult-to-replicate, enigmatic black box, making its outputs inherently stochastic.Resource Intensive: AI is a resource-intensive industry, requiring significant amounts of energy, chips, and computing power.Human-like Intelligence: AI is (soon to be) capable of passing the Turing test, making it increasingly difficult to distinguish between humans and AI.
※ On October 30, 2023, researchers from the University of California, San Diego, unveiled the Turing test scores for GPT-3.5 and GPT-4.0. The latter achieved a score of 41%, narrowly missing the pass mark of 50% by just 9 percentage points, with humans scoring 63% on the same test. The essence of this Turing test lies in how many participants perceive their chat partner to be human. A score above 50% indicates that a majority believes they are interacting with a human, not a machine, thereby deeming the AI to have successfully passed the Turing test as at least half of the people could not distinguish it from a human.
As AI paves the way for groundbreaking advancements in human productivity, it simultaneously introduces profound challenges to our society, specifically:
How to verify and control the stochasticity of AI, turning it into an advantage rather than a flawHow to bridge the vast requirements for energy and computing power that AI demandsHow to distinguish between humans and AI
Crypto and blockchain technology could offer the ideal solution to the challenges posed by AI, characterized by three key attributes:
Determinism: Operations are based on blockchain, code, and smart contracts, with clear rules and boundaries. Inputs lead to predictable outputs, ensuring a high level of determinism.Efficient Resource Allocation: The crypto economy has fostered a vast, global, and free market, enabling swift pricing, fundraising, and transfer of resources. The presence of tokens further accelerates market supply and demand alignment, rapidly achieving critical mass through incentivization.Trustlessness: With public ledgers and open-source code, anyone can easily verify operations, creating a “trustless” system. Furthermore, Zero-Knowledge (ZK) technology further ensures that privacy is maintained during these verification processes.
To demonstrate the complementarity between AI and the crypto economy, let’s delve into three examples.
Example A: Overcoming Stochasticity with AI Agents Powered by the Crypto Economy
AI Agents are intelligent programs designed to perform tasks on behalf of humans according to their directives, with Fetch.AI being a notable example in this domain. Imagine we task our AI agent with executing a financial operation, such as “investing $1000 in BTC.” The AI agent could face two distinct scenarios:
Scenario 1: The agent is required to interact with traditional financial entities (e.g., BlackRock) to buy BTC ETFs, encountering many compatibility issues with centralized organizations, including KYC procedures, document verification, login processes, and identity authentication, all of which are notably burdensome at present.
Scenario 2: When operating within the native crypto economy, the process becomes simplified. The agent could directly carry out the transaction through Uniswap or a similar trading aggregator, employing your account to sign in and confirm the order, and consequently acquiring WBTC or other variants of wrapped BTC. This procedure is efficient and streamlined. Essentially, this is the function currently served by various Trading Bots, acting as basic AI agents with a focus on trading activities. With further development and integration of AI, these bots will fulfill more intricate trading objectives. For instance, they might monitor 100 smart money addresses on the blockchain, assess their trading strategies and success rates, allocate 10% of their funds to copy their trades over a week, halt operations if the returns are unfavorable, and deduce the potential reasons for these strategies.
AI thrives within blockchain systems, fundamentally because the rules of the crypto economy are explicitly defined, and the system allows for permissionlessness. Operating under clear guidelines significantly reduces the risks tied to AI’s inherent stochasticity. For example, AI’s dominance over humans in chess and video games stems from the fact that these environments are closed sandboxes with straightforward rules. Conversely, advancements in autonomous driving have been more gradual. The open-world challenges are more complex, and our tolerance for AI’s unpredictable problem-solving in such scenarios is markedly lower.
Example B: Resource Consolidation via Token Incentives
The formidable global hash network backing BTC, boasting a current total hash rate of 576.70 EH/s, outstrips the cumulative computing power might of any country’s supercomputers. This growth is propelled by simple and fair incentives within the network.

BTC Hashrate Trend

Moreover, DePIN projects like Mobile, are exploring token incentives to cultivate a market on both the supply side and demand side to foster network effects. The forthcoming focus of this article, IO.NET, is a platform designed to aggregate AI computing power, hoping to unlock the latent potential of AI computing power through a token model.
Example C: Leveraging Open Source and ZK Proof to Differentiate Humans from AI While Protecting Privacy
Worldcoin, a Web3 project co-founded by OpenAI’s Sam Altman, employs a novel approach to identity verification. Utilizing a hardware device known as Orb, it leverages human iris biometrics to produce unique and anonymous hash values via Zero-Knowledge (ZK) technology, differentiating humans from AI. In early March 2024, the Web3 art project Drip started to implement Worldcoin ID to authenticate real humans and allocate rewards.

Worldcoin has recently open-sourced its iris hardware, Orb, ensuring the security and privacy of biometric data.

Overall, due to the determinism of code and cryptography, the resource circulation and fundraising advantages brought by permissionless and token-based mechanisms, alongside the trustless nature based on open-source code and public ledgers, the crypto economy has become a significant potential solution for the challenges that human society faces with AI.
The most immediate and commercially demanding challenge is the extreme thirst for computational resources required by AI products, primarily driven by a substantial need for chips and computing power.
This is also the main reason why distributed computing power projects have led the gains during this bull market cycle in the overall AI sector.
The Business Imperative for Decentralized Computing
AI requires substantial computational resources, necessary for both model training and inference tasks.
It has been well-documented in the training of large language models that once the scale of data parameters is substantial, these models begin to exhibit unprecedented capabilities. The exponential improvements seen from one ChatGPT generation to the next are driven by an exponential growth in computational demands for model training.
Research from DeepMind and Stanford University indicates that across various large language models, when handling different tasks—be it computation, Persian question answering, or natural language understanding—the models only approximate random guessing unless the training involves significantly scaled-up model parameters (and by extension, computational loads). Any task’s performance remains nearly random until computational efforts reach 10^22 FLOPs. Beyond this critical threshold, task performance improves dramatically across any language model.
*FLOPs refer to floating-point operations per second, a measure of computing performance.

Emergent Abilities of Large Language Models

Emergent Abilities of Large Language Models

The principle of “achieving miracles with great effort” in computing power, both in theory and verified in practice, inspired OpenAI’s founder, Sam Altman, to propose an ambitious plan to raise $7 trillion. This fund is intended to establish a chip factory that would exceed the current capabilities of TSMC by tenfold (estimated to cost $1.5 trillion), with the remaining funds allocated for chip production and model training.
In addition to the computational demands of training AI models, the inference processes also require considerable computing power, albeit less than training. This ongoing need for chips and computational resources has become a standard reality for players in the AI field.
In contrast to centralized AI computing providers like Amazon Web Services, Google Cloud Platform, and Microsoft’s Azure, decentralized AI computing offers several compelling value propositions:
Accessibility: Gaining access to computing chips through services like AWS, GCP, or Azure typically requires weeks, and the most popular GPU models are frequently out of stock. Additionally, consumers are usually bound by lengthy, rigid contracts with these large corporations. Distributed computing platforms, on the other hand, provide flexible hardware options with enhanced accessibility.Cost Efficiency: By leveraging idle chips and incorporating token subsidies from network protocols for chip and computing power providers, decentralized computing networks can offer computing power at reduced costs.Censorship Resistance: The supply of cutting-edge chips is currently dominated by major technology companies, and with the United States government ramping up scrutiny of AI computing services, the ability to obtain computing power in a decentralized, flexible, and unrestricted manner is increasingly becoming a clear necessity. This is a core value proposition of web3-based computing platforms.
If fossil fuels were the lifeblood of the Industrial Age, then computing power may well be the lifeblood of the new digital era ushered in by AI, making the supply of computing power an infrastructure for the AI age. Similarly to how stablecoins have emerged as a vigorous derivative of fiat currency in the Web3 epoch, might the distributed computing market evolve into a burgeoning segment within the fast-expanding AI computing market?
This is still an emerging market, and much remains to be seen. However, several factors could potentially drive the narrative or market adoption of decentralized computing:
Persistent GPU Supply Challenges: The ongoing supply constraints for GPUs might encourage developers to explore decentralized computing platforms.Regulatory Expansion: Accessing AI computing services from major cloud platforms involves thorough KYC processes and scrutiny. This could lead to greater adoption of decentralized computing platforms, particularly in areas facing restrictions or sanctions.Token Price Incentives: Increases in token prices during bull markets could enhance the value of subsidies offered to GPU providers by platforms, attracting more vendors to the market, increasing its scale, and lowering costs for consumers.
At the same time, the challenges faced by decentralized computing platforms are also quite evident:
Technical and Engineering ChallengesProof of Work Issues: The computations in deep learning models, due to the hierarchical structure where the output of each layer is used as the input for the next, verifying the validity of computations requires executing all prior work, which is neither simple nor efficient. To tackle this, decentralized computing platforms need to either develop new algorithms or employ approximate verification techniques that offer probabilistic assurance of results, rather than absolute determinism.Parallelization Challenges: Decentralized computing platforms draw upon a diverse array of chip suppliers, each typically offering limited computing power. Completing the training or inference tasks of an AI model by a single chip supplier quickly is nearly impossible. Therefore, tasks must be decomposed and distributed using parallelization to shorten the overall completion time. This approach, however, introduces several complications, including how tasks are broken down (particularly complex deep learning tasks), data dependencies, and the extra connectivity costs between devices.Privacy Protection Issues: How can one ensure that the data and models of the client are not disclosed to the recipient of the tasks?
Regulatory Compliance ChallengesDecentralized computing platforms, due to their permissionless nature in the supply and demand markets, can appeal to certain customers as a key selling point. However, as AI regulatory frameworks evolve, these platforms may increasingly become targets of governmental scrutiny. Moreover, some GPU vendors are concerned about whether their leased computing resources are being used by sanctioned businesses or individuals.
In summary, the primary users of decentralized computing platforms are mostly professional developers or small to medium-sized enterprises. Unlike cryptocurrency and NFT investors, these clients prioritize the stability and continuity of the services provided by the platforms, and pricing is not necessarily their foremost concern. Decentralized computing platforms have a long journey to go before they can win widespread acceptance from this discerning user base.
Next, we will delve into the details and perform an analysis of IO.NET, a new decentralized computing power project in this cycle. We will also compare it with similar projects to estimate its potential market valuation after its launch.
Decentralized AI Computing Platform: IO.NET
Project Overview
IO.NET is a decentralized computing network that has established a two-sided market around chips. On the supply side, there are globally distributed computing powers, primarily GPUs, but also CPUs and Apple’s integrated GPUs (iGPUs). The demand side consists of AI engineers seeking to complete AI model training or inference tasks.
The official IO.NET website states their vision:
Our MissionPutting together one million GPUs in a DePIN – decentralized physical infrastructure network.
Compared to traditional cloud AI computing services, this platform highlights several key advantages:
Flexible Configuration: AI engineers have the freedom to select and assemble the necessary chips into a “cluster” tailored to their specific computing tasks.Rapid Deployment: Unlike the lengthy approval and wait times associated with centralized providers such as AWS, deployment on this platform can be completed in just seconds, allowing for immediate task commencement.Cost Efficiency: The service costs are up to 90% lower than those offered by mainstream providers.
Furthermore, IO.NET plans to launch additional services in the future, such as an AI model store.
Product Mechanism and Business Metrics
Product Mechanisms and Deployment Experience
Similar to major platforms like Amazon Cloud, Google Cloud, and Alibaba Cloud, IO.NET offers a computing service known as IO Cloud. This service operates through a distributed and decentralized network of chips that supports the execution of Python-based machine-learning code for AI and machine-learning applications.
The basic business module of IO Cloud is called Clusters——self-coordinating groups of GPUs designed to efficiently handle computing tasks. AI engineers have the flexibility to customize the clusters to meet their specific needs.
The user interface of IO.NET is highly user-friendly. If you’re looking to deploy your own chip cluster for AI computing tasks, simply navigate to the Clusters page on the platform, where you can effortlessly configure your desired chip cluster according to your requirements.

