DeFi Protocols: Business Models, Revenue Streams, and Sustainability

This collection of posts and summaries explores the business models of Decentralized Finance (DeFi) protocols, specifically looking at Protocols for Loanable Funds (PLFs), Decentralized Exchanges (DEXs), and Yield Aggregators. It examines how these protocols generate revenue, often through methods analogous to traditional finance but with unique blockchain-based mechanisms like automated liquidations. The discussion also covers the sustainability and risks associated with various DeFi models, the pricing discrepancies of governance tokens, and regulatory concerns.

📌 Let’s Connect:
I’m Tomide Adeoye, a startup builder passionate about leveraging technology, strategy, and innovation to drive business growth across Africa.

🔗 linkedin.com/in/tomide-adeoye-828604129/
🐦 x.com/_Tomide

1. Lender Borrower wToken (IOU) Profit from Interest Collateral PROTOCOLS FOR LOANABLE FUNDS : BUSINESS MODEL Smart Contract PLF Treasury % interest Lending Asset A Short Survey on Business Models of Decentralized Finance (DeFi) Protocols By Teng Andrea Xu and Jiahua Xu Follow us here: WWW.REALLYGREATSITE.COM Revenue Source: interest and fees from borrowers Loaned Asset Payback + fees Collateral 1 2 3 4 5 6 ?5 Keeper At the liquidation threshold, the collateral is bought at a discount by liquidators DEFINITIONS: Wrapped tokens are used to represent ownership. They are a way to use cryptocurrencies such as Bitcoin or Dogecoin on blockchains other than the blockchain they were originally built on. SCRF Summary: Tomide Adeoye

2. At the liquidation threshold, collateral is bought at a discount by liquidators. LENDING PROTOCOL BUSINESS MODEL Smart Contract Borrower Lender wToken (IOU) Interest Collateral PLF Treasury % interest Lending Asset Loaned Asset Payback + fees KEEPER A Short Survey on Business Models of Decentralized Finance (DeFi) Protocols By Teng Andrea Xu and Jiahua Xu Liquidation Research Summary: Tomide Adeoye. At the liquidation threshold, collateral is bought at a discount by liquidators.

3. Liquidity Provider Buyer LP Tokens Interest DECENTRALIZED EXCHANGES: BUSINESS MODEL DEX Treasury % interest A Short Survey on Business Models of Decentralized Finance (DeFi) Protocols By Teng Andrea Xu and Jiahua Xu Fees paid by buyers are split proportionally between liquidity providers, and a percentage goes to the protocol’s treasury Fees Swapped Assets Deposited Assets Smart Contract/ Liquidity Pool DEFINITIONS: Liquidity provider tokens or LP tokens are tokens issued to liquidity providers on a decentralized exchange (DEX) that run on an automated market maker (AMM) protocol. Uniswap, Sushi and PancakeSwap are some examples of popular DEXs that distribute LP tokens to their liquidity providers. CoinMarketCap Alexandria. 2022. Liquidity Provider Tokens (LP Tokens) | CoinMarketCap. [online] Available at: <https://coinmarketcap.com/alexandria/glossary/liquidity-provider-tokens-lp-tokens> [Accessed 31 July 2022]. SCRF Summary: Tomide Adeoye 1 2 4 3 3 4

4. Investor Yield YIELD AGGREGATORS: BUSINESS MODEL A Short Survey on Business Models of Decentralized Finance (DeFi) Protocols By Teng Andrea Xu and Jiahua Xu % fee Invest Locked Assets Aggregator Treasury Smart Contract/ Vault Staking Lending Liquidity Provision SCRF Summary: Tomide Adeoye The protocol earns commission fees from the strategy’s profit.

5. DEFI ABSTRACTED BUSINESS MODEL: DeFi common mechanism and revenue strategy. A Short Survey on Business Models of Decentralized Finance (DeFi) Protocols By Teng Andrea Xu and Jiahua Xu Investor User Yields DEFI’s Treasury % interest Uses Commits Financial Service SCRF Summary: Tomide Adeoye 1 4 2 3 5 Locked Assets Pays Locks DEFI PROTOCOL SMART CONTRACT INVESTOR USER FINANCIAL SERVICE PLFs Lending Pool Lender Borrower Loan DEXs Liquidity Pool Liquidity Provider Buyer/Trader Exchange Yield Aggregators Vault Vault User   Asset Management DEFI NAMING TAXONOMY

6. DEFI BUSINESS MODELS Protocols for Loanable Funds (PLF) Decentralized Exchange (DEX) Yield Aggregator Service: loan Actors: lender and borrower Smart Contract: lending pool Revenue Source: interest paid by borrowers Service: exchange Actors: liquidity provider and buyer Smart Contract: liquidity pool Revenue Source: swap fees paid by buyers Service: asset management Actor: vault user Smart Contract: vault Revenue Source: profit from performance

7. A SOURCE­CODE­BASED TAXONOMY FOR ETHEREUM SMART CONTRACTS Hofmann, Adrian & Kolb, Julian & Becker, Luc & Winkelmann, Axel. (2021). A Source-Code-Based Taxonomy for Ethereum Smart Contracts. tags: Tooling and Languages, Auditing and Security 150 Smart Contracts in 101 DApps analysed FINDINGS Identification of common functionalities of Ethereum smart contracts based on similarities in their codebase. METHOD Development of standards & libraries for Smart Contracts OBJECTIVES Identification of features critical to the development of niche Smart Contracts Easier description of technical specifications and requirements based on established categories 64 Characteristics 6 meta-categories 28 Dimensions Research Summary Core Research Question: Which common code patterns are used to develop smart contracts, and which archetypes of smart contracts can be distinguished based on these patterns?

8. FRONTRUNNING ON ETHEREUM DEFAULT TRANSACTION ORDERING ON GETH SEALED-BID AUCTIONS INVESTIGATING ARBITRAGEURS AND ORACLE MANIPULATORS IN ETHEREUM. Kevin Tjiam and Prof. Dr. Kaitai Liang Follow us here:

9. METHODS GUARANTEEING TRANSACTION ORDER ON ETHEREUM. DEFAULT TRANSACTION ORDERING ON GETH SEALED-BID AUCTIONS INVESTIGATING ARBITRAGEURS AND ORACLE MANIPULATORS IN ETHEREUM. Kevin Tjiam and Prof. Dr. Kaitai Liang Follow us here:

10. Designed by: M: [phone] E: [email protected] LinkedIn | GitHub | Website Medium | Twitter MERISLABS M: [phone] E: [email protected] LinkedIn | GitHub | Website Youtube merislabs .com TOMIDE ADEOYE