How do DeFi protocols earn money?
This is best explained in 4 Simple Steps:
Build > Charge > Capture > Pass on
Firs they Build a platform that seamlessly connects to their users. Users can be lenders to borrowers, stakers to PoS Blockchains, LPs to traders, etc.
We’ll use Uber to compare it to the TradFi world — Uber would build a platform that seamlessly connects drivers to riders.
Then, they Charge their end for the great service they’re receiving. So borrowers pay a fee for borrowing on the platform, traders pay a fee for trading, and in the case of Uber, the driver pays a fee for riding with Uber.
They Capture a % of those fees from the volume of users on the platform.
Lastly, they Pass on the rest of the fees to the other users to incentivize them to continue providing the great service. So the lenders get paid for providing the service to borrowers, LPs get paid for providing liqudity to the traders, and in the case of Uber, drivers get paid for providing a ride-share service.