The rise of revenue-sharing tokens is redefining the crypto landscape and bridging the gap between speculative trading and tangible value. By directly linking token holder returns to project growth, these modern mechanisms aren’t only attracting investors but additionally reshaping decentralized finance (DeFi).
The way pioneers prefer it airfield, RaydiumAnd banana When we display the potential of aligned incentives, the stage is ready for a brand new era of crypto investing – one where sustainable growth meets progressive regulatory adaptation. In this evolving ecosystem, the opportunities for fundamental investors have never been more promising.
Given the existential business risk posed by Securities and Exchange Commission (SEC) enforcement actions, the overwhelming majority of DeFi applications in recent times have opted to indefinitely suspend all discussions of value appreciation. Although this decision was logical under the circumstances on the time, it had enormous disadvantages for the industry. Many DeFi tokens that had no direct connection to the success and growth of the underlying business were deemed useless and underperformed the market.
The election of Donald Trump and the expected leisure of regulation for the crypto industry have upended this dynamic. DeFi protocols now assume that popular value appreciation mechanisms carry far less risk. Even hesitant DeFi projects must reckon with the advantages that these mechanisms have had on the projects brave enough to implement them.
In this post, I introduce three applications which have taken different approaches to returning economic value to their token holders. All three have been very successful, seeing huge increases in each the number of individuals using their products and the costs of their tokens. The success of those projects provides examples of possible methods that more low-key DeFi protocols could implement under a more advanced regulatory framework.
airfield
Aerodrome is the dominant decentralized exchange on Coinbase’s Ethereum Layer 2 (L2), Base. In crypto markets, governance has been challenged as participants prioritize short-term profits over the long-term health of the corporate. Aerodrome addresses this problem with a system wherein token holders are incentivized to be long-term energetic participants within the network.
To have the best influence on governance matters, holders must lock their tokens for a protracted duration, giving them greater voting power. With this voting power and continued participation in governance, this group of token holders is entitled to 100% of the revenue the exchange generates from trading fees and bribes. This design solves the issue of making long-term alignment between token holders and the project. The Aerodrome’s design provides essentially the most control possible for essentially the most dedicated owners.
To offer you an idea of ​​how impactful these revenue distributions will be, in Q4 2024, the applying generated $100.7 million in revenue, representing an annual run rate of >$400 million. This variety of design also creates a virtuous circle for the corporate, where as volume and sales increase, token dividend yields increase to match those returns. Market participants must purchase after which lock their tokens, effectively reducing the provision in circulation and benefiting all token holders.
This design and the long-term growth of DeFi on Base have made Aerodrome one in all DeFi’s biggest winners this 12 months, with its native token AERO increasing 13x for the reason that token’s launch in February 2024. Your direct contact with the success of the Application has undoubtedly contributed a big part to Aerodrome’s success in 2024.
Raydium
Raydium, a decentralized exchange built on Solana, was among the many first DeFi applications to attain success on Solana after its launch in early 2021. Over the past two years, as Solana recovered from the fallout from FTX’s collapse, Raydium has solidified its position because the leading decentralized exchange.
In order to share the economics with its token holders, Raydium is introducing a buyback program as a substitute of paying out fee income directly. Through this technique, 12% of all fees generated by the protocol are used to buy RAY tokens on the open market. This creates a scientific demand for the token, which is directly linked to increased usage of the applying. In 2024, as meme coin trading exploded on Solana, trading volume on Raydium also increased, increasing greater than 13-fold in December in comparison with the previous 12 months. Volume growth results in fee growth, and in December Raydium surpassed 45 million RAY tokens repurchased through the buyback program. This amount represents greater than 10% of all RAY tokens and circulation and has resulted in roughly $360 million in buying pressure for the token at current prices.