Cluster Page on IO.NET

First, you need to select your cluster type, with three options available:
General: Provides a general environment, suitable for early stages of a project where specific resource requirements are not yet clear.Train: A cluster designed specifically for the training and fine-tuning of machine learning models. This option provides additional GPU resources, higher memory capacity, and/or faster network connections to accommodate these intensive computing tasks.Inference: A cluster designed for low-latency inference and high-load work. In the context of machine learning, inference refers to using trained models to predict or analyze new datasets and provide feedback. Therefore, this option focuses on optimizing latency and throughput to support real-time or near-real-time data processing needs.
Next, you need to choose a supplier for your cluster. IO.NET has partnerships with Render Network and the Filecoin miner network, allowing users to select chips from IO.NET or other two networks as the supply source for their computing clusters. This effectively positions IO.NET as an aggregator (note: Filecoin services are temporarily offline). It’s worth noting that IO.NET currently has over 200,000 GPUs available online, while Render Network has over 3,700 GPUs available.
Following this, you’ll proceed to the hardware selection phase of your cluster. Presently, IO.NET lists only GPUs as the available hardware option, excluding CPUs or Apple’s iGPUs (M1, M2, etc.), with the GPUs primarily consisting of NVIDIA products.

Among the officially listed and available GPU hardware options, based on the data tested by me on the day,  the total number of online GPUs available within the IO.NET network was 206,001. The GPU with the highest availability was the GeForce RTX 4090, with 45,250 units, followed by the GeForce RTX 3090 Ti, with 30,779 units.
Furthermore, there are 7,965 units of the highly efficient A100-SXM4-80GB chip (each priced above $15,000) available online, which is more efficient for AI computing tasks such as machine learning, deep learning, and scientific computing.

The NVIDIA H100 80GB HBM3, which is designed from the ground up for AI (with a market price of over $40,000), delivers training performance that is 3.3 times greater and inference performance that is 4.5 times higher than the A100. Currently, there are 86 units available online.

Once the hardware type for the cluster has been chosen, users will need to specify further details such as the geographic location of the cluster, connectivity speed, the number of GPUs, and the duration.
Finally, IO.NET will calculate a detailed bill based on your selected options. As an illustration, consider the following cluster configuration:
Cluster Type: General16 A100-SXM4-80GB GPUsConnectivity tier: High SpeedGeographic location: United StatesDuration: 1 week
The total bill for this configuration is $3311.6, with the hourly rental price per card being $1.232.

The hourly rental price for a single A100-SXM4-80GB on Amazon Web Services, Google Cloud, and Microsoft Azure is $5.12, $5.07, and $3.67 respectively (data sourced from Cloud GPU Comparison, actual prices may vary depending on contract details).
Consequently, when it comes to cost, IO.NET offers chip computing power at prices much lower than those of mainstream providers. Additionally, the flexibility in supply and procurement options makes IO.NET an attractive choice for many users.
Business Overview
Supply Side
As of April 4th, 2024, official figures reveal that IO.NET had a total GPU supply of 371,027 units and a CPU supply of 42,321 units on the supply side. In addition, Render Network, as a partner, had an additional 9,997 GPUs and 776 CPUs connected to the network’s supply.

Data Source: io.net

At the time of writing, 214,387 of the GPUs integrated with IO.NET were online, resulting in an online rate of 57.8%. The online rate for GPUs coming from Render Network was 45.1%.
What does this data on the supply side imply?
To provide a benchmark, let’s bring in Akash Network, a more seasoned decentralized computing project.
Akash Network launched its mainnet as early as 2020, initially focusing on decentralized services for CPUs and storage. It rolled out a testnet for GPU services in June 2023 and subsequently launched the mainnet for decentralized GPU computing power in September of the same year.

Akash Network GPU Capacity

According to official data from Akash, even though the supply side has been growing continuously since the launch of its GPU network, the total number of GPUs connected to the network remains only 365.
When evaluating the volume of GPU supply, IO.NET vastly exceeds Akash Network, operating on a dramatically larger scale. IO.NET has established itself as the largest supply side in the decentralized GPU computing power sector.
Demand Side

From the demand side, IO.NET is still in the early stages of market cultivation, with a relatively small total volume of computation tasks being executed on its network. The majority of GPUs are online but idle, showing a workload percentage of 0%. Only four chip types—the A100 PCIe 80GB K8S, RTX A6000 K8S, RTX A4000 K8S, and H100 80GB HBM3—are actively engaged in processing tasks, and among these, only the A100 PCIe 80GB K8S is experiencing a workload above 20%.
The network’s official stress level reported for the day stood at 0%, indicating that a significant portion of the GPU supply is currently in an online but idle state.
Financially, IO.NET has accrued $586,029 in service fees to date, with $3,200 of that total generated on the most recent day.

Source: io.net

The financials concerning network settlement fees, both in terms of total and daily transaction volumes, align closely with those of Akash. However, it’s important to note that the bulk of Akash’s revenue is derived from its CPU offerings, with an inventory exceeding 20,000 CPUs.

Source: Akash Network Stats

Additionally, IO.NET has disclosed detailed data for AI inference tasks processed by the network. As of the latest report, the platform has successfully processed and validated over 230,000 inference tasks, though most of this volume stems from BC8.AI, a project sponsored by IO.NET.

Source: io.net

IO.NET’s supply side is expanding efficiently, driven by expectations surrounding an airdrop and a community event known as “Ignition.” This initiative has rapidly attracted a significant amount of AI computing power. On the demand side, however, expansion remains nascent with insufficient organic demand. The reasons behind this sluggish demand—whether due to uninitiated consumer outreach efforts or unstable service experiences leading to limited large-scale adoption—require further evaluation.
Given the challenges in quickly closing the gap in AI computing capabilities, many AI engineers and projects are exploring alternatives, potentially increasing interest in decentralized service providers. Moreover, IO.NET has not yet implemented economic incentives or activities to boost demand, and as the product experience continues to improve, the anticipated equilibrium between supply and demand holds promise for the future.
Team Background and Fundraising Overview
Team Profile
The core team of IO.NET initially focused on quantitative trading. Up until June 2022, they were engaged in creating institutional-level quantitative trading systems for equities and cryptocurrencies. Driven by the system backend’s demand for computing power, the team began exploring the potential of decentralized computing and ultimately focused on the specific issue of reducing the cost of GPU computing services.
Founder & CEO: Ahmad Shadid
Before founding IO.NET, Ahmad Shadid had worked in quantitative finance and financial engineering, and he is also a volunteer at the Ethereum Foundation.
CMO & Chief Strategy Officer: Garrison Yang
Garrison Yang officially joined IO.NET in March 2024. Before that, he was the VP of Strategy and Growth at Avalanche and is an alumnus of the University of California, Santa Barbara.
COO: Tory Green
Tory Green serves as the Chief Operating Officer of IO.NET. He was previously the COO of Hum Capital and the Director of Business Development and Strategy at Fox Mobile Group. He graduated from Stanford University.
IO.NET’s LinkedIn profile indicates that the team is headquartered in New York, USA, with a branch office in San Francisco, and employs over 50 staff members.
Funding Overview
IO.NET has only publicly announced one funding round—a Series A completed in March this year with a valuation of $1 billion, through which they successfully raised $30 million. This round was led by Hack VC, with participation from other investors including Multicoin Capital, Delphi Digital, Foresight Ventures, Animoca Brands, Continue Capital, Solana Ventures, Aptos, LongHash Ventures, OKX Ventures, Amber Group, SevenX Ventures, and ArkStream Capital.
Notably, the investment from the Aptos Foundation might have influenced the BC8.AI project’s decision to switch from using Solana for its settlement and accounting processes to the similarly high-performance Layer 1 blockchain, Aptos.
Valuation Estimation
According to previous statements by founder and CEO Ahmad Shadid, IO.NET is set to launch its token by the end of April 2024.
IO.NET has two benchmark projects that serve as references for valuation: Render Network and Akash Network, both of which are representative decentralized computing projects.
There are two principal methods to derive an estimate of IO.NET’s market cap: 
The Price-to-Sales (P/S) ratio, which compares the FDV to the revenue; FDV-to-Chip Ratio (M/C Ratio)
We will start by examining the potential valuation using the Price-to-Sales ratio:

Examining the price-to-sales ratio, Akash represents the conservative end of IO.NET’s estimated valuation spectrum, while Render provides a high-end benchmark, positing an FDV ranging from $1.67 billion to $5.93 billion.
However, given the updates to the IO.NET project, its more compelling narrative, coupled with its smaller initial market cap and a broader supply base, suggest its FDV could well surpass that of Render Network.
Turning to another valuation comparison perspective, namely the “FDV-to-Chip Ratio”.
In the context of a market where demand for AI computing power exceeds supply, the most crucial element of decentralized AI computing networks is the scale of GPU supply. Therefore, we can use the “FDV-to-Chip Ratio,” which is the ratio of the project’s fully diluted value to the number of chips within the network, to infer the possible valuation range of IO.NET, providing readers with a reference.

