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

Introduction

This article aims to learn and expand knowledge related to REV, so that we can have a more comprehensive assessment and interpretation of public chains. We should inclusively learn knowledge, dialectically view the existing debates on REV, while avoiding the isolated use of any indicator parameters, thus preventing some potential negative impacts.

Interpretation of REV

What is REV?

REV represents real economic value and is an indicator that measures the total fees paid by users to the public chain.

REV to public chains is like revenue to enterprises. However, there will certainly be differences in details, and it is not completely equivalent to the concept of revenue for enterprises. There is also much controversy on this matter.

The complete REV calculation formula is as follows:

REV = ∑(In-protocol fees) + ∑(Out-of-protocol tips) + ∑(MEV)

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

• REV Maxis: believes that maximizing REV is beneficial for reducing the marginal cost of the network / expanding the user base / achieving sustainable revenue growth.

• REV Minimalists: believe that REV is a poor long-term value indicator because it soars during speculative bubble periods and is not suitable for blockchains like Bitcoin where REV is nearly zero. They advocate for implementing minimal viable REV to reduce its potential negative economic impact.

Recent Features

Data table showing the proportion of REV over 5 years:

• ETH dominated from 2020 to 2023.
• SOL has taken on a new leadership position since 2024.
• The REV of TRON is also quite substantial and is continuously expanding.

In the past three months of REV, SOL, TRON, and ETH are the leaders of REV.

The most prominent feature reflected by REV is: a significant increase in the impact weight of income factors from non-user ends.

The calculation formula for REV tells us that it encompasses Out of Protocol Tips( or MEV), aside from user demand. Therefore, it is not difficult to see that among all public chains, Solana's MEV can significantly help enhance its REV, thereby further increasing its potential valuation space.

Pros and Cons of REV

Advantages:

• Compared to the number of active addresses and transaction volume, REV is harder to manipulate, especially when some REV is burned.
• It can effectively indicate the historical activity of retail investors across various chains.

Disadvantages:

• Has a certain lagging nature
• Cannot reflect the full situation of a public chain, and cannot be isolated to estimate its value.
• Although it is difficult, there is still a possibility of being manipulated.
• There are some deviations; in certain cases, MEV and REV can be significantly higher than the average value.
• On some public chains where MEV infrastructure is underdeveloped, REV may be smaller, potentially leading to certain unfair valuations.

In general, we need to approach REV dialectically, just like we do with MEV, and we must avoid applying any indicators or methods in an isolated or metaphysical manner.

Valuation method of overlapping FDV: F/R multiplier

By overlaying FDV and valuing it against REV, we will obtain an FDV/REV multiple.

This type of multiplier is somewhat similar to the Price-to-Earnings (P/E) Ratio, and its core logic is to measure the extent of market premium on project valuation. That is, the larger the F/R multiplier, the greater the possible valuation bubble, and the more optimistic the market's growth expectations for the project ### or the stronger the speculation (. Conversely, the smaller the bubble, the more aligned the valuation is with the possible reality, and it may also represent relative undervaluation in longitudinal comparisons.

The FDV/REV multiple is a ratio that measures the market expectations of a project's FDV) against its annualized 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 multiple is the highest, implying long-term narratives and liquidity premiums.
• The F/R ratios of SOL and Tron are relatively low, indicating that the market may perceive their earning potential to be stronger or their valuations to be more reasonable.

FDV may be inflated due to the impact of token releases, which in turn affects short- to mid-term valuations. We can also use circulating market cap as a supplementary reference, which can more accurately reflect the market's recognition of the project's value—thus establishing an MC/R or M/R multiple. Such a multiple is also more suitable for assessing the market's pricing efficiency regarding the project's income in the short term.

The difference and connection between ( and MEV

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

![REV and F/R Multipliers: A New Valuation Method for Public Chains])https://img-cdn.gateio.im/webp-social/moments-956442f4ddbd698e3aa4fffc5da7c680.webp###

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 among different chains ( and enterprises ).

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

4. The views of REV Minimalists may not necessarily be desirable, while maximizing REV has many aspects worth discussing in the long term.

5. REV can be combined with many indicators to form a relatively comprehensive observation system.

• We discussed the relationship between REV and Fees in the article.
• Discussed the reference value of F/R multiples and M/R multiples for public chain valuation.
• Discussed the differences and connections with MEV, and provided the health indicators of MEV/REV for public chains.
• Reasonably and flexibly using these combined indicators can provide us with a relatively comprehensive perspective when evaluating public chains.