Value capture in the crypto world: who are the supercapturers?

The crypto world is still very early, and the entire industry is still in its infancy. In this case, which tracks are capturing value? What is the magnitude of the captured value?

Blue Fox Notes briefly sorted out the overall value capture of the crypto industry, and glimpsed the current status of value capture at different tracks in the crypto industry, especially the value capture of tokens.

Exchange

From the current pattern of the crypto industry, the most important early application scenario is transactions. This makes the exchange the largest value capturer in the entire crypto space. Due to transaction depth and liquidity, the exchange also has a network effect. This is why, although there are many crypto exchanges, the vast majority of the transaction volume is concentrated in several Top exchanges.

How much value does the exchange capture in the current crypto space? BNB is a typical case of exchange value capture. BNB captures the cost of a transaction, which means that as the transaction volume increases, the magnitude of its capture value also increases. A few days ago, Binance destroyed 2,216,888 BNBs, valued at $ 38.8 million, which is to remove these BNB tokens from circulation, thereby increasing their value.

The destruction of BNB represents the value capture of Binance Exchange Ecology in the fourth quarter of 2019, which includes spot, margin, futures and other business activities. This quarter of value capture level, in the current crypto industry, few projects can reach. According to the full year of 2019, the total value of BNB token destruction is nearly 115 million US dollars. As far as current value capture is concerned, the exchange is at the top of the food chain.

1579771348522 (Data source: Binance)

The reason why exchanges can capture such great value is largely due to their network ecological effects. Taking Binance as an example, it started its business from the spot and gathered sufficient scale of trading users. When there are enough users, it starts to provide more services, and these users have natural needs for these services. For example, in 2019, Binance launched margin trading, lending, futures and other businesses. These services meet the more needs of existing users, while also attracting new users.

These products and services essentially meet the needs of trading users. This can be seen from the launch of Binance's futures exchange. Binance's futures trading initially launched only Bitcoin futures contract transactions, and then gradually expanded to permanent contracts with multiple tokens. From the perspective of trading volume, the daily average trading volume of Binance's futures has exceeded the average daily trading volume of the spot, that is to say, the future value of BNB captures not only the spot trading volume but also the futures trading volume, and this part of the space Bigger.

In addition to futures, exchanges can also provide services such as staking and crypto asset custody of the PoS chain, which are also important crypto business maps in the future. Whoever gathers users and who has the advantage of the network ecology will have the opportunity to provide better one-stop services and capture greater value.

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(Chart source: MESSARI, as Binance launches futures and other businesses, value capture will also increase)

As the transaction size increases, the BNB representing its trading activities also captures the value, because it is supported by transaction costs. Although it is different from the traditional valuation model, it can also be used to a certain extent "discounted cash flow" The model roughly estimates the magnitude of its value capture.

Of course, in the long run, the value capture of BNB will be linked to more use cases. This is related to its use cases of Binance Chain, DEX, and various scenarios. The integration of these use cases with BNB will make it more useful, including its stablecoin BUSD The USD is anchored on Binance Chain, which facilitates the capture of its transaction costs.

From the above cases, it can be seen that, in terms of capturing value, at the current stage, exchanges are mainly supported by transaction scale. Considering that the current transaction scale is still in its infancy, it is estimated that with the rise of the overall market, there is still much room for increase in the transaction scale.

In addition, the exchange has the ecological effect of the network. It can use its highly sticky user ecology to build decentralized public chains, decentralized exchanges and other services, and gradually transform to encrypted public infrastructure to allow its tokens. Can capture greater network value, of course, this is not the most important capture method, but a sustainable capture method.

2.DeFi

DeFi is a new development trend in the crypto field in 2019 and a rare new highlight. This year, DeFi projects such as MakerDAO, Synthetix, Compound, Uniswap, dYdX, and Kyber have emerged, and they have respectively captured some value.

First, let's look at the value captured by MakerDAO's system token, MKR. As of the writing of Blue Fox Notes, the stability fee captured by MKR was $ 2,756,625, and the total number of MKR destroyed was 11,202. Considering that the main development of its business is in 2019, the magnitude of its captured value can also be understood. Compared with exchanges, such as Binance's more than 1 billion US dollars, it is still in its infancy. Of course, the development of DeFi is still early. As the number of DAI use cases increases, the cost of subsequent MKR capture will also increase.

The development of Synthetix from December 2018 to the present (as of the time of writing of Blue Fox Notes) has generated a cost of $ 5,692,938, which is by far the highest capture cost project in the DeFi field. Synthetix's fees are mainly derived from the transaction costs of synthetic assets. This also shows from another aspect that even in the DeFi field, the trading field is also the largest value capturer, although it is still small compared to centralized exchanges.

