Sources of income in cryptocurrency

Written by: Prathik Desai

Translated by: Block unicorn

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

Trend reports and articles about cryptocurrencies are becoming more engaging, such as “This ETF's fund flows are different,” “Crypto financing finally matures in 2025,” “Bitcoin is about to see a surge this year,” and so on. Recently, while reading a report titled “The State of DeFi in 2025,” I noticed some charts about how crypto protocols generate “substantial income.”

These charts show the main protocols that generated the most revenue in the past year in the crypto space. They confirm a fact that industry insiders have been discussing for the past year: cryptocurrencies are finally starting to focus on revenue. But what exactly drives this revenue growth?

There’s another lesser-known story behind these charts: where do these fees ultimately flow?

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

In today’s analysis, I aim to add some nuance to these numbers and demonstrate how funds flow and are allocated within crypto.

Let’s get to the point.

Last year, the total revenue generated by crypto protocols exceeded $16 billion, more than double the approximately $8 billion in 2024.

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

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

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

But perpetual decentralized exchanges (DEXs)—which were nearly nonexistent in 2024—had grown significantly by 2025. Hyperliquid, EdgeX, Lighter, and Axiom together account for 7-8% of total industry revenue, far surpassing traditional DeFi categories like lending, staking, cross-chain bridges, and DEX aggregators.

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

Arbitrage trading involves holders and movers of funds earning profits by holding and transferring assets.

The revenue model of stablecoin issuers is both structural and fragile. It’s structural because their scale is proportional to supply and circulation. Each digital dollar they hold is backed by a government bond, which itself generates interest. It’s fragile because this model depends on a macroeconomic variable almost beyond their control: the Federal Reserve’s interest rates. The era of easing policies has just begun. As interest rates further decline this year, the revenue dominance of stablecoin issuers will weaken accordingly.

Next is the execution layer. This is precisely where DeFi protocols created the most successful category in 2025—perpetual contract DEXs.

The simplest way to understand why decentralized exchanges (DEXs) can quickly gain significant market share is to observe how they help users execute trades. They build trading venues that allow users to buy and sell risk assets on demand, conveniently. Even in less volatile markets, users can hedge, leverage, arbitrage, rotate funds, or research and position for the future.

Unlike spot DEXs, these platforms enable continuous, high-frequency trading without transferring the underlying assets, avoiding inconvenience.

While this part of execution sounds simple and fast, there’s much more behind it. These perpetual DEXs must build robust trading interfaces to prevent crashes under high load; they need matching and liquidation systems that remain stable in chaotic situations; and they must provide sufficient liquidity depth to keep traders active. Liquidity is the key to winning in perpetual DEXs. Those who can provide continuous, ample liquidity will attract the highest trading activity.

In 2025, Hyperliquid dominated the real-time decentralized trading space by offering the most liquidity from the largest market makers on its platform. Over the past 12 months, Hyperliquid led in fee revenue for 10 months among perpetual DEXs.

Ironically, even these DeFi categories’ perpetual DEXs succeeded because they don’t expect traders to understand blockchain and smart contracts—they operate like familiar traditional exchanges.

Once all these issues are addressed, exchanges can earn automatic profits by charging small fees on high-frequency, large-volume trades. This can continue even in sideways markets, simply because trading platforms offer traders a rich variety of options.

For this reason, I believe that despite only accounting for single-digit percentages last year, decentralized crypto exchanges (DEXs) are the only category that can barely challenge the stablecoin issuers’ dominance.

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. Although Airbnb and Amazon don’t own any inventory, their large-scale distribution strategies helped them surpass aggregator roles and lowered marginal costs for increasing supply.

Crypto issuance infrastructure itself doesn’t own the crypto assets created on its platform, such as meme coins, tokens, and micro-communities. However, by simplifying user experience, automating listing processes, providing ample liquidity, and streamlining trading, it can become the preferred platform for those wishing to create crypto assets.

By 2026, two questions may determine the trajectory 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 becomes more integrated?

Turning revenue into ownership

These three factors—fees, execution, and distribution—together reveal the sources of crypto revenue. But that’s only part of the story. Equally important, or even more so, is understanding how much of the total fees are allocated to token holders before protocols retain net income.

Value transfer through token buybacks, 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 approximately $30.3 billion in fees. After paying liquidity providers and suppliers, protocols retained $17.6 billion as revenue. About $3.36 billion of this total was returned to token holders via staking rewards, fee sharing, buybacks, and burns.

This means 58% of the fees became protocol revenue, while roughly 19% of the revenue belonged to token holders.

This marks a significant shift from the previous cycle. We see more protocols trying to make tokens operate like proof of operational performance. This provides real incentives for investors to continue investing and holding projects they believe in long-term.

The crypto world is far from perfect; most protocols still don’t distribute any earnings to token holders. But from a macro perspective, the situation has changed considerably, indicating that the status quo is evolving.

Over the past year, the proportion of holder income in total protocol revenue has steadily increased. It surpassed the previous high of 9.09% early last year and peaked at over 18% in August 2025.

This impact is reflected in token trading. If the tokens I hold never generate any income, my trading decisions are influenced by media reports. But if the tokens I hold can generate income—whether through buybacks or fee sharing—I will start to see them as income-generating assets. Although this approach may not be as safe or reliable as others, it will change how markets price tokens. Valuations will become more aligned with fundamentals and less influenced by media hype.

When investors look back at 2025 to understand where crypto income will flow in 2026, incentives will be a key consideration. Last year, teams prioritizing value transfer also stood out.

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

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

By 2026, “value transfer” will no longer be a niche choice but a necessary condition for any protocol wishing its tokens to trade based on fundamentals. Last year, the market already learned to distinguish protocol revenue from token holder value. Once token holders see tokens functioning like ownership certificates, reverting to previous models will seem irrational.

I believe the “2025 DeFi State of Affairs Report” doesn’t offer any groundbreaking insights into crypto profit models. This has been a hot topic over the past few months. The report’s role is to clarify some data, and with deep analysis, these data can reveal the most likely secrets to success for anyone aiming to generate income in crypto.

By analyzing revenue dominance trends among protocols, the report clearly shows that whoever controls the pipeline (transmission, execution, and distribution) will reap the greatest rewards.

I expect that in 2026, more projects will start converting fees into lasting, disciplined returns for their token holders—especially as declining interest rates diminish arbitrage trading’s attractiveness.

That concludes this analysis. See you in the next article.