BTCS Inc. Revenue Disclosure

Note 7 – Revenues and Cost of Revenues

 

Revenue Recognition

 

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers, which requires an entity to recognize revenue when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.

 

Under ASC 606, the Company applies the following five-step model to all revenue-generating arrangements:

 

	●	Step 1: Identify the contract with the customer
	●	Step 2: Identify the performance obligations in the contract
	●	Step 3: Determine the transaction price
	●	Step 4: Allocate the transaction price to the performance obligations in the contract
	●	Step 5: Recognize revenue when the Company satisfies a performance obligation

 

The Company’s revenues are generated from blockchain-based operations and comprise three primary sources: (i) staking rewards earned from validator node operations (NodeOps); (ii) execution-layer transaction fees, priority fees, and MEV rewards earned from block-building activities (Builder+); and (iii) protocol-driven rewards earned from participation in DeFi protocols (Imperium). Revenues from NodeOps and Builder+ are aggregated and presented as Blockchain infrastructure revenues, while revenues from Imperium are presented separately as DeFi revenues in the statements of operations. 

 

The transaction consideration the Company receives in the form of native digital assets, such as ETH or other network tokens, represents non-cash consideration at fair value on the date the digital assets are earned.

 

Collectively, these activities represent the outputs of the Company’s ordinary blockchain infrastructure operations and are measured at the fair value of the digital assets earned at the time each performance obligation is satisfied.

 

NodeOps

 

The Company engages in network-based smart contracts by running its own digital assets validator nodes as well as by staking (or “delegating”) digital assets directly to both its own validator nodes and nodes run by third-party operators. Through these contracts, the Company provides digital assets to stake to a node for the purpose of validating transactions and adding blocks to a respective blockchain network. The term of a smart contract can vary based on the rules of the respective blockchain and typically lasts from a few days to several weeks after it is cancelled (or “un-staked”) by the delegator and requires that the digital assets staked remain locked up during the duration of the smart contract.

 

In exchange for staking the digital assets and validating transactions on blockchain networks, the Company is entitled to all of the fixed digital assets award earned from the network when delegating to the Company’s own node and is entitled to a fractional share of the network-determined digital assets award a third-party node operator receives (less digital assets transaction fees payable to the node operator, which are immaterial and are recorded as a deduction from revenue), for successfully validating or adding a block to the blockchain. The Company’s fractional share of awards received from delegating to a third-party validator node is proportionate to the digital assets staked by the Company compared to the total digital assets staked by all Delegators to that node at that time.

  

On blockchain networks on which the Company operates a validator node, the Company may earn a validator node fee (“Validator Fee”) based on the digital asset rewards generated by those validator nodes.

 

Token rewards earned from staking, as well as tokens earned as Validator Fees, are calculated and distributed directly to BTCS digital wallets by the blockchain networks as part of their consensus mechanisms.

 

 

BTCS Inc.

NOTES TO FINANCIAL STATEMENTS

 

The provision of validating blockchain transactions is an output of the Company’s ordinary activities. Each separate block creation or validation under a smart contract with a network represents a performance obligation. The satisfaction of the performance obligation for processing and validating blockchain transactions occurs at a point in time when confirmation is received from the network indicating that the validation is complete, and the awards are available for transfer. At that point, revenue is recognized.

 

Builder+

 

The Company earns revenue by participating as a Builder on blockchain networks that have implemented a proposer-builder separation (“PBS”) framework, including Ethereum and Binance Smart Chain (“BSC”). In these roles, the Company bundles and proposes transaction blocks for submission to network Validators (“block building”), and is compensated when its blocks are selected, proposed, and successfully finalized on the applicable network.

