Introduction
This article aims to learn and expand knowledge related to REV, allowing us to have a more comprehensive assessment and interpretation of public chains. We should embrace learning, view the existing debates on REV dialectically, and avoid isolating the use of any indicator parameters to prevent potential negative impacts.
1. Related Articles:
Poopman (??✨) on Twitter / X
mteam.eth ? on Twitter / X
Valuing blockchains: The great REV debate
2. Important Dashboards:
Chain Comparison: Overview - Analytics Dashboard - Blockworks
3. Interpretation of REV:
3.1 What is REV?
REV represents Real Economic Value, an indicator that measures the total fees users pay to public chains.
REV stands for Real Economic Value and is a measure of how much users pay to use a chain, in total.
REV for public chains is like revenue for businesses. Revenue is to businesses as REV is to Chains.
"REV consists of both in-protocol transaction fees and out-of-protocol tips that users pay for transaction execution, so it measures the [aggregate] monetary demand to transact on-chain." - @blockworksres
However, there will certainly be differences in detail, and it is not entirely equivalent to the revenue concept for enterprises, which has many disputes.
Note that the '∑(Out of protocol tips/MEV)' in the formula should be understood as a conjunction rather than a division. The complete formula should be as follows to reduce ambiguity:
REV = ∑(In-protocol fees) + ∑(Out-of-protocol tips) + ∑(MEV)
It is not advisable to focus on the authenticity of specific data and implementation paths here, as the marginal return rate for mining and verifying these data is low. We know the calculation method and ready-made data dashboards are sufficient as valuation references.
Currently, there is widespread debate on CT about whether REV should be maximized:
**REV Maxis:** Believe that maximizing REV is beneficial for reducing the marginal costs of the network / expanding the user base / achieving sustainable revenue growth.
Dan Smith on Twitter / X
**REV Minimalists:** Believe that REV is a poor long-term value indicator because it will spike during speculative bubbles and is not applicable to blockchains like Bitcoin where REV is almost zero. A minimum viable REV should be implemented to reduce its potential negative economic impact.
Ryan Berckmans on Twitter / X
Diario on Twitter / X
However, the focus of this article is not to discuss whether REV should be maximized or minimized, but only to focus on the application of REV itself, what help and reference it can provide for us, and I ask readers to think rationally and dialectically about this indicator.
3.2 Recent Characteristics
Data on REV ratios over the past five years shows:
ETH held a dominant position from 2020 to 2023;
Starting in 2024, SOL will take the new leadership position;
TRON's REV is also quite considerable and continues to expand.
From the REV over the past three months, SOL, TRON, and ETH are the leaders in REV, corresponding to the above chart.
When directly comparing on-chain revenues, the most significant feature that REV reflects is: it greatly increases the weight of non-user revenue factor impact.
The formula for calculating REV tells us that it encompasses Out of Protocol Tips (or MEV) in addition to user demand. Therefore, it is not difficult to see that Solana's MEV significantly helps enhance its REV, further increasing its potential valuation space (the application of REV valuation will be mentioned later, so I won't elaborate here).
We invited Teacher DeepSeek to help us summarize the linkage analysis method for the two indicators:
3.3 Advantages and Disadvantages of REV (@mteamisloading)
Advantages:
Compared to the number of active addresses and transaction volume, REV is more difficult to manipulate, especially when some REV is burned;
It can effectively indicate the historical activity of retail investors on various chains.
Disadvantages:
It has a certain lag;
It does not reflect the entire situation of a public chain and should not be isolated to conduct valuations;
Although it is difficult, there is still a possibility of manipulation;
There are some deviations, and in certain cases, MEV and REV can be far above average;
On some public chains with immature MEV infrastructure, REV is low, which may lead to certain unfair valuations.
Overall, we need to approach REV with a dialectical perspective, just like MEV, and avoid applying any indicators and methods in isolation and metaphysically.
3.4 Valuation Method Overlaying FDV: F/R Multiplier
Overlaying FDV with REV for valuation will give us an FDV/REV multiplier.
This multiplier is somewhat similar to the P/E ratio, where the core logic is to measure the extent of market premium on the project’s valuation; the larger the F/R multiplier, the greater the potential valuation bubble, and the more optimistic the market's growth expectations (or the stronger the speculation); conversely, the smaller the bubble, the closer the valuation is to the actual situation, which can also represent relative undervaluation in vertical comparisons.
Thus, we can propose a concept of the F/R multiplier:
The FDV/REV multiplier measures the ratio of a project’s FDV (market expectations) to annualized actual economic income (current profitability), reflecting the premium the market pays for each unit of income.
From this, we can see:
BTC's F/R multiplier is the highest, implying long-term narrative and liquidity premium;
SOL and Tron have lower F/R multipliers, indicating the market may believe their revenue-generating capacity is stronger or their valuations are more reasonable.
