A brand new thesis that argues that the majority crypto worth as we speak is captured in apps, somewhat than blockchains, is gaining reputation with the rise of Hyperliquid and will shift investor habits over the subsequent few months, a crypto govt says.
“All of the cool youngsters are speaking concerning the ‘fats app’ thesis. Appears like that may very well be a dominant theme within the coming months,” Bitwise chief info officer Matt Hougan mentioned in an X put up on Wednesday. The fat-app idea suggests crypto functions will take in extra worth than the underlying blockchain protocols sooner or later.
“It’s the type of thesis that I think will seem within the mainstream media in 1-3 months. As such, I feel it’s a beneficial psychological mannequin to bear in mind as of us watch crypto unfold,” Hougan defined.
A couple of layer-1s might stand out, however apps will dominate
The Fats App thesis, which is a comparatively new thought, challenges Joel Monegro’s 2016 Fats Protocol thesis, arguing that the majority worth will accrue to the bottom layer — chains like Ethereum, Solana or Avalanche — somewhat than functions.
As an alternative, the Fats App thesis means that worth concentrates on the software layer, with functions capturing extra income and consumer consideration than the blockchains they run on.
Ought to extra folks undertake the thesis, it might change how traders worth layer-1 tokens in comparison with software tokens.
The Fats Protocol thesis has additionally garnered loads of controversy over time.
Digital asset Funding agency chief funding officer Jeff Dorman defined in a report again in 2021 that the Fats Protocol Thesis has not been confirmed appropriate but, because it may very well be resulting from causes that “don’t have anything to do with worth being captured.”
He mentioned it might be resulting from retail traders treating layer-1s as a straightforward index guess and enterprise capital funds favoring the extra important performs available in the market.
“Digital asset investing continues to be dominated by early stage enterprise capital funds, who give attention to complete addressable market (TAM) over monetary valuation, and have a tendency to hunt out what “may very well be” over “what at the moment is,” he defined.
Dorman mentioned on Feb. 9 that “Fats protocol thesis has accomplished main harm to crypto.”
“It’s nonsense, it causes each app to attempt to turn out to be an L1, it drives all VC {dollars} to L1s, and it makes useless L1s price $1 bn+.”
Crypto business has “already began voting,” says funding agency
“A couple of L1s will win, however none might be price greater than the sum of the apps,” he added.
In the meantime, institutional funding agency Starkiller Capital mentioned in a report on Tuesday that there are indicators that the Fats App narrative is already taking maintain.
“Over the previous yr, the relative worth motion of core blockchain tokens versus software tokens tells the story clearly. Ethereum, Solana, Avalanche, decide your chain, have gone sideways or bled towards BTC,” the agency mentioned.
The SOL/BTC ratio, which measures Solana’s relative power towards Bitcoin, is down 16.11% over the previous 12 months, in accordance with TradingView.
“The market has already began voting,” the agency mentioned. “Essentially the most explosive token efficiency has come from functions, not protocols.”
Bitwise exec disagrees with “anti-L1 take”
Nonetheless, Hougan disagrees with the agency’s “anti-L1 take.”
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“I feel main L1s are literally well-positioned for the subsequent yr. But it surely’s well-argued and positively price contemplating,” Hougan mentioned, claiming that Hyperliquid (HYPE) has been the standout crypto token available in the market in latest occasions.
“It’s not an accident. HYPE is a pure expression of application-level demand, precise customers, precise flows, precise token velocity tied to utilization, not only a generalized blockspace toll,” Hougan mentioned.
Hyperliquid is buying and selling at $55.56, up 1,636% over the previous 12 months, in accordance with CoinMarketCap.
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