Source: IOSG
Author | Jiawei @IOSG
Three years ago, we wrote an article about Appchain, triggered by dYdX's announcement to migrate its decentralized derivatives protocol from StarkEx L2 to the Cosmos chain, launching its v4 version as an independent blockchain based on Cosmos SDK and Tendermint consensus.
In 2022, Appchain might have been a relatively marginal technical option. Entering 2025, with the emergence of more and more Appchains, especially Unichain and HyperEVM, the competitive landscape is quietly changing, forming a trend around Appchains. This article will start from this point and discuss our Appchain Thesis.
Uniswap and Hyperliquid's Choice
▲ Source: Unichain
The concept of Unichain appeared very early, with Nascent founder Dan Elitzer publishing "The Inevitability of UNIchain" in 2022, pointing out that Uniswap's scale, brand, liquidity structure, and needs for performance and value capture indicate the inevitability of launching Unichain. Discussions about Unichain have been ongoing since then.
Unichain was officially launched in February, with over 100 applications and infrastructure providers building on it. Currently, its TVL is around $1 billion, ranking in the top five among L2s. In the future, it will launch Flashblocks with a 200ms block time and the Unichain validation network.
▲ Source: defillama
As a perp, Hyperliquid clearly had Appchain and deep customization needs from day one. Beyond its core product, Hyperliquid launched HyperEVM, protected by the HyperBFT consensus mechanism, just like HyperCore.
In other words, beyond its powerful perp product, Hyperliquid is exploring the possibility of building an ecosystem. Currently, the HyperEVM ecosystem has over $2 billion in TVL, with ecosystem projects emerging.
From the development of Unichain and HyperEVM, we can intuitively see two points:
The L1/L2 competitive landscape is beginning to differentiate. The combined TVL of Unichain and HyperEVM ecosystems exceeds $3 billion. These assets would have previously been deposited on Ethereum, Arbitrum, and other general-purpose L1/L2s. Top applications establishing their own platforms directly led to the loss of core value sources such as TVL, transaction volume, transaction fees, and MEV for these platforms.
In the past, L1/L2s and applications like Uniswap and Hyperliquid had a symbiotic relationship, with applications bringing activity and users to the platform, and the platform providing security and infrastructure. Now, Unichain and HyperEVM have become platform layers, forming a direct competitive relationship with other L1/L2s. They not only compete for users and liquidity but also start competing for developers, inviting other projects to build on their chains, which significantly changes the competitive landscape.
The expansion paths of Unichain and HyperEVM are completely different from current L1/L2s. The latter often first build infrastructure and then attract developers with incentives. In contrast, Unichain and HyperEVM's model is "product-first" - they first have a market-verified core product with a massive user base and brand recognition, and then build an ecosystem and network effects around this product.
This path is more efficient and sustainable. They don't need to "buy" the ecosystem through high developer incentives but "attract" the ecosystem through the network effects and technical advantages of their core product. Developers choose to build on HyperEVM because of high-frequency trading users and real demand scenarios, not because of vague incentive promises. This is clearly a more organic and sustainable growth model.
What Changed in the Past Three Years?
▲ Source: zeeve
First, the maturity of the tech stack and the improvement of third-party service providers. Three years ago, building an Appchain required teams to master full-stack blockchain technology. However, with the development and maturation of RaaS services like OP Stack, Arbitrum Orbit, and AltLayer, developers can now modularly combine various modules for execution, data availability, settlement, and interoperability, like choosing cloud services. This greatly reduces the engineering complexity and initial capital investment of building an Appchain. The operational model has shifted from self-built infrastructure to purchasing services, providing flexibility and feasibility for application-layer innovation.
Second, brand and user mindset. We all know that attention is a scarce resource. Users are often loyal to an application's brand, not the underlying technical infrastructure: users use Uniswap because of its product experience, not because it runs on Ethereum. With the widespread adoption of multi-chain wallets and further UX improvements, users are almost imperceptive when using different chains - their first touchpoint is often the wallet and application. When an application builds its own chain, users' assets, identity, and usage habits are deposited within the application ecosystem, forming a powerful network effect.
▲ Source: Token Terminal
Most importantly, applications' pursuit of economic sovereignty is gradually becoming apparent. In the traditional L1/L2 architecture, we can see a clear "top-down" trend of value flow:
Application layer creates value (Uniswap's trading, Aave's lending)
Users pay fees to use applications (application fees + gas fee), with part of these fees going to the protocol and part to LPs or other participants
Gas fees are 100% directed to L1 validators or L2 sequencers
MEV is divided among searchers, builders, and validators in different proportions
Finally, the L1 token captures value through staking beyond app fees
In this chain, the application layer, which creates the most value, actually captures the least.
According to Token Terminal, out of Uniswap's $6.4 billion total value creation (including LP earnings, gas fees, etc.), less than 1% is allocated to the protocol/developers, equity investors, and token holders. Since its launch, Uniswap has created $2.7 billion in gas revenue for Ethereum, approximately 20% of Ethereum's settlement fees.
But what if an application has its own chain?
They can keep gas fees for themselves, use their own token as the gas token; internalize MEV by controlling the sequencer to minimize malicious MEV and return beneficial MEV to users; or customize fee models to implement more complex fee structures.
Looking at it this way, seeking value internalization becomes an ideal choice for applications. When an application has sufficient bargaining power, 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 income of protocols (red) and applications (green) from 2020 to now. We can clearly see that the value captured by applications is gradually increasing, reaching around 80% this year. This may, to some extent, overturn Joel Monegro's famous "fat protocol, thin application" theory.
We are witnessing a paradigm shift from the "fat protocol" theory to the "fat application" theory. Looking back at the pricing logic for crypto projects in the past, it was mainly driven by technological breakthroughs and underlying infrastructure. In the future, it will gradually shift towards a pricing method anchored by brand, traffic, and value capture capabilities. If applications can easily build their own chains based on modular services, the traditional L1 "rent-seeking" model will be challenged. Just as the rise of SaaS reduced the bargaining power of traditional software giants, the maturity of modular infrastructure is also weakening the monopoly position of L1.
In the future, the market value of top applications will undoubtedly exceed most L1s. The valuation logic of L1 will transform from "capturing total ecosystem value" to becoming a stable, secure decentralized "infrastructure service provider". Its valuation logic will be closer to a public product generating stable cash flow, rather than a "monopolistic" giant that captures most of the ecosystem value. Its valuation bubble will be squeezed to some extent. L1 will also need to rethink its positioning.
Regarding Appchain, our view is: Due to its brand, user mindset, and highly customizable on-chain capabilities, Appchain can better precipitate long-term user value. In the "fat application" era, these applications can not only capture the direct value they create but also build a blockchain around themselves, further externalizing and capturing infrastructure value - they are both products and platforms; serving both end users and other developers. Beyond economic sovereignty, top applications will also seek other sovereignties: the right to decide protocol upgrades, transaction ordering and censorship resistance, and ownership of user data.
Of course, this article mainly explores the context of top applications like Uniswap and Hyperliquid that have already launched Appchains. The development of Appchains is still in its early stages (Uniswap's TVL on Ethereum still accounts for 71.4%). For protocols like Aave that involve wrapped assets and collateral, and are highly dependent on composability on a single chain, Appchain is not very suitable. Relatively speaking, perpetual protocols with only external oracle needs are more suitable for Appchain. Moreover, Appchain is not the best choice for mid-tier applications and requires case-by-case analysis. We will not elaborate further here.
