Moonbeam profitability vs Solana and Avalanche: security cost vs revenue
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Compares what L1s pay for security through emissions to the fee revenue they earn. Solana and Avalanche pay roughly 56x and 35x revenue, Moonbeam about 128x, with the case that Moonbeam is earlier in its adoption curve.
Key claims
Solana issues about $1b SOL per year, Avalanche about $385m AVAX
Moonbeam collator cost about $17m per year vs $132k cumulative fee revenue
GLMR emissions are 5% of supply per year and 80% of fees are burnt
0/ let's have a look into @MoonbeamNetwork's profitability
how much revenue does it generate? How much does it pay for security and how does it compare to other L1s like $SOL or $AVAX? 🌖🤔
Find out in my $GLMR 🧵 below (0/25) ✨👇
1/ Originally I wanted to reply to @ThePolkadoge on his below question but got carried away a bit and decided to make it a quick thread lol
x.com/ThePolkadoge/status/1565963759084003328
2/ but let's get into it. $SOL & $AVAX pay for security (their validator sets) through token emissions:
- #Solana issues rougly $1b in $SOL per year
- #Avalanche issues roughly $385m in $AVAX per year
source: moneyprinter.info
3/ in the past three months, #Solana generated a total of roughly $50k in daily fees (🟣). Roughly 50% of tx fees is burned to accrue value to $SOL holders (shown in 🔵 on chart)
annualized revenue = $18m
source: @tokenterminal
4/ in the past three months, #Avalanche generated roughly $25k-$30k in daily fee revenue (🟣). With a fee burn rate of 100%, it's all protocol revenue & accrues value to $AVAX holders (shown in 🔵 on chart)
annualized revenue = $11m
source: @tokenterminal
5/ as we see, the imbalance between cost & revenue is quite large:
- $SOL : security cost is ∼56x revenue (1y)
- $AVAX : security cost is ∼35x revenue (1y)
6/ but how does it look for $GLMR?
$GLMR "rents" security from the relay chain under #Polkadot's shared security model. In order to win a parachain slot, #Moonbeam needs to compete in parachain auctions & accumulate enough $DOT to win
7/ a lease period on #Polkadot amounts to 365 days and bonded funds are returned after the lease period ends. Hence, in order to stay under Polkadot's shared security umbrella, @MoonbeamNetwork needs to win another auction every year
8/ strategies for funding a #parachain auction can either be self-funded (treasury, parachain bonding reserves) or based on a crowdloan (borrow $DOT from community)
9/ in the long-term, it's @MoonbeamNetwork's goal to accumulate enough $DOT to sustainably self-fund parachain slots through their “Parachain Bond Funding” and “Parachain Bond Reserve” allocations
3% + 0.5% = 3.5% of initial 1bn supply = 35'000'000 $GLMR = $17m
10/ however, the strategy for #Moonbeam's next auction (Oct 2023) is not defined yet
source: @purestakeco
11/ the first @MoonbeamNetwork crowdloan amounted to roughly 36m $DOT ( ∼$250m) and participants were incentivized with 150m $GLMR (15% of supply).
however, since auction 12 (currently at auction 26), slots have consistently gone for $1m-$7m
> source: @parachains
12/ but since we're talking about the cost of the validator set & protocol emissions, we won't consider crowdloan incentives (funded from reserves)
but similar to $AVAX & $SOL, $GLMR has a collator set that it needs to incentivize through token emissions
source: @purestakeco
13/ collators are rewarded through protocol emissions. $GLMR emissions amount to 5% of supply p.a.
inflation is broken down & distributed as follows:
source: @purestakeco
14/ hence, annual issuance amounts to 50m $GLMR or roughly $24m at current prices
with collator/delegator rewards amounting to 70%, @MoonbeamNetwork pays approximately 35m $GLMR or $17m in collator incentives per year
15/ on the revenue side stands a total of 10m transactions that have been processed on the #Moonbeam network, burning a total of 219k $GLMR or $106k in gas
source: @dtmb_xyz
16/ since 80% of tx fees on #Moonbeam are burnt, this means that total fee revenue on @MoonbeamNetwork since its inception amounts to approx. 274k $GLMR or $132k
source: @purestakeco
17/ let's put that into relation with the cost of the collator set:
cost: $17m
revenue: $132k
cost/revenue = 128x
hence, $GLMR's multiplier is even higher than $AVAX or $SOL
18/ but while it might seem like a lot, we have to keep in mind that $GLMR is still in a way earlier stage of development than $SOL & $AVAX
emissions remain stable at 5%, while tx fee revenue will increase with growing adoption/usage, hopefully turning the tide at some point
19/ I am definitely bullish on @MoonbeamNetwork. A lot of strong teams are building on it and I'm sure with improving UX in the overall $DOT ecosystem and a growing number of cross-chain integrations, $GLMR will only become more interesting for both users and devs alike
20/ however, tokenomics are a different story and with issuance of crowdloan rewards (15% of supply) and pre-sale unlocks on top of collator incentivization (5% inflation), circulating supply is currently being diluted rather rapidly
21/ but it will improve over time and I'm personally still staking my #TakeFlight bag of $GLMR at ∼16% APY
$GLMR already is the dominant smart contract L1 in the #Polkadot ecosystem and will likely remain so in the foreseeable future
22/ the launch of @RaresamaNFT's marketplace, the #Gromlins collection & the #Raresama originals shows why
in less than a week, @RaresamaNFT has generated a volume of ∼820k $GLMR or $400k 🤯
a major adoption catalyst for $GLMR, courtesy of @DonnieBigBags
source: @RaresamaNFT
23/ interestingly, @MoonbeamNetwork is also yet to launch its liquidity incentive programs, for which the foundation has set aside 50m $GLMR (5% of supply) or $24m, which will likely draw more liquidity & users to $GLMR
source: @purestakeco
24/ additionally, there is also a "long-term protocol & ecosystem development" allocation of 168m $GLMR (16.7% of supply) or $80m and a "developer adoption program", amounting to 35m $GLMR
these funds will be used to support #Moonbeam ecosystem growth
great things are coming🚀
25/ If you liked this thread, please support a fellow #arbinaut by following & sharing the first post of the thread (linked here) 🥰✨
x.com/expctchaos/status/1567469610605092865
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