Cryptographic applications are shifting from being dominated by technological innovation to competing on distribution capabilities, no longer attracting new users to adapt to on-chain operations, but transforming into backend services embedded in other product ecosystems. Frontend platforms that control user traffic will occupy a larger share of value, and competitive barriers will focus on distribution capabilities rather than liquidity. This article is sourced from a piece by Matt, organized, translated, and written by Foresight News. (Previous summary: Arthur Hayes warns that Monad may plummet by 99%: VC coins with high valuations and low Liquidity) (Background Supplement: Monad is officially launched! $MON market price performance, token economics, Coinbase public sale results… all organized)

Table of Contents

• Technical optimization falls into diminishing marginal returns
• Transition from B2C to B2B2C
• Coinbase case verifies distribution advantages
• Future competition focuses on distribution capabilities

Nowadays, even cryptocurrency applications are gradually becoming standardized infrastructure, serving those users familiar with the front-end interfaces of Web2 and traditional financial institutions.

Every round of cryptocurrency cycles gives rise to a new theory about “how value settles in the encryption ecosystem,” and these theories are reasonable at the time.

In 2016, Joel Monegro proposed the “Fat Protocol Theory”: value aggregates towards underlying public chains like Ethereum through shared data, tokens, and network effects.

In 2022, Westie proposed the “Fat Application Theory”: As layer two networks significantly reduce transaction costs, applications like Uniswap, Aave, and OpenSea earn fees that even exceed those of the public chains they belong to by building Liquidity and user experience barriers.

As of today in 2025, the industry has officially entered a new phase: cryptocurrency applications themselves have become standardized products that are interchangeable.

The technical optimization is falling into diminishing marginal returns.

The reasons for this change are simple: the encryption industry has invested excessive resources in infrastructure and technology optimization. We have been focused on complex automated market maker (AMM) algorithms, innovative clearing mechanisms, customized consensus protocols, and cost optimizations for zero-knowledge proofs, but we have now fallen into diminishing marginal returns. The technological improvements in application are no longer perceptible to end users.

Users do not care about the cost reduction of oracle data by 1 basis point, the increase of lending rates by 10 basis points, or the improvement of quoting accuracy in decentralized exchange liquidity pools; what they truly care about is using the interface they have long trusted and are familiar with.

Transition from B2C to B2B2C

This trend is becoming increasingly evident: applications such as Polymarket, Kalshi, Hyperliquid, Aave, Morpho, and Fluid are investing more time and resources into B-end collaborations. They are no longer striving to attract new users to adapt to cumbersome on-chain operations, but are transforming into backend services, integrating into other product ecosystems.

Convince 25 million new users to download the browser extension, manage private keys, prepare Gas fees, transfer assets across chains, and adapt to complex on-chain processes; or enable platforms like Robinhood to add a “yield” feature that directly channels user deposits into your lending market. Clearly, the latter is easier to achieve.

Integration and collaboration will ultimately prevail, distribution channels will ultimately prevail, and front-end interfaces will ultimately prevail; while encryption applications will only become mere traffic pipelines.

Coinbase case verifies distribution advantages

The case of Coinbase perfectly illustrates this point: users can use their Bitcoin (cbBTC) on the platform as collateral to borrow USDC, and this transaction flow will be directed to the Morpho lending market on the Base chain.

Despite the fact that Aave on the Base on-chain and the Fluid platform offer significantly better rates for cbBTC collateralized stablecoin borrowing, Morpho still dominates the market. The reason is simple: Coinbase users are willing to pay an additional cost for “visible convenience in operations.”

Future competition focuses on distribution capabilities

However, not all applications will become invisible infrastructure. Some applications will still adhere to the B2C ( business-to-consumer ) track and will not take B2B2C ( business-to-business-to-consumer ) as their main profit model. But they must undergo a thorough transformation: adjusting core priorities, restructuring profit logic, creating new competitive barriers, optimizing marketing strategies and development strategies, while reinterpreting the core path for users entering the encryption realm.

This does not mean that infrastructure-type applications can no longer create value, but rather that the front-end platforms that truly control user traffic will occupy a larger share of value.

In the future, competitive barriers will no longer be built around Liquidity or encryption native user experiences, but will focus on distribution capabilities.