Messari: A brief analysis of Web 3 infrastructure revenue in the first quarter

Important points:

  • Several Web3 infrastructure protocols are generating significant protocol revenue, including Filecoin, Helium, Arweave, and Livepeer.
  • Most Web3 protocols have seen significant revenue growth over the past year, with many continuing to grow in the first quarter of 2022.
  • While adoption of Web3 infrastructure is growing, many protocols are overvalued on a revenue basis, and the underlying market remains a reason for investor optimism.


Web3 Index data shows that after years of construction, some Web3 infrastructure is gradually being used. This generates revenue for these Web3 protocols as the use of Web3 infrastructure typically requires the protocol’s native tokens to be spent in exchange for services.

Filecoin and Helium generated substantial protocol revenue in Q1 2022 — $9.4 million and $14.5 million, respectively — while other Web3 infrastructure protocols counted cumulatively generated over $1 million in protocol revenue.



Income calculation method


Web3 Index, TokenTerminal, and other sources of revenue data are calculated differently (Web3 index calculates fees based on protocol demand, while Token Terminal tracks protocol revenue and revenue earned by participants/vendors). We attempt to reconcile data and use the most accurate source of income information where possible.


Deep Dive: Web3 Infrastructure 2022 Q1 Protocol Revenue


file storage


Among file storage protocols, Filecoin remains unique in revenue, surpassing $9 million in Q1 2022. Interestingly, Filecoin’s revenue has dropped significantly quarter-on-quarter as base fees (the main fee for storing data on Filecoin) have fallen.

While the exact reason is unclear, the increase in network capacity may have lowered storage costs as miners are willing to accept lower storage fees. Additionally, Filecoin miners are subsidized through FIL rewards, which means that fees may also be reduced as the majority of miner revenue shifts from fee income to token rewards. More analysis is needed to determine the exact reason for the drop in revenue.

Arweave’s revenue was $740,000, an increase of 47% compared to the previous quarter. The Arweave network saw a 977% year-over-year increase in data storage, thanks in large part to Bundlr, which accounts for over 70% of total Arweave transactions .



Storj’s revenue rose 15% in the quarter, while Sia’s revenue fell 2%. More recently, Sia integrated Skynet storage capabilities with Polkadot and is launching Skynet Kernal — a browser extension that may enable decentralized front-end solutions, but still use existing centralized APIs.




Various applications and services require computing resources. Today, most decentralized computing protocols like Livepeer, Render, and Akash operate on an Airbnb model, where vendors rent idle CPU and GPU power for fees. These decentralized protocols are often able to offer better prices than centralized providers due to the protocol’s ability to aggregate supply from various sources.

Computation-centric protocols made significant progress in 2021, with Livepeer generating a total of $340,000 in protocol fee revenue in 2021 . Akash’s revenue has also grown in 2021, hitting an all-time high in the first quarter of 2022.



Data retrieval and indexing


By now, most investors are familiar with The Graph, a data indexing protocol that can query blockchain data without being connected to the blockchain. While The Graph is widely used by various data aggregators, DAOs, and individuals, the fees it generates do not match the extent to which it is used. The Graph has increased usage by heavily subsidizing its query services, but at the cost of low income and token dilution in the form of rewards.



Recently, the Graph community has put forward proposals and roadmaps to improve The Graph performance, user experience, token economics, and more. Of all these updates, the most exciting is Firehose, a new subgraph structure designed to improve indexing performance by creating a more modular architecture.




Helium is an open wireless network built on the Helium blockchain, run by hardware devices (nodes) that maintain the network and transmit data. Helium has grown tremendously over the past year, with its most recent funding round in February 2022.

It’s worth noting that the Web3 Index and Token Terminal have very different calculations of Helium’s revenue. Token Terminal shows Helium earning $14.5 million in the first quarter of 2022, but Web3 Index puts it at $26,000 for the same period. Considering that Helium generates data credits by destroying HNT tokens to pay for network fees, and Token Terminal calculates demand based on the amount of destruction, and also shows different token incentives, Token Terminal’s calculation may be more accurate.




Of the protocols we analyzed, Helium generated the most revenue ($14.5 million) in the first quarter of 2022, up 4% from the previous quarter. With the advent of the 5G era, Helium may generate more data credit consumption and be more widely adopted.


Perspectives on Infrastructure


The revenue we count primarily comes from network usage – fees paid to the Web3 network – rather than token reward distribution. Based on an appropriate price-to-sales ratio, the current valuations of these agreements may be overvalued. The least valuable protocol (Akash) has a fully diluted valuation of $450 million, while the highest value protocol (Filecoin) has a fully diluted valuation of $38 billion. Excessive valuations backed by meager fees compared to any Web2 company may indicate that crypto investors are skewed on valuations.



The potential advantage of these overvalued Web3 infrastructure protocols is the accessible market size (TAM) of these industries. Today’s most valuable Web2 companies provide computing, indexing, storage, and networking services and command high valuations and corresponding revenues. Given the slightly larger TAM of these Web3 infrastructure protocols — coupled with the growth potential of these industries — each winner in these categories is likely to be undervalued in the long run. Nonetheless, it is clear that many of these assets are currently fundamentally overvalued.

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