REV and F/R Multipliers: A New Valuation Method for Public Chains

This article aims to study and discuss knowledge related to REV, so that we can have a more comprehensive assessment and interpretation of public chains. We should learn knowledge inclusively, dialectically view the existing debates on REV, and at the same time avoid the isolated use of any indicator parameters to mitigate potential negative impacts.

1. Interpretation of REV

1.1 What is REV?

REV represents Real Economic Value and is an indicator of the total fees paid by users to the public chain. REV to the public chain is like revenue to a business.

The complete calculation formula for REV is:

REV = Σ( on-chain protocol fees ) + Σ( off-chain tips ) + Σ( MEV )

There is currently a widespread debate on whether REV should be maximized.

• The REV maximization faction believes that maximizing REV is beneficial for reducing network marginal costs, expanding the user base, and achieving sustainable revenue growth.

• The minimal REV faction believes that REV is a poor long-term value indicator because it surges during speculative bubble periods and is not applicable to blockchains like Bitcoin where REV is nearly zero. A minimum viable REV should be implemented to reduce its potential negative economic impact.

This article does not focus on whether REV should be maximized or minimized, but rather on the application of REV itself and what kind of help and reference it can provide us.

1.2 Recent Features

Data table showing the proportion of REV over 5 years:

• ETH held a dominant position from 2020 to 2023.
• In 2024, SOL will take on a new leadership role.
• The REV of TRON is also quite substantial and is continually expanding.

Looking at the REV over the past three months, SOL, TRON, and ETH are the leaders of REV.

The most prominent feature directly reflected by REV is: it significantly increases the weight of the income factor impact on non-user endpoints.

The calculation formula of REV tells us that it includes off-chain tips ( or MEV ) in addition to user demand. Therefore, it is not difficult to find that among all public chains, Solana's MEV can significantly help enhance its REV, thereby further increasing its potential valuation space.

Advantages and Disadvantages of 1.3 REV

Advantages:

• Compared to the number of active addresses and trading volume, REV is harder to manipulate, especially when some REV is destroyed.
• Can effectively indicate the activity of retail investors across various chains in history.

Disadvantages:

• Has a certain lagging effect
• Cannot reflect the full situation of a public chain, and cannot be valued in isolation based on it.
• Although it is difficult, there is still a possibility of being manipulated.
• There are some deviations; in certain cases, MEV and REV can be much higher than the average.
• On some public chains where MEV infrastructure is immature, REV may be smaller, potentially leading to certain unfair valuations.

Overall, we need to view REV dialectically and avoid applying any indicators and methods in an isolated or metaphysical manner.

1.4 Valuation method of overlaying FDV: F/R multiple

By overlaying FDV and valuing it against REV, we obtain an FDV/REV multiplier. This multiplier is somewhat similar to the Price-to-Earnings (P/E) Ratio, and its core logic is to measure the degree of market premium on the project's valuation. The larger the F/R multiplier, the greater the potential valuation bubble, and the more optimistic the market is about the project's growth expectations ( or the stronger the speculation ). Conversely, a smaller bubble indicates a valuation that is more aligned with the possible reality, and in longitudinal comparisons, it can also represent relative undervaluation.

The FDV/REV multiple measures the ratio of a project's FDV( market expectations) to its annual actual economic income( and current profitability), reflecting the premium that the market pays for each unit of income.

It can be seen from this:

• BTC's F/R multiplier is the highest, implying a long-term narrative and liquidity premium.
• The F/R multiples of SOL and Tron are relatively low, indicating that the market may perceive their earning potential as stronger or their valuations as more reasonable.

FDV may be inflated due to the impact of token releases, which can affect short to medium-term valuations. We can also use Market Cap to assist in reference, as it can more accurately reflect the current market's recognition of the project's value—thus establishing an MC/R or M/R multiple. Such multiples are also more suitable for assessing the pricing efficiency of the market regarding the project's revenue in the short term.

The differences and connections between 1.5 and MEV

MEV stands for Maximal Extractable Value, which is the profit that specific participants can obtain by leveraging the native characteristics of on-chain transactions, such as price delays, lending liquidations, transaction visibility, and so on.

MEV usually manifests as arbitrage, liquidation, front-running, sandwich attacks, etc., and it is inherently a neutral term.

In the valuation system, MEV and REV are actually two completely different concepts:

• MEV should actually be seen more as a micro indicator in the valuation role to measure the health of the network and some strategic value distribution situations.
• REV is actually more macro, focusing on the overall income premium situation of the public chain itself.
• The ratio of MEV to REV can be dynamically monitored as an auxiliary indicator of ecological health. A low ratio indicates health, while a high ratio poses risks.

2. Conclusion

1. REV does not equal the value capture of the on-chain native token.

2. The FDV/REV ratio ( is similar to the price-to-earnings ratio P/E ), which inherently varies between different chains ( and enterprises ). For tokens, factors such as yield and currency premium can significantly affect the price. Moreover, the quality and sustainability of REV on different chains also differ.

3. Blockchain is not a company, and native tokens are not equity.

4. The views of REV Minimalists may not necessarily be advisable, while there are many aspects worth discussing about maximizing REV in the long term.

5. REV can be combined with many indicators to form a relatively comprehensive observation system. In the article, we discussed the relationship between REV and Fees; we discussed the reference value of the F/R multiplier and M/R multiplier for public chain valuation; we discussed the distinctions and connections with MEV and provided the MEV/REV public chain health indicator. Reasonable and flexible use of these combined indicators can provide us with a relatively comprehensive perspective when evaluating public chains.