On the other hand, **FDV may be inflated due to token releases, thus affecting short- to mid-term valuations. We can also use circulating market cap to assist in reference, which can more accurately reflect the current market recognition of the project’s value—thus establishing an MC/R or M/R multiplier. This multiplier is also more suitable for evaluating short-term market pricing efficiency for project revenue.** However, I will not elaborate on this; the principles and algorithms can be directly copied.
Here we would like to ask Teacher DeepSeek to summarize and compare the four valuation methods, including PE and PS, in a table:
Indicator Core Definition Data Dependency Advantages Limitations Typical Application Scenarios PE Market Cap / Net Profit Stable Profitability, Consistent Accounting Standards Directly reflects profit premium, suitable for mature enterprises Ignores growth potential, cannot calculate loss-making enterprises Consumer goods, manufacturing, and other traditionally profitable industries PS Market Cap / Sales Revenue Authenticity, Comparability Applicable to loss-making/high-growth enterprises, focusing on revenue scale Ignores cost structure, cannot measure profit quality Technology startups, high-growth sectors (e.g., SaaS) FR Fully Diluted Valuation / Annualized On-chain Revenue Assumption of full token circulation, annualized income Reflects long-term narrative and liquidity premium FDV may be overstated (unlocked tokens), income volatility interference Evaluating long-term valuations of public chains (e.g., Bitcoin, Ethereum) MR Circulating Market Cap / Annualized On-chain Revenue Circulating token ratio, income sustainability More realistic short-term pricing, avoids dilution valuation interference Ignores unlocked token sell pressure, relies on income stability Projects with high circulating ratios (Solana), short-term trading decision reference
3.5 The Differences and Connections with MEV
Since the two names are similar, and the former is a component of the latter, it is naturally easy to associate them with each other. We might as well compare and sort them together, focusing on their different roles in valuation for better understanding of the two indicators.
We know that MEV is Maximal Extractable Value, which refers to the profit obtained by specific participants utilizing the native characteristics of on-chain transactions, such as price delays, lending liquidations, transaction visibility, etc.
MEV usually manifests as arbitrage, liquidation, front-running, sandwich attacks, etc., and is a neutral term in itself. I would like to ask Teacher DeepSeek to create a comparison table:
Dimension MEV's Advantages MEV's Disadvantages Network Participants ✅ Increases validator income, enhances network security (high returns attract more nodes) ❌ Ordinary user transactions are front-run, gas fees surge, experience worsens Ecosystem Health ✅ Reflects market activity level (arbitrage and liquidation demand are indicators of liquidity health) ❌ Malicious MEV (such as sandwich attacks) undermines user trust, leading to ecosystem loss Decentralization ✅ Small nodes can capture MEV to make up for income gaps (theoretically) ❌ In practice, MEV is often monopolized by large mining pools/professional bots, exacerbating centralization Economic Model ✅ MEV income can be captured by the protocol (e.g., EIP-1559 burning part of the gas fees) ❌ Unallocated MEV may become a systemic risk (e.g., validator collusion)
Therefore, in the valuation system, MEV and REV are actually two completely different concepts. We have already mentioned the composition of REV in the initial formula, which actually includes MEV, combined with our current understanding of REV:
MEV should actually be measured more as a micro-indicator to gauge the health of the network and some strategic value distribution;
REV is more macro, focusing on the overall revenue premium of the public chain itself;
The ratio of MEV to REV can be monitored dynamically as an auxiliary indicator of ecosystem health (a low ratio is healthy, while a high ratio is risky).
4. Conclusion
Conclusion 1 (@mteamisloading): REV is not equal to the value capture of on-chain native tokens.
REV has its advantages and disadvantages, and should not be used and referenced in isolation;
Many times, REV will be burned, returned to users through incentive mechanisms, or paid as operating expenses to validator node operators, thereby reducing nominal REV.
Logan Jastremski on Twitter / X
Conclusion 2 (@mteamisloading): The FDV/REV ratio (similar to the P/E ratio) inherently varies between different chains (and enterprises).
For tokens, factors like yield and monetary premium will significantly affect prices. Moreover, the quality and sustainability of REV vary across different chains.
Conclusion 3 (@mteamisloading): Blockchains are not enterprises, and native tokens are not equity.
Conclusion 4 (@mteamisloading): The views of REV Minimalists may not always be advisable, while maximizing REV has many aspects worth discussing in the long term.
mteam.eth ? on Twitter / X
Dan Smith on Twitter / X
Conclusion 5: REV, when combined with many indicators, can form a relatively comprehensive observation system.
In the article, we discussed the relationship between REV and Fees;
Discussed the reference value of F/R multipliers and M/R multipliers for public chain valuation;
Discussed the differences and connections with MEV, and provided the MEV/REV public chain health indicator.
Reasonably and flexibly using these composite indicators can provide us with a relatively comprehensive perspective when evaluating public chains.
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Written by: Cage / WolfDAO
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Thanks to the above friends for their outstanding contributions to this week's report, which is collaboratively published by WolfDAO, for learning exchanges, research, or appreciation only.