Translation: Blockchain in Vernacular

The above chart is the data supporting the L1 and L2 networks with the most revenue and earnings. Today, we will explore the top four L1 and L2 by revenue and analyze how much revenue these blockchains actually retain.

For the purposes of this article, we define yield as: total revenue minus token issuance.

1. Which L1 blockchains are profitable?

1) Ethereum

In terms of revenue, @Ethereum is far ahead of all other blockchains, both L1 and L2, with $2.22 billion in revenue over the past year.

However, despite the impressive revenue, Ethereum recorded a net loss of $15 million.

What’s going on? The loss is primarily due to new token issuance outpacing revenue, leaving earnings negative year-to-date after a strong second half of 2023. Much of this can be traced to the shift of transaction activity to L2, reducing direct payments to the global computer. As a result, this migration has caused Ethereum’s earnings to decline despite heavy transaction volume and network activity.

2) TRON

Unsung giant @trondao ranks second in terms of total revenue, with $1.4 billion in revenue over the past year.

Tron’s success is directly attributable to the widespread stablecoin activity on its network, with it being second only to Ethereum in the number of stablecoins. This feature is particularly notable due to its widespread use in developing economies such as Argentina, Turkey, and African countries where inflation rates continue to be high. While some might call it a "single skill player," this "skill" has translated into $271 million in revenue over the past year, making it the most profitable blockchain to date.

3）Solana

@solana is also one of the top-earning protocols, with revenue of $157 million in the past year.

Solana’s popularity stems from its status as a hub for meme coins, capital growth from airdrops, technology upgrades to address spam issues, and support for leading trends such as artificial intelligence, which have helped it gain traction this cycle. Significant attention and strong revenue. However, this growth has not translated into real gains. Factoring in tokens issued to stakers and operating costs, Solana recorded massive net losses of $2.53 billion over the past four full quarters, completely offsetting its revenue and pushing it deep into the red.

4) Avalanche

L1 @avax, which has its own memecoin fund, ranked fourth with $69 million in revenue.

Avalanche is known for its subnet scaling solutions and gaming-focused features, and its upcoming major upgrade ACP-77 will improve the subnet deployment and management experience, making it more affordable, potentially increasing revenue. Still, the chain is facing a net loss of $860.6 million over the past year, mainly due to token issuance and operating costs, so there is still a long way to go in the future.

2. Which L2 blockchains are profitable?

1）Base

Despite being less than a year old, L2 Base, launched by Coinbase, has quickly made a name for itself with OP Stack, generating $66.6 million in revenue since its inception.

Remarkably, @base managed to retain 63% of that, netting $42 million during the same period. This success can be attributed to two key factors:

• First, Base introduced blobs through EIP-4844, significantly reducing costs from $9.34 million in the first quarter of 2024 to $699,000 in the second quarter of 2024.

• Second, Base has no native token, which makes it more competitive and avoids the distribution-related fees faced by other L2s.

2) Decision

Arbitrum is the L2 with the largest TVL, with a locked-in value of $17.2 billion and generated $61.14 million in revenue in the past year.

As the hub of DeFi, leading DeFi protocols such as @GMX_IO and @pendle_fi have settled in @arbitrum, and its SDK also provides major infrastructure for L3s such as @SankoGameCorp, @degentokenbase and @XAI_GAMES. Although revenue has not yet reached Base's level, Arbitrum has made $21.8 million in revenue in the past year, especially in the second quarter, when its expenses dropped to only $613,000, compared with $20 million in the first quarter.

4) zkSync Mode

As one of the leading zero-knowledge (ZK) technology-driven L2s, @zksync Era generated $53.3 million in revenue over the past year.

Since the June 2023 airdrop, the network’s locked volume (TVL) has increased significantly, with ZK technology adding approximately $850 million in value to the chain, although this amount has gradually decreased as users sell airdropped tokens . However, the chain has remained profitable, netting $15.3 million over the past year and $17.5 million over the past four full quarters. Although zkSync only ranks eighth in the L2 ranking, its profitability makes it the third most profitable L2.

5) ON Mainnet

At the heart of Superchain, @Optimism has generated $44.6 million in revenue over the past year through sorter fees on its mainchain and projects in the network such as @zora and Base.

In the second quarter of 2024, Optimism network activity reached record levels. The average number of daily active addresses increased to 121.6K, a month-on-month increase of 37%. Despite the sluggish market, the average daily transaction volume also increased to 601K, a month-on-month increase of 28%. Like other L2s, EIP-4844 contributed greatly to this growth. The reduction in fees increased network activity, which in turn increased Optimism's net profit by more than 150%.

Despite this, Optimism remains deeply in the red, having incurred a net loss of $239 million over the past year due to retroactive airdrops, incentive programs and operating costs.

3. Narrative and fundamentals

When analyzing this data, remember that, as in traditional finance (TradFi), profitability only tells part of the story. No one is betting trillions on Nvidia based on its current financials, but rather the narrative behind it that drives its growth.

Narrative-based investing is often the default choice for cryptocurrency buyers who seek outsized returns while taking high-risk actions. However, it is important to remember that there are still networks that have built substantial businesses based on today’s activity.

Diving deeper into the revenues and earnings of the top L1 and L2 networks provides greater insight into the underlying health of these networks and their place in the competitive landscape.