Written by: Poopman

Compiled by: TechFlow

 

The following is a list of the five most profitable DeFi protocols in the past six months, which have occupied an important position in the decentralized financial industry. The revenue of these protocols comes from various fee models, such as lending, trading, market making, etc., as well as token incentives to encourage user participation and holding. Let's take a look at the characteristics and revenue of these protocols.

 

 

 

Definition of “profitable”

DeFi’s fee model varies, but in general, DeFi projects make profits by:

  • transaction fee

  • Borrowing Fees

  • Stability Fees (e.g. LiquityProtocol)

 

Furthermore, DeFi distributes profits through three main channels:

  • Protocol Library

  • Token Holders

  • LP (Liquidity Provider)

 

While the first two can be classified as protocol revenue, LP profit is different. LP profit is "supply-side revenue," meaning that the profit is redistributed to those who provide liquidity in the pool. For example, Uniswap generates over $700 million in fees per year, but it is only profitable because the majority of this revenue is returned to LPs.

 

To assess the profitability of a project, “revenues” would be a better metric as they represent “net income” after fees are distributed to LPs. In short, Revenue = Fee Income - Token Incentives. Now that we have defined what “profitability” is, let’s dive in.

 

 

Top 5 Most Profitable DeFi Protocols

 

1st place: MakerDAO ~ $7.16 million

 

MakerDAO allows users to post ETH/BTC/USDC/LINK as collateral and borrow its stablecoin $DAI, which is pegged to the US dollar.

 

 

Cost Model

When someone borrows money through MakerDAO, they have to pay a stability fee, which is used to purchase $MKR and then destroyed.

 

In the past six months, MakerDAO has generated $7.25 million in revenue from fees. After deducting $93,200 in token incentives, MakerDAO's total revenue is $7.16 million, firmly ranking first in the revenue list.

 

 

 

2nd Place: Gains Network ~ $5.73 million

 

Gains Network is a derivatives trading platform built on Arbitrum and Polygon, providing users with cryptocurrency and forex trading options and offering leveraged trading.

 

 

Cost Model

Gains charges a trading fee when a user opens, closes, or updates a trade. In addition, there are rollover fees, funding fees, and liquidation fees. In the past six months, Gains has earned $7 million from fees. However, $GNS does not provide any incentives, so it only paid $1.27 million in supply-side fees.

 

This means that GainsNetwork earned approximately $5.73 million, placing it second on the list of top earners.

 

 

 

3rd Place: GMX ~ $3.64 million

 

GMX is a popular perpetual contract trading platform that enables low swap fees and zero price impact trading on Arbitrum. Users can conduct spot trading and trade perpetual futures on GMX with up to 50x leverage.

 

 

Cost Model

GMX distributes fees generated from swaps and leveraged trading to those who hold $GMX and provide liquidity for $GLP. In the past 6 months, GMX earned $67.54 million in fees, of which $47.27 million (70%) went to supply-side fees for GLP holders. The remaining $20.26 million was used as revenue, but $16.6 million (82%) was used for token incentives.

 

Despite performing well during the bear market, GMX’s profits were relatively small due to the high cost of token incentives, earning it only third place on the list of the most profitable projects.

 

 

 

4th place: Convex ~$1.57 million

 

Convex is a yield enhancer built on top of CurveFinance. By controlling more than 50% of veCRV, Convex uses its governance power to increase CRV rewards in Curve, thereby enhancing yields.

 

 

Cost Model

Convex generates revenue from 3CRV earnings, $CRV, and other liquidity mining rewards. In the past six months, Convex earned $70.51 million in fees, of which 80% of revenue ($56.31 million) went to Curve LP market makers.

 

The remaining $14.17 million in revenue was primarily used for token incentives ($CVX), leaving only $1.57 million in earnings.

 

 

5. 1inch ~ $1.27 million

 

1inch is a non-custodial DEX aggregator based on ETH and BSC.

 

 

Cost Model

In the past six months, 1inch has generated $1.97 million in revenue. After deducting $693,000 worth of token incentives, 1inch's revenue reached $1.27 million, ranking fifth on the list.

 

 

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