Utilizing the market-to-chip ratio to calculate IO.NET’s valuation range places us between $20.6 billion and $197.5 billion, with Render Network setting the upper benchmark and Akash Network the lower.
Enthusiasts of the IO.NET project might see this as a highly optimistic estimation of market cap.
It is important to consider the current vast number of chips online for IO.NET, stimulated by airdrop expectations and incentive activities. The actual online count of the supply after the project officially launches still requires observation. 
Overall, valuations derived from the price-to-sales ratio could offer more reliable insights.
IO.NET, built upon Solana and graced with the convergence of AI and DePIN, is on the cusp of its token launch. The anticipation is palpable as we stand by to witness the impact on its market cap post-launch.
Reference
The Real MergeUnderstanding the Intersection of Crypto and AI

By Lawrence Lee, Researcher at Mint Ventures

Introduction
Mint Ventures has always been keeping a keen eye on Web3 gaming. Although the once-popular Play-to-Earn model, brought by the previous bull market, has fallen out of the discussion—highlighted by the dramatic collapse of Axie Infinity and StepN as Ponzi schemes—their peak engagement levels showcased millions of daily active users, marking the crypto space’s first encounter with “Massive Adoption.” Unlike social products, another category with the potential for Massive Adoption, games naturally feature a richer and more complex economic ecosystem. This affords teams refined space and greater control to implement various taxation strategies, coupled with the immersive experiences and irrational consumption brought about by exquisite design, thereby more likely to maintain a relative balance in the ecosystem for a long time. Furthermore, Web3 gaming adeptly leverages crypto’s tokenization opportunities, leading to widespread investor optimism about its future.
Following the era of Axie and StepN, Web3 gaming has enjoyed the following favorable conditions:
The ongoing enhancement of infrastructures. In 2024, game developers are presented with an abundance of choices in blockchain technology. Whether opting for existing Layer1 solutions like Solana, Layer2 solutions like Arbitrum, employing one-click blockchain deployment services offered by platforms such as Avalanche Subnets and OP Stack, or embracing the trend towards modular blockchain for a custom design, developers now have access to a variety of efficient and cost-effective options. On the wallet front, both MPC and Abstract Account (AA) wallet technologies have reached commercial viability, effectively addressing the issue of private key management for ordinary users.Gradual Recovery of Market Conditions, notably spurred by the recent approval of Bitcoin ETFs, has ignited a robust rally across the crypto space, making crypto once again attract more attention from the general public. This provides a significant boost to the potential user base for Web3 game projects.
Compared to traditional Web2 games, Web3 games maintain clear competitive edges:
The lifecycle of a typical Web3 game, marked by “NFT sales – FT issuance – game launch,” provides various revenue streams through NFT royalties and FT transaction fees even before the game’s official launch. This model enables game development teams to start earning revenue from day one of their project, helping to balance out the lengthy development process and significant costs involved. Post-launch, the ability to levy fees across different aspects is far more flexible than in Web2 games. The prospect of earlier and more varied monetization strategies is an attraction for game development teams toward the Web3 space.Web3 gaming has yet to be dominated by powerful distributors, which means high user acquisition costs common in Web2 gaming are not a concern here. Put simply, Web3 gaming isn’t as fiercely competitive, presenting an open field ripe for development by talented teams.
We’ve observed a lot of skilled game development teams venturing into Web3 gaming. These teams are creating many games with excellent narratives, engaging gameplay, and high playability. The supply side of Web3 games has seen significant development, which also forms the favorable conditions of Web3 games.
Given these developments, Mint Ventures maintains its keen interest in Web3 gaming. Ultiverse is a game project that Mint Ventures has been continuously following since the previous bear market stage. Despite the downturn, Ultiverse has continued to build, constantly enriching its product matrix, actively enhancing its storytelling, and also possesses an excellent investment background. Recently, they have launched several airdrop activities aimed at attracting new users, which are worth keeping an eye on.
Disclosure: Mint Ventures participated in Ultiverse’s ElectricSheep NFT Builder Round and holds ElectricSheep NFTs.
Ultiverse Landscape
Ultiverse is a blockchain-based metaverse with deep integration with AI. Its architecture is divided into 4 layers:

Protocol Layer: Ultiverse uses the Bodhi Protocol as the foundation of the entire ecosystem. According to its official documents, the Bodhi Protocol employs large language models and Stable Diffusion to generate a variety of in-game content. This AI-driven approach helps to provide comprehensive support across the ecosystem by producing more intelligent non-player characters (NPCs) and enriching narrative backgrounds.
Infrastructure: Ultiverse abstracts a series of gaming infrastructures into SDKs, which will be available for developer utilization. These infrastructures include MPC wallets, AA wallets, native marketplaces, and a DID system. Moreover, its proprietary live streaming platform, Ultiverse Live, has captured the attention of 350,000 followers on Binance live, alongside receiving close to 40 million likes, offering substantial visibility for its collaborators. Additionally, Ultiverse’s infrastructure features its dedicated task platform, Mission Runner.
Core Assets: Ultiverse’s prime assets presently encompass the Electric Sheep NFT, Meta GF NFT, and World Fragment. 
Electric Sheep NFT, as the first asset of the Ultiverse ecosystem and one of its core assets, has a total supply of 7000. Launched in July 2022 at 0.5 ETH, its floor price now hovers around 2 ETH, providing holders with quadruple returns in ETH and octuple in USD, significantly strengthening its community foundation. Holders of Electric Sheep gain early access and boosted rewards across numerous Ultiverse ecosystem projects, in addition to being eligible for airdrops of Ultiverse’s governance token, $ULTC.

The Floor Price Trend of Electric Sheep NFT

The Meta GF NFT was issued at the end of 2022, positioned as an AI companion that supports customizable appearances, designed to join players in their explorations within the Ultiverse.
Meanwhile, the World Fragment NFT, pending release, is designated to be airdropped to Electric Sheep NFT holders. As detailed in official documents, players can merge fragments to forge unique worlds. Ownership of varied World NFTs can unlock distinct, AI-driven personal experiences in the game. This includes divergent storylines, characters, world objectives, and core conflicts, among other elements, suggesting that different NFTs pave the way for unique gameplay experiences.
Dapp, also known as “Micro Worlds” within the Ultiverse ecosystem, are divided into two categories: those in partnership with Ultiverse and those developed internally by Ultiverse. Partner Dapps includes the likes of the casual education simulation game Meta Merge and the upcoming racing game BAC on Blast. These partnerships extend beyond mere collaboration for traffic acquisition to encompass a deeper level of asset interoperability. For example, Meta Merge once airdropped its token $MMM to Electric Sheep holders, and Meta Merge’s NFT holders can also receive a portion of the upcoming $ULTC airdrop. The other category consists of Dapps developed in-house by Ultiverse, including Ulti-pilot, Terminus, and Endless Loop, which were just launched at the end of February.
Launched in March, Terminus is a pivotal platform within the Ultiverse ecosystem, built using the cutting-edge UE5 engine, and is available in both PC and VR versions. Official documentation reveals Terminus as a distinctive virtual world where, different from average games, all NPCs are powered by sophisticated AI. These NPCs can engage players in diverse, highly interactive dialogues and interactions, which could significantly influence the gameplay and its outcomes. Furthermore, the game’s characters are also AI-operated, allowing for their continuous evolution even when the player is offline. This feature cements Terminus as an eternally active game universe.

Terminus Gameplay

Ulti-pilot was launched in February and serves as the gateway for users to experience the Ultiverse world. Users can dispatch their characters to explore the Ultiverse world and can earn substantial $Soul incentives, which are redeemable for the governance token, $ULTC, in the future.
Endless Loop is an MMORPG game within the Ultiverse, also built upon the UE5 engine. The game has not yet been launched.
The product structure of Ultiverse reveals that it aspires to be more than a game; it aims to evolve into an AI-driven metaverse platform. This ambition entails connecting with a vast user base while simultaneously engaging with many Web3 projects, thereby bringing its Meta-Fi concept to fruition.
In the future roadmap, Ultiverse is poised to focus on the comprehensive rollout of its products in 2024, which includes launching both the PC and VR editions of Terminus and fostering collaborations with additional gaming partners. In the latter half of 2024, they aim to introduce a Game Launchpad and initiate their Rollup. This approach is designed to enhance support for their gaming collaborators and to further solidify their vision of a Web3 gaming ecosystem.
Financing and Partners
Ultiverse has completed three rounds of financing, with an impressive lineup of investors:
On March 18, 2022, Ultiverse completed a $4.5 million seed round financing at a valuation of $50 million. This round was co-led by Binance Labs and Defiance Capital, with participation from Three Arrows Capital and SkyVision Capital.
Following closely on March 25, 2022, Binance Labs made an additional investment of $5 million in Ultiverse, executed through an equity purchase. Nicole Zhang, the director at Binance Labs, emphasized that this investment aims to ensure that Binance Labs retains a voice in the strategic direction of Ultiverse’s team moving forward.
On February 14, 2024, Ultiverse successfully closed a strategic funding round, securing $4 million on a valuation of $150 million. The round was led by IDG Capital, with notable contributions from many leading investors such as Animoca Brands, Polygon Ventures, MorningStar Ventures, Taiko, ZetaChain, Manta Network, and DWF Ventures. This round was also marked by the engagement of prominent NFT influencers and KOLs, including Dingaling, Grail.eth, Christian2022.eth, and 0xSun, among others.

