Revenue models of decentralized applications : an empirical study how decentralized software products generate income

Abstract

This Master’s thesis explores decentralized application software products and how they generate revenue. It focuses on the intersection of cutting-edge technologies and business innovation. The paper observes 58 pioneering DApps that apply emerging technologies such as blockchain, smart contracts and tokens with a demonstrated intention for earning financial income. The primary goal is to identify and classify main types of revenue models of DApps. Secondary goal is to understand each revenue model better in contrast to the practical observations from real DApps currently existing on the software industry. The study presumes that applications are developed with an intention towards earning money to ensure long-term viability, either for only sustaining development operations or gaining greater monetary profit. With 17 distinct identified and analysed revenue models, the results show that many DApps leverage tokenization to create novel revenue streams, while also mirroring traditional software-as-a-service and open-source software revenue models. Many observed applications combine and adapt elements from multiple different theoretical models to formulate their own unique revenue models. The findings suggest a need to re-evaluate the traditional definition of DApps to reflect the diverse evolving technological, organizational and business nuances. Conclusions highlight the transformative potential of decentralized technologies in various industries as a part of forward-thinking digital development of society. However, various challenges for achieving the potential exist, ranging from user awareness to regulatory issues and from cautious bias of cryptocurrencies and NFTs to costs and complexities of DApp development. Achieving financial sustainability for decentralized software products requires understanding the vision of the product, customer segments and demand, core value proposition, business model, competition, and strategies to overcome the challenges. This paper provides valuable information and insights for developers, researchers, students, and others interested in decentralized technologies, business models, and digital innovation for advancing DApps.