Monetizing decentralized platforms: How blockchain startups can set prices and fees

Web3 aims to reduce reliance on intermediaries, potentially lowering fees and empowering users with greater control over their data and assets. Think Gensyn offering AI compute at a fraction of AWS’s cost, or Drife promising to free drivers from Uber’s 30% commission.

But, as appealing as reducing costs for users sounds, setting fees and prices is a delicate balance that platforms have to get right. The most successful decentralized marketplaces can’t reject fees; instead, they’ll pair decentralized pricing with thoughtful, value-adding fee structures that help balance supply and demand.

In this post, we’ll explain, based on our research, the roles that pricing control and fee structures play in platform economics and governance; why zero-fee designs are destined to fail, however good their designers’ intentions; and how blockchain platforms should think about setting prices, using a new model we call “affine pricing” that’s based on volume, a mechanism that resolves the tension between private information and market coordination.

Platform economics 101: Why pricing and fees matter

Digital platforms rise or fall based on how they manage two core levers: pricing control and fee structure (i.e., how much they extract from sellers and buyers using  the platform). These aren’t just revenue tools; they’re market design instruments that shape behavior and determine outcomes.

Pricing control defines who sets transaction prices. Uber, for example, uses centralized algorithms to set fares, optimizing for supply-demand balance and consistency. Airbnb, by contrast, gives hosts autonomy to set their rates, nudging them with algorithmic suggestions. Each model solves different problems: Centralized pricing ensures coordination at scale. Decentralized pricing lets providers incorporate private information, like costs, quality, or differentiation, into their strategies. Neither model is inherently better. Their effectiveness depends on context.

Fee structures shape more than revenue, they influence who shows up and how the market works. Apple’s App Store charges up to 30%, but that fee curates supply and funds infrastructure; it may frustrate app developers but not users. Ticketmaster’s high fees, by contrast, drive artists and fans to alternative channels if available. On the low-fee end, Facebook Marketplace’s free listings attract scams, while several NFT platforms with near-zero fees drew low-quality NFTs that cluttered those experiences. When fees are too high, suppliers leave; when they’re too low, quality suffers.

Many blockchain projects have adopted zero commission fees. Removing a platform’s ability to extract value, the logic goes, will lead to better outcomes for suppliers and users. But this view misses the role well-designed fees play in making markets work. 

Fees aren’t just a way to take a cut. They can be a coordination mechanism.

The information vs. coordination tradeoff

At the heart of platform design lies a core tension: using providers’ private information versus coordinating the market for efficiency. Our research shows that the way pricing control and fee structures interact determines whether this tension is resolved or worsened. Here’s what we mean.

When the platform sets prices, it can coordinate the supply side, and competition between individual providers, more easily. But because it doesn’t observe their private costs, prices often misfire for suppliers and buyers: too high for some, too low for others. Since platforms typically take a commission on each transaction, this inefficiency leaves money on the table.

If instead providers set their own prices, they can reflect their true costs and capabilities. Low-cost providers can undercut. In theory, this leads to better matches and more efficient outcomes. But without coordination, this approach can backfire in two ways:

1. When competition is intense, such as when products are highly substitutable, a race to the bottom can emerge. Higher-cost providers exit, reducing supply just as demand rises, undermining the platform’s ability to meet demand. 
2. Second, average prices fall, which may benefit consumers but directly undermines the platform’s commission-based revenue.

When competition is too weak, such as when products are highly complementary, providers tend to overprice. Many join the platform, but each sets fares too high, pushing up average prices and driving customers away. This isn’t just theory. In 2020, Uber tested “Project Luigi” in California, letting drivers set their own prices. The result? Drivers set fares that were too high, pushing customers to alternative platforms. The project was scrapped after about a year.

Crucially, our analysis shows that these outcomes are not anomalies; they represent equilibrium results under standard commission contracts. Even when optimized, such contracts can still lead to these persistent market failures. The real question, then, isn’t how much commission platforms should charge, but how to design fee structures to ensure the system works for everyone.

How quantity-based fee structures can solve the problem

Our research reveals that a targeted fee structure — specifically, a quantity-based “affine” fee structure — can elegantly solve the market coordination problem while preserving price tailoring. This affine-fee approach implements a two-part fee where agents pay the platform:

1. A fixed base fee per transaction, and
2. A variable component that either increases with quantity (a surcharge) or decreases with quantity (a discount).

The approach differentially affects providers based on their costs and market positioning.

Consider a decentralized GPU marketplace where providers have heterogeneous costs. Some have inherently lower costs due to better technology, renewable energy access, or cooling efficiency, while others have higher costs but might offer premium reliability. With basic commission models, when competition is too intense, budget GPU providers set aggressively low prices and capture disproportionate market share. This leads to the type of market distortions mentioned earlier: some suppliers drop out restricting transaction volume while lowering average prices.

In this scenario, the optimal approach is a quantity surcharge: As providers serve more customers, they pay progressively higher fees per transaction. (In blockchain settings, quantity-based fees may be vulnerable to Sybil attacks depending on the nature of the product offered, so some type of identity verification may be required.) This creates a natural dampening effect on the most aggressive low-cost providers, preventing them from capturing excessive market share with unsustainably low prices. 

Conversely, when competition is moderate or weak, the optimal approach becomes a quantity discount: as providers serve more customers, they pay progressively lower fees per transaction. This incentivizes providers to lower prices to gain volume, effectively stimulating more competitive behavior without forcing prices below sustainable levels. On decentralized social platforms, this could mean implementing lower fees for creators who attract more engagement, encouraging them to price their premium content more competitively.

The beauty of the affine fee mechanism is that it doesn’t require the platform to know each provider’s costs. The fee structure creates the right incentives for providers to self-regulate based on their private cost information. Low-cost providers can still charge lower prices than their higher-cost competitors, but the fee structure prevents them from completely dominating the market in ways that harm overall ecosystem health.

How and why do these mechanisms work? Our mathematical simulations show that platforms with properly calibrated quantity-based fee structures can achieve over 99% of the theoretically optimal market efficiency — dramatically outperforming both centralized pricing and zero-commission models in our theoretical framework. This creates a marketplace where:

• Low-cost providers maintain their competitive advantage but don’t capture excessive market share
• Higher-cost providers can still participate by focusing on market segments that value their differentiated offerings
• The overall market reaches a more balanced equilibrium with appropriate price dispersion
• The platform generates sustainable revenue while improving market function

Our analysis shows that the optimal fee structure depends on observable market features, not on each provider’s private cost information. In designing the contract, the platform uses observable signals — prices and quantities served — as proxies for hidden costs, allowing providers to retain pricing control based on their private information, while still solving the coordination failures that arise in fully decentralized systems. This makes affine pricing practical because platforms can implement it without needing to know what each provider charges behind the scenes. 

The path forward for blockchain projects

By adopting traditional commission-based or zero-fee based fee models, many blockchain projects undermine both their financial sustainability and their market efficiency.

Our research demonstrates that properly designed fee structures are not contrary to decentralization — they’re essential for creating functional decentralized markets. The quantity-based fee approach we’ve identified can provide a sophisticated middle ground that preserves provider autonomy, while solving the inherent coordination problems of decentralized markets.

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Gérard P. Cachon is a professor at the University of Pennsylvania.

Tolga Dizdarer is a professor at Boston College.

Gerry Tsoukalas is a professor at Boston University. Their paper “Pricing Control and Regulation on Online Service Platforms” was accepted for publication at Management Science, in March 2025.

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