IOSG Weekly Report｜Application Cycle: The Golden Age for Asian Developers

Chainfeeds Guide:

Although this wave of infrastructure boom allowed later-born companies like Google and Facebook to take root and flourish on cheap and ubiquitous networks, it also brought growing pains for the then-enthusiastic investors: the valuation bubble of infrastructure burst rapidly, and the market value of star companies such as Cisco shrank by more than 70% within a few years.

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Author:

IOSG Ventures

Opinion:

IOSG Ventures: In the early development of the crypto industry, scalability and the blockchain trilemma were core themes that lasted for years. Early public chains like Ethereum had extremely limited throughput, making block space a scarce resource for a time. Take DeFi Summer as an example: due to the stacking of on-chain activities, users often had to pay $20–50 in gas fees for a simple interaction on a DEX, and in extreme cases, even hundreds of dollars. Entering the NFT cycle, the demand for scalability peaked further. While Ethereum’s composability brought ecological prosperity, it also significantly increased the complexity and gas consumption of single transactions, causing the limited block capacity to be mainly occupied by high-value transactions. At that time, the market generally regarded L1 transaction fees and burn mechanisms as valuation anchors, forming the mainstream narrative of “fat protocols, thin applications”—a large amount of value would be captured by the underlying infrastructure, fueling a technological boom and even a bubble in the scalability track. With the development of modular architecture and the official implementation of EIP-4844, Ethereum migrated L2 data availability from expensive calldata to lower-cost blobs, reducing the unit cost of mainstream L2s to just a few cents. The surge of Rollup-as-a-Service, customized appchains, and Alt-L1s supporting different virtual machines has gradually transformed block space from a scarce asset into a highly substitutable internet commodity. The long-term decline in block space costs allows more applications to put core logic directly on-chain without the need for complex off-chain architectures. This structural change is shifting value capture from a focus on underlying infrastructure to the application and distribution layers that can directly acquire user traffic, improve conversion, and form stable cash flow loops. In terms of revenue, applications have a clear advantage over protocols in value capture: compared to staking rewards, governance rights, or ambiguous fee sharing, applications can generate direct on-chain income through transaction fees, service fees, subscription fees, etc., which can further be used for buybacks, burns, or reinvestment, thus forming a closed-loop growth model. According to Dune statistics, since 2020, the share of revenue captured by applications has continued to rise, reaching about 80% by 2025. In TokenTerminal’s 30-day protocol revenue rankings, only about 20% of the top 20 projects are L1 or L2, while the leaders are stablecoins, DeFi protocols, wallets, and trading tools—application-type products. Meanwhile, buyback actions are making the price performance of application tokens increasingly correlated with revenue data. For example, Hyperliquid’s daily buybacks of about $4 million provide clear support for the token price, becoming an important factor driving price rebounds. As the application cycle rises, the Asian developer community is also facing structural opportunities. Electric Capital’s latest report shows that the proportion of blockchain developers in Asia has risen to 32% for the first time, surpassing North America as the world’s largest developer hub. Over the past decade, products like TikTok, Temu, and DeepSeek have proven the comprehensive advantages of Chinese teams in engineering, product strength, growth, and operations. In primary market investment, trading, asset issuance, and financialization applications remain the directions with the strongest PMF and the ability to weather bull and bear cycles, with typical representatives including Hyperliquid (perpetual trading), Pump.fun (Launchpad), and Ethena (popularizing spread products). For more uncertain niche tracks, one can choose to invest in track beta, such as prediction markets. Although there are as many as 97 public prediction market projects, Polymarket and Kalshi have already taken the lead, and the probability of long-tail projects overtaking them is extremely low; compared to betting on dark horses, a more certain choice is peripheral tools for prediction markets, such as aggregators and chip analysis tools, which can directly benefit from the growth of the track. The next key link in the application cycle is to truly bring products to the masses. In addition to typical entry points like Social Login, aggregated trading frontends and mobile experiences will become critical. Whether it’s trading, prediction markets, or financial applications, mobile is the most natural touchpoint for users and the main interface for first deposits and high-frequency operations. The importance of aggregated frontends lies in their ability to distribute traffic, and the conversion efficiency at the traffic end directly determines the project’s cash flow structure. At this stage, wallets have a status similar to Web2 browsers: they can capture order flow and distribute it to block builders and searchers for monetization, and they are also the first entry point for users to use cross-chain bridges, DEXs, and staking, holding the most important user relationships and traffic scheduling capabilities.