January 22th 2025
The blockchain ecosystem continues to evolve, and the debate over the most efficient and cost-effective networks is intensifying. Solana, NEAR Protocol, Avalanche, and the Internet Computer Protocol (ICP) are among the top discussed platforms. These ecosystems promise scalability and fast transaction processing but differ significantly in how they manage payments for computational resources, storage, and transactions. This article explores the payment structures of these networks, comparing their cost models, transaction fees, storage costs, and scalability. We will also analyze which system might offer the most profitability for different use cases, considering the factors that influence cost efficiency.
The DeFi Ecosystem
According to the data, ICP stands out as the fastest, most cost-efficient, and eco-friendly blockchain. However, a key question arises: Which blockchain is currently the most profitable in terms of revenue generation? How do we measure and calculate this revenue across different blockchains?
Source: Crypto Valley
An analysis of weekly revenue figures for NEAR, Avalanche (AVAX), and ICP reveals an intriguing contrast: ICP generates significantly higher revenue than NEAR and AVAX, despite having a smaller DeFi ecosystem with lower liquidity and a smaller market capitalisation.
Source: tokenterminal
Let’s analyse and compare the percentage changes in monthly revenue for Solana, Avalanche, NEAR Protocol, and ICP over the last 30 days:
- ICP has experienced an impressive 55% increase in revenue during this period.
- NEAR Protocol, on the other hand, saw a 25.8% decrease in revenue, while Avalanche (AVAX) experienced a dramatic 82.8% drop in just 30 days.
- Meanwhile, Solana (SOL) recorded a 25.8% increase in monthly revenue, coinciding with an increase in liquidity within its DeFi ecosystem.
The declines in revenue for NEAR and AVAX are directly tied to the loss of liquidity in their DeFi ecosystems over the last month. In contrast, Solana’s revenue increase is a result of a corresponding rise in DeFi liquidity.
Source: tokenterminal
ICP’s DeFi ecosystem is still relatively small, which means fewer DeFi applications, such as lending, staking, and trading platforms, and less overall activity within the sector. Blockchains like Solana, NEAR, and Avalanche calculate revenue based on fees generated from network transactions. More transaction activity leads to higher fees and more revenue.
However, if liquidity in the DeFi ecosystems of these blockchains drops, so does their revenue. DeFi platforms, which contribute significantly to blockchain transaction volume, drive activities like swaps on decentralized exchanges (DEXs), lending, and staking. As DeFi liquidity declines, fewer high-value transactions occur, reducing revenue from gas fees and smart contract execution fees.
DeFi liquidity directly impacts the perceived utility of a blockchain. As liquidity shrinks, developers may hesitate to build new DeFi protocols, and users may migrate to other ecosystems. This reduces activity and, consequently, revenue.
This creates a feedback loop: decreased liquidity leads to reduced activity, which in turn leads to less revenue. Maintaining liquidity in DeFi ecosystems is therefore crucial for ensuring sustained revenue and network health for blockchains like Solana, NEAR, and Avalanche.
During a bull market, DeFi-based blockchains thrive, generating significant revenue. But in a bear market, the scenario changes drastically. Liquidity in DeFi ecosystems tends to drop, causing a severe decline in revenue and fees.
Historical data from DeFiLlama clearly demonstrates this trend. During the last bear market, Solana’s Total Value Locked (TVL) plummeted from $10 billion to $260 million. Avalanche’s TVL dropped from $10.2 billion to $480 million, and NEAR’s TVL shrank from $470 million to just $30 million. These sharp declines highlight how reliant revenue is on DeFi liquidity, illustrating the challenges these ecosystems face in maintaining profitability during market downturns.
- Declining DeFi Usage: Less DeFi activity reduces high-value transactions and revenue from gas fees.
- Liquidity’s Importance: Lower liquidity can drive developers and users away, shifting activity to stronger ecosystems.
- Feedback Loop: Decreased liquidity reduces activity, further hindering revenue and participation.
- Market Impact: In bull markets, DeFi-based blockchains perform well; in bear markets, liquidity drops, causing a revenue decline.
A Different Revenue Model
While NEAR, and Avalanche see drops in Total Value Locked (TVL) and revenue, the ICP stands out by experiencing a rise in revenue despite a decrease in TVL.
ICP’s system revolves around cycles. Users convert ICP tokens into cycles to pay for services like data processing and storage. As demand for these services increases, ICP’s revenue grows. When users convert ICP into cycles, they burn some of the tokens, boosting revenue even further.
This model gives ICP a unique advantage, especially in tough market conditions. While other blockchains suffer revenue declines due to drops in DeFi activity, ICP continues to thrive. Its revenue is tied to the demand for computational power, which remains stable even when the market is down.
ICP’s Cycle Burn Rate indicates the growing usage of the network. A year ago, the burn rate stood at 5 billion cycles per second. Today, it has surged to 1,341 billion cycles per second—a staggering 268-fold increase. This significant rise shows that as demand for computational resources and network services grows, the burn rate accelerates. ICP is becoming an increasingly important player in powering the decentralized web.
This increase in the burn rate proves that ICP can generate consistent revenue through its cycle-based model, independent of DeFi liquidity shifts.So, why can’t Solana, Avalanche, and NEAR replicate ICP’s model? The answer is simple: these blockchains are Web 2.5 systems, not designed to provide on-chain storage and computation at ICP’s scale. They aren’t “World Computers” like ICP.For example, storing 1GB of data for a year on blockchains like Solana, Ethereum, NEAR, or Avalanche can cost tens of thousands of dollars. In contrast, ICP offers highly efficient, scalable on-chain storage at a fraction of the cost.
Source: Internet Computer Wiki
While these blockchains rely on third-party services like AWS for storage, ICP ensures greater security and superior computational power. Its network is designed to scale efficiently, offering decentralized computing that these Web 2.5 blockchains simply cannot match.
In conclusion, while Solana, NEAR, and Avalanche rely heavily on DeFi activity for revenue, ICP’s unique cycle-based model enables it to generate consistent income, even in fluctuating market conditions. Its scalability, cost efficiency, and decentralized computational power set it apart from Web 2.5 blockchains. As DeFi liquidity wanes, ICP’s ability to thrive positions it as a more resilient platform. ICP’s sustainable revenue generation system offers promising potential for future growth and adoption.
Leave a Reply