REV and F/R Multiplier: A New Public Chain Evaluation Method

Preface

This article aims to learn knowledge related to divergent REV, so that we can have a more comprehensive evaluation and interpretation of the public chain. We should learn knowledge inclusively, view REV existing debates dialectically, and avoid the use of any indicator parameters isolated, thereby avoiding some potential negative effects.

1. Related articles:

Poopman (💩🧱✨) on Twitter / X

mteam.eth 🗼 on Twitter / X

Valuing blockchains: The great REV debate

2. Important boards:

Chain Comparison: Overview - Analytics Dashboard -Blockworks

3. REV interpretation:

3.1 What is REV?

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

REV stands for Real Economic Value and is a measure of how much users pay to use a chain, in total.

• REV is to public chains just like revenue is to enterprises. Evenue is to businesses as REV is to Chains.

" REV consists of both in-protocol transaction fees and out-of-protocol tips that users pay for transaction execution, so it measures the [aggregate] monetary demand to transaction onchain." -> @blockworksres

* But of course there will be a gap in details, which is not entirely equivalent to the concept of revenue to the enterprise, and there are also many controversies here. 

• Note that the "/" in ∑ (Out of protocol tips/MEV) after the formula should be a parallel relationship, not a division relationship. The complete formula should be as follows to reduce ambiguity:
  • REV = ∑(In-protocol fees) + ∑(Out-of-protocol tips) + ∑(MEV)
• It is not recommended to pay attention to the authenticity of specific data and implementation paths, because the marginal return rate of mining and verification of these data is low. We know that the calculation method and ready-made data boards are OK, as a valuation reference.

Currently, there is a widespread debate on whether REV should be maximized:

• **REV Maxis: **Maximizing REV is helpful to drive lower marginal costs of the network/expand user base/achieve sustainable revenue growth.

Dan Smith on Twitter / X

• **REV Minimalists: **Reckon REV is a bad long-term value indicator because it will soar during the speculative bubble period and is not suitable for blockchains with almost zero REVs like Bitcoin. Minimum viable REV should be implemented to reduce its possible negative economic impact.

Ryan Berckmans on Twitter / X

Diario on Twitter / X

However, the focus of this article does not discuss whether REV should be maximum or minimized, but only focuses on the application of REV itself. What kind of help and reference can it bring to us? Please think rationally and look at this indicator dialectically.

3.2 Recent Features

The REV proportion data within 5 years shows that:

• ETH has been dominant for 20 to 23 years;
• Starting from 24 years, SOL has mastered a new leadership position;
• TRON's REV is also quite considerable and is constantly amplifying.

Judging from the REV in the past three months, SOL, TRON, and ETH are the leaders of REV, which corresponds to the above figure.

Looking at the direct comparison of on-chain revenue, the biggest feature directly reflected by REV is that it significantly increases the influence weight of the revenue factor on non-user side.

The calculation formula of REV tells us that it includes Out of Protocol Tips (or MEV) except for user needs. Therefore, it is not difficult to find that Solana's MEV in all public chains can significantly help its REV increase, thereby further increasing its potential valuation space (about the valuation application of REV, which will be mentioned later, and will not be expanded here).

We asked DeepSeek to help us summarize the linkage analysis methods of two indicators:

3.3 Pros and cons of REV (@mteamisloading)

• advantage:

  • Compared to the number of active addresses and transaction volume, REVs are more difficult to manipulate, especially when some REVs are destroyed;
  • It can well point out the activeness of retail investors in various chains in history.

• shortcoming:

* Has a certain lag;
* It cannot reflect the entire situation of a public chain, and it cannot be valuated based on it in isolation;
* Although it is difficult, there is still the possibility of being manipulated;
* There are some deviation values, and in some cases the MEV and REV will be much higher than the average;
* On some public chains with immature MEV infrastructure, the REV is smaller, which may bring some unfair valuations. 

Overall, when dealing with REV, we need to look at it dialectically as if we were looking at MEV, and we should avoid applying any indicators and methods in isolation and metaphysical way.

3.4 Evaluation method for superimposing FDV: F/R multiplier

Add FDV and evaluate it with REV, and we will get a multiplier of FDV/REV.

Such a multiplier is somewhat similar to the price-to-earnings ratio P/E Ratio. Its core logic is to measure the market's premium to project valuation, that is, the larger the F/R multiplier, the larger the possible valuation bubble, and the more optimistic the market 's expectations for project growth (or more speculative). On the contrary, the smaller the bubble, the more appropriate the valuation is, and it may also be used to represent relatively undervaluation in a vertical comparison.

From this, we can give a concept of F/R multiplier:

The FDV/REV multiplier is the ratio of a project 's FDV (market expectation) to an annualized real economic income (current profitability), reflecting the degree of premium paid by the market for each unit of income.

From this we can see:

• BTC has the highest F/R multiplier, implying long-term narrative and liquidity premium;
• The lower F/R multiplier of SOL and Tron suggests that the market may consider its revenue capacity to be stronger or its valuation is more reasonable.

On the other hand, **FDV may be inflated by the token release, which will affect short- and medium-term valuations. We can also use the circulating market cap Market Cap to assist in reference, which can more truly reflect the current market's recognition of the project value - thus establishing an MC/R or M/R multiplier. Such multiplier is more suitable for evaluating the market's pricing efficiency of project revenue in the short term. ** However, I won't go into it here, just copy the principles and algorithms.

Here we just ask DeepSeek to use a table to summarize and compare four valuation methods including PE and PS:

index| Core definition| Data dependency| Advantages| Limited| Typical application scenarios
---|---|---|---|---|---
PE| Market value/net profit| Stable profits and consistent accounting standards| Directly reflect profit premium, suitable for mature enterprises| Ignore growth potential, loss-making companies cannot calculate| Traditional industries with stable profits such as consumer goods and manufacturing
PS| Market value/sales| Income authenticity and comparableity| Applicable to loss/high growth enterprises, pay attention to revenue scale| Ignore the cost structure and cannot measure the quality of profit| Technology startups, high-growth tracks (such as SaaS)
FR| Completely diluted valuation/annualized chain revenue| Token full circulation assumption, annual revenue| Reflect long-term narrative and liquidity premium| FDV inflated (ununlocked tokens), income volatility interference| Evaluate the long-term valuation of public chains (such as Bitcoin, Ethereum)
MR| Circulation Market Value/Annualized Chain Revenue| The proportion of circulating tokens and the sustainability of revenue| Short-term pricing is more realistic to avoid dilute valuation interference| Ignore ununlocked token selling pressure and rely on income stability| High circulation rate project (Solana), short-term trading decision reference

3.5 Differences and connections with MEV

Since the two have similar names and the former is an integral part of the latter, it is naturally easy to associate with each other. We might as well put the two together for a comparison and sort out the different roles of them in valuation, so as to better understand the two indicators.

We know that MEV is the Maximal Extractable Value, which is a profit obtained by specific participants using the native features of on-chain transactions, such as price delays, lending clearing, transaction visibility, etc.

MEV is usually represented as arbitrage, liquidation, rushing, sandwich attack, etc., and is itself a neutral word. Also, please ask Mr. DeepSeek to make a comparison table:

Dimension	Advantages of MEV	Disadvantages of MEV
Internet Participants	✅ Increase validator revenue and enhance network
security (high returns to attract more nodes)	❌Ordinary users are being
snatched away, Gas fees soar, experience deteriorates
Ecological health	✅Reflect market activity (arbitrage and liquidation
demand are signs of liquidity health)	❌Malignant MEV (such as sandwich
attacks) damage user trust and lead to ecological loss
Decentralization	✅Small nodes can make up for the income gap through MEV
capture (theory)	❌In reality, MEV is often monopolized by large mining
pools/professional robots, which aggravates centralization
Economic Model	✅MEV revenue can be captured by agreement (such as
EIP-1559 destroying part of the Gas fee)	❌Unallocated MEVs may become
systemic risk (such as validator conspiracy)

So in the valuation system, MEV and REV are actually two completely different concepts. The composition of REV has been mentioned in the formula we started, and it is actually composed of MEVs. Combined with our current understanding of REV, we can draw:

• In fact, MEV should be used as a micro indicator to measure the health of the network and some strategic value allocation in the role of valuation;
• REV is actually more macro, focusing on the overall revenue premium of the public chain itself;
• Dynamic monitoring can be performed in combination with the ratio of MEV to REV as an auxiliary indicator of ecological health (low ratio is health, high ratio is risky) .

4. Conclusion

**Conclusion 1 (@mteamisloading): REV is not equal to the value capture

of native tokens on the chain.**

• REV has advantages and disadvantages and must not be used and referenced in isolation;
• Many times REVs are destroyed and returned to users through incentive mechanisms, or paid to verification node operators as operating expenses, thereby reducing the nominal REV.

Logan Jastremski on Twitter / X

**Conclusion 2 (@mteamisloading): The FDV/REV ratio (similar to price-to-earnings ratio P/E) is inherently different between different chains (and

companies).**

• For tokens, factors such as yield and currency premium will significantly affect the price. Moreover, the quality and sustainability of REVs on different chains are also different.

**Conclusion 3 (@mteamisloading): Blockchain is not an enterprise, and

native tokens are not equity.**

**Conclusion 4 (@mteamisloading): The REV Minimalists ' perspective may

not necessarily be desirable, and maximizing REV has a lot to discuss in the long run.**

mteam.eth 🗼 on Twitter / X

Dan Smith on Twitter / X

**Conclusion 5: REV combined with many indicators can form a relatively

comprehensive observation system.**

• We discussed the linkage between REV and Fees in the article;
• The reference value of F/R multiplier and M/R multiplier on public chain valuation is discussed;
• The difference and relationship with MEV is discussed, and the health indicators of MEV/REV are given.
• Reasonable and flexible use of these combination indicators can bring us a relatively comprehensive view when evaluating public chains.

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