Explore Profit-Sharing Models In The Crypto Industry
- Oct 31, 2023
- 4 min read
Written by: Adnan Alisic, Executive Contributor
Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.
There has been a massive growth and development within the crypto industry, with various projects constantly seeking ways to stand out and reward their users. Traditional profit-sharing models have made their way into the crypto space, offering a fresh perspective on how blockchain and digital assets can create financial opportunities for users.
These models are a natural fit in the crypto space, particularly within the context of Web3, which is fundamentally built around the concept of community empowerment and decentralized collaboration. In this ecosystem, profit-sharing aligns seamlessly with the ethos of rewarding and engaging the community for a project's success. It represents a tangible way for crypto projects to directly involve and incentivize their user base, ensuring that as the project prospers, so do its community members.
By distributing a portion of the profits generated through activities like trading fees or staking, profit-sharing fosters a sense of shared ownership and responsibility, further strengthening the bond between the project and its community. It not only acknowledges the vital role that the community plays in the project's growth but also encourages active participation and long-term commitment, making it an ideal mechanism to drive the success and sustainability of Web3 initiatives.
In this article, we explore a few profit-sharing models in the crypto industry, highlighting the benefits of those tied to staking platforms, copy-trading and trading fees.
Three profit-sharing styles
Profit-sharing models in the crypto industry aim to distribute a portion of the platform's profits back to users. These models not only create incentives for users to actively engage with the platform but also offer a source of passive income. Three primary models have gained prominence: staking platforms, copy-trading, and trading fee profit-sharing.
Profit-sharing model through copy-trading
Profit-sharing through copy-trading involves distributing a portion of the profits earned by experienced traders or investors to those who follow and mimic their trading strategies. This allows followers to benefit from the success of skilled traders without requiring extensive knowledge of the markets, fostering a symbiotic relationship where both parties share in the gains while spreading the risk.
Huobi
Huobi’s (HTX) profit-sharing system provides timely compensation to traders and followers in the copy-trading program. After closing all copy-trading positions, a portion of the net profits, determined by the trader's preset profit-sharing ratio, is temporarily held and then paid to the trader by 10:00 the following day. Net profits are computed by deducting total losses from total gains. If a trader is unfollowed, profit-sharing settlements occur immediately, with any remaining funds after settlement returned to the follower's futures account.
This process ensures transparency and efficiency, with the credited profit being directly proportional to net profits and the predefined profit-sharing ratio. Positive profits are given to the trader, while negative amounts result in the release of previously frozen funds to the follower's account, creating a balanced profit-sharing ecosystem.
Profit-sharing models through staking
Staking in the crypto world involves users locking up a certain amount of a particular cryptocurrency to support network security and functionality. In return, they receive staking rewards. Some innovative projects have taken this concept further by implementing profit-sharing mechanisms.
Eterna (EHX)
Eterna provides a unique value proposition by distributing 50% of profits generated from its platforms and apps to token stakers. These stakers also receive attractive returns for locking their tokens, which can be withdrawn at any time without penalties. Every hour, 50% of Eterna's trading fees (excluding referral rewards and operating expenses) are placed in a profit pool, which is then distributed to token stakers. These income shares are automatically disbursed as ERC-20 USDT tokens.
Profit-sharing through trading fees
Trading fees in cryptocurrency exchanges are typically calculated based on trading pairs and trading volumes. These fees serve as a source of revenue for exchanges and are instrumental in profit-sharing models and shows a commitment to active engagement fosters long-term support for the platform, significantly contributing to its sustainability, all the while maintaining ethical conduct.
Biokript
Our platform shares a percentage of its trading fees with token holders, in harmony with Mudarabah profit-sharing principles. Users are rewarded based on their token holdings and trading activity, encouraging active participation while upholding principles of risk-sharing and fairness.
The advantages of trading fee profit-sharing models
The profit-sharing trading fee model offers several compelling advantages. Users stand to benefit from higher payouts, as they receive a direct share of the trading fees generated on the platform, potentially leading to more substantial rewards. This model also fosters active engagement, encouraging users to participate actively in trading and holding tokens, which not only bolsters liquidity but also contributes to heightened platform activity. In addition, our liquidity mining program will have similar profit-sharing features available so users can lock token pairs for 3 months at 60% APR, 6 months at 140% APR, and 12 months at 300% APR while receiving monthly profit distribution.
Transparency is a key feature, allowing users to easily track their earnings, as they are intrinsically linked to the trading fees generated on the platform. Moreover, this active participation tends to translate into long-term support for the platform, which significantly contributes to the project's sustainability, reinforcing the model's appeal for both users and the platform's long-term success.
Final thoughts
Profit-sharing models in the cryptocurrency industry are revolutionizing user engagement with blockchain projects. While staking platforms provide passive income, trading fee profit-sharing models, exemplified by Biokript, introduce dynamic incentives that reward active participation. These models establish a mutually beneficial relationship where users share in the platform's success, while projects cultivate heightened activity and user loyalty. The evolving crypto industry is likely to bring forth more innovative profit-sharing models, demonstrating its adaptability and unwavering commitment to delivering value to users through unique and meaningful approaches.
Adnan Alisic, Executive Contributor Brainz Magazine
Adnan is a Certified Islamic Banker, bestselling author, and a passionate entrepreneur who has more than seven years of experience in the crypto industry. He started his crypto journey as a successful Paxful trader where he completed thousands of trades. He currently leads a passionate team in building Biokript, the world’s first hybrid, Shariah-compliant cryptocurrency platform.
