Crypto assets derive value from three primary business models: enterprises, protocols, and the currencies themselves.
Author: IOSG Ventures
Cover Photo: Shubham Dhage via Unsplash
Disclaimer: This article is for educational purposes only and does not constitute investment advice. All referenced projects are for illustrative purposes.
1. Crypto Business Models
The rapid evolution of Ethereum and Layer 2 (L2) solutions has sparked debates about their value accumulation. This section breaks down the three core models underpinning crypto projects.
1.1 Enterprise Model
Key Traits: Control + Monopoly (Permissioned), Profit via Price Discrimination
- Centralized entities prioritize revenue generation, akin to traditional companies.
- Decentralization is secondary; examples include Solana Foundation, which maintains high ecosystem control (e.g., MEV revenue from monopolized block space).
- Competitive Edge: Business model agility, user growth, and token utility for customer acquisition.
👉 Explore Solana’s enterprise model
1.2 Protocol Model
Key Traits: Permissionless Participation, Fixed Fee Structures
- Open, immutable protocols (e.g., Uniswap) enable decentralized asset creation and trading.
- Governance ranges from team-controlled updates to fully autonomous DAOs.
- Success Factors: Sustainable product-market fit (PMF), first-mover advantage, and network effects.
1.3 Asset Model
Key Traits: Intrinsic Value via Consensus
- Examples: BTC, memecoins, algorithmic stablecoins.
Value drivers:
- Early adoption (e.g., BTC as "digital gold").
- Tokenomics (scarcity, deflation mechanisms).
- Cultural symbolism (e.g., memecoin virality).
2. L2 Business Models
2.1 L2’s Current Role
- Scaling Success: L2s handle 85% of Ethereum’s transactions but contribute only 31% of its revenue (Dune Analytics).
Revenue Streams:
- DA Fees: Post-EIP4844, costs are reduced via blobs, but demand growth lags supply.
- MEV Capture: Mostly retained by L2s (e.g., Based Rollup exceptions).
Challenge: L2s increasingly operate as independent ecosystems, diverging from Ethereum’s revenue-sharing model.
2.2 L2 Subcategories
| Type | Description | Business Model |
|---------------------|--------------------------------------|----------------------|
| Universal L2 | Alt L1 competitors (e.g., Arbitrum) | Enterprise |
| Alliance L2 | Permissioned chains (e.g., Optimism)| Protocol (Centralized)|
| AppChain L2 | Niche applications (e.g., GameFi) | Hybrid |
Key Insight: Universal L2s leverage Ethereum’s liquidity but face tokenization hurdles, while Alliance L2s balance control with ecosystem growth.
3. Ethereum’s Evolving Model
3.1 L2 Issuance Protocol
- Ethereum’s Rollup-Centric roadmap emphasizes decentralization, sacrificing short-term revenue (e.g., waived MEV/DA fees).
- Long-Term Bet: L2 growth will drive ETH demand as the primary settlement asset.
3.2 ETH’s Monetary Value
Five PMF Milestones:
- Token Issuance: Initial asset creation.
- DeFi Summer: ETH as liquidity benchmark.
- Liquid Staking: Enhanced yield utility.
- L2 Mining: Bridging + staking synergies.
- Restaking: EigenLayer-style AVS rewards.
Network Effects: ETH dominates as the default currency (>80% of Uniswap pools), though competitors (e.g., L2-native assets) emerge.
4. Key Takeaways
- Ethereum’s Sacrifice: Forgoes L2 revenue to foster ecosystem expansion.
- ETH’s Edge: Network effects from DeFi/L2 adoption cement its role as “programmable money.”
- L2 Future: Enterprise-driven models (Universal/Alliance) will push technical boundaries, while ETH captures value at scale.
FAQ
Q: How do L2s impact Ethereum’s security?
A: ETH’s PoS model relies on its price; L2 growth indirectly bolsters security via increased demand.
Q: Are DA fees sustainable for Ethereum?
A: Only if demand outstrips blob supply—currently unlikely due to bot-dominated transactions.
Q: Why do AppChain L2s prefer alliances?
A: Lower startup costs and shared liquidity (e.g., Base’s cbBTC).
👉 Learn about Ethereum’s restaking economy
Final Note: ETH’s value hinges on its utility across Ethereum’s expanding ecosystem—liquidity, staking, and beyond.