Pima: Analyzing the Business Model of the Crypto Industry, The Path to Value in Blockchain Investment
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Pima: Analyzing the Business Model of the Crypto Industry, The Path to Value in Blockchain Investment
The crypto circle has created an entirely new business model: selling block space.
Navigating Web3 tides with focused insightsAuthor: Pima
What are you actually buying in the public blockchain market—or in the blockchain industry at large? And where does the business model of blockchain truly lie?
Underwhelming performance in the altcoin market has led many to question the industry’s viability. In complex environments and across different stages of development, investing naturally becomes harder. But the core issue is this: you must identify projects with long-term, sustainable business models.
It's been ten years, yet I still find that even seasoned industry insiders often don't understand why public blockchains dominate so many spots in the TOP100 rankings, why top-tier chains attract billions despite their size, while your token struggles to reach even millions. I like simplifying complexity, so let me try to break it down.
From first principles: P = E * PE, i.e., Price = Earnings * Price-to-Earnings ratio. Therefore, in the long run, only two factors drive price: earnings and valuation.
First, the PE (valuation). This is complicated—many factors affect it: growth potential, interest rates, penetration rate, total addressable market, central bank liquidity, monopolistic advantages, etc. These all influence how much investors are willing to pay for a stock at any given time. Buffett famously says he won’t buy BTC because it generates no cash flow (think of cash flow as profit). Long-term, I agree with most of that view—but only if you focus solely on E (earnings) and ignore PE. From another angle, both MEMEs and BTC fall into the same category: assets driven purely by PE. As long as your meme keeps attracting new buyers, it can rise—even without generating cash flow—up to a point. But here’s the key caveat: within certain market cap limits. The larger the market cap, the more people you need to keep pulling in. Without ongoing cash flow, sustainability becomes extremely difficult.
Second, earnings (E)—this is what we’ll mainly explore. Earnings come from revenue. For prices to rise sustainably, revenue must grow. And where does revenue come from? Business models. By definition, a business model is a commercial activity that earns money by providing goods or services to others—in simple terms, how your company makes money.
In 2006, Duan Yongping paid $620,000 for a lunch with Buffett. He asked a question that had long troubled him: What matters most in investing? Buffett replied: business models. A company cannot sustain long-term growth without knowing how to make money. The driving force behind the sustained rise of America’s “Magnificent Seven” tech stocks is profit—not short-term hype.
So what about crypto? What is its business model?
In my view, it boils down to: block space fees; swap fees (from exchanges, including DEXs/CEXs); lending spreads; stablecoin seigniorage; and MEV, which parasitizes block space. Most of these are straightforward—except block space fees, which deserve special attention.
Here’s something subtle but profound: crypto has created an entirely new business model—selling block space. Public blockchains charge users gas fees to access computational power, bandwidth, and storage on a global scale. Every transaction requires payment for access to this shared infrastructure.
I used to be confused by the phrase "value internet." We know most internet content—images, text, videos—is free. Information can be copied infinitely, so early internet pioneers didn’t know how to monetize. Over time, business models emerged: SaaS subscriptions, ads, e-commerce transactions, etc.
So where is blockchain’s business model? I eventually realized what the "value internet" means: it’s the paid internet. Every click costs gas. Blockchain was designed to solve monetary properties—something fundamentally incompatible with the free internet. You can’t copy one dollar endlessly and spend it repeatedly. The free internet fails at solving money.
Thus, during the evolution from digital currency to public blockchains, a key innovation emerged: shifting the cost of accessing computing resources from service providers to end users. For decades, traditional internet companies rented servers (like AWS), paid operational costs, then charged customers for services. Blockchain flips this: users directly pay for the network usage via gas fees.
Today, global consumers collectively pay tens to hundreds of billions of dollars annually in gas fees—that’s blockchain’s revenue stream. Suppose a chain earns $1 billion yearly. At a 5% government bond yield and a 20x PE multiple, it’s worth $20 billion. At 10x PE, $10 billion. At 50x PE, $50 billion. This is why public blockchain markets are massive.
For example, TRON hosts ~$60 billion of USDT—about half the total supply. TRON’s 2023 revenue was roughly $400–500 million, with 75% coming from USDT transfers—meaning around $400 million in profit. Applying a 20x PE gives TRON a fair valuation of $8 billion. Not the main point, though. The real question is: can this number grow tenfold in the next decade—or far beyond? How much future market share can SOL capture through payments and open finance? That’s a broader discussion—we’ll leave expansion scenarios aside for now.
You should understand: I’m only explaining why the public chain market is large—I’m describing the existing phenomenon of users willingly paying gas fees. I haven’t gone deeper into *why* people pay gas, or why more will do so in the future. Transfer needs? Get-rich-quick motives (hoarding gas)? Entertainment (paying for DApps)? Trading cryptocurrencies, commodities, stocks, swapping anything? Remember: if no one pays gas fees in the future, the entire public chain market collapses.
That’s why today we see so many flashy, abstract terms—whether due to crypto’s early stage or inherent difficulty in tangible implementation. Words like scalability, ZK tech, L2, UTXO, chain abstraction, modularity, homomorphic encryption, parallel EVM—these are constantly hyped. Since I didn’t participate in early internet development, I only later learned that terms like modularity and monolithic architecture originated there. Yet they’re rarely emphasized online, unlike in crypto, where they’re relentlessly marketed. I’ve grown skeptical of such narratives. After grasping basic concepts, I now ask directly: How much revenue will this technology generate? How much profit can it produce for buybacks? Otherwise, what’s your product-market fit? I support long-term R&D in foundational tech—but tell me: how long until a clear business model emerges? Two years? Ten? Twenty? The real questions are: how to increase gas revenue, and who will capture top market share. These complex issues should be your focus—even though I’ve already picked $SOL 😂
Therefore, since public blockchains generate revenue, cash flow, and profits, their business models are clear and viable. The remaining challenge is strategic: how to expand revenue, gain market share, reduce costs—standard business growth levers.
Many crypto projects lack real business models—they simply don’t know how to make money. Among Fortune 500 companies, only 3% survive over time. Investing is about identifying those rare 3% and holding them long-term. Many investment principles are simple—but hard to execute. With tens of thousands of crypto projects ahead, how can you invest without seeing value? Be serious. This is investing.
Time waits for no one. Less smoke and mirrors, more substance—otherwise, your time is running out.
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@LeePima