 

Ethereum Block Building

 

The Company participates in the Ethereum blockchain network by engaging in the construction of blocks containing strategically bundled transactions from the Ethereum mempool and from searchers who connect to the Company’s endpoint with the intent of the Company’s Builder proposing their transactions. Revenue recognition for these activities, conducted through Builder+, entails the recognition of execution layer transaction fees (or “transaction fees”) and priority fees (or “tips”) earned in exchange for successfully constructing blocks of bundled transactions and having these blocks selected and proposed by a validator to the Ethereum network for validation and successfully finalized on the network.

 

These transaction fees and tips are earned as a direct result of the Company’s fulfillment of its performance obligations, which include the construction of blocks by bundling transactions to maximize the value of the included fees and the proposal of that block by a Validator. Each constructed block under a smart contract with the Ethereum network signifies a distinct performance obligation.

 

As part of the block construction and proposal process, the Company’s Builder purchases block space through a fixed non-negotiable fee paid to a Validator (a “Validator Payment”) embedded in each proposed block. The Validator Payment, predetermined by the Builder, is paid to Validators as compensation for selecting and proposing the Company’s block to the network for validation. The Validator Payment is intrinsically linked to the Company’s performance obligations and is disbursed in the block constructed by the Builder if our Builder’s block is both selected by a Validator and successfully proposed to, and finalized on, the Ethereum network; otherwise, our Validator Payment may be included in a subsequent block. The Validator Payment represents a direct and fixed pre-determined cost.

 

The satisfaction of the performance obligation occurs at a point in time when the constructed block is both proposed by a Validator and successfully finalized on the Ethereum network. At this juncture, the Company has fulfilled its obligations, and the transaction fees and tips associated with the transactions included in the block become available and are transferred to the Company’s digital wallet.

 

The Company recognizes revenue, reflecting the fair value of the total transaction fees and tips earned from the constructed block.

 

 

BTCS Inc.

NOTES TO FINANCIAL STATEMENTS

 

Binance Smart Chain (BSC) Block Building

 

The Company also operates as a Builder on Binance Smart Chain (“BSC”), which uses a Proof-of-Staked-Authority (“PoSA”) consensus and a distinct block-building and reward structure. The native token of BSC is BNB, which is used for both transaction fees and transaction-based payments.

 

Builders on BSC construct block bids composed of transactions and optional searcher tips. Unlike Ethereum, transaction fees on BSC are paid directly to the Validator’s coinbase and are not received by the Builder. Instead, the Builder earns revenue in the form of BNB-denominated tips, which are voluntarily sent by searchers to a Builder-controlled smart contract as priority fees. These tips accumulate in the smart contract and are periodically withdrawn to the Company’s Builder wallet.

 

The Company recognizes revenue from BSC block building at the time the BNB tips are withdrawn from the tip smart contract to the Company’s wallet, measured at the fair value of BNB at the time the withdrawal occurs. Because BSC validator payments are embedded in the transaction fees of a self-transfer transaction appended by the Builder, the associated transaction cost is treated as cost of revenue.

 

Builder performance obligations on BSC are satisfied when the constructed block is selected and proposed by a Validator and finalized on-chain. Similar to Ethereum, each block is considered a separate performance obligation.

 

Imperium

 

Beginning in 2025, the Company expanded its blockchain infrastructure operations to include DeFi activities under its Imperium business line. Through Imperium, the Company participates directly in DeFi ecosystems by deploying digital assets, including ETH and stablecoins, into smart contract-based protocols that facilitate decentralized lending, liquidity provision, and other on-chain financial services.

 

When the Company deposits ETH into a DeFi protocol, such as Aave, the ETH is converted into a tokenized representation (for example, Aave Wrapped ETH, “WETH” or “aEthWETH”) that represents the Company’s on-chain deposit position and entitles it to earn variable digital assets rewards (e.g., ETH). These rewards accrue continuously based on protocol activity, supply-and-demand dynamics, and utilization of the Company’s deployed assets within the lending pool.