This variety of repurchase program has the advantage of being more conservative from a regulatory risk perspective, as no fees are paid out, and provides a direct link between the expansion of the applying’s fundamentals and the demand for the token. This design element distinguishes Raydium and its token from its competitors on Solana, a lot of which issue tokens to incentivize usage, resulting in high inflation rates. Raydium is an awesome example of how a worth appreciation mechanism can significantly improve the investment case for a token. Raydium’s token delivered a return of +289% in 2024.
banana
Bananagun provides its users with sophisticated trading tools and allows them to implement these complex strategies via chat on the favored social media platform Telegram. Bananagun charges a fee between 50 and 100 basis points depending on the variety of trade executed. While the applying could have kept all of this revenue to pay expenses and salaries, Bananagun’s developers as a substitute passed on 40% of all fees to token holders through direct dividend payments.
In order to limit access to this program to long-term investors, Bananagun has decided that users must purchase and stake at the very least 50 tokens (roughly $3,000 on the time of writing) to be eligible for rewards. Once these tokens are acquired and locked, users will receive programmatic payments within the project’s native token (BANANA) or ETH at the top of every epoch. Currently, these dividends provide holders with an annual yield of 19%, making a Bananagun a real income-producing asset.
Similar to the Raydium buyback, these dividends fluctuate with the entire fees generated by the applying. As fees increase, the dividend yield also increases. Although this strategy carries greater regulatory risk than the others we now have described, it provides a direct connection that makes it very easy to judge an investment within the BANANA token. Many investors have done this evaluation and decided to purchase BANANA, with the token returning 218% in 2024.
The intersection of value and growth
Value enhancement mechanisms alone won’t be enough to save lots of projects with weak fundamentals. All investments in crypto assets assume that the users and economic value of blockchains will increase by orders of magnitude over time. Given this core concentrate on growth, without growth, no amount of value creation can save a crypto project whose fundamentals are stagnating or shrinking.
There are various examples of applications that were pioneers by way of adding value creation mechanisms to their tokens, but were unable to sustain the underlying growth and subsequently fell significantly in need of expectations. Conversely, there are also examples of applications which have experienced high and consistent growth, but whose tokens aren’t linked to this growth and subsequently also underperform.
Another factor that’s crucial to the long-term prospects of a crypto application is the expansion trajectory of the blockchains on which it’s deployed. In recent years, crypto innovators have created various varieties of blockchain infrastructures, giving application developers limitless options to make a decision which blockchain(s) to construct on. Many applications are initially limited to only one blockchain. For this reason, in lots of cases, the fate of an early-stage app will be determined by the fate of the blockchain. Even with the very best technology and user experience, an app that only exists in a shrinking chain is doomed.
The best ways to speculate in cryptocurrencies today are applications that:
1) Have high fundamental growth.
2) Deployed on protocols which can be also seeing a rise in user numbers.
3) Have a approach to link the worth of their tokens to improving fundamentals.
Each of the three tokens we highlighted at first of this text meet all of those criteria and we consider these characteristics have led them to deliver outsized returns to their holders this 12 months.
While the tokens within the chart above represent only a fraction of all the applying tokens investors can pick from today, we consider their YTD return profile is emblematic of today’s investor preference. Projects that fall into the golden zone we now have described are few and much between and have subsequently generated above-average returns. Projects with two of the three key catalysts described above, resembling: Uniswap or Spirithave fallen into the center of the sector. And those that meet just one in all our three criteria have been completely left behind on this bull market.
The vivid future lies ahead
Similar to stocks, it is sensible that for early-stage projects, providing money flows to stakeholders might not be a priority. However, if this step is delayed or ignored, token holders may increasingly discount the worth of the token, risking that there is no such thing as a path to increasing value. While not all tokens today are required to implement value appreciation mechanisms, a sensible path to monetization is vital to long-term buy-in from token holders.
Under a more advanced regulatory system, the trail to monetizing crypto applications shall be clear. This shift will see more hesitant applications move to sharing money flows with token holders, making a gold rush of opportunities for fundamental investors within the crypto markets.
