Written by: Prathik Desai

Translated by: Block unicorn

I really enjoy the seasonal traditions in cryptocurrency, like Uptober and Recktober. People in the community often share various data around these periods. And humans love trivia, don’t they?

Reports and articles about trends in cryptocurrency are even more engaging, such as "This time the ETF fund flows are different," "Cryptocurrency financing has finally matured this year," "Bitcoin is about to see a surge this year," and so on. Recently, while reading a report titled "The State of DeFi in 2025," some charts about how crypto protocols generate "substantial revenue" caught my attention.

These charts showcase the major protocols that generated the most revenue in the cryptocurrency space over the past year. They confirm a fact that industry insiders have been discussing for the past year: cryptocurrency has finally started to focus on revenue. But what exactly are the factors driving this revenue growth?

There is another lesser-known story hidden behind these charts: where do these fees ultimately go?

Last week, I delved into DefiLlama's fee and revenue data (revenue refers to the fees retained after paying liquidity providers and suppliers) to try to find the answer.

In today’s analysis, I aim to add some nuance to these numbers and show how funds flow in and out of cryptocurrency.

Let’s get to the point.

Last year, crypto protocols generated over $16 billion in revenue, more than double the approximately $8 billion expected in 2024.

Over the past 12 months, the range of value capture in the cryptocurrency industry has expanded, with many new categories emerging in the decentralized finance (DeFi) space, such as decentralized exchanges (DEXs), token issuance platforms, and perpetual contract DEXs.

However, the profit centers generating the highest revenue remain concentrated in older categories—most notably stablecoin issuers.

The top two stablecoin issuers, Tether and Circle, accounted for over 60% of total cryptocurrency revenue throughout the year. In 2025, their share slightly decreased to 60%, down from about 65% the previous year.

But perpetual decentralized exchanges (DEXs)—which barely existed in 2024—have grown significantly by 2025. Hyperliquid, EdgeX, Lighter, and Axiom collectively accounted for 7-8% of total industry revenue, far exceeding the total share of traditional DeFi category protocols like lending, staking, cross-chain bridges, and DEX aggregators.

So, what factors might drive revenue growth in 2026? I believe the answer lies in the same three factors that influenced the concentration of cryptocurrency revenue last year: arbitrage trading, execution, and distribution.

Arbitrage trading refers to individuals who hold and transfer funds to earn profits through these activities.

The revenue model of stablecoin issuers is both structural and fragile. It is structural because its scale is proportional to supply and circulation. Every digital dollar they hold is backed by government bonds, which themselves generate interest. It is fragile because this model relies on a macroeconomic variable that the issuer can hardly control: the Federal Reserve's interest rates. The phase of loose monetary policy has just begun. As interest rates decline further this year, the revenue dominance of stablecoin issuers will also weaken.

Next is the execution layer. This is precisely where DeFi protocols built the most successful category in 2025—perpetual contract decentralized exchanges (DEXs).

To understand why decentralized exchanges (DEXs) can quickly capture significant market share, the simplest way is to observe how they help users execute trades. The trading venues they build allow users to buy and sell risk assets on demand and conveniently. Even when market volatility is low, users can still hedge, leverage, arbitrage, rotate funds, or conduct research and position for the future.

Unlike spot DEXs, they allow users to execute continuous, high-frequency trades without transferring the underlying assets, thus avoiding inconvenience.

While this execution part sounds simple and fast, there is much more behind the scenes. These perpetual DEXs must build a robust trading interface to ensure it does not crash under high load; they must have a matching and clearing system that remains stable in chaotic situations; and they must provide sufficient liquidity depth to ensure trader activity. In perpetual DEXs, liquidity is key to success. Those who can provide consistently ample liquidity will attract the highest trading activity.

In 2025, Hyperliquid dominated the real-time decentralized exchange (DEX) space with ample liquidity provided by the largest number of market makers on its platform. Therefore, in the past 12 months, Hyperliquid led in fee revenue for 10 months among perpetual decentralized exchanges.

Ironically, even these DeFi category perpetual DEXs succeeded because they do not expect traders to understand blockchain and smart contracts; they operate like familiar traditional exchanges.