In the DeFi project, Uniswap and Kyber also have good capture costs. The transaction costs captured by Uniswap's liquidity providers within a year are about $ 1.2 million. For details, refer to the article "Understanding Uniswap" before Blue Fox Notes. The fees captured by Kyber are close to $ 1 million. Previous article "Kyber's Fade Out and Rise".

Judging from the current value captured by DeFi's main projects, the most captured value is in the two areas of trading and lending. The transactions are mainly Synthetix and Uniswap, while the lending is mainly MakerDAO and Compound. However, from the current point of view, the scale of fees captured in the entire DeFi field is still very small, and the total fees captured in a year are less than 10 million US dollars, which is less than 10% of the fees captured by Binance Exchange.

As far as the fees captured so far, DeFi is still unable to occupy a major position in the entire encryption field. Of course, DeFi has fully demonstrated its potential and will have greater development in the future, especially in the derivatives field such as synthetic assets.

3.public chain

The fees captured by the public chain are mainly transaction fees. Looking at the daily transaction costs on January 22, 2020, the transaction cost of Bitcoin is about $ 207,000, while the transaction cost of Ethereum is about $ 69,000, and the third-ranked Litecoin is only $ 500. ETC and DASH are around $ 317 and $ 164. From the perspective of transaction transaction capture, except for Bitcoin and Ethereum, which have a certain scale (no statistics are available for EOS and TRON here), other public chains can almost ignore transaction transaction capture. The transaction fees captured by Bitcoin in 2019 are around $ 150 million.

1579771424374

(Source: Coinmetics, BTC, ETH, LTC, ETC, and DASH and other public chain transaction fees)

From the above aspect of the transaction cost capture of the public chain, the total cost of BNB destroyed by Binance in 2019 is in the same order of magnitude as the annual transaction cost of Bitcoin.

4. Mining

The last field in the crypto field that can capture greater value is mining, and the total mining revenue of miners in 2019 will be more than $ 5 billion.

1579771459495

(Source: theblock, Bitcoin issuance proceeds and fee income)

However, mining is more like the process of storing energy as value, and cannot form the ecological network effect of users. With the halving of Bitcoin rewards in May 2020, its value capture will face challenges. Unless prices rise, miners will face a greater test of competition, which may be one of the most significant events in the entire crypto space in 2020 in terms of its potential deep impact on the entire industry.

In addition, with the arrival of ETH2.0 and the maturation of other PoS chains (such as Tezos, ATOM, EOS, Harmony, etc.), Staking will also capture some value, but this part of the block producers will also face competition from exchanges Because the exchange has hosted a large number of users' assets, once the exchange cuts in, it will also capture part of the value. For the moment, exchanges are in a good position to capture value in the entire crypto space.

At present, there is only one possibility to break the overwhelming advantage of the exchange in terms of value capture, which is that the public chain ecology is extremely rich, and there are countless dApps based on the public chain. Social and many other scenarios, and its actual total users reached more than 100 million.

In this case, the native tokens of the public chain can capture two aspects of value. One is the value of economic bandwidth. Various dApps use native tokens as pledged assets to complete various business scenarios. Transaction costs generated by chain activities. If this vision can be realized, the public chain will have the opportunity to reach a market of billions of dollars, and the public chain will also have the opportunity to become one of the largest value capturers in the crypto field.

From the current point of view, the public chain not only needs to solve the problem of scalability, but also the problem of product and market fit. This is by no means a thing that can be completed in a year or two.

Conclusion

From the above, the current circuits in the crypto field that can capture value include exchanges, DeFi, public chains, and mining. There are also some tracks that are not mentioned, such as the oracles, but the magnitude of the value they capture is not very large, and will be skipped for the time being. If there is a major omission, please leave a message to correct it.

Among these circuits that capture value, the exchange that currently captures the most value is still the exchange. From the data released by Binance and the total amount of BNB destroyed, the exchange can directly capture the value based on the size of the transaction. Unlike PoW miners, the value capture of the exchange can also be captured by tokens (such as Binance's BNB), which can achieve a premium through transactions and form a community.

Another advantage of the exchange is that it has a product and market fit. Trading is the biggest demand in the entire crypto field. This has led to the exchange gathering the largest user group. The value of single user contributions in this part of the user group is relatively high. In addition to spot trading, it can also be extended to loans, futures, etc., and even to the public chain, DEX and other fields. This allows exchanges to obtain ecological advantages. These ecological advantages are connected through tokens to form an overall collaborative value capture capability.

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Risk Warning: All articles of Blue Fox Notes cannot be used as investment advice or recommendations. Investment is risky. Investment should consider personal risk tolerance. It is recommended to conduct in-depth inspection of the project and make good investment decisions.