Ultiverse’s Investors

Overall, Ultiverse boasts a remarkable investment pedigree, featuring top-tier VCs, market makers, exchanges, public blockchains, and influencers, all of which can support Ultiverse’s multifaceted development.
Frank, the founder of Ultiverse, graduated from Carnegie Mellon University and had a deep passion for gaming. With over 200 members, the team’s background is equally impressive, boasting veterans from esteemed gaming companies such as Gameloft, Blizzard, Ubisoft, and Tencent who contributed to the development and design of well-known games like Elden Ring, Assassin’s Creed, and Prince of Persia.
As its goal is to become a platform that connects players with games, Ultiverse has forged an extensive network of partnerships, collaborating broadly with various projects and communities within the gaming ecosystem.
An example is the “Finding Your Path Partners” campaign held by Terminus in March, a concerted effort by Ultiverse alongside a variety of collaborators, including public blockchains like Zetachain, other gaming ventures such as Ainchess, infrastructure service providers like Rpggo and Particle Network, gaming guilds including N9Club and GuildFi, and NFT communities like the Weirdo Ghost Gang.

UltiverseDAO

Moreover, Ultiverse recently revealed that it has established collaborations with more than 300 teams in the AI and gaming realms across both Web2 and Web3. This extensive partnership network includes virtually all the top Web3 gaming projects, advancing Ultiverse’s ambition to develop a comprehensive gaming platform.

Tokenomics
Ultiverse has unveiled the utilities and tokenomics of its governance token $ULTC:

In the Ultiverse ecosystem, $ULTC has three primary utilities: 
GovernanceEntry Pass, Dapps looking to integrate with the Ultiverse ecosystem are required to pay with $ULTC, with a portion of these tokens allocated to usersPayment Method, $ULTC serves as a payment method for assets within the Ultiverse ecosystem
The total supply of $ULTC is set at 10 billion tokens, with its allocation detailed as follows:

Ultiverse Token Structure Overview

A point of interest is that 8% of the total token supply will be allocated for airdrops, targeting holders of the Electric Sheep NFT and MetaGF NFT, $Soul token holders, and holders of other assets within the ecosystem.
The current floor price of Electric Sheep NFT is around 2 ETH, with a total market cap of approximately 14,000 ETH, equivalent to about $47.6 million. If we base our calculations on Electric Sheep NFT holders receiving 2% of the $ULTC supply, this would equate to a fully diluted market cap for $ULTC of $2.38 billion. Such a valuation aligns closely with that of another Game+Ai project, Portal, which was recently listed on Binance, suggesting a fair valuation. Beyond the $ULTC airdrop, the Electric Sheep NFT carries several additional benefits within the Ultiverse ecosystem, including access to the previously mentioned World NFT.
$Soul represents the “points” system within the Ultiverse ecosystem, initially available through staking Electric Sheep NFT as a reward for early holders. The team previously announced the redeem ratio of $Soul to $ULTC as 100:1. After unveiling the tokenomics, Ultiverse sparked a series of initiatives aimed at drawing new users, aiming to leverage Soul to further promote the Ultiverse brand. Among these, the Ulti-pilot campaign that started in late February will release 10 billion $Soul (equivalent to 100 million $ULTC, accounting for 1% of the total supply), drawing significant user participation.
Conclusion
Ultiverse stands out as a project meriting attention for the following reasons:
It occupies a favorable position in Web3 gaming, poised for breakout success in the bullish cycle.Throughout the bear market, Ultiverse’s team has consistently built upon its foundation, delivering not only engaging products but also cultivating a tightly-knit community.With the striking progress of artificial intelligence over the past year drawing global interest, Ultiverse’s strategic integration of AI throughout its platform anticipates positive reception as the AI+gaming narrative gains prominence.The project benefits from a robust investment background.

By Lydia Wu, Researcher at Mint Ventures

Decoupling the classical chain concept
The figures on DefiLlama and CoinMarketCap seem to conclusively show that TON is an “under-the-radar giant among chains” — consistently ranking within the top 20 in terms of market cap, yet its 24-hour trading volume lingers beyond the top 100. Despite reaching a new peak in Total Value Locked (TVL) at $53 million, it failed to enter the top 50 public chains; moreover, its market cap to TVL ratio hit an astonishing 293, which is 33 times that of Ethereum.

Source: DefiLlama, CoinMarketCap

Recent months have seen a decoupling in the Ethereum-defined concept of chains, facilitated by the advent of Rollups and modular approaches, diluting the traditional narrative around blockchain legitimacy. The market has accepted Blast’s mere name without substantial blockchain functionality and acknowledged Arweave AO’s actions of leveraging network effect for actual public chain operations.
This shift has accelerated the unleashing of TON’s potential under its “less legitimacy” positioning. The market’s evaluation of TON now extends beyond TVL-centric narratives of classic chains, suggesting a closer look at metrics like daily and monthly active users, adding a new dimension to understanding its value.
Recently, the founder of Telegram, Pavel Durov, shared with the Financial Times that Telegram’s monthly active users have soared past 900 million, reaching a valuation of over 30 billion USD, and the company is contemplating an Initial Public Offering. This starkly contrasts with Meta’s 3 billion monthly active users and a market capitalization of 1.3 trillion USD, placing Telegram’s valuation at just 1/40th of Meta. Telegram’s user demographic is notably concentrated in Asia, Europe, South America, and the Middle East, characterized by a significant presence of retail investors and a robust demand for peer-to-peer payments, positioning it as an ideal audience onboarding into the Web3 space. As Telegram continues to expand, if TON can draw in 30% of Telegram’s users within the next 3 to 5 years, it could effectively bolster its valuation.

Source: DefiLlama, CoinMarketCap, Nansen, Token Terminal

New Paradigm of Web3 Creator Economy: Leveraging Telegram for Content Packaging and Value Transfer
Redefining Distribution: How Telegram Activates the Web2 Incremental Growth Market
Last year, I outlined the three stages of the Web3 creator economy, with Phase 1.0 embracing the straightforward “blockchain+” approach, integrating centralized content creation with Web3 distribution mechanisms, predominantly through NFTs. This model remains mainstream, except NFTs are beginning to be used more as speculative Pre-token tools rather than as creative mediums.
Throughout this year, my immersion in the TON ecosystem has gradually made me realize that, along the same attention-driven pathways, the role of NFTs wrapping content, vouchers, and governance are seamlessly supplanted by a more intuitive “channel-advertising-payment” framework. The briefly celebrated Friend.tech serves as an intermediate form of this idea—wrapping group chats into assets, albeit with limited content scalability and an unsustainable economic model.
Compared to many NFT and SocialFi projects still struggling to find application scenarios for their assets, the TON ecosystem, developed on the Telegram platform, offers a more friendly product experience and value network for Web2 developers, creators, and users — on existing social networks, further deconstructing the Web3 distribution model into a combination of traditional Web2 business practices, middleware wallets, and Web3 financial settlements. This approach not only simplifies the onboarding process for both creators and users but also diversifies the creators’ revenue streams through mechanisms like ad revenue sharing.

Source: Lydia @Mint Ventures

From Content to Services, Trading Bots Facilitate the Transition of Web3 User Base
WeChat, a super App in the Web2 space, has achieved ecosystem expansion from a content-centric to a service-oriented ecosystem by launching service accounts and mini-programs. Telegram has followed a similar path by introducing business accounts and service-oriented bots to solidify its position as a key gateway for mobile traffic, among which Trading Bots have won the favor of the crypto degens.
The Trading Bot sector has seen explosive growth since 2023, emerging as one of the few products with genuine demand and cash flow during the bear market. As the market shifts from bear to bull , the financial allure of these Bots has intensified, with leading protocols like Banana Gun and Unibot generating daily revenues exceeding $200,000. Though a minority are hosted on websites and Discord, the majority of Trading Bots are integrated through Telegram.

Source: https://dune.com/whale_hunter/dex-trading-bot-wars

At this stage, the operation of Trading Bots and TON are not closely related, primarily leveraging Telegram’s Bot module for integration with Ethereum and Solana. However, the popularity of Bots has greatly contributed to market education and the nurturing of user engagement within the TON ecosystem. As crypto enthusiasts grow more comfortable with innovative interaction models like Bots, the barrier to exploring other non-trading products within the TON ecosystem will significantly diminish. Supported by a fully on-chain identity system and payment infrastructure, TON is theoretically poised to develop a coherent system for content packaging and value transfer.
Exploring the Bazzar Mode: The Bots and Mini Apps of TON
The TON ecosystem currently hosts a range of products that, at first glance, seem to consist merely of simply Telegram Bot portals combined with HTML5 websites, coupled with lively Telegram groups flooding the screen, making one feel as if they are in a bustling and chaotic bazzar.
In the Meme project Notcoin, players engage in the activity of tapping on coins to earn points. Additionally, they can join teams led by celebrities, such as Telegram’s founder Durov, or gain attraction by sending “red packets” to friends. Through its no-frills gameplay and viral marketing strategy, Notcoin quickly attracted 5 million players within just a week, with the current player base exceeding 26 million and 1 million followers on X. In the recently launched Pre-Market trading, the biggest deal was a purchase of one billion points with 1100 $TON, which was equivalent to approximately $4521.

