By Ryan Watkins
Compiled by: TechFlow
It is widely believed that there are no other valuable applications in the industry besides Bitcoin and stablecoins. It is said that the previous cycle was driven entirely by speculation and there has been little progress since the crash in 2022. The industry is oversaturated with infrastructure that no one uses, and venture capitalists who funded this infrastructure may suffer losses due to improper capital allocation.
The second half of this argument does have some truth to it, as markets begin to punish blind infrastructure investment and long-term winners emerge from the foundation of the crypto economy. However, the first half, that there are few applications relative to infrastructure and little progress since the last cycle, is inaccurate once we look at the data.
In fact, the age of applications has arrived, with many already outpacing infrastructure in terms of revenue. Leading platforms like Ethereum and Solana have a large number of applications that are generating tens to hundreds of millions of dollars in revenue per year and growing at triple-digit percentages. However, despite these impressive numbers, applications still trade at a significant discount to infrastructure, which trades at an average revenue multiple of approximately 300x. While infrastructure assets at the center of the smart contract ecosystem, such as ETH and SOL, may maintain a premium as a store of value, non-monetary infrastructure assets, such as L2 tokens, may see their multiples compress over time.
Applications taking a larger share of total global blockchain fees and outpacing most infrastructure assets in revenue could mark a turning point in future trends. Data from two major application ecosystems, Ethereum and Solana, already show applications taking a smaller share of revenue from underlying platforms. This trend is likely to accelerate as applications continue to fight for a larger share of the economic benefits and vertically integrate to better control the user experience. Even Solana applications, which pride themselves on Solanaâs synchronous composability, are moving some operations off-chain, leveraging second layers and sidechains to achieve scaling.
The rise of fat apps
Is the rollapp hypothesis inevitable? As applications struggle to overcome the limitations of a single global state machine in efficiently processing all on-chain transactions, modularization across blockchains seems imperative. For example, Solana, while performing well, began to hit bottlenecks in April when only a few million users were trading memecoin per day. While Firedancer can help, it is unclear whether it can improve performance by the orders of magnitude required to support billions of daily active users, even AI agents and enterprises. As mentioned above, Solana's modularization process has already begun.
The key question is to what extent this shift will occur, and how many applications will ultimately move operations off-chain. To run the entire global financial system on a single serverâa fundamental assumption of any integrated blockchainâwould require full nodes to be run in hyperscale data centers, making it nearly impossible for end users to independently verify the integrity of the chain. This would undermine one of the fundamental characteristics of a globally scalable blockchain: ensuring clear property rights and resistance to manipulation and attack. In contrast, Rollups allow applications to spread these bandwidth requirements across a collection of independent ordering nodes, while ensuring end-user verification through data availability sampling at the base layer. Furthermore, as applications scale and become closely connected to their users, they will likely demand maximum flexibility from their underlying infrastructure to better meet the needs of their users.
This is already happening on Ethereum, the most mature on-chain economy. Leading applications such as Uniswap, Aave, and Maker are actively developing their own Rollups. These applications are not only pursuing scalability, but are also pushing for features such as custom execution environments, alternative economic models (such as local yield), enhanced access controls (such as permissioned deployment), and customized transaction ordering mechanisms. Through these efforts, applications not only increase user value and reduce operating costs, but also gain greater economic control over their base layer infrastructure. Chain abstraction and smart wallets will make this application-centric world more seamless and gradually reduce friction between different block spaces.
In the short term, next-generation data availability providers such as Celestia and Eigen will be key enablers of this trend, providing greater scale, interoperability, and flexibility for applications while ensuring low-cost verifiability. However, in the long term, every blockchain that hopes to become the foundation of the global financial system will need to scale bandwidth and data availability while ensuring low-cost end-user verification. For example, while Solana is integrated in concept, there are teams working to implement light client verification, zk compression, and data availability sampling to achieve this goal.
The focus is not on specific scaling technologies or blockchain architectures. Token scaling, coprocessors, and ad hoc rollups are enough to allow integrated blockchains to scale and provide customization for applications without destroying their atomic composability. Regardless, future trends point to applications continuing to pursue greater economic control and technical flexibility. It seems inevitable that applications will gain more than their infrastructure.
