Chainfeeds Summary:
The moat of the future will no longer be built around liquidity or crypto-native user experience, but around distribution capabilities.
Article source:
https://x.com/MattFiebach/status/2001644564772246002
Article Author:
Matt
Opinion:
Matt: Joel Monegro's "Fat Protocols" theory from 2016 suggests that value primarily flows to underlying protocols like Ethereum because they aggregate value through shared data, tokens, and network effects. @WestieCapital's "Fat Apps" theory from 2022 shows that with the significant cost reduction of L2 cryptography, applications like Uniswap, Aave, and OpenSea have built moats in liquidity and user experience, with transaction fees exceeding those of the blockchains themselves. In 2025, we officially entered the next phase: crypto applications themselves began to commoditize. The reason for this is quite simple: the entire industry has invested too much in infrastructure and "geeky" technological improvements. We continuously optimize more complex AMM mathematical models, newer liquidation engines, customized consensus mechanisms, and lower proof costs, but we've now reached a stage where marginal improvements are almost imperceptible to end users. Users don't care about a 1 basis point lower oracle cost, a 10 basis point higher lending rate, or a more granular price scale in a DEX pool. What they care about is continuing to use the interface they already trust and are used to. Therefore, we are rapidly seeing a shift: applications like Polymarket, Kalshi, Hyperliquid, Aave, Morpho, and Fluid are investing more and more time and resources in integrated trading—becoming backend services behind other products—rather than trying to pull new users into an already cumbersome on-chain native experience. Because which approach is easier? Is it convincing 25 million new users to download wallet plugins, safeguard their private keys, prepare gas, manage cross-chain assets, and navigate complex on-chain processes? Or is it having Robinhood add a "earn yield" feature, directly routing users' deposits into your lending marketplace? The answer is clear: integration wins, distribution wins, the frontend wins, and the application ultimately becomes a pipeline. Coinbase is a prime example. Users can borrow USDC on Coinbase using cbBTC as collateral, but the actual trading volume is routed to the Morpho market on Coinbase. Although Aave and Fluid offer significantly better interest rates on Coinbase for borrowing stablecoins using cbBTC as collateral, Morpho still dominates the market for one simple reason: Coinbase users are willing to pay a little more for an experience they're already accustomed to.
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