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Protocol economics
A protocol fee is charged by software rather than billed by a company, and the payer, the currency and the recipient are three separate facts.
10lessons
68 minreading in all
Foundationwhere it starts
01
Lessons in this track
01
What a protocol fee is, and who actually pays itA protocol fee is charged by software rather than billed by a company, and the payer, the currency and the recipient are three separate facts.
6 min · Foundation
02
Fees versus revenue, and who keeps the moneyOne payment splits into a supply-side share, a protocol share and sometimes a holder share; reporting only the first number describes almost nothing.
7 min · Working knowledge
03
Take rate: what a high or a low one impliesTake rate is the share of user fees a protocol retains, and both a high reading and a low one have several possible mechanical causes.
6 min · Working knowledge
04
Total value locked, and the double-counting problemTVL is a dollar valuation of deposited assets, which means it moves with prices, and the same dollar can legitimately appear in several places at once.
7 min · Working knowledge
05
DEX volume: the most abused number in the sectorReported trading volume is easy to manufacture, easy to double count, and mostly generated by machines rather than by people wanting to trade.
7 min · Working knowledge
06
Stablecoin supply on a chain as a demand measureDollar-denominated balances hosted on a network measure willingness to hold value there without depending on the price of the network's own token.
6 min · Working knowledge
07
An address is not a person: reading active addressesActive addresses counts identifiers that transacted, and the relationship between identifiers and human beings runs in both directions at once.
6 min · Foundation
08
Revenue quality: concentration, incentives, durabilityTwo protocols reporting the same retained revenue can be entirely different businesses once the payers, the subsidies and the switching costs are examined.
8 min · Advanced
09
Never add a chain's economics to an application'sChains and the applications running on them are separate layers with separate tokens, and summing their fees counts the same activity twice.
7 min · Advanced
10
Why protocol revenue is not income-statement revenueThe word is borrowed from accounting, but the measurement, the entity, the cost side and the legal claim behind it are all missing or different.
8 min · Working knowledge
10 lessons
DeFi
10 lessons
How networks work
10 lessons
Institutional access and regulation
10 lessons
Market structure
12 lessons
Risk
8 lessons
Stablecoins and payments
10 lessons
Start here
10 lessons
Supply and issuance
6 lessons
Using this site
12 lessons