 

The Company’s participation in DeFi protocols represents a distinct performance obligation that is satisfied over time, as the protocol’s users simultaneously receive and consume the benefits of the Company’s contributed liquidity or other deployed assets. Revenue is recognized over time in proportion to the variable rewards accrued to the Company’s position, measured at the fair value of the native token at the time the consideration is earned. Variable consideration is constrained to amounts not subject to significant reversal, consistent with ASC 606-10-32-11.

 

Revenues earned through Imperium are classified as DeFi revenues in the statements of operations. The Company is considered the principal in these transactions because it controls the deployed digital assets, bears protocol and market risks (including smart-contract, liquidity, and liquidation risk), and earns consideration directly from the protocol rather than through an intermediary.

 

Disaggregation of Revenues

  

The following table summarizes the revenues earned from the Company’s operations for the years ended December 31, 2025 and 2024:

 Schedule of Disaggregation of Revenues

		2025				2024
		For the Year Ended December 31,
		2025				2024
Blockchain infrastructure revenues
NodeOps		$	2,058,971			$	1,620,305
Builder+			13,118,696				2,453,213
Total blockchain infrastructure revenues			15,177,667				4,073,518
DeFi revenues (Imperium)		$	1,313,917				-
Total revenues		$	16,491,584			$	4,073,518

 

Cost of Revenues

 

The Company’s cost of revenues primarily consists of direct expenses incurred in connection with its blockchain operations, including NodeOps, Builder+ and Imperium activities.

 

Blockchain Infrastructure Operations (NodeOps and Builder+)

 

The Company’s cost of revenues related to its blockchain infrastructure operations primarily includes direct production costs associated with transaction validation and block construction on blockchain networks. These costs include cloud-based server hosting expenses related to our validator nodes and Builders, allocated employee compensation related to the monitoring, maintenance and support operations.

 

 

BTCS Inc.

NOTES TO FINANCIAL STATEMENTS

 

Additionally, for Ethereum block building, cost of revenues includes Validator Payments made by the Company’s Builder to Validators as compensation for proposing constructed blocks. These are fixed amounts embedded within the proposed blocks and are paid only when the block is successfully finalized on-chain.

 

For Binance Smart Chain (“BSC”) block building, although the Builder does not receive the transaction fees attached to the bundled transactions included in a finalized block, it must still compete for inclusion by proposing an additional bid, structured as a self-transaction, that specifies extra fees intended to incentivize the Validator to select its block. This self-transaction results in a direct payment to the Validator’s coinbase address. These Builder-specified bids are separate from the transaction fees attached to user transactions and represent incremental value added by the Builder intended to increase the likelihood of block inclusion. The Company records these Builder-specified bid payments as cost of revenues, as they are a direct cost of fulfilling the block-building performance obligations under the BSC block-building arrangement in accordance with ASC 606.

 

The Company also includes in cost of revenues any third-party fees for hosting, infrastructure support, or software maintenance related to Validator or Builder operations.

 

These expenses are collectively presented as Cost of blockchain infrastructure revenues in the statements of operations.

 

Imperium

 

Beginning in 2025, the Company’s DeFi operations under its Imperium business line generated revenues from participation in decentralized finance protocols. Related costs of revenues primarily consist of allocated employee compensation and related expenses associated with establishing, monitoring, and maintaining DeFi activities, as well as any third-party services that support these operations and other direct on-chain expenses incurred in connection with deploying or interacting with DeFi protocols. These costs are presented as Cost of DeFi revenues in the statements of operations.

 

Disaggregation of Cost of Revenues

 

The following table further details the costs of revenues for the years ended December 31, 2025 and 2024:

 Schedule of Disaggregation of Cost of Revenues

		2025				2024
		For the Year Ended December 31,
		2025				2024
Cost of blockchain infrastructure revenues
Cost of staking revenues (NodeOps)		$	75,892			$	186,669
Cost of block-building revenues (Builder+)			14,393,462				2,940,840
Total cost of blockchain infrastructure revenues			14,469,354				3,127,509
Cost of DeFi revenues (Imperium)			12,300				-
Total cost of revenues		$	14,481,654			$	3,127,509