"The 'Fat App' is dead, welcome to the era of 'Fat Distribution'"

Author: Matt

Translation: Chopper, Foresight News

Today, even cryptocurrency applications are gradually becoming standardized infrastructure, serving those Web2 and traditional financial institutions that have user-friendly front-end interfaces.

Each crypto cycle has spawned a new theory about “how value is accumulated in the crypto ecosystem,” and these theories were all reasonable at the time.

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

In 2022, Westie introduced the “Fat Application Theory”: as layer 2 networks significantly reduce transaction costs, applications like Uniswap, Aave, and OpenSea earn transaction fees that even surpass those of their underlying public chains by building liquidity and user experience barriers.

And today, in 2025, the industry has officially entered a new stage: crypto applications themselves have become interchangeable standardized products.

The reason for this shift is simple: the crypto industry has invested excessive resources in infrastructure and technological optimization. We have been obsessively researching complex AMM algorithms, innovative clearing mechanisms, customized consensus protocols, and cost optimization for zero-knowledge proofs, but now we have reached diminishing marginal returns. Technological improvements in applications are no longer perceptible to end users.

Users do not care if oracle data costs decrease by 1 basis point, lending interest rates increase by 10 basis points, or if the quote accuracy of decentralized exchange liquidity pools improves; what they truly care about is using interfaces they already trust and are familiar with.

This trend is becoming increasingly evident: applications like Polymarket, Kalshi, Hyperliquid, Aave, Morpho, and Fluid are dedicating more time and resources to B2B collaborations. They are no longer struggling to attract new users to adapt to cumbersome on-chain operations but are transforming into backend services embedded within other product ecosystems.

Convincing 25 million new users to download browser plugins, safeguard private keys, prepare Gas fees, transfer assets cross-chain, and adapt to complex on-chain processes; or enabling platforms like Robinhood to add “Yield” features that directly deposit user funds into your lending markets—obviously, the latter is easier to implement.

Ultimately, integration partnerships will prevail, distribution channels will prevail, front-end interfaces will prevail; and crypto applications will only become simple traffic pipelines.

Coinbase’s case perfectly illustrates this: users can use its platform’s Bitcoin (cbBTC) as collateral to borrow USDC, and this transaction flow is directed to the Morpho lending market on the Base chain. Although Aave and Fluid on the Base chain offer significantly better interest rates for cbBTC collateralized loans, Morpho still dominates the market. The reason is simple: Coinbase users are willing to pay extra for “visible convenience.”

However, not all applications will become invisible infrastructure. Some will still stick to the B2C (business-to-consumer) track and not treat 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 and development strategies, and re-understanding the core pathways through which users enter the crypto space.

This does not mean infrastructure applications cannot create value again; rather, the front-end platforms that truly control user traffic will capture a larger share of value.

In the future, competitive barriers will no longer be built around liquidity or native crypto user experience but will focus on distribution capabilities.