Farcaster, a favorite among crypto influencers, introduced its Frames in January 2024, celebrated for being “a groundbreaking innovation.” Yet, this feature’s efficacy on the densely populated mobile landscape leaves something to be desired. Although users can perform basic Swap and Mint operations, when it comes to more complex interactions, even to the extent of the simplest mini-games, executing these within a diminutive frame that takes up less than one-third of a smartphone screen can be a significant visual challenge.
By contrast, what is rarely mentioned is that the integration of Telegram and TON has already achieved an almost seamless transition from chat boxes to semi-native applications, with the response speed of calling up applications via Bots even faster than WeChat mini-programs. 

In June 2015, Telegram launched its Bot feature with limitations such as the inability to custom interface design and the absence of direct client-server communication. Based on this functionality, Trading Bots act more as intermediary interfaces than independent apps, facing constraints in response speed and the challenge of conducting multiple simultaneous interactions.
In April 2022, Telegram rolled out the Mini App, granting developers complete control over user interfaces and enabling direct client-to-server communication. Mini Apps provides a more friendly user experience and enhanced composability, with seamless wallet integration and other infrastructure capabilities, making it well-suited for deploying Web3 products. Mini Apps have the potential to supplant all mobile websites.
After the launch of Mini Apps, Bots have not been relegated to obsolescence; instead, they play a “relay room” role. They serve as the primary gateway for user interactions, seamlessly connecting a series of Mini Apps.

Source: TON x Fans

Source: Lydia

Deploying a Bot or Mini App is relatively easy. Users can swiftly configure their Bot through a Q&A format on the Telegram @BotFather channel. Additionally, they can explore a virtual dining experience with a Mini App by visiting @DurgerKingBot and experiencing the setup firsthand.
Unique On-Chain Experience: A Spotlight on the TON Ecosystem
Lite Gaming
In the current landscape, where blockchain capabilities far exceed demand, the platform choice—whether it’s on Ethereum Layer2, Solana, or Binance Smart Chain—makes little difference to a game’s playability. Yet, games imbued with strong social attributes, like chess, card games, or other party games, would offer vastly different experiences when it comes to one-click sharing for team formation on Telegram or waiting for random matches with strangers on the network.
Originally an MMORPG game on Facebook, Tap Fantasy attracted over 700,000 players after venturing into Web3 on the Binance Smart Chain and Solana blockchains. By August 2023, Tap Fantasy became the premier IDO project on TonUP, the first Launchpad within the Ton ecosystem, with its token $MC achieving a sell-out in just half an hour. Come November 2023, a TON-based new version of Tap Fantasy was rolled out by Pluto, a Web3 gaming incubator. This update broke through 600,000 players in three months, with the on-chain players exceeding 16,000. A robust in-game economy propelled the value of the $MC token from a 1:5 to a 1:1 exchange rate against TON.
Catizen, a new game developed by Pluto, merges AI technology with the metaverse concept to offer a unique cat-raising experience. Its beta version was released on March 7, 2024, quickly attracting a community of over 160,000 players and 13,000 blockchain participants in merely five days. Catizen also partnered with $FISH, a leading meme within the TON ecosystem, announcing an upcoming airdrop to $FISH token holders following the conclusion of its beta testing phase.

Source: Tap Fantasy TON version dashboard

Source: Catizen dashboard

Social Inscriptions and Memes
As a novel approach to asset distribution, the expansion of the Bitcoin inscription ecosystem to multiple chains is a trending experiment. TON’s inscription ecosystem has cleverly incorporated Telegram’s front-end and native wallet, streamlining user interactions while implementing safeguards against spambots.
$NANO: As the first TON-20 inscription, it has injected the TON ecosystem with 20 million interactions and 36,000 unique minting addresses.$GRAM: Drawing its name from the Telegram Open Network’s native token, which faced regulations from the SEC, it pioneered the deployment, minting, and transferring processes via the Telegram Mini Apps.$TONOT: Breaking $NANO’s records with 61,000 unique minting addresses and 57,000 holders, TONOT facilitates transitions between inscriptions, NFTs, and tokens. Its roadmap extends to in-game currencies, decentralized identities (DID), and staking mechanisms, among other features.
Meme assets had a period of scarcity on the lesser-known TON blockchain, creating a gap in crypto awareness and interaction with TON, until Notcoin captured widespread attention.
$NOT: Notcoin plans to airdrop $NOT tokens in late March or early April. Pre-market trading for $NOT is currently active on Getgems, an NFT marketplace within the TON ecosystem.$REDO: Inspired by a sketch made by Durov, during a protest, $REDO has risen to become the meme with the highest market cap within the TON ecosystem.$FISH: Marking its place as the TON ecosystem’s first social meme, Ton Fish has amassed a community exceeding 18,000 holders.$TPET: Emerging from the Ton Fish ecosystem, $TPET fair launch is ongoing until March 26. It is positioned to be the key token for the upcoming game Ton Pet: Tik Ton, offering $FISH and NFT holders a chance to participate in an airdrop.
Multichain Liquidity Launchpad
XTON is the first launchpad to introduce multichain liquidity within the TON ecosystem, featuring team members from the TON Foundation. XTON is scheduled to finalize its mainnet launch and token sale in Q1 2024 and to kick off its first project in Q2 2024. In line with XTON’s vision, the TON ecosystem is poised to bridge the gap and facilitate bilateral traffic integration between the Web2 social networking giant and the Web3 EVM-compatible world.
Moving Toward a Future of Interconnectivity
Since March, with the announcement of Telegram using TON to process advertising revenues, Binance launching a USDⓈ-M TON perpetual contract, and Telegram seeking an IPO, the TON token, previously dormant, has swiftly achieved a notable leap in both price and on-chain activity.

Source: https://www.tonstat.com/
Reflecting on TON’s journey since its 2018 inception—from Telegram’s launch to community stewardship, the establishment of the first cross-chain bridge, to the evolution of its infrastructure—the TON ecosystem’s resilience and dynamism stand out. With a 2024 focus on stablecoins, cross-chain bridges, and expansion in the Asian market, there’s an eagerness to witness TON evolve into a genuinely open network fostering interconnectivity across various regions, ecosystems, and applications, potentially offering each participant a glimpse into the long-promised future of blockchain technology.
*Data referenced in this article is updated to March 13, 2024.
Reference
Transforming Telegram to Web3 with Toncoin – TOKEN2049 Singapore 2023Telegram Game ‘Notcoin’ Launches Pre-Market Trading Ahead of AirdropPractical Guide to Developing Telegram Bots and Mini-AppsTON’s roadmapAn In-depth Analysis of Inscriptions within TON Ecosystem

