Over the rolling 24 hours: $ETH -9.11%; over the rolling 24 hours: $AAVE -10.89%; over the rolling 24 hours: $UNI -16.24%. All three spot prices are falling, but price declines are not a thermometer for protocol revenue, let alone a substitute for an explanation of where the fees go. What I want to ask right now is: whose books does the money paid by DeFi users ultimately end up on?
Borrowers pay interest to use funds; traders pay fees to complete transactions. A protocol receiving fees and token holders gaining rights as a result are two different things. To determine whether money has reached token holders, we need to look at the specific rules already in effect for that protocol. We can't simply call it a dividend just because the protocol has revenue.
Liquidity incentives should also be accounted for separately. Rewards can attract funds or participants, but they are not fees paid by users for a service; who bears the cost of the rewards depends on the specific mechanism. The amount of funds locked at a given point in time is a stock; the fees actually collected over a period of time are a flow. A large stock does not guarantee stable revenue, and generous rewards don't prove that anyone is willing to keep paying fees.
So I would look at three things separately: whether anyone uses the service, who pays the fees and where they go, and whether token holders have clearly defined rights. A proposal is not the same as implementation, and a general mechanism can't be passed off as a protocol's latest feature. Prices can tell us how the market is valuing something right now, but they can't serve as evidence for a protocol's ledger. Until these accounts add up, so-called value accrual is still just an unfinished calculation.
Borrowers pay interest to use funds; traders pay fees to complete transactions. A protocol receiving fees and token holders gaining rights as a result are two different things. To determine whether money has reached token holders, we need to look at the specific rules already in effect for that protocol. We can't simply call it a dividend just because the protocol has revenue.
Liquidity incentives should also be accounted for separately. Rewards can attract funds or participants, but they are not fees paid by users for a service; who bears the cost of the rewards depends on the specific mechanism. The amount of funds locked at a given point in time is a stock; the fees actually collected over a period of time are a flow. A large stock does not guarantee stable revenue, and generous rewards don't prove that anyone is willing to keep paying fees.
So I would look at three things separately: whether anyone uses the service, who pays the fees and where they go, and whether token holders have clearly defined rights. A proposal is not the same as implementation, and a general mechanism can't be passed off as a protocol's latest feature. Prices can tell us how the market is valuing something right now, but they can't serve as evidence for a protocol's ledger. Until these accounts add up, so-called value accrual is still just an unfinished calculation.