Once all the above issues are resolved, exchanges can achieve automatic profits by charging small fees on traders' high-frequency, large-volume trading activities. This can continue even when spot prices are stagnant, for the simple reason that trading platforms offer traders a wealth of trading options.

For this reason, I believe that although last year's revenue share was only in the single digits, decentralized exchanges (DEXs) in cryptocurrency are the only category that can barely challenge the dominance of stablecoin issuers.

The third factor, distribution, can bring incremental revenue to crypto projects (such as token issuance infrastructure). Think of pump.fun and LetsBonk. This is very similar to what we see with Web 2.0 companies. While Airbnb and Amazon do not own any inventory, their large-scale distribution strategies help them surpass the role of aggregators and reduce the marginal cost of increasing supply.

The cryptocurrency issuance infrastructure itself does not own the crypto assets created through its platform, such as meme coins, tokens, and micro-communities. However, by simplifying the user experience, automating the listing process, providing ample liquidity, and streamlining trading, it can become the preferred platform for those looking to create crypto assets.

By 2026, two questions may determine the direction of these revenue drivers: will the share of stablecoins in industry revenue decline from around 60% as interest rate cuts weaken arbitrage trading? Will the market share of perpetual trading venues break through the 7-8% bottleneck as trading execution consolidates?

Transforming Revenue into Ownership

These three factors—transaction fees, execution fees, and distribution fees—together reveal the sources of cryptocurrency revenue. But that is only part of the story. Equally important, if not more so, is understanding how much of the total fees will be allocated to token holders before the protocol retains net revenue.

Value transfer through token buybacks, token burns, and fee sharing indicates that tokens are an economic claim to ownership, not just governance badges.

In 2025, users of DeFi and other protocols paid a total of approximately $30.3 billion in fees. Of this, after paying liquidity providers and supplier fees, the protocols retained $17.6 billion as revenue. About $3.36 billion of the total revenue was returned to token holders through staking rewards, fee sharing, buybacks, and token burns.

This means that 58% of the fees turned into protocol revenue, while about 19% of the revenue belonged to token holders.

This represents a significant change compared to the previous cycle. We see more and more protocols trying to make tokens operate like certificates of operational performance. This provides tangible incentives for investors to continue investing and holding long-term in projects they believe in.

The cryptocurrency world is far from perfect, and most protocols still do not allocate any earnings to token holders. But from a more macro perspective, there has been a considerable shift, indicating that the status quo is changing.

Over the past year, the share of holder income in total protocol revenue has continued to rise. This share surpassed the previous record of 9.09% at the beginning of last year and peaked at over 18% in August 2025.

This impact is reflected in token trading. If the tokens I hold never provide me with any earnings, my trading decisions will be influenced by media reports. But if the tokens I hold can generate earnings for me, whether through buybacks or fee sharing, I will start to view them as income-generating assets. Although this practice may not be as safe and reliable as others, it will still change the way the market prices tokens. The valuation of tokens will be closer to their fundamentals and less influenced by media reports.

As investors look back at 2025 to understand where cryptocurrency revenue will flow in 2026, they will consider incentives as an important factor. Last year, teams that prioritized value transfer also stood out.

Hyperliquid established a culture of returning about 90% of its revenue to users through the Hyperliquid Assistance Fund.

Among many token issuance platforms, pump.fun reinforced the idea of rewarding community members for their activity on its platform. It offset 18.6% of the circulating supply of its native token $PUMP through daily buybacks.

It is expected that in 2026, "value transfer" will no longer be a niche choice but a prerequisite for any protocol wishing its tokens to trade based on fundamentals. Last year, the market learned to distinguish between protocol earnings and token holder value. Once token holders see tokens operate like ownership certificates, it would be irrational to revert to previous models.

I believe the "State of DeFi in 2025" report does not provide us with any new insights into cryptocurrency profit models. This has been a hot topic over the past few months. The report's role is to clarify some data, which, when analyzed in depth, can reveal the secrets of success for anyone hoping to generate revenue in the cryptocurrency space.

By analyzing the dominant revenue trends among protocols, the report clearly indicates that those who control the pipeline (transmission, execution, and distribution) will reap the greatest rewards.

I expect that in 2026, more projects will begin to convert fees into lasting, disciplined returns for their token holders, especially as interest rate cuts diminish the appeal of arbitrage trading.

This concludes the analysis; see you in the next article.

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