From narratives to numbers: what fees are really telling us

At our Legends4Legends conference three weeks ago, Lasse Clausen, co-founder of 1kx made a simple point that cuts through a lot of debate: if you want to know where this new trust economy is useful, follow the fees. After all, users do not pay fees for ideology, they pay for utility. That makes onchain, user-paid fees the cleanest ground truth we have for adoption and product-market fit. 1kx’s insightful report puts shape to that claim.

First off, the scale is no longer trivial. Onchain fees are on track for roughly $20 billion in 2025, up 10x since 2020. More than 400 protocols now generate $1 million or more annually, with more than 30 having generated more than $100 million in the last year, the majority being DeFi protocols. There is now a broad base of recurring activity that can be verified in real time.

Secondly, efficiency has changed the industry’s economics. Average transaction costs have fallen by more than 80–90% as scaling matured, opening up more and more usecases beyond just high value financial transactions. A stablecoin transaction on Ethereum in October 21 cost on average $24 in fees and today, using scaling solutions on top, goes for less than a cent. This is also pushing monetization up the stack from the base layers to the applications built on top it.

Thirdly, the lack of a clear regulatory framework has long hindered protocols to distribute revenues to tokenholders. This is now changing and value distributed to token holders is hitting all-time highs. Lower base-layer fees, higher application-layer revenues, and clearer value accrual are now the default, not the exception.

With further regulatory tailwinds, YoY growth of onchain fees is projected at 60% for 2025. Tokenization, DePIN, Wallets and Consumers are the high-growth application areas to watch.

Figuring out which networks just make a lot of noise and which ones actually generate fees is clearly an important distinction when you are looking to invest in blockchain protocols. The 1kx report is a great step in that direction.

Also this week

• Tether's annual profits top $10 billion as Treasury holdings swell
• Coinbase targets $2 billion BVNK deal for fresh stablecoin push
• Crypto giant Animoca Brands eyes Nasdaq debut via reverse merger
• 65 Million Revolut users can now swap stablecoins at zero cost
• European Commission eyes SEC-style single supervisor over crypto, stock exchanges
• Google brings prediction markets Polymarket and Kalshi to its search and finance platforms

Relevant financial updates

• Kite AI, a purpose-built Layer-1 blockchain platform specifically designed for AI applications, had its TGE and is currently trading at a $690mln FDV
• Ripple*, a company that provides enterprise-grade solutions using crypto and blockchain technology, has raised $500M in a Strategic funding round with investments from Pantera Capital, Brevan Howard, Marshall Wace, Fortress Investment Group, Citadel Securities and 1 other
• FOMO, a mobile application for trading cryptocurrencies such as memecoins and altcoins across blockchains, has raised $17mln in a Series A funding round with investments from Coinbase Ventures, Archetype, Will Price, Luca Netz, Sabrina Hahn and 23 others
• Sprinter*, a toolkit designed to streamline multichain development, offering features such as asset aggregation, just-in-time liquidity, dynamic liquidity, route optimization, and one-click abstraction, has raised $5.20mln in a Seed funding round with investments from Robot Ventures, Wagmi Ventures, Uniswap, A.Capital Ventures, Atka and 21 others
• Liquid, a mobile application that aggregates decentralized perpetual futures trading platforms, has raised $7.60mln in a Seed funding round with investments from Paradigm, General Catalyst, Alpen Capital, Ashwin Ramachandran, Eric Wu and 2 others
• Donut Labs*, a company developing an AI-powered crypto browser that autonomously executes blockchain transactions such as token swaps, yield farming, and portfolio optimization, has raised $15mln in a Seed funding round with investments from Hack VC, Bitkraft Ventures, Inception Capital, Axia8 Ventures, Sky9 Capital and 4 others.
• Lava, a financial services platform that enables users to save in bitcoin and spend in dollars securely and simply, has raised $200mln in a Debt Financing round with investments from Anthony Pompliano and Eric Jackson
• Arx Research*, a producer of NFC chips and protocols that authenticate physical items and bind them to blockchain assets, has raised $6.10mln in a Seed funding round with investments from 1kx, Castle Island Ventures, Placeholder VC, Inflection and Seed Club Ventures
• Canaan, a technology company specializing in the design and production of application-specific integrated circuits (ASICs) for high-performance computing, with a focus on cryptocurrency mining hardware, has raised $72mln in a Post IPO funding round with investments from BH Digital, Galaxy Digital and Weiss Asset Management
• Harmonic, an open block-building system for Solana that introduces a competitive marketplace for constructing and selecting blocks, has raised $6mln in a Seed funding round with investments from Paradigm

*Underlying TBV portfolio position | Prices as per 07/11

Interesting things to read

• Pantera partner Paul Veradittakit explains how businesses can now integrate blockchain functionalities into their operations without having to build anything from scratch
• a16z Crypto Managing Partner Chris Dixon explains that smart policy has provided the regulatory clarity needed for institutions to finally see crypto as an opportunity and begin integrating it into their systems

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