Web3 Business Models in the Wild
Toward dApp monetization & sustainability.
We’ve seen a boom of dApp creation over the past few years. Increasingly, dApp developers are looking for ways to monetize and establish a viable revenue model.
We’ve compiled a few top business models currently used among dApps to help you get started on a path to monetization and sustainability.
Transaction Fees
Transaction fees — a tried and true business model. Taking transaction fees on volume or usage of your dApp is an obvious choice.
Uniswap, an exchange, takes 30 basis points (bps) from each trade:
A small liquidity provider fee (0.3%) is taken out of each trade and added to the reserves. While the ETH-ERC20 reserve ratio is constantly shifting, fees makes sure that the total combined reserve size increases with every trade. — Uniswap docs
Beyond exchanges, transaction fee models work well for marketplaces. OpenSea, an NFT marketplace, makes it free to buy or list an item but takes 2.5% from the price of a successful sale.
Good for: Exchanges, DeFi, marketplaces
Currently used by: Uniswap, Kyber Network, OpenSea
Transaction Fees on Third Party Integrations
Third party integrations into dApps are becoming more and more common. Instead of building from scratch, it’s quick and easy to integrate these services into your dApp.
Wyre, is frequently used as a fiat on-ramp for dApps. You can add a transaction fee on top of the one that Wyre charges. So, each time one of your users converts from USD to ETH, for example, your dApp receives a small percentage.
0x Instant offers something similar for so-called crypto on-ramps. You can earn a fee percentage on crypto to crypto exchanges passed through the 0x Instant widget embedded into your dApp.
Good for: Wallets, dApps who utilize a fiat on-ramp, dApps who may not be able to monetize through other methods
Currently used by: Balance.io
Fees to Mint or Sell Tokens
We’re also seeing the emergence of dApps which allow end users to create tokens — whether that’s a NFT, synthetic position token, or something else entirely.
Market Protocol, a decentralized derivatives exchange, for example, allows users to mint position tokens which act as a way to obtain synthetic price exposure. Market Protocol takes a small minting fee for this process.
Conversely, some dApps take a fee only when the created token is sold. This approach is becoming common in the NFT world.
Mintbase, a NFT creation platform, for example, takes a 1% fee from every sale.
Good for: NFT platforms, exchanges
Currently used by: Mintbase, Market Protocol
Monetizing cToken Interest
Compound recently announced cTokens. They allow anyone to earn interest by simply holding cTokens that track assets like ETH, DAI, and USDC.
This unlocks a new business model for dApps: taking a cut of interest earned through cTokens from staked capital in the dApp.
PoolTogether, is an excellent example of this. It’s a no loss lottery that collects a pool of DAI, lends it on Compound, then distributes the interest earned to one random winner.
PoolTogether utilizes this business model by taking 10% of the interest accrued.
Pool#2 was recently unlocked. The winner won 195.85 DAI indicating that PoolTogether made 21.76 DAI on that pool. Think about how that might scale with larger pools!
Good for: DApps with long staking periods, wallets
Currently used by: PoolTogether
Subscriptions
EIP 1337 is a standard for recurring payments on the blockchain (subscriptions). It will allow dApps to utilize a business model commonly found in the web 2.0 SaaS space — charging end users a recurring price for using the service.
Groundhog is a suite of tools powering the crypto subscription economy. Forseeably, they will offer services that help dApps integrate subscription payments — much like Recurly and Chargebee currently do for the web 2.0 SaaS world.
Groundhog is currently accepting early access interest submissions here.
House Edge
Some dApps have chance built into their logic. An easy way to turn this into a business model is by creating a house edge — a mathematical advantage that results in an assured percentage return over time.
This is a useful model for gambling dApps or games who wish to monetize.
Good for: gambling dApps, adventure games, any dApps with a chance component
Currently used by: FCK, Etheroll, Dungeon Riches
Final Thoughts
As a dApp developer, consider experimenting with some of these web3 business models and see what works best for your dApp.
This post has scratched the surface of some web3 business models seen out in the wild today. For further reading, I highly recommend:
- Kevin Owocki’s “Web3 Revenue Primitives”
- Max Mersch’s “Which New Business Models Will Be Unleashed By Web 3.0?”
Happy building! 🛠️🛠️🛠️
