Which protocol tokens are the most "profitable"? An article lists 19 cash flow protocols.
The ability to capture the value of tokens is a key factor affecting the long-term development of projects. This article provides an overview of 19 cash flow protocols that distribute protocol revenue to token stakers.
Table of Contents
Cash Flow Protocols in the Field
ProtoFi is a DeFi protocol based on the Fantom public chain, offering AMM trading and liquidity mining with a decentralized governance model, where token ELCT stakers receive protocol fees distributed via DAI.
The best practice is to purchase ELCT off-chain and hold it, otherwise, you would need to buy the PROTO token and hold it, but in this case, the price/discount ratio is quite high, making the returns even worse.
Synthetix is a well-known DeFi protocol dedicated to derivative trading and atomic swaps through synthetic assets. The implementation of atomic swaps significantly increased protocol revenue last month, possibly due to arbitrageurs operating between SNX/CEX and greatly boosting stakers' APR.
The approach here is to mint sUSD by buying SNX and carefully manage your collateral ratio to avoid putting your position at risk, with rewards paid in sUSD.
UniDex is an aggregator platform offering various services such as charts, exchanges, leveraged trading, limit orders, etc. 20% of the protocol revenue goes to UNIDX token holders, making it very attractive in terms of price. They are not yet very large, so it might be challenging for whales to get in.
Users can obtain part of their rewards in FTM and USDC forms by purchasing UNIDX.
LooksRare NFT marketplace launched in early 2022, where traders and collectors can buy and sell NFTs at lower fees compared to leading platforms like Opensea.
With a high 2% commission and high business volume, 100% of the commission is given to LOOKS stakers. If they retain market share at the end of liquidity mining (i.e., trading and listing rewards), they could potentially become one of the largest cash flow protocols in the future.
Users just need to purchase LOOKS and stake them on their platform to receive ETH and LOOKS rewards.
YieldYak is a native exchange and yield aggregator in the Avalanche ecosystem, offering partial protocol revenue to YAK token stakers.
Currently a relatively small protocol, but with a responsive team and great potential, its development will largely depend on the growth of the Avalanche ecosystem. Users can buy YAK on TraderJoe or Pangolin and stake to receive protocol revenue dividends.
GMX is a decentralized exchange allowing zero-slippage exchanges and perpetual contract trading based on oracle pricing, currently deployed on Arbitrum and Avalanche.
GMX token stakers receive 30% of the protocol fees, with the remaining 70% allocated to LPs, making it one of the protocols distributing a fair share of funds to their stakers, continuously innovating new products like PvP AMM, X4, etc. Users can purchase GMX and stake to earn rewards.
Curve is one of the flagship projects in DeFi due to its successful business model and innovative tokenomics, widely emulated by many protocols (i.e., veCRV).
Consistently one of the protocols distributing the most fees, I believe they will continue to be a significant part of the field, even if they may face some challenges (i.e., stablecoin integrations).
To receive part of the protocol fees, holders need to lock their CRV tokens for a period to obtain veCRV and qualify for rewards.
Beefy Finance is one of the leading yield aggregators in the space, deployed across 16 chains and leading on many chains. Its simple and effective design makes farming easier and more efficient.
One of the earliest protocols distributing fees among holders, 97.5% of its supply is in circulation. BIFI token stakers on each chain accumulate fees generated on that chain through the protocol.
Users can earn rewards in two ways, either by staking tokens in the "maxi pool" for automatic compounding of BIFI rewards or in the "earnings pool" to receive rewards in tokens from each chain.
TraderJoe is a leading DeFi protocol in the Avalanche ecosystem, offering trading, liquidity mining, lending services, and recently launching an NFT trading market. TraderJoe continuously distributes earnings in the form of USDC to the sJOE pool (staked JOE).
The distribution was significant earlier this year but has significantly decreased due to the overall market downturn (Avalanche TVL taking a hit even worse than other chains like Ethereum mainnet).
Umami is an innovative project that pivoted from OHM forking to deploying delta neutral strategies, generating around 20% APR based on GMX and TracerDAO.
