How Does Competition Impact a Protocol’s Projected Fee Capture Rate?
Competition directly impacts a protocol's fee capture rate by driving down the fees it can charge. In a highly competitive market, protocols must offer lower transaction fees or higher user incentives to attract and retain users, which reduces the total revenue available to the token holders.
The projected fee capture rate must be conservatively adjusted downward over time to reflect the inevitable commoditization and competition in the decentralized application space.
Glossar
Fee Capture Rate
Mechanism ⎊ Fee capture rate, within cryptocurrency derivatives and options trading, quantifies the proportion of trading fees retained by market makers or liquidity providers after accounting for operational costs and risk management expenses.
Fee Capture
Mechanism ⎊ Fee capture, within cryptocurrency derivatives and options trading, represents the systematic extraction of value from market participants through trading fees, protocol charges, or intermediary costs.
Competition
Market ⎊ Competition in the cryptocurrency and derivatives markets refers to the rivalry among exchanges, protocols, and market makers for liquidity, trading volume, and user base.