Three years ago, we wrote an article about Appchain, sparked by dYdX's announcement that it would migrate its decentralized derivatives protocol from StarkEx L2 to the Cosmos chain, launching version 4 as a standalone blockchain based on the Cosmos SDK and Tendermint consensus. In 2022, Appchain might have been a relatively marginal technology option. As we head into 2025, with the launch of more and more Appchains, particularly Unichain and HyperEVM, the market's competitive landscape is quietly shifting, and a trend centered around Appchains is forming. This article will explore our Appchain Thesis, drawing on this foundation. The idea of Unichain emerged very early. In 2022, Nascent founder Dan Elitzer published The Inevitability of UNIchain, which highlighted Uniswap's scale, brand, liquidity structure, and demand for performance and value capture, pointing to the inevitability of launching Unichain. Discussions about Unichain have been ongoing ever since. Unichain officially launched in February, and over 100 applications and infrastructure providers have already built on it. Its current TVL is approximately $1 billion, ranking it among the top five L2 platforms. Flashblocks with 200ms block times and the Unichain verification network will be released in the future. ▲ Source: DeFiLlama As a perp, Hyperliquid clearly had a need for Appchain and deep customization from day one. In addition to its core product, Hyperliquid has also launched HyperEVM, which, like HyperCore, is secured by the HyperBFT consensus mechanism. In other words, beyond its powerful perp product, Hyperliquid is also exploring the potential of building an ecosystem. Currently, the HyperEVM ecosystem has over $2 billion in TVL, and ecosystem projects are beginning to emerge. The development of Unichain and HyperEVM clearly demonstrates two key points: The L1/L2 competitive landscape is beginning to diverge. The combined TVL of the Unichain and HyperEVM ecosystems exceeds $3 billion. These assets would have previously been held on general-purpose L1/L2 platforms like Ethereum and Arbitrum. The independent development of top applications has directly led to the loss of these platforms' core value sources, including TVL, transaction volume, transaction fees, and MEV. In the past, L1/L2 and applications like Uniswap and Hyperliquid enjoyed a symbiotic relationship: applications brought activity and users to the platforms, while the platforms provided security and infrastructure for the applications. Now, Unichain and HyperEVM have become platform layers themselves, directly competing with other L1/L2 platforms. They not only compete for users and liquidity, but also for developers, inviting other projects to build on their chains. This has significantly changed the competitive landscape. Unichain and HyperEVM's expansion path is completely different from that of current L1/L2 platforms, which often build infrastructure first and then attract developers with incentives. Unichain and HyperEVM, on the other hand, adopt a "product-first" model—they first establish a market-proven core product with a large user base and brand recognition, and then build an ecosystem and network effects around this product. This approach is more efficient and sustainable. They don't need to "buy" an ecosystem through high-cost developer incentives, but rather "attract" it through the network effects and technological advantages of their core product. Developers choose to build on HyperEVM because of the high-frequency trading users and real demand scenarios there, not because of vague incentive promises. This is clearly a more organic and sustainable growth model. What has changed in the past three years? ▲ Source: zeeve First, the maturity of the technology stack and the development of third-party service providers. Three years ago, building an Appchain required teams to master the full blockchain stack. However, with the development and maturity of RaaS services like OP Stack, Arbitrum Orbit, and AltLayer, developers can combine various modules on demand, from execution and data availability to settlement and interoperability, just like using cloud services. This significantly reduces the engineering complexity and initial capital investment required to build an Appchain. The shift in operating models from self-built infrastructure to purchased services provides flexibility and feasibility for innovation at the application layer. Secondly, brand and user awareness are key. We all know that attention is a scarce resource. Users are often loyal to an application's brand, not its underlying technology: they use Uniswap because of its product experience, not because it runs on Ethereum. With the widespread adoption of multi-chain wallets and further improvements in UX, users are becoming almost oblivious to the differences between chains—their initial touchpoints are often wallets and applications. When applications build their own chains, users' assets, identities, and usage habits are embedded within the application ecosystem, creating a powerful network effect. ▲ Source: Token Terminal Most importantly, applications' pursuit of economic sovereignty is gradually becoming more prominent. In the traditional L1/L2 architecture, we can see that the flow of value presents an obvious "top-down" trend:
The application layer creates value (Uniswap's transactions, Aave's lending)
Users pay fees for using the application (application fees + gas fee), part of these fees goes to the protocol, and part goes to LP or other participants
100% of the gas fee flows to the L1 validator or L2 sorter
MEV is divided up by searchers, builders and validators in different proportions
Ultimately, L1 tokens capture value beyond app fees through staking. In this chain, the application layer, which creates the most value, captures the least. According to Token Terminal, of Uniswap's $6.4 billion in total value creation (including LP returns, gas fees, etc.), the protocol/developers, equity investors, and token holders have received less than 1%. Since its launch, Uniswap has generated $2.7 billion in gas revenue for Ethereum, which is roughly 20% of Ethereum's settlement fees. And what happens if applications have their own chains? They can collect gas fees for themselves, using their own tokens as gas tokens; internalize MEV, minimizing malicious MEV by controlling the sorter and returning healthy MEV to users; or customize fee models to achieve more complex fee structures, and so on. Thus, seeking to internalize value becomes an ideal choice for applications. When an application's bargaining power is sufficiently strong, it will naturally demand more economic benefits. Therefore, high-quality applications have a weak dependency on the underlying chain, while the underlying chain has a strong dependency on high-quality applications. Summary ▲ Source: Dune@reallario The above chart roughly compares the revenue of protocols (red) and applications (green) since 2020. We can clearly see that the value captured by applications has been gradually increasing, reaching approximately 80% this year. This may to some extent overturn Joel Monegro's famous theory of "fat protocols, thin applications." We are witnessing a paradigm shift from the "fat protocol" theory to the "fat application" theory. Historically, the pricing logic for crypto projects has primarily focused on technological breakthroughs and the development of underlying infrastructure. In the future, pricing will gradually shift to a more focused approach based on brand, traffic, and value capture. If applications can easily build their own chains based on modular services, the traditional "rental collection" model of L1 will be challenged. Just as the rise of SaaS has reduced the bargaining power of traditional software giants, the maturity of modular infrastructure is also weakening the monopoly of L1. In the future, the market capitalization of leading applications will undoubtedly exceed that of most L1s. The valuation logic of L1 will shift from "capturing the total value of the ecosystem" to a stable, secure, decentralized "infrastructure service provider." Its valuation will be closer to that of public goods generating stable cash flow, rather than "monopolistic" giants that capture the majority of the ecosystem's value. Its valuation bubble will be squeezed to a certain extent. L1 also needs to rethink its positioning. Regarding Appchain, our view is that due to its brand, user mindshare, and highly customized on-chain capabilities, Appchain can better accumulate long-term user value. In the era of "fat apps," these applications can not only capture the direct value they create, but also build blockchains around them, further externalizing this value and capturing the value of the infrastructure—they are both products and platforms, serving both end users and other developers. In addition to economic sovereignty, top applications will also seek other sovereign rights: the right to decide on protocol upgrades, transaction ordering and censorship resistance, and ownership of user data. Of course, this article focuses primarily on top applications such as Uniswap and Hyperliquid, which have already launched Appchain. Appchain is still in its early stages of development (Uniswap still holds 71.4% of the total TVL on Ethereum). Protocols like Aave, which involve wrapped assets and collateral and rely heavily on composability on a single chain, are also less suitable for Appchain. Relatively speaking, perps, whose only external requirements are oracles, are more suitable for Appchain. Furthermore, Appchain isn't the best choice for mid-tier applications, requiring a case-by-case analysis. I won't elaborate further here.
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