By Alex Xu, Research Partner at Mint Ventures

Key Takeaways
Last week, BTC touched a historical high against the USD, signifying our entrance into the official stage of this bull market. Unlike the initial rebound and warm-up from the depths of the bear market, the official bull market phase brings an amplified sentiment and even more pronounced volatility.
Each bull market’s official start is characterized by a set of common features, including:
A shift from $BTC -led gains to altcoins spearheading the surge, resulting in a decline in Bitcoin’s market share.An increase in the velocity and magnitude of gains across various cryptocurrencies.A surge in popularity on social media and search engines, leading to a swift rise in public interest.
In this article, I explore the potential differences between this cycle and previous ones, offering my analysis and strategies for navigating ahead.
Please note that the insights above reflect my current thinking and may evolve. The perspectives are subjective and there may be factual inaccuracies or biases. This is not financial advice, but feedback and discussions are welcomed.
Let’s dive into the heart of this analysis.
The Catalysts for Crypto Bull Markets and Alpha Opportunities
Catalysts for the Bull Market
With Bitcoin’s valuation reaching significant levels, a retrospective of the last three cycles reveals that bull markets are typically ignited by a confluence of factors, including:
The anticipated halving of Bitcoin, a critical adjustment to its supply and demand dynamics, is on the horizon for April in this cycle.Loosening monetary policies or the expectation thereof, with a market consensus that the zenith of interest rates is behind us and a strong anticipation for rate cuts in the upcoming quarter.The relaxation of regulatory policies. In this cycle, notable developments include updates to U.S. accounting standards that allow crypto assets to be accounted for at fair value on the balance sheets of public companies, and the SEC’s legal setback against Grayscale, which paved the way for the approval of ETFs.Innovations in asset and business models.
The current bull market has already seen the emergence of the first three factors.
Identifying Alpha Opportunities in Bull Markets
Historically, the most substantial gains in each bull market cycle have been captured by the newcomers or those who experienced their first major breakout during the cycle. For example, the 2017 bull market was dominated by the ICO craze, with platforms like Neo and Qtum, which facilitated smart contracts, leading the charge. Fast forward to 2021, and the spotlight shifted to Defi, Gamefi, Metaverse, and NFTs, with 2020 heralded as the year of DeFi, and 2021 marking the rise of NFTs and GameFi.
Yet, as we navigate through the current bull market, no new asset class or business model has achieved the transformative impact akin to that of smart contract platforms or DeFi in previous cycles.
As for the current landscape of Defi, Gamefi, NFTs, and Depin, there seems to be a stagnation in terms of innovation in product or narrative evolution, regardless of whether the projects are new or established. Most advancements are merely iterations or refinements of existing functionalities, leading to the perception that these are merely “old concepts” being recycled.
The current cycle has witnessed the emergence of two particularly novel categories within the crypto ecosystem:
Bitcoin Ecosystem Innovations: This category includes inscription assets, exemplified by $ORDI and Node Monkeys, and projects that leverage Bitcoin’s Layer 2 solutions.Web3 + AI: This includes both decentralized computing projects from the previous cycle, like Akash and Render Network, and novel AI-centric initiatives such as Bittensor (TAO), which have surged to prominence in this cycle.
It’s crucial to underline, however, that AI does not inherently derive from within the blockchain. The surge of interest in Web3+AI projects is largely a spillover from the AI boom, particularly triggered by developments in ChatGPT in 2023. This positions AI-related projects as a “partially new narrative” within this cycle.
Speculations and Strategies for the Current Bull Market
Potentially Overestimated Alphas
In many recommended investment portfolios, I’ve seen a common inclination towards including Gamefi, DePIN, and DeFi-related altcoins within the asset pool. The prevailing logic suggests that due to their smaller market capitalization and higher volatility, these cryptocurrencies are expected to significantly outperform $BTC and $ETH in the bull market’s peak phases(after BTC reaches new highs), achieving Alpha returns.
However, as previously pointed out, “the most substantial gains in each bull market cycle have been captured by the newcomers or those who experienced their first major breakout during the cycle.” Given that DeFi, GameFi, NFT, and DePIN do not fit the characteristic of being “new assets or new business models” of this cycle, and considering they’re embarking on their second round, expecting them to replicate their inaugural cycle’s price performance is optimistic. It’s essential to understand that an asset class tends to enjoy its most substantial valuation bubble only during its first appearance in a cycle.
In their debut in the bull market, new business models or asset classes grapple with the challenge of “disproval.” This is a tough hurdle to clear amid the bullish euphoria. Conversely, in the second bull market, they face the necessity to “prove their mettle,” demonstrating that their growth potential is still untapped and their room for imagination substantial. This is equally challenging as reigniting faith in previously told tales isn’t straightforward, especially when they are still wary of being trapped at the high peaks of the previous bull market.
Some might argue that the Layer1 track was the “brightest star” in both the 2017 and 2021 bull markets, posing a counterexample.
This is not the case.
The demand for L1 solutions in the 2021 bull market experienced exponential growth, propelled by the meteoric rise of several product categories, including DeFi, NFT, and GameFi. This growth spurt resulted in a swift expansion of the market for both users and developers, creating an unparalleled demand for blockchain capacity. This not only elevated Ethereum’s market valuation but also catalyzed a boom among alternative L1 platforms due to overflow demand from Ethereum, making 2021 the watershed year for these Alternative L1s.
Can this current cycle replicate the previous cycle’s explosive growth in decentralized applications and asset classes, leading to further demand for L1?
At this juncture, we may not witness this replication. Hence, the conditions that allowed L1 platforms to enjoy a meteoric rise in their last cycle seem absent now, suggesting a need to moderate expectations for Alternative L1 platforms in this bull market’s context.
$BTC and $ETH : The Better Choices
In this current bull market phase, the most significant propulsion seems to be the capital inflow triggered by the facilitation of ETF approval, alongside optimistic expectations for long-term inflows. Consequently, the main beneficiaries of this cycle are primarily BTC and potentially ETH (as a likely candidate for ETF listing). Taking into account the perspectives on GameFi, DePIN, DeFi, and L1s discussed earlier, achieving Alpha in this bull market seems more challenging, indicating that a strategic investment in BTC and ETH could yield a more favorable risk-reward balance compared to the last cycle.
When deliberating between $BTC and $ETH , both likely to gain from ETF endorsements, which emerges as the superior target?
From my perspective, $ETH might edge out in the short term. This is attributed to the market having already adjusted $BTC prices in anticipation of its ETF approval, with little else to drive its value post-April’s halving. $ETH , conversely, stands at a comparative low against $BTC , and with rising speculation about its ETF prospects, $ETH appears to offer better short-term potential than BTC.
Looking towards the future, $BTC could emerge as the more favorable investment choice. $ETH increasingly mirrors the characteristics of a technology stock, with its valuation closely tied to its role in providing blockchain capacity, similar to a Web3 cloud computing venture. This sector is marked by intense competition, with $ETH under continual threat of losing narrative appeal and market share to other blockchain capacity offerings (including L1s, Rollups, and DA projects) and a variety of novel technological solutions. Missteps in Ethereum’s technological development or delays in product updates could prompt investors to withdraw their support.
In contrast, $BTC ’s status as “digital gold” is progressively being cemented. The steady growth of its market valuation, coupled with the facilitation provided by ETFs, solidifies its position. The consensus on $BTC as a hedge against fiat inflation is slowly gaining endorsement, extending from financial institutions and publicly traded companies to smaller nations.
The once-popular argument that “$ETH ’s potential as a store of value could surpass $BTC ” is increasingly becoming a thing of the past.
Crafting a Bull Market Strategy: A Comprehensive Overview
Acknowledging the improved risk-reward proposition of favoring $BTC + $ETH in this cycle over the last doesn’t negate the value of diversifying with other altcoins. It simply suggests a more deliberate approach to determining their share in the investment portfolio.
The cornerstone of my current strategy involves:
Elevating the allocation for $BTC and $ETHExercising restraint in investments within established sectors like DeFi, GameFi, Depin, and NFTs.Identifying and leveraging new tracks for seeking Alpha, including:Memecoins: Positioned as the best speculative vehicles, with each cycle presenting renewed concepts and are known for generating remarkable wealth narratives, making it the easiest asser category to understand and to trigger widespread popularity.AI-related Projects: Emerging as a fresh commercial frontier within Web3, gaining traction from non-crypto groups.$BTC Ecosystem: Particularly the inscription assets, and to a lesser extent, Bitcoin L2 solutions. The former is favored for introducing a novel asset class in this cycle, whereas the latter is perceived as a conceptual iteration of Ethereum’s Rollups — essentially old wine in a new bottle.
Market Cycles Persist with an Accelerated Timeline
Furthermore, in the context of market cycles, my analysis diverges from the traditional pattern observed in past bull markets, where the year after a halving marked the primary ascent. Instead, I posit that the pinnacle of this cycle’s bull run will be in 2024, rather than 2025.
Historically, the Bitcoin halving events occurred in 2012, 2016, and 2020, with the forthcoming cycle slated for 2024.
Last year, Hithink Finance conducted a comparison of the returns of major financial assets over the last decade, summarized as follows:

Generally, Bitcoin adheres to a “three-year rising, one-year falling” principle, correlating with its price increasing in the year leading up to the halving, the halving year itself, and the year following, before undergoing a decline.
In the first cycle of Bitcoin’s halving, the halving year of 2012 experienced a 186% price surge, followed by a monumental 5372% increase in 2013. Similarly, 2017 followed a comparable pattern, where, before the 2017 bull market cycle, $BTC price trend aligns with the principle of “moderate gains before the halving, followed by a substantial surge in the subsequent year.”
Nonetheless, this established pattern started to shift in the most recent cycle. Notably, the year preceding the halving, 2019, registered a notable rise of 93.4%, outpacing the 40.9% growth observed in 2015. The halving year of 2020 posted a 273% gain, surpassing the 62.3% increase recorded in the post-halving year, 2021.
The current cycle prominently showcases a shift towards an earlier “bull phase.” In 2023, the year before the halving, BTC achieved a 147.3% increase, outperforming the pre-halving year of the previous cycle (2019). As we venture into the first quarter of 2024, $BTC has already secured nearly a 60% increase.
I believe that it’s highly probable that 2024 will be the year of the main bull run for this cycle. Waiting for a boom in 2025 may lead to missed opportunities; thus, strategically increasing your investment now seems to be a more cautious approach. The year 2025, in contrast, might be apt for scaling down investments and harvesting gains.
Lastly, I extend my best wishes for a prosperous and rewarding journey through this bull market to all.

👉Due to length constraints, only a part of the report is provided here. Please click the link for the complete content：

https://mintventures.fund/pdf/Gelato-A-Veteran-in-Web3-Developer-Services-Embarks-on-a-RaaS-Journey

