Demystifying Filecoin’s Revenue

Key Insights

• Filecoin's revenue framework is similar to Ethereum's, since its gas system is based on EIP-1559.
• The HyperDrive upgrade in July '21 benefited network participants through lower congestion and scaled throughput to 10-25x; however, it hurt the protocol’s revenue.
• Protocol revenue stayed flat relative to June '21, while active storage deals increased 507% YoY.
• The Filecoin Plus program accounts for 89% of total active deals in June '22; through block rewards, Filecoin Plus incentivizes storing data at near-zero cost to clients.
• The real test for Filecoin will be generating token utility and demand beyond verifiable storage: from smart contract applications to services like CDN-quality retrievals and decentralized compute.

Metrics like total value locked (TVL) and market cap are commonly used to value protocols. However, for Web3 infrastructure protocols such as Filecoin, these metrics can fall short. TVL fails to evaluate a network’s usage. Market cap isn’t useful either, since token price doesn’t necessarily reflect future cash flows. Instead, Web3 infrastructure protocols can be valued by the network’s real usage. One common metric is demand-side revenue – it tracks fees paid to use the network and its services by end-users rather than token reward distribution.