If they build a successful track record, I see this as a product with potentially high demand. They are developing new strategies that could become significant competitors to options vaults like Ribbon or StakeDao. Users can earn protocol distribution rewards by converting UMAMI to mUMAMI.
Trisolaris is the first DEX on Aurora, rewarding stablecoin (USDT, USDC) stakers.
As a native protocol, their success is closely tied to the success of the chain they are deployed on, so I have no doubt they will do well if Aurora gains adoption.
Currently valued under 1 million, even with a high APR (around 25%) currently, it will decrease as it grows in size. Converting tokens to pTRI and staking in the protocol are necessary.
Lifinity is an innovative Solana-based DEX, implementing oracle pricing and centralized liquidity to reduce impermanent loss and achieve higher capital efficiency.
50% of the protocol revenue is shared with veLFNTY (SOL, USDC, ETH, etc.), while the other 50% is used to buy back LFNTY to maintain continuous demand for the token, showing a fairly decent tokenomics in this aspect. Unfortunately, token holders need to lock tokens for a period to receive protocol fees, as with some other projects in this list.
Gains Network is a decentralized sustainable protocol deployed on Polygon, allowing leverage trading up to 125x, using an AMM model based on custom oracles instead of order books.
The GNS token has three use cases, including being the counterparty for traders, accumulating protocol fees, and serving as a governance token. Their FDV is unknown as it depends on traders' wins and losses, so in the model, FDV equals the current market value. Rewards from the protocol are distributed in DAI.
Balancer Labs is the first AMM deploying imbalanced pools instead of the 50%/50% model used in Uniswap/Sushiswap. They have managed to maintain their market share, even though they are far from becoming the leader in their niche market.
Recently, they implemented new tokenomics simulating Curve with vemodel and decided that 75% of the protocol fees will be distributed in USDC to veBAL stakers. As seen with other tokens following the vemodel, locking over time is mandatory for accumulating protocol rewards.
Ribbon Finance is a major player and the largest TVL player in the options vault space, offering a range of options with an APY from 20-85%.
Recently, they implemented their "ribbonomics" based on the Curve model, redirecting 50% of the protocol fees to vRBN holders, with rewards paid in ETH.
Hegic is the first on-chain options market, striving for mass adoption due to the complexity of options markets and high gas fees on the Ethereum mainnet. I believe they have the potential to gain more traction if some off-chain options trading volume moves on-chain.
There are two options to stake in ETH, BTC, and USDC and earn rewards, with the better one being the "bulk staking" requiring staking 888,000 HEGIC (about $5,200) to receive 80% of the protocol fees, with the remaining 20% distributed to users staking less than 888,000 HEGIC.
Metavault Trade is a new protocol, somewhat akin to a GMX fork deployed on Polygon but with some slight variations (e.g., total supply).
Currently, they are bootstrapping liquidity and gaining adoption, hence the high APR is understandable. GNS has been a long-standing player in Polygon, making it not easy to gain significant attraction. They distribute rewards in Polygon, following the same structure as GMX (70% to LPs, 30% to MVLP stakers).
Blackpool HQ is a decentralized investment fund focusing on gaming and NFTs, distributing rewards weekly to veBPT holders. Despite not having impressive results currently due to some collapses in their portfolio holdings (Axie, Curio Cards, Hashmasks, etc.), it remains a very interesting concept.
They recently changed their model, now requiring up to a 4-year lock on BPT to qualify for ETH rewards.
CapDot Finance is a decentralized perpetual market based on oracle pricing deployed on Arbitrum, allowing leverage up to 50x with 0% fees. Liquidity is provided by ETH and USDC pools, acting as the counterparty similar to the GMX model (where LPs lose if traders win).
1% of the protocol fees are allocated to CAP stakers, but this figure is subject to change in the future, making it easy for them to significantly increase their ratio, thus being more attractive to cash flow investors. Rewards are paid in ETH and USDC.
In addition to the above protocols, there are some protocols planning to distribute protocol revenue to stakers in the future to generate cash flow, such as Redacted Cartel, Perpetual Protocol, Jones Dao, etc.
In conclusion, good tokenomics involve distributing fees to token holders, low circulation, while successful tokens consist of good tokenomics, demand for the product, and pricing power.