Native yield chains are a new type of blockchain emerging as a valuable and powerful infrastructure tool to create revenue models for blockchain developers and users. Native yield chains generate their own profits and pay those profits out to chain builders and users.
In this post we will look at why native yield chains are the next massive blockchain trend, how they differ from airdrop and trading strategies, and how Last sources sustainable native yield for long-term shared incentives to pay users and builders in our new native yield chain world.
The Bitcoin blockchain launched in 2009. Bitcoin incentivizes miners to secure the Bitcoin network by paying them a block reward in $BTC. This model set the standard for blockchain incentives for 15 years, but since 2021 blockchain engineers have called for more sustainable models of incentive distribution. Most projects that follow this model simply send their token out to the community as grants or emissions and use it to encourage adoption, hoping that by the time the token rewards run out, there will be enough adoption to encourage users to stay and find value.
The harsh reality of this model is that it is not profitable or sustainable. Projects that rely on token emissions alone end up selling their own team or foundation token supply into the market, dumping on their users to pay operations expenses. They are at the mercy of bull and bear market cycles and hope to have enough runway to keep encouraging a small community of builders before the next big crypto bust.
This is no way to build sustainable economic architecture. It’s circular and shortsighted. Possibly even spherical.
Native yield chains are trying a different approach to the token emission problem outlined above. Instead of selling or giving away pre-minted tokens, native yield chains build at the foundational level to generate profits, and redistribute those profits back to the community of users and builders.
This incentive model has captured the attention of the larger cryptocurrency community as the opportunity for new revenue-generating business models can potentially thrive when backed by incentives that come from known, transparent revenue lines.
Native yield chains can and will use airdrops to reach a wide base of early users. Airdrops can be an effective tool at marketing to a broad community of potential users, or a governance token distribution strategy. In most cases, they are both.
However, the way native yield chains are built means that airdrops are not the only available distribution method. Over time, native yield chains can regularly build distributions into monthly, weekly, or even streaming emissions directly to users and builders that generate regular activity on the chain.
This is an important distinction from an airdrop strategy where early users attempt to generate activity onchain for a reward to come at some later time. Instead, real regular use can be incentivized as users earn for participating in important activities onchain. It remains to be seen whether the speculative marketing hype around airdrops will continue to be the go-to distribution method for new ecosystems, or if regular incentive streams can achieve results with more aligned, real users.
For native yield chains to conduct ongoing distributions to users, they must have a regular and predictable source of generating funding beyond pure token emissions.
How do native yield chains make money to distribute to users? If these networks need to make money to incentivize users, it’s critical to understand how they make money, and whether their revenue models make sense.
Blockchains are built to make money, but this is not always as the core mission of the network. The most common form of chain-owned revenue is the transaction fee, also known as a sequencer fee. The many different blockchains have almost as many transaction fee designs, but at the core, the chain itself charges each user a transaction fee to prevent spam transactions attacks on the network, and the fee is used to incentivize network participation in some way. In the case of Bitcoin, the fee is distributed to miners. In the case of Ethereum, the fee is destroyed, reducing the overall supply of Ether.
Recent Native Yield Chain advances have identified several new revenue lines that provide more opportunity for chain-owned revenue than ever before. The most common are listed below.
Transaction or Sequencer Fees: Sequencers process unordered transactions into ordered blocks and charge fees for this service to prevent spam on the network. Some blockchains have their own sequencers and collect fees from users as revenue.
Native Swap Fees: Blockchains with their own native Decentralized Exchange (DEX) charge users a fee for each swap made on the network.
Yield Rake: Some new networks encourage users to bring assets to the network from other blockchain ecosystems. The yield-generating assets provide additional income, and the blockchain takes a rake, or a small fee, from the yield on the deposit.
Token Sales: Many chain foundations conduct a kind of token sale at inception to make money and hold additional sales in tranches later on. Each subsequent token sale further dilutes previous token holders, creating limitations with this approach. However, projects are developing new models of sustainable token sales that work within the system to maintain a block reward value that encourages decentralized security for the underlying chain over long time frames.
In the coming months, builders and users will need to assess how a blockchain or layer's native yield economics will impact the security and incentives within the system. Here are several guiding questions to take into account when evaluating native yield chain economic models.
Where does the revenue come from?
Are the revenue sources sustainable?
Do revenue sources require their own unsustainable practices?
Where do chain emissions go?
Do parties that receive chain emissions have a balanced incentive to sell or hold?
Who makes decisions about where to stake yield-generating assets?
What yield-generating assets are restaked into the blockchain?
Does restaking cause systemic risk to the value on the chain?
These are active areas of research that the Last community would like to support. If you have an idea about how to research and present an analysis on any of the topics above, please reach out in the community channels.
The Last Network generates sustainable cash flow at the network level across a wide variety and perpetually growing number of revenue sources. Just like a business makes money by offering a variety of product lines, Last has diversified revenue sources. This variety acts as a derisking strategy, allowing the chain to maintain stability across varying market cycles. By diversifying the ways the network makes money, the chain is better equipped to sustain a stable ecosystem through market fluctuations.
But what exactly are Last’s revenue sources for making money?
With Last’s Twin Chain design, users can bring yield-bearing assets to Last via the L1 Utility Chain. Last takes a percentage rake from these assets, with the rake decreasing as the network’s owned yield profile increases over time. Acquiring yield-bearing assets is a low risk strategy to maintain a consistent yield stream. Additionally, Last mitigates centralized restaking risk by incentivizing a broad range of yield-bearing assets including liquid staked ETH, yield-bearing BTC, RWAs, and a number of stablecoin strategies.
Transaction fee gas will be collected by the sequencer and reinvested into the cash flow cycle.
Token sales are a way for blockchains to make money but they often lack long-term sustainability. Last fixes this with oLAST, an options token. oLAST gives holders the right to purchase LAST at a discount determined by time-based and governance conversion modifiers. oLAST creates a mechanism for ongoing token sales, generating continual revenue for the network—aka a sustainable way to make money, while giving users an opportunity to earn arbitrage from oLAST discount, or gain an even larger discount by staking into veGovernance.
The Last Network is incentivized to participate in infrastructure on its own behalf, including operating nodes as part of the active validator set for Last and other revenue-generating blockchain networks.
Through its infrastructure fund over time, the Last Network will purchase its own infrastructure to maintain nodes across the Bitcoin, Ethereum, Cosmos, and any other aligned ecosystem. This approach generates a consistent flow of revenue back to the network and contributes to the security of the broader yield-bearing multichain ecosystem.
As infrastructure and application demands increase, Last will develop additional revenue-generating products and services within the network stack. Some examples of additional revenue sources include native swap fees, a data marketplace, and data availability services. All profits from these additional revenue streams will continue to be reinvested back into the community.
As Last continues to innovate and develop new revenue streams for sustainable cash flow, it is paving the way for a more stable and resilient ecosystem. With a commitment to community reinvestment across builders, users, and other chains, Last offers a promising, bountiful vision for the future of decentralized finance. Join us in building a vibrant and inclusive community where everyone can thrive.
The community is a diverse and inclusive group united by a passion for Last's mission. Whether you're a seasoned developer, a DeFi enthusiast, a gamer, or an artist, there's a place for you in the Last ecosystem.
Are you interested in building on Last? Get in touch on Telegram or Discord.
Last is the shared incentives layer for everything. Learn more about the upcoming network that pays profits to users and accelerates yield from every chain. Join the community, post cube.
Andy Boyan
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