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The cryptocurrency market has undergone a seismic shift in recent times. The euphoria surrounding high-flying token launches has cooled, and institutional investors are increasingly scrutinizing the underlying fundamentals of blockchain projects. Amidst this evolving landscape, a crucial question emerges: Which blockchains are actually turning a profit?
This analysis delves into the heart of this matter by examining the top four Layer 1 and Layer 2 blockchains based on their revenue generation. Beyond merely identifying these top performers, we will scrutinize their financial health by determining how much of this revenue is retained as profit. By dissecting the revenue streams and expenditure patterns of these blockchains, we aim to shed light on their financial sustainability and profitability.
Layer 1:
Ethereum:
Ethereum undeniably reigns supreme as the most lucrative blockchain, amassing a staggering $2.22 billion in revenue over the past year. However, this financial prowess is paradoxically overshadowed by a $15 million net loss. The culprit? The rapid issuance of new tokens has outpaced income, pushing Ethereum into the red for the current year. This stark contrast is largely attributed to a shift in transaction activity towards Layer 2 solutions, which has siphoned off a significant portion of fees that once directly benefited the Ethereum mainnet. Despite its dominant position in the blockchain ecosystem, Ethereum’s financial health is facing unprecedented challenges.
Tron:
Trailing closely behind Ethereum in terms of overall revenue is Tron, which generated a substantial $1.4 billion over the past year. This impressive figure is primarily driven by the platform’s dominance in the stablecoin market. Tron has emerged as the second-largest network for stablecoin activity, particularly benefiting from the surge in demand from regions grappling with high inflation rates, such as Argentina, Turkey, and various African nations. While its revenue stream might appear somewhat concentrated, it’s undeniably effective, resulting in a robust $271 million in earnings—a clear testament to Tron’s profitability within the blockchain landscape.
Solana
Solana, a prominent player in the blockchain ecosystem, has generated a respectable $157 million in revenue over the past year. Its reputation as a breeding ground for memecoins, coupled with the windfall from airdrops and strategic network upgrades to combat spam, has propelled it into the spotlight. Despite this financial traction, Solana’s earnings story paints a starkly different picture. When factoring in token issuance to stakers and operational expenditures, the protocol has incurred a staggering net loss of $2.53 billion over the past four quarters, completely offsetting its revenue and plunging it into the red.
Avalanche
Occupying the fourth position in terms of revenue generation is Avalanche, which has amassed $69 million over the past year. Renowned for its subnet scaling solution and a strong focus on the gaming industry, Avalanche is poised for significant growth with the upcoming ACP-77 upgrade. This enhancement is expected to streamline subnet deployment and management, potentially driving increased revenue. However, despite its promising prospects, Avalanche has encountered substantial challenges, incurring a net loss of $860.6 million over the past year due to token issuance and operational expenses.
Source: create.vista.com
Layer 2
Base:
Coinbase’s Layer-2 solution, Base, has quickly become a significant player in the blockchain space, generating $66.6 million in revenue since its launch and retaining 63% of it as net profit, totaling $42 million. Base’s success is due to its innovative use of EIP-4844 to reduce costs from $9.34 million in Q1 2024 to just $699K in Q2 2024. Additionally, Base’s choice to forgo a native token has strategically avoided the distribution costs faced by other Layer-2 solutions.
Arbitrium:
Arbitrum, with $17.2 billion in Total Value Locked (TVL), leads the Layer-2 scaling solutions, generating $61.14 million in revenue over the past year. As a key player in DeFi, Arbitrum hosts major platforms like GMX and Pendle, and its SDK supports Layer-3 developments like Sanko, Degen chain, and Xai. Although it trails Base in revenue, Arbitrum’s profitability shines with $21.8 million earned last year. A standout Q2 saw expenses drastically cut from $20 million to just $613,000, showcasing Arbitrum’s efficiency and strong cost management.
zkSync Era:
zkSync Era quickly became a key player in the Layer-2 space, generating $53.3 million in its first year. Following a major airdrop in June 2023, the platform’s Total Value Locked (TVL) surged by $850 million but later declined as users cashed out. Despite this, zkSync Era showed strong financial resilience, earning $15.3 million and consistently profiting over the past year. It now ranks as the third most profitable Layer-2 solution and the eighth-largest by TVL.
Op Mainnet:
Optimism, the core of the Superchain ecosystem, generated $44.6 million in revenue last year from sequencer fees on its mainnet and affiliated networks like Zora and Base. The platform saw significant growth in Q2 2024, with daily active addresses rising 37% to 121.6K and transactions increasing 28% to 601K. This was driven by EIP-4844’s implementation on other Layer-2s, which reduced fees, boosted usage, and increased Optimism’s profitability by 150%. Despite this, Optimism faces financial challenges, with a $239 million deficit due to retroactive airdrops, incentive programs, and operational costs.
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