The popularity of Web3 has long been anticipated, but will take time to fully materialize due to the infrastructure required across computing, indexing, data management, hosting, storage and other vital services.
Web3 Index: Tracks the revenue of Web3 protocols
Data from the Web3 Index shows that after years of construction, network usage of some Web3 protocols is starting to strengthen. As a result of this usage, often requiring the protocol's native token to be spent in exchange for the service, these Web3 protocols start generating revenue.
Note that the Web3 Index tracks revenue from network usage, i.e. fees paid to the Web3 network, not the distribution of token rewards. Token reward revenue for individual participants does not always require network utilization, while revenue generated directly from network usage (burning tokens, or paying fees for services, etc.) is a more powerful tool for analyzing protocol revenue and growth. index.
Careful observation shows that after the peak of protocol usage and revenue generation of the Web3 protocol, the protocol revenue declines.
However, this is to be expected in early networks trying to integrate providers and developers to use their services. Network usage varies by network. For example, a file storage protocol may experience share growth in the usage of new NFT projects, while usage of networks such as The Graph or Livepeer fluctuates with consumer demand for query or computing services. Over time, fluctuations in usage should flatten out for networks with more stable demand.
Liberate the Internet
All of these Web3 protocols operate by providing services such as computing, storage, and bandwidth. Currently, the network requirements for these protocols are slowly growing. For storage protocols, the surge in demand is attributed to the growth of industries such as NFT (increased demand for NFT storage on IPFS and Arweave). Other protocols such as Helium and Livepeer are also seeing growing demand as new businesses or developers use their services to build applications.
calculate
Various applications and services require computing resources. Many decentralized computing protocols function by creating a network that includes leftover computing resources from personal devices to data centers and provides computing power at a low cost.
Livepeer is a marketplace for video infrastructure providers and streaming applications that processes millions of videos every week and generates thousands of dollars in protocol fee revenue.
Akash Network consists of a blockchain network and a distributed peer-to-peer marketplace for cloud computing resources. Akash enables developers to deploy Docker containers at a lower cost than traditional cloud providers like AWS or Google. Developers use Docker containers to run the maximum number of applications on the minimum number of servers.
Akash enables data centers to rent out their excess capacity, similar to how Airbnb enables homeowners to rent out underutilized bedrooms in apartments and houses. Most recently, Akash announced an integration with Equinix Metal, one of the largest infrastructure providers in the world with over 220 data centers in 25 countries.
storage
Decentralized storage platforms have met the real needs of Layer 1 (Layer 1) and witnessed the adoption of more and more NFT markets.
Filecoin and Arweave are both file storage protocols. However, Arweave focuses on permanent data storage, while Filecoin offers more flexible storage solutions. Additionally, the Filecoin blockchain acts as an incentive protocol for IPFS, while Arweave uses a variant of the blockchain called blockweave to incentivize the network's long-term storage.
While Filecoin generated more total revenue, Arweave has generated more revenue than Filecoin in the past two quarters.
index
Whether you know it or not, you use indexers every day. Google indexes the website's information - compiling and making it searchable. Google's robots are constantly crawling the web, indexing new sites and making them available for everyday internet shoppers.
Likewise, The Graph is a decentralized indexing protocol capable of querying blockchain data without connecting to the blockchain or relying on a centralized third party. Essentially, The Graph acts as an API protocol for blockchains and protocols.
bandwidth and network
Helium is an open wireless network built on the Helium blockchain, run by a network of hardware devices (nodes) that maintain the network and transmit data. Helium implements an open LoRaWAN wireless network that enables longer distance connections while consuming less bandwidth.
The usage of "data credits" spent each month is rapidly increasing, which means that the amount of data transferred on the network is growing.
Final Thoughts on Web3
Revenue by network usage more accurately reflects the growth of the network because it shows what early customers are willing to pay for Web3 services. While a useful metric, network revenue isn't the only metric that matters. Ultimately, the network needs to grow its supply-side business (data centers, hotspots, etc.) and demand-side (companies, developers, etc.), which can help further increase adoption.
With blockchains such as Ethereum, Cosmos, Solana, Polkadot, and Terra making meaningful progress, the fringes of a multi-chain future are being outlined.
However, the multi-chain future does not only exist in a common smart contract protocol and its interoperable second layer. The multi-chain world will consist of a composable Web3 protocol network, breaking down the existing Internet infrastructure. As Web3 protocols continue to evolve, they will transition from difficult-to-use stand-alone protocols to robust application blockchains serving a wide variety of dapps, developers, individuals, and institutions.