Table of Contents
Researcher
1. To App, Or To Chain
During the Solana Breakpoint, a debate held regarding whether applications should launch their own chains. Meanwhile, in the Ethereum community, which faces the risk of losing its value proposition to L2s built on top of it, a core researcher proposed that DeFi should remain at the L1.
The discussions in both Solana and Ethereum ecosystems have raised an intriguing question: Will all applications eventually launch their own chains? If so, which applications will remain on underlying layers (L1 or general-purpose L2s), and which will opt for dedicated chains?
The modular blockchain thesis, originally conceived to address Ethereum's scalability limitations, has evolved into a generalized framework for building blockchain networks. Launching a dedicated chain becomes trivial, with blockspace becoming a commodity. The cost of setting up a chain has now become negligible, with capital expenditures transforming into operational expenses. This shift allows platforms with sufficient volume to potentially generate profit from day one.
Many applications begin as smart contracts on established networks like Ethereum and Solana. However, once they achieve a certain level of value or success, a significant number choose to spin off as a separate network. Examples include, but not limited to Grass, Zeta Market, Blast, Frax, Code, and Helium—and this list continues to grow.
The rationale behind this trend is both simple but powerful: applications seek to accrue value for themselves, whether in the form of brand recognition, financial gains, or ecosystem influence. Given that crypto is still in its nascent stage, everyone wants to become platforms or hubs for larger ambition. This drives the transition from being a part of an existing network to launching a dedicated chain.
1.1 Why Build Own Chain?
Advantages for applications by launching their own chains include:
1.1.1 Economic Control and Value Capture
Source: Make Applications Great Again
By owning their block space and controlling the sequencer, apps can capture more economic value. This enables them to build additional revenue streams and create meaningful business models that were not available before. Relying solely on token sales limits the functionality of applications and accelerates their life cycle. With their own sequencing layer, applications can generate revenue not just from their app functions but also from facilitating ecosystem activities like secondary markets. For example Base, initiated by Coinbase, earned more than $55 million in profit from its launch alone. This demonstrates that running a chain can be a highly profitable business, providing applications with greater economic control and value capture opportunities.
1.1.2 Customization and Dedication of Block Space
Applications can create custom execution environments and implement additional usability features like account abstraction or KYC/KYB directly at the protocol layer when launching their own chains. This can be particularly effective for certain types of apps, such as those dealing with RWAs or consumer-centric chains.
The customization can also be used to overcome the scalability limitations of the underlying network, allowing apps to optimize their execution environment without waiting for the underlying mainnet to support such improvements. While high-performance chains like Solana or Sui are expected to have sufficient throughput capacity, they will inevitably reach a theoretical ceiling point as single state machines. Dedicated blockspace can relieve risks associated with congestion on the underlying layer.
1.1.3 Brand and Awareness
Source: X(@LucaNetz)
Building their own ecosystem and platform can effectively accrue the activities and prosperity to its brand power. In crypto, awareness and attention are often the scarcest resources, not fast and secure blockspace. Although this effect is often difficult to measure quantitatively and thus underrated, the most critical impact of building a vibrant ecosystem lies in its distribution power and market presence.
In most cases, technical superiority and level of decentralization only attract a few types of apps that require a higher level of reliability. The majority of applications don't require such stringent security measures, but benefit greatly from strong distribution power.
The case of Pudgy evolving into Abstract showcases this well. With an already vibrant community and well-established brand, being part of another ecosystem could potentially diminish their brand value and only accrue value to another entity. Other projects are following a similar path, as evidenced by Azuki's recent launch of their own chain, Anime. This trend is likely to continue as more projects recognize the branding and awareness benefits of launching their own chains, allowing them to maintain control over their identity and community engagement in the competitive landscape.
This trend indicates that technical superiority alone may not be the key factor for chains and ecosystems. Projects that have achieved a substantial level of PMF and brand value are likely to join the movement towards building their own chains. In a context where the cost of transitioning from existing ecosystems has become extremely low, each ecosystem now are urgent to build a moat or network effect to prevent the escape.
It's important to note that these advantages are not limited to any specific underlying network but can be broadly applied. While modular blockchain architecture is often associated primarily with the Ethereum ecosystem, this is not exclusively the case. This suggests that even Solana's future development may follow a similar trajectory. Projects like Metaplex are already developing solutions for network building based on Solana, and many of the examples mentioned earlier are, in fact, Solana-based services.
As explained above, the decision to launch a dedicated chain is more of a strategic choice to maximize autonomy and value accrual, rather than a response to limitations of the underlying network or a pursuit of superior technical alternatives.
1.2 There is a Caveat
While launching dedicated chains offers numerous advantages, there are trade-offs to consider when leaving an integrated ecosystem. Two primary concerns are: 1) inferior UX caused by moving assets across multiple chains, and 2) the loss of seamless interoperability within a unified ecosystem.
However, these concerns can be mitigated through thoughtful app design. User experience of onchain applications interacting with token and wallet generally fall into two categories: deposit or connect.
Deposit-based apps can easily handle cross-chain interactions by receiving tokens from other networks and converting or bridging them to their network. For example, users can deposit USDC from Arbitrum to Hyperliquid without realizing they're bridging tokens between networks. Most of apps that uses smart accounts are operating as a deposit-based UX.
On the other hand, connect-based apps are developing frameworks and libraries to streamline the user experience. For instance, Infiniex proposes a superior user experience for interacting with multiple chains and tokens through a single interface. The improvement in UX layer is expected to be taken further, as intent-centric execution and chain abstraction methodology matures.
Nevertheless, certain categories of applications may not benefit from fully separating from underlying chains. DeFi is a prime example. The core value proposition of DeFi stems from instant and permissionless composability, which is best achieved by remaining on the same chain as the tokens being traded.
When chains and tokens are separated, it introduces more friction to make assets tradable. While cross-chain features and liquidity can enable operation on other chains, this approach is often suboptimal and may incur additional fees.
Uniswap, for instance, provides a venue where anyone can launch tokens and make them tradable without permission. Even though they achieve the most strong and sustainable pmf, will they leave the chain and build their own? I guess they would not.
Additionally, applications that require higher levels of reliability and security, especially those dealing with large volumes per user (such as RWAs like Ondo or middleware protocols), have strong incentives to stay on the most secure and reliable networks.
In conclusion, most apps will likely consider building their own chains, particularly if they achieve a sufficient level of brand, community, or product-market fit. The incentives to do so are compelling and well-justified. However, in some categories like DeFi or RWAs, where the advantages of being on the same network as the traded tokens and significance of reliability are significant, apps may choose to remain on established networks.
2. Product Spotlight
2.1 TMR News: Betting on Tomorrow's Headlines
Source: TMR.NEWS
TMR.NEWS is a prediction market for tomorrow’s New York Times headline. Users submit their predictions as sentences along with a betting amount. An LLM model then judges the semantic similarity between these predictions and the actual headline when it's published. Rewards are distributed based on how closely the predictions match the real headline, with the entire process handled onchain for transparency and security.
While the interface is simple, TMR.NEWS is powered by a sophisticated blend of crypto and AI technologies. It leverages Index Supply for chain indexing, Reclaim Protocol as an oracle with zk Fetch, Privy for seamless onboarding, OpenAI for its AI capabilities. A standout feature is the use of web proofs(TLS) to verify offchain data from the NYT.
TMR.NEWS stands out as a particularly fascinating case, masterfully blending the speculative nature of crypto with an AI-enabled novel user experience. Furthermore, its approach to verifiability sets it even further apart, suggesting an innovative way of integrating offchain data in an onchain environment.
2.2 TYB - Earn from the Brands You Love
Source: TYB
TYB is a rewards platform focused on community engagement, enabling fans to earn rewards from their favorite brands. Launched in 2022, the platform now serves over 50 brands, offering demos and seamless onboarding for easy integration. TYB recently gained popularity when Selena Gomez invited her community to join her brand, Rare Beauty, on the platform during an IG live stream.
The platform's core mechanics involve users following brand communities and completing challenges to unlock coins and rewards. Brands can customize these challenges to include activities like social media sharing or product campaign participation. For brands, TYB offers a tool to create engaging interactions that deepen their connection with their audience. For fans, it's an opportunity to engage with beloved brands through these challenges, earning exclusive rewards and tokens for their participation. This symbiotic relationship is designed to enhance brand loyalty and customer engagement.
Despite operating for a relatively long period since 2022, TYB remains largely unrecognized by many crypto communities. This may be attributed to two factors: 1) the demographic of TYB's target users differs from typical CT users, and more significantly, 2) it doesn't present itself as a typical crypto app. While it includes elements like wallets and coins, these features are presented more like status and point systems found in conventional Web2 apps. We need more apps like TYB with web2-level user experiences and fully abstracting the blockchain thing at the backend.