The Future of Blockchain Value Capture
The next question to watch is, as applications gradually gain more economic control in the coming years, how will value be distributed between applications and infrastructure? Will this change become an inflection point, making applications have an impact similar to infrastructure in the coming years? According to Syncracy, although applications will gradually occupy a larger share of global blockchain fees, infrastructure (L1s) may still create greater benefits for a small number of participants.
The core argument of this view is that in the long run, base layer assets such as BTC, ETH, and SOL will compete as non-sovereign digital stores of value, which is the largest market in the crypto economy. While Bitcoin is often compared to gold and other L1 assets to stocks, this distinction is more narrative. Essentially, all native blockchain assets share common characteristics: they are non-sovereign, resistant to seizure, and can be digitally transferred across borders. These characteristics are critical for any blockchain that hopes to build a digital economy independent of state control.
The main difference lies in the global adoption strategy. Bitcoin directly challenges central banks by attempting to replace fiat currencies and become the world's dominant store of value. In contrast, L1s such as Ethereum and Solana are committed to building parallel economies in cyberspace, creating natural demand for ETH and SOL as they develop. This is already happening. In addition to being a medium of exchange (gas fee payment) and unit of account (NFT pricing), ETH and SOL are also the main stores of value in their respective economies. As proof-of-stake assets, they directly capture the fees and maximum extractable value (MEV) generated by on-chain activities and provide the lowest counterparty risk, which is the highest quality collateral on the chain. In contrast, BTC, as a proof-of-work asset, does not provide staking or fee income, but operates purely as a commodity currency.
While the strategy of building a parallel economy is extremely ambitious and has little chance of ever being accomplished, it may ultimately prove easier to compete in parallel with national economies than directly with them. In fact, Ethereum and Solanaâs approach is similar to how nations have historically vied for reserve currency status: build economic influence first, then encourage others to use your currency for trade and investment.
In the case of MEV, it is unlikely to become a large enough industry to support current valuations, and the proportion of on-chain activity is expected to decrease over time, being absorbed more by applications. The closest analogue to MEV in traditional finance is high-frequency trading (HFT), which has global revenue estimates of between $10 billion and $20 billion. Furthermore, current blockchains may be over-earning on MEV, which may decrease as wallet infrastructure and order routing improve, and applications work to internalize and minimize MEV. Can we really expect MEV revenue on a blockchain to exceed the global HFT industry, all of which goes to validators?
Similarly, while execution and data availability fees are attractive revenue streams, they may not be enough to support a multi-billion or even trillion dollar valuation. For this to happen, trading volumes will need to grow exponentially while fees remain low enough to foster mainstream adoption, a process that could take as long as a decade.
Note: Visa has a processing capacity of up to 65,000 tps, but typically averages around 2,000 tps.
So how do you provide enough value to pay validators to maintain their basic services? Blockchains can provide a permanent subsidy similar to taxes through monetary inflation to maintain their own operations. That is, asset holders will lose a small portion of their wealth over time to subsidize validators who provide abundant block space, which provides value to applications and thus drives the growth of the blockchain's underlying assets.
Itâs worth considering a more pessimistic view that blockchain valuations should be based on fees, but that these fees may not be able to support high valuations in the long term as applications gain more economic control. This situation is not without precedent - during the dot-com boom of the 1990s, telecom companies attracted a lot of infrastructure investment, and many of them eventually became common commodities. While companies like AT&T and Verizon adapted and survived, most of the value shifted to applications built on this infrastructure, such as Google, Amazon, and Facebook. In the crypto economy, this pattern may repeat itself: blockchains provide infrastructure, but the application layer captures more value. However, for now in the early stages of the crypto economy, this is still a big relative value competition - BTC wants to surpass gold, ETH wants to surpass BTC, and SOL aims at ETH.
The age of apps, the age of cryptocurrency
The crypto economy as a whole is undergoing a major shift from speculative experiments to revenue-generating businesses and active on-chain economies that bring real monetary value to blockchain-native assets. While current activity may seem small, it is growing exponentially as systems scale and user experience improves. At Syncracy, we believe that we will look back on this period in a few years and wonder why anyone questioned the value of this space, as many important trends are already evident.
The era of application has arrived, and blockchain will therefore generate more powerful non-sovereign digital value storage than ever before.
Special thanks to Chris Burniske, Logan Jastremski, Mason Nystrom, Jonathan Moore, Rui Shang, and Kel Eleje for feedback and discussions.
