Value distribution to token holders returns to all-time high: 1kx report

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VC firm 1kx has run the numbers on the crypto economy in a report shared with Blockworks ahead of its release later today.

After analyzing more than 1,200 protocols across 2020 and until Q3 2025, 1kx found that value distribution to token holders has returned to all-time highs, even if total revenues have yet to beat their 2021 tops.

1kx defined value distribution to token holders as the net sum of buybacks, burns and other accruals, minus emissions (validator rewards and so on). 

That came to $1.9 billion distributed in Q3 this year, about on par with H2 2021, when fees paid by users had peaked.

“Applications drive most of the distributed value, driven by incentive reductions: top apps cut token incentives from $2.8 billion (90% of their fees) in H2 2021 to less than $0.1 billion in H1 2025, boosting net returns to holders,” the report stated.

Value accrual has gone up and to the right | Source: 1kx

The trend is not uniform across the space, however. Many protocols still distribute net zero value to token holders, particularly newer networks which emit more token incentives than they return to investors, “a common pattern e.g. amongst L1s,” per 1kx.

In total, 1kx placed the size of the crypto economy at an estimated $56 billion for the first half of 2025.

• Onchan fees: $9.7 billion (+41% YoY);
• Offchain fees: $23.5 billion (+25% YoY);
• Other income: $23.1 billion (+5% YoY).

(“Other income” mainly consists of block rewards and the yield earned by stablecoin issuers on T-Bills etc.)

The crypto economy is also much more diversified now than in 2021. Ethereum alone did more than 40% of all onchain fees in that year, now less than 3% year-to-date, according to the report. “Their scaling efforts are a major driver of the 86% decrease of average blockchain transaction fees.”

This has given cover for the app layer to flourish, even if the top 20 protocols (2% of the total) are generating 69% of all onchain fees right now. 

“Of 1,000+ protocols analyzed, 71 have exceeded $100 million in onchain ARR, and 32 reached that within a year of launch, a pace comparable only to top AI breakouts like Cursor,” 1kx analysts found. They added that Meta/Facebook took three to four years to achieve $100 million ARR.

While revenues for some examples have since fallen, the firm counted blockchains Base, Filecoin, and Linea, DePIN cloud computing platform Aethir, DeFi apps Ethena, GMX, Virtuals and SushiSwap, wallets and interfaces Axiom, Moonshot and Photon, and consumer apps friend.tech, LooksRare and pump.fun, among others.

And many early surges were propelled by massive incentive programs. LooksRare in particular generated $500 million in fees within its first quarter but emitted the same amount in token rewards during that time, and volumes largely disappeared when those programs ran out.

The onchain economy has expanded far beyond Ethereum mainnet

It all points to an onchain economy that’s changing. User fees are increasingly coalescing around apps and protocols instead of the underlying chains.

But it might be that the market has yet to catch up to the new dynamics (read: the revenue meta). 1kx highlighted that “DeFi/Finance protocols account for 73% of all fees, though in aggregate their market cap share remains well below 10%.”

As for where it’s all headed, the app layer is tipped to continue growing — the DeFi/Finance sector could see YoY growth of over 50% from here (asset prices willing), with onchain fees exceeding $32 billion next year (+63% YoY).

And what would a crypto newsletter be without bullish predictions? Here’s five about revenues from 1kx: 

• Tokenized RWAs will generate $100 million fees (5x YoY):
• DePIN protocols will rake in more than $450 million, sustaining triple-digit growth.
• Wallets will grow slightly faster than DeFi (50%).
• Consumer apps will see roughly a 70% YoY increase in fees.
• Middleware will grow by 50% with many protocols about to start or boost monetization (e.g. WalletConnect).

TL;DR: We like the apps.

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