The P&L of a Decentralized Application
Introduction
The top 50 most valuable protocols all have circulating market caps of at least one billion. Why do these tokens, many of which have unproven business models, trade at such high valuations? One of the core assumptions behind these valuations is that the protocol will someday mature to have product-market fit, justifying its current market value.
For protocols that operate decentralized applications (dApps), assessing profitability is one of the few ways investors can begin to evaluate tokens based on tangible metrics instead of relying on user metrics and topline fee growth. A project with a profitable P&L demonstrates that it is delivering tangible value to its users above its costs, and is moving closer to achieving product market fit. While dApps that continue to rely on unprofitable incentives require a different level of scrutiny from tokenholders.
Most decentralized applications are in the early growth phase, where they must attract users and suppliers to their network through costly token incentives. They may have high user numbers and market caps, but their product market fit is likely distorted by ongoing native token incentives. Users on the network may only be there because they are paid to be, or because the product they use is subsidized th...Reports you may have missed
INTRODUCTION Blockchain networks initially were more like closed-loop systems, meaning the value created and traded on-chain was confined to crypto native assets. As technology has developed, blockchains and the real world are becoming more intertwined. Crypto protocols and TradFi institutions alike are looking to tokenize real-world assets and benefit from transaction efficiencies, cost savings, interoperability, composability, and transparency. Protocols have already begun bringing assets like dollars and treasuries on-chain while...
WHAT ARE AIRDROPS? Crypto Airdrops are a unique growth and distribution mechanism that crypto protocols use to attract users and give them ownership of the protocol through the "airdropping" of tokens. Airdrops involve giving away tokens to selected users to generate interest, raise awareness, and attract potential users to the project. Most airdrops aim to distribute tokens to early users and backers of the project, ideally rewarding these early backers...