Author: Lawrence Lee, Researcher at Mint Ventures

Investment Thesis
Gelato has been deeply involved in the developer services field for many years and has developed a comprehensive suite of tools and services for developers. It is expected to achieve a breakthrough in business by integrating these offerings with its newly minted Rollup-as-a-Service (RaaS) platform, launched at the end of 2023.The RaaS projects are currently in a phase of vigorous token issuance, with notable projects such as Altlayer, Dymension, and Saga having recently launched their tokens. In addition, the sector includes well-funded competitors such as Conduit and Caldera. Given the influx of attention and funding, the RaaS landscape is anticipated to remain a focal point of market interest and activity in the foreseeable future.
Risk Factors
Challenges in Revenue Generation: The business models of Gelato’s dual-core services—smart contract automation and Reliability as a Service (RaaS)—present challenges in generating sustainable revenue streams.Competitive Pressures: In the smart contract automation sector, Gelato faces formidable competition from Chainlink. In the RaaS domain, rivals such as Altlayer, Conduit, Caldera, and Dymension significantly challenge Gelato’s market position, as its competitive advantages are not sufficiently strong.Limited Token Utility
Overview of Gelato
Gelato’s business covers merely all aspects of developer services, such as account abstraction(AA) wallet services, multichain payment services, RELAY services that can help developers better onboard users, Verifiable Random Function (VRF) that used by NFT & Game projects, etc. But among them, two most important businesses are: Automate(of smart contracts) and RaaS(Rollup as a service).
Automate
We published a research report in December 2021 about Gelato, which interested parties can refer to for further information.
At that time, Gelato’s primary business strategy centered on “automated smart contracts.” This process involves the conditional automation of operations within smart contracts, specifically triggering operation B when condition A is met. The products introduced by Gelato included the following three features:
AMM Limit Orders: This feature automates trade execution when a token’s price hits a specified threshold. Gelato’s pioneering limit order service, Sorbet Finance, has been directly integrated into the platforms of major decentralized exchanges (Dexes) such as PancakeSwap, QuickSwap (the largest Dex on Polygon), and SpookySwap (the largest Dex on Fantom).Loan Liquidation Protection: Designed to protect loans from liquidation by automatically managing the Loan-to-Value (LTV) ratio, this feature swaps collateral for debt and repays the debt when the LTV ratio reaches a critical level. Gelato introduced this feature through a consumer-oriented product, Cono Finance. This feature also received a grant from Aave and was integrated into Instadapp.G-UNI, Position Management Tool for Uniswap V3: This tool adjusts the liquidity provision (LP) market-making range on Uniswap V3 based on token price movements, optimizing the position management process. In 2022, the strategic decision to spin off GUNI as Arrakis Finance and plan for its token issuance marked a pivotal evolution in its offering.
Beyond the three core functionalities previously outlined, Gelato’s Automate platform extends its capabilities to a vast array of use cases, becoming an indispensable tool for numerous DeFi protocols. Notably, it facilitates automatic yield harvesting within Yield Farming protocols and ensures timely updates to oracles, among other applications.
Gelato plans to upgrade its automation services to “Web3 Function” in June 2024. This strategic upgrade will broaden the scope of trigger conditions available to developers, empowering them to initiate on-chain transactions in response to a diverse array of off-chain data sources, including APIs and subgraphs. These advanced trigger conditions will be securely stored on IPFS before being seamlessly submitted to Gelato for execution.
RaaS
As the year 2023 concluded, Gelato made a significant stride by launching its Rollup-as-a-Service (RaaS) offering. This innovative service is designed to guide developers through the selection of the optimal technology stack, thereby streamlining the Rollup deployment process.
Gelato’s RaaS offering has already integrated a multitude of infrastructure service providers:
Execution Layer Integration: Gelato has incorporated leading solutions such as the OP stack, Polygon CDK, and Arbitrum Orbit.Data Availability Layer Integration: Gelato has partnered with Ethereum, Celestia, and Avail.Cross-Chain Solutions: Gelato has integrated with Layerzero and Connext.Oracle Services: Gelato has integrated Oracle services from Redstone, Pyth, and API3.Indexers: Gelato has integrated with The Graph and Goldsky.Fiat Payment and Other Services: Gelato also extends its offerings to include fiat payment solutions with Moonpay and Monerium, KYC services through Fractal ID, and wallet services via Safe.

Business Analysis
Automate
In the world of Web3, scenarios requiring the automatic execution of smart contracts are widespread, such as periodic reinvestment of earnings, regular salary payments, liquidity rebalancing, and more. For developers, designing and executing a complete set of monitoring, computation, and operational programs is both labor-intensive and time-consuming. Automation service providers can help developers avoid “reinventing the wheel”. For providers like Gelato, the marginal cost of serving new users is meager. There is no difference between the process of conducting limit orders on Uniswap and Quickswap, which not only fosters economic synergies between Gelato and decentralized exchanges but also solidifies the business rationale underpinning such collaborations.
However, a potential challenge lies in the relatively low technical barriers to entry for the services Gelato provides, leading to a ceiling on the value developers are prepared to pay. This dilemma mirrors the experiences of Web2 automation platforms like IFTTT, which, despite offering valuable tools, struggle to convert free users into paying customers.
According to insights from IOSG, Gelato commands an impressive 80% share of the smart contract automation market. Achieving dominance in a niche market also involving the Web3 infrastructure leader Chainlink is no small feat. Unfortunately, a high market share has not translated into stable revenue streams, and the product is in a state of being “liked but not widely adopted,” presenting hurdles to effective commercialization.
From a competitive standpoint, Gelato’s early market entry and current leadership pose significant advantages. However, in the medium to long term, Chainlink possesses stronger brand recognition, superior developer engagement channels, more substantial financial resources, and the synergy of cross-selling with its array of services. For Gelato to sustain its competitive edge over Chainlink will not be easy.
RaaS
With the rapid development of Ethereum Layer2 solutions, the scalability issues that Ethereum once faced seem to have been largely addressed through Rollups. Especially with the upcoming Dencun upgrade, the cost of Rollups is expected to decrease significantly, laying the groundwork for potential widespread commercial adoption.
Embracing Ethereum’s Layer2 solutions and the broader adoption of Rollup technology is expected to persist into the future. In the process of developers constructing Rollups, there remains a series of issues and trade-offs for developers to consider. These include selecting a Rollup solution that aligns with their project’s unique requirements, the intricacies of building and managing a Sequencer, mitigating MEV issues, and choosing appropriate oracles and indexing services. RaaS platforms, serving as one-stop service providers and offering a suite of toolkits, clearly have a relatively stable demand in this context.
Despite its relatively recent emergence, the RaaS field is characterized by its highly competitive environment. Gelato’s competitors in RaaS field are as follows:

Drawing from an analysis of the current landscape, possible ways for RaaS providers to generate revenue or capture value have been identified:
Hosting sequencers and engaging in MEV extraction at the execution layer emerge as the most direct and promising revenue sources.Becoming the settlement layer for Rollups or Appchains.Instead of charging fees on user transactions, RaaS providers can explore revenue generation by offering a suite of integrated infrastructure services, such as wallets, and explorers, and engaging in technical consulting services.RaaS providers can institute subscription fees for access to their services.
Furthermore, the Restaked rollup, which Altlayer is exploring in collaboration with Eigenlayer, is designed to utilize $ALT more as economic bandwidth, coupled with Restaking mechanisms, to capture value for the token. However, this method of value capture is not closely related to the RaaS services they provide.
Overall, due to the limited number of launched RaaS projects, viable business models of revenue generation remain uncertain. Yet, an analysis of the revenue and cost structure of existing Rollups illustrates the challenges RaaS providers face in revenue generation.
In the competitive landscape of RaaS providers, given the primary target audience consisting of developers and project builders, the ability to attract and retain developer interest becomes a pivotal factor. Despite the presence of unique technological features across different RaaS platforms, the scope and nature of the services offered are inherently influenced by the underlying framework on which they operate. This dependency on the core framework results in a level of service homogeneity among RaaS providers.
Given the relatively uniform service offerings within the RaaS space, The ecosystem influence of the project may be a deciding factor for its success.
For RaaS platforms with strong network effects, the business development capabilities are critical determinants of their long-term success and scalability.
In such a niche market that appears ripe with opportunities but may, in reality, be approaching saturation, Gelato does not necessarily have an advantage in terms of influence or business development prowess compared to its competitors. Rather, Gelato’s true strength is rooted in the team’s longstanding commitment to serving the developer community, allowing it to offer a more comprehensive suite of development tools.
Team, fundraising and Partners
Gelato’s co-founders, Hilmar Orth (X: @hilmarxo) and Luis Schliesske (X: @gitpusha), are both esteemed developers. They initially architected the core functionalities that underpin Gelato’s innovative products. They have been close friends since their university days and have worked together ever since. Before founding Gelato, they co-founded a startup aimed at pioneering new business models for large European enterprises through the strategic use of smart contracts. Their prowess and innovation were further showcased through their active participation and notable successes in a series of high-profile hackathons, including ETHParis, ETHBerlin, ETHCapeTown, and the Kyber DeFi Hackathon. These achievements paved the way for securing grants from Gnosis and MetaCartel, which were crucial in the establishment of the Gelato Network.
Gelato has conducted four rounds of fundraising, including three private rounds and one public round:
In September 2020, Gelato embarked on its fundraising journey with a seed round that culminated in $1.2 million, supported by investors including IOSG, Galaxy Digital, D1 VC, The LAO, Ming Ng, MetaCartel, and Christopher Jentzsch. The valuation of $GEL, Gelato’s native token, was pegged at $0.019 during this round.In September 2021, Gelato announced a fundraising of $11 million from investors such as Dragonfly, Parafi, IDEO, Nascent, and Stani Kulechov (the founder of Aave). The cost of $GEL for this round rose to $0.2971.The public sale also occurred in September 2021 and Gelato conducted a public sale that raised $5 million, with $GEL priced equally at $0.2971.In December 2023, Gelato completed a bridge round led by IOSG. The specific details regarding the amount raised and the financing method remain undisclosed.
In addition to the fundraising rounds, Gelato received grants from Gnosis and MetaCartel at the inception of the project.
Partnerships have been a cornerstone of Gelato’s strategy, underpinning its RaaS offering and establishing it as a key player in the developer services industry. The project has numerous partners, which have been listed in the previous part.
Furthermore, a testament to Gelato’s innovation was its recognition as one of the winners of Most Valuable Builders III on BNB Chain in 2021.
Valuation
Whether in the realm of smart contract automation or RaaS, there exists a significant gap in accessing detailed revenue metrics for projects operating in these areas. This scarcity of precise financial data makes the process of accurately valuing these projects challenging. In this context, our analysis focuses on presenting the circulating market cap and the fully diluted market cap of various projects that are in direct competition with Gelato for reference.

👉Due to length constraints, only a part of the report is provided here. Please click the link for the complete content：

https://mintventures.fund/pdf/Gelato-A-Veteran-in-Web3-Developer-Services-Embarks-on-a-RaaS-Journey

👉Due to length constraints, only a part of the report is provided here. Please click the link for the complete content：

https://mintventures.fund/pdf/Covalent-Network-The-Hidden-Gem-of-Decentralized-Infrastructure

Author: Alex Xu, Research Partner at Mint Ventures

Overview of Covalent
Business Positioning
Covalent offers Blockchain Indexer services, providing a comprehensive suite of blockchain data APIs that enable developers to conduct queries across multiple blockchains.
Messari’s 2023 DePin sector map included indexers as a part of the DePin ecosystem, categorized under the “Digital Resource Networks” segment. Both The Graph and Covalent are featured as representative projects in this map.

Source: Messari
Target Clients
Covalent focuses on serving Business-to-Business (B2B) clientele, a sector comprising a diverse range of DApps and DeFi protocols, as well as centralized crypto enterprises. Notable clients include Consensys (dashboard), CoinGecko (data aggregator), Rotki (tax tools), NFTX (NFT curation), and Rainbow (crypto wallet).
Business Logic
Product Mechanism
Covalent’s core product is the Unified API, which facilitates data transfer between two modules: the client and the server. Through the API, the server can control its system and respond to client requests. Users such as application developers or analytics firms leverage the Unified API to extract a wealth of blockchain data. In the current stage, data providers – predominantly Covalent itself, with plans to integrate third-party providers – retain data ownership. Although many companies have built server-side infrastructure to provide access to blockchain data, most self-built server-side solutions are limited to the RPC layer and often only access unprocessed blockchain data from the target chain.

Covalent’s Business Process

​​”Base blockchain data” refers to the information that can be directly queried from the blockchain via RPC. However, more sophisticated data analyses, like complex query executions, and relational and trend analyses of historical data, require higher-level data processing and indexer services. These are the types of services provided by Covalent and The Graph.
Leveraging the Unified API, Covalent has also introduced strategic toolkits to facilitate customer integration and product-side presentation.
GoldRush
GoldRush is an open-source, modular blockchain explorer and toolkit provided by Covalent, designed to be integrated into various Dapps and Web3 applications.
In the context of NFT marketplaces like Blur or Web3 gaming platforms, integrating Covalent’s GoldRush module can embed a more user-friendly interface directly within their applications.

Source: NFT Wallet Token List

Having outlined Covalent’s industry mechanism, let’s explore how it integrates with tokenomics.
Decentralized Design
Covalent’s decentralized network architecture is designed to accommodate multiple network participants, commonly referred to as “Operators.” Currently, two primary roles have been activated within this network: Block Specimen Producers (BSP) and Refiners. Covalent’s network boasts 15 active BSPs, including notable participants such as Chorus One, Woodstock, StakeWithUs, and 1kx.
The proof and data storage solution based on Moonbeam is an interim measure. Covalent plans to launch its Layer 1 blockchain for ledger purposes and will migrate the staking of $CQT to Ethereum. This migration process is expected to commence by the end of February 2024.
Let us explore the four operator roles in Covalent’s decentralized indexer Network:
Block-Specimen Producer (BSP), which is currently active within Covalent’s network. BSPs are responsible for uploading raw blockchain data to storage instances. These operators have the flexibility to either run these storage instances locally or outsource the task to storage operators. The latter contributes to increasing data availability, especially when proofs are loaded through IPFS and stored locally. The staking stats for BSPs are as illustrated in the following graph, with the current staking APR exceeding 10%. 

Staking Stats

Refiner, another active role in Covalent’s ecosystem, can access Block Specimens from storage instances and transform this raw data into queryable data objects, known as Block Results. They also publish proofs of their verification work. The following graph is a list of stakers for Refiners:

The list of Stakers for Refiners

Query Operator. Before responding to API queries, Query Operators load the transformed data into local data warehouses.Delegator. Each network operator, after fulfilling their assigned duties, receives compensation. This compensation is contingent upon the confirmation of each proof by the Delegators for a specified period. Before payment, a group of Delegators is randomly selected from the pool of network operators to serve as Delegators for the audited period.
Currently, the operator roles are filled by members who are part of a whitelist established by the Covalent Foundation. The Covalent Foundation has plans to gradually open these roles to a broader pool of applicants in the future.

Other Business Operations
Ethereum Wayback Machine

Following the implementation of EIP-4844, a new data structure called “blob” will be introduced. Blob is primarily used for storing information that doesn’t need permanent retention on the blockchain and requires short-term propagation across the network.  Blob serves as a temporary storage mechanism on the Ethereum network. The decision regarding the duration and preservation of blob data is left to the discretion of individual nodes, leading to concerns about the long-term data availability for blob data.
Covalent’s Ethereum Wayback Machine is an open-source solution launched to address the issue of long-term data availability. It aims to provide decentralized, cryptographically secure access to historical data for users, positioning it as a form of Data Availability (DA) solution.
For more information, you can read The Ethereum Wayback Machine.
Ethereum Wayback Machine is currently under development and has not yet been officially launched.
It is worth noting that Ethstorage, another project targeting decentralized blob storage, finished a $7 million funding at a $100 million valuation in its seed round in July 2023.
Business Status
Number of Blockchains Supported by the Indexer Service
Covalent currently offers comprehensive historical transaction data for over 211 different blockchain networks.
User Base

Fee Collection Details
Covalent’s 2023 Revenue Performance and Comparative Analysis with The Graph
The Covalent team provided us with some revenue data as follows:
Covalent’s revenue from the indexer in 2023 amounted to $600,000. This figure is noteworthy as it represents the first year of Covalent’s formal commercial operations, with the revenue journey starting from a baseline of $0 in January 2023.Covalent gained over 150 paying customers, predominantly consisting of various institutions and projects.Covalent projects an ambitious 100% growth in revenue for the year 2024.
The Graph, another prominent player in this domain, has reported an annualized revenue of over $100,000 in the recent three months. 

Source: Query Fees Paid

The Covalent team plans to launch their detailed business metrics in the coming weeks, allowing users to access in-depth information on Covalent’s revenues.
Overview of Covalent’s Clientele
Covalent has established itself as a key player in the B2B sector of blockchain services. Its clientele spans various categories:
Wallets and Data Dashboards: Popular wallets and data dashboards, including Rainbow and Zerion, leverage Covalent’s API to aggregate historical balances and track the profits of DeFi and NFT assets. 
Data Aggregator: Platforms like CoinGecko use Covalent’s services to present detailed market data, including price trends, liquidity metrics, and investment returns.
Cross-Chain Projects: Cross-chain liquidity aggregators such as Li Finance rely on Covalent for accessing asset pricing information across different networks.
Cryptocurrency Taxation: Portfolio trackers like Rotki utilize it to extract cross-chain historical balances and pricing data for tax reporting purposes.
DeFi Platforms: Aave, Balancer, Paraswap, Curve, Lido, Frax, and Yearn use Covalent’s services to integrate user data from various chains.
Centralized Exchanges: To comply with tax regulations, exchanges need to extract users’ historical transaction data to generate reports.
Traditional Finance and Custodial Institutions: Fidelity, a global wealth management firm, and EY (Ernst & Young), one of the Big Four accounting firms, Jump Crypto, a notable name in the crypto space, are all among its clientele.
AI Training and Decision Making: Covalent provides crucial on-chain data to projects like Nomis.cc, a multi-chain identity and reputation protocol, and Network3, a distributed computing protocol. This data helps train and enhance decision-making processes for AI models, especially in large-language models.
Additionally, Consensys, the parent company of Metamask, Infura, and Linea, also forms part of Covalent’s diverse client base.
In a strategic expansion move, Covalent has started collaborating with RPC service providers like Chainstack, QuickNode, and Infura. This partnership enables Covalent to offer its indexer services through these providers’ channels, broadening its reach. Notably, the fees generated through Infura alone have already scaled to 100,000+ dollars.
Team, Financing, and Partners
Founders and Team Composition
Covalent was founded and led by Ganesh Swami and Levi Aul.
Ganesh Swami, with a strong foundation in physics and a rich experience exceeding a decade in data analysis, brings a unique perspective to Covalent. He successfully made his first company public on the New York Stock Exchange. Besides, Ganesh scaled heights as a professional mountaineer, including expeditions to Mount Everest. Levi Aul established the first Bitcoin exchange in Canada and was part of the IBM team that developed CouchDB. The core team at Covalent, numbering between 40 and 60 members, comprises a diverse group of professionals, including network architects, data scientists, and software engineers. 
Overall, the founders’ backgrounds and their entrepreneurial successes underscore a strong alignment with Covalent’s mission. 
Valuation
For assessing Covalent’s valuation, a comparative approach is implemented, aiming to establish a relative valuation by comparing Covalent with two key projects in the decentralized indexing service sector: The Graph and Pocket Network.
As a direct competitor, The Graph’s valuation is particularly relevant. Comparing Covalent to The Graph is crucial for understanding Covalent’s competitive position and potential in the market. Pocket Network operates as a decentralized RPC service and is an upstream entity in the same industry. Its valuation also provides a valuable reference for valuation purposes.

A key observation in this comparative valuation is the nearly 7-fold gap in FDV between Covalent and The Graph. However, when considering the fact that Covalent’s annualized revenue is approximately 6 times that of The Graph, Covalent’s valuation appears to be quite attractive. 
Despite having a higher revenue level, Covalent’s valuation is lower compared to Pocket Network. However, both entities are closely matched in terms of overall valuation, each being valued in the range of several hundred million dollars. Notably, Pokt has experienced an impressive nearly 12x increase in value over the past three months, completing a remarkable round of “value discovery.”

In contrast, $CQT has seen a modest increase of about 80% over the same three-month period. This growth appears more aligned with the broader market rebound rather than being indicative of specific capital attraction or investor focus on Covalent. 

The Risks
There are two primary risks facing Covalent worth noting:
If other larger centralized blockchain data service providers, such as Alchemy, Infura, Quicknode, start expanding from RPC into the indexing service field, offering indexing services as well, it could squeeze Covalent’s market share and pricing power. For instance, Alchemy completed the acquisition of the indexing platform Satsuma in September 2023.Indexer remains a relatively niche and less recognized field among general investors, lacking significant attention. This trend could continue unless catalyzed by high-impact events or significant market shifts.
Reference
Special thanks to Leo and Bruce from the Pocket Network community for their valuable review and insightful comments on this report.
Messari: Covalent: A Unified API for Retrieving Blockchain Data1KX: Indexing the universe of blockchains with CovalentThe Graph Dashboard: https://thegraph.com/explorer/network?chain=mainnetPocket Network Dashboard: https://poktscan.com/

👉Due to length constraints, only a part of the report is provided here. Please click the link for the complete content：

https://mintventures.fund/pdf/Covalent-Network-The-Hidden-Gem-of-Decentralized-Infrastructure