The Enduring Value of Blockchains in the Crypto Market: More Than Just Standalone Apps

The crypto market often seems to prioritize Decentralized Applications (DApps) based on adoption rates and revenue. However, the foundational blockchains that support these applications are critical and deserve significant recognition. Without these “roads,” the “cities” (DApps) cannot exist. This article explores why blockchains remain the core value driver in the crypto space.

Understanding the Value Perspective

Traditionally, a distinction is made between blockchains and DApps, sometimes mirroring Web2 frameworks. One perspective, referencing Joel Monegro’s “Fat Protocols” thesis, suggests that the value in the blockchain application stack is reversed compared to the internet stack. In the internet stack, underlying protocols (like TCP/IP) yield lower returns than applications (like Google). In the blockchain world, the protocol layer (the blockchain) theoretically captures more value. However, recent data challenges this view.

While popular apps attract users to the blockchain and increase demand for the chain’s token, leading to network growth and value capture, the debate continues.

DApps vs. Blockchains: A Revenue Comparison

Recent reports indicate that DApps are generating significant revenue. Blockchains control a large portion of the crypto market cap (excluding Bitcoin and stablecoins) and earn substantial fees. However, DApps also contribute significantly, generating a notable percentage of total onchain fees. Higher fees associated with DApps reflect increased usage, as users engage with them for trading, gaming, investing, and socializing. This suggests that DApps drive user interaction and create revenue opportunities.

The argument is that apps are the user’s first point of contact, offering higher demands and more growth potential. Blockchains built the foundation, but apps are actively building the user experience.

Why Blockchains are Fundamental

Despite the appeal of DApps, blockchains provide the necessary trust and security for decentralized transactions. They act as transparent and immutable ledgers, ensuring tamper-proof records for multiparty interactions. Blