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Revenue models and operational cost

To run an application on the web, whether a centralized web app or a dapp, someone must pay for hosting. In Web2, this is relatively simple. A company runs servers and offers those servers to other companies or developers for a fee. The fee can be a fixed subscription or calculated based on usage. Developers pay the hosting company using traditional fiat currency.

In Web3, things work differently. Since platforms are decentralized, there's no single company in control of all servers. Servers, or nodes, are run by many companies or individuals who contribute resources to the network and, in return, get paid in cryptocurrency. That way, all payments can be managed by the system in code, and there's no need for a central legal entity that collects and distributes money.

The problem with gas fees​

In early Web3 platforms, such as Ethereum, hosting is paid by users when sending individual transactions. This fee, on Ethereum referred to as gas fee, is essentially a bid put up by the user to get their transaction included in the next block. If the fee is competitive enough, the transaction will get included in a block. The gas fee for a given transaction is calculated based on the computational resources required to run that particular transaction and the demand on the network at that time.

This means that every time users want to perform an action that affects dapp state on the blockchain, they have to pay a small fee. Imagine using a social media app where you must pay every time you post or a work collaboration tool with a fee to update a task. Not the best user experience.

Chromia's flexible fee model​

Chromia solves this problem by putting the fee structure back in the hands of developers. As a developer, you host your dapp in a container on the network for a predictable fee. You know the cost and resources of your dapp, just like on a traditional cloud hosting platform. Hosting fees are paid by sending cryptocurrency to a dedicated address on the system and are automatically distributed among providers running nodes on the network.

How to collect currency from users is then up to you. You can, of course, have the equivalent of gas fees, charging a small amount every time a user performs an action, but you can also implement a subscription model, a freemium model, or even subsidize your dapp by collecting money off-chain if you'd like. You have the power to put user experience first and build whatever model makes the most sense for your specific dapp, just like in Web2.

Web2 application economy​

Revenue models

  • Often ad-driven, where user data is monetized.
  • Subscription models and one-time purchases are also prevalent.
  • Direct sales and affiliate marketing are common in e-commerce platforms.

Operational costs

  • Ongoing server maintenance, data storage, and infrastructure costs.
  • Licensing fees for certain software or platforms.

Web3 dapp economy​

Revenue models

  • Token monetization allows for unique revenue streams, such as Token Sales. Capital can be raised through Initial Coin Offerings (ICOs).
  • Users can earn by participating in network validation or staking.
  • Decentralized finance (DeFi) offers interest earnings, lending, and other financial instruments.
  • Using Chromia, there is always the possibility of using a subscription model, freemium model, pay-by feature, or even collecting money off-chain, just like in Web2.

Operational costs

  • Early Web3 platforms like Ethereum use gas fees that are unpredictable and make the end-user pay for every action.
  • Chromia features a predictable hosting fee where you pay a recurring subscription for a set unit of resources, much like on modern Cloud services today.

Simple example of a revenue model on Chromia​

Chromia's flexible fee structure means you can implement dapp revenue models that are impossible on earlier Web3 platforms. For example, you could implement a freemium model, with some users paying a subscription to gain access to premium features while keeping the dapp free for the rest. Premium users pay their subscription in cryptocurrency. Part of the collected fees can automatically be used to pay for hosting on Chromia, and part can be sent to an account controlled by you as payment for developing and maintaining the dapp.

To summarize:

  • User 1 and User 2 pay a subscription fee and get access to premium features.
  • User 3 has a free account and has access to free features.
  • User 1 and User 2's subscription fees cover operation costs; part of it can be earnings for the dapp developer.