Application Cycle: The Golden Age of Asian Developers

MarsBitNews

2025-11-24 15:03:45

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Author: Jiawei, IOSG

In the late 1990s, investment in the Internet focused heavily on infrastructure. At that time, capital markets were almost entirely betting on fiber optic networks, ISP providers, CDNs, and manufacturers of servers and routers. Cisco's stock price soared, and by 2000, its market value surpassed $500 billion, making it one of the most valuable companies in the world; fiber optic equipment manufacturers like Nortel and Lucent also became extremely popular, attracting hundreds of billions of dollars in financing.

During this boom, the United States added millions of kilometers of optical fiber cables between 1996 and 2001, far exceeding the actual demand at that time. The result was a serious overcapacity around the year 2000—cross-country bandwidth prices dropped by more than 90% in just a few years, and the marginal cost of connecting to the internet approached nearly zero.

Although this round of infrastructure boom allowed later-born companies like Google and Facebook to take root and thrive on cheap and ubiquitous networks, it also brought growing pains for the frenzied investors at the time: the valuation bubble of infrastructure quickly burst, and the market value of star companies like Cisco shrank by more than 70% in a few years.

Doesn't it sound a lot like the Crypto of the past two years?

Is the era of infrastructure perhaps coming to a temporary end?

The block space has shifted from scarcity to abundance.

The expansion of block space and the exploration of the blockchain's “impossible triangle” have largely occupied the theme of the early development of the cryptocurrency industry for several years, making it suitable to be presented as a symbolic element.

▲ Source: EtherScan

In the early stages, the throughput of public chains was extremely limited, and block space was a scarce resource. Taking Ethereum as an example, during the DeFi Summer, under the circumstances of various on-chain activities overlapping, the single transaction cost for DEX interactions often ranged from $20 to $50, and during extreme congestion, transaction costs reached hundreds of dollars. By the time of the NFT period, the market's demand and calls for expansion reached a peak.

The composability of Ethereum is one of its major advantages, but it overall increases the complexity and gas consumption of single transactions, and the limited block capacity will be prioritized by high-value transactions. As investors, we often discuss the fees and burning mechanisms of L1, and use this as a benchmark for L1 valuation. During this period, the market has given high pricing to infrastructure, and the notion of “fat protocols and thin applications” that infrastructure can capture most of the value has been recognized, leading to a wave of construction of various scaling solutions, even resulting in a bubble.

▲ Source: L2Beats

From the results, Ethereum's key upgrades (such as EIP-4844) have shifted the data availability of Layer 2 (L2) from expensive calldata to lower-cost blobs, significantly reducing the unit cost of L2. The transaction fees for mainstream L2s have generally dropped to a few cents. The introduction of modular solutions and Rollup-as-a-Service has also significantly lowered the marginal cost of block space. Various Alt-L1s supporting different virtual machines have also emerged. The result is that block space has transformed from a singularly scarce asset into a highly interchangeable commodity.

The above chart shows the changes in various L2 on-chain costs over the past few years. It can be seen that from 2023 to early 2024, Calldata accounted for the majority of costs, with daily costs even approaching 4 million dollars. Subsequently, in mid-2024, the introduction of EIP-4844 led to Blobs gradually replacing Calldata as the dominant cost, resulting in a significant decrease in overall on-chain costs. Entering 2025, the overall expenses tend to a lower level.

As a result, more and more applications can directly place core logic on the chain, rather than adopting the complex architecture of off-chain processing and then putting it on the chain.

From this point on, we observe that value capture begins to migrate from the underlying infrastructure to the application and distribution layer that can directly handle traffic, enhance conversion, and form a cash flow closed loop.

The evolution of income levels

Building on the discussion in the last paragraph of the previous chapter, we can intuitively verify this viewpoint at the income level. In a cycle dominated by infrastructure narratives, the market's valuation of L1/L2 protocols is primarily based on expectations of their technical strength, ecological potential, and network effects, known as “protocol premium.” Token value capture models are often indirect (such as through network staking, governance rights, and vague expectations of transaction fees).

The value capture of applications is more direct: generating verifiable on-chain revenue through transaction fees, subscription fees, service fees, etc. This revenue can be directly used for token buybacks and burns, dividends, or reinvestment in growth, forming a tight feedback loop. The revenue sources of applications become solid—more coming from actual service fee income, rather than token incentives or market narratives.

▲ Source: Dune@reallario

The above chart roughly compares the income of protocols (in red) and applications (in green) from 2020 to the present. We can see that the value captured by applications is gradually increasing, reaching about 80% this year. The table below lists the 30-day protocol income rankings compiled by TokenTerminal, where L1/L2 accounts for only 20% among 20 projects. Notably, applications such as stablecoins, DeFi, wallets, and trading tools stand out.

▲ Source: ASXN

In addition, due to the market response brought about by the buyback, the correlation between the price performance of the token and its income data is also gradually increasing.

Hyperliquid's daily buyback scale is approximately $4 million, providing significant support for the token price. Buybacks are considered one of the important factors driving price rebounds. This indicates that the market is beginning to directly associate protocol revenue and buyback behavior with token value, rather than solely relying on sentiment or narrative. Furthermore, the author expects this trend to continue strengthening.

Embrace the new cycle with applications as the main theme.

The Golden Age of Asian Developers

▲ Source: Electric Capital

The Electric Capital 2024 Developer Report shows that the proportion of blockchain developers in Asia has reached 32% for the first time, surpassing North America to become the largest developer hub in the world.

In the past decade, global products like TikTok, Temu, and DeepSeek have demonstrated the outstanding capabilities of Chinese teams in engineering, product development, growth, and operations. Asian teams, especially Chinese teams, possess a strong iteration rhythm, can quickly validate demands, and achieve overseas expansion through localization and growth strategies. Crypto precisely aligns with these characteristics: it requires rapid iteration and adjustment to adapt to market trends; it must serve global users, cross-language communities, and multiple market regulations.

Therefore, Asian developers, especially Chinese teams, have a structural advantage in the Crypto application cycle: they possess strong engineering capabilities as well as sensitivity to market speculation cycles and strong execution ability.

Against this backdrop, Asian developers have a natural advantage, enabling them to deliver Crypto applications with global competitiveness more quickly. In this cycle, we see representatives like Rabby Wallet, gmgn.ai, and Pendle, which are all from Asian teams making their mark on the global stage.

It is expected that we will soon see this transformation: namely, the market trend will shift from being dominated by the American narrative to the Asian product implementation leading the way, followed by a new path of expanding into the European and American markets from point to area. The Asian team and market will hold more discourse power under the application cycle.

Primary market investment under application period

Here are some insights on investments in the primary market:

The trading, asset issuance, and financial applications still have the best PMF and are almost the only products that can survive a bull and bear market. Correspondingly, these include products like Hyperliquid for perpetuals, Pump.fun for launchpads, and Ethena. The latter packages the capital rate arbitrage into products that can be understood and used by a broader user base.

If there is a significant uncertainty in investing in a niche market, one can consider investing in the Beta of the market, thinking about which projects will benefit from the development of that market. A typical example is prediction markets—there are approximately 97 publicly available prediction market projects on the market, with Polymarket and Kalshi being the more prominent winners. At this point, the probability of betting on long-tail projects overtaking is very low. On the other hand, investing in tool-type projects in prediction markets, such as aggregators and chip analysis tools, is more certain and can yield dividends from the market's development, turning a very difficult multiple-choice question into a single-choice question.

After having the products, the next core step is how to bring these applications to the public. In addition to common entry points like Social Login provided by Privy and others, I believe that an aggregated trading front-end and mobile platform are also quite important. During the application cycle, whether it's perp or prediction markets, the mobile platform will be the most natural touchpoint for users, whether it’s the user's first deposit or daily high-frequency operations, the experience will be smoother on mobile.

The value of aggregating the front end lies in the distribution of traffic. The distribution channel directly determines the conversion efficiency of users and the cash flow of the project.

Wallets are also an important part of this logic.

The author believes that wallets are no longer merely tools for asset management, but have a positioning similar to that of Web2 browsers. Wallets directly capture order flows, distributing them to block builders and seekers, thereby monetizing traffic; at the same time, wallets serve as distribution channels, incorporating built-in cross-chain bridges, integrated DEXs, and connecting to third-party services like Staking, becoming the direct entry point for users to access other applications. In this sense, wallets hold the rights to order flow and traffic distribution, serving as the primary entry point for user relationships.

For the entire infrastructure during the cycle, the author believes that some public chains created out of thin air have lost their meaning of existence; while the infrastructure that provides basic services around applications can still capture value. Here are a few specific points:

Providing customized multi-chain deployment and application chain construction infrastructure for applications, such as VOID;

Companies that provide user onboarding services (including login, wallets, deposits and withdrawals, exit funds, etc.), such as Privy, Fun.xyz; this can also encompass wallet and payment layers (fiat-on/off ramps, SDK, MPC custody, etc.)

Cross-chain bridge: As the multi-chain world becomes a reality, the influx of application traffic will urgently require secure and compliant cross-chain bridges.