Analysis: The Impact of Roll-Up Sequencers on Ethereum and Coinbase
Blockchain financial models increasingly mirror traditional finance, with new profit centers emerging
Gm Fintech Architects —
Today we are diving into the following topics:
Summary: We explore how Web3 mirrors traditional financial models, focusing on “money-in-motion” (transaction fees like Ethereum’s gas or Visa’s interchange) and “money-at-rest” (interest on assets, like Tether’s reserves). The rise of Layer 2 roll-ups, such as Base ($6B TVL), has shifted value accrual to sequencers, central entities that batch and post transactions to Ethereum, profiting from gas fees and transaction ordering (MEV). Unlike Ethereum’s decentralized fee distribution, roll-up sequencers capture most of the value, leading to a more centralized profit model
Topics: Ethereum, Bitcoin, Tether, Revolut, Fidelity, Visa, Base, Coinbase, Optimism, Arbitrum, Taiko, GMX, Curve, Uniswap, dYdX, Solana.
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Long Take
The Alphabet of Money
There is a limited number of financial business models out there.
This is why everyone ends up converging on the same shape once they reach scale. Whether you look at Citigroup in the 1980s or Revolut in the 2020s, you will see the same lines of business.
Under the money-in-motion business model, we have exchange of various assets.
Those assets can be used in commerce, trading dollars for sandwiches. In that case, you would see payment networks charging 2%+ for interchange. Or, those assets can be various currencies trading against each other, with remittance, FX, and various other conversions yielding fees on spreads. Or, capital markets incorporate the exchange of different financial instruments against cash or each other. The movement of assets from one place to another generates fees, whether in brokerage, market making, or otherwise.
Under the money-at-rest business model, assets will sit in place and transform. Dollars can earn interest from deposit accounts, fixed-income products, asset management portfolios, and other uses of capital. They can access risk and interact with the mysteries of the financial universe in exchange for compensated growth.
Blockchains are financial venues that incorporate the power of general-purpose computation and Internet-level networking and connectivity. They bundle digital financial features with a modern economic architecture for commerce and GDP growth. This means that blockchains are subject to the same financial alphabet as traditional financial firms and the neobanks / roboadvisors / digital brokers of the Fintech generation.
The above two charts look difficult to read, but we will walk you through it.
The first shows revenues in Web3 protocols over time. In green, you can see Ethereum’s gas fee revenue. Gas is charged every time someone makes a transaction — so you might pay $5 or $0.05 per transaction depending on computational complexity and demand. This may remind you of paying $10 per trade to Fidelity, or the 2% interchange fee to Visa. The revenues have clearly fallen off a cliff, and we will return to this topic later in the discussion.
Then we see a blue revenue area .That is interest being earned by Tether on money sitting at rest. We have discussed this in detail previously. You may compare the stablecoin business to a bank or a money-market fund, generating cash from net-interest.
On the second chart, we’ve labeled all the top revenue generators in Web3 by their function. Most protocol chains that generate large gas fees are fancy payment venues. Notably, more modern chains generate lower fee pools due to better design. Since many of them attach to Ethereum as roll-ups, Ethereum also has developed mechanisms to make transactions cheaper.
On the left, you see the purpose-built decentralized exchanges like GMX, Curve, Uniswap, and dYdX. Their usage is a small share of overall on-chain activity — more people hold tokens and move them around rather than trade them via DeFi. As a result, monetization levels are lower. Finally, scattered throughout you can see the lending and savings-like products, playing games of risk.
However, something is missing from these charts — something profound for both the traditional and decentralized finance industry in the money-at-rest category.
Can you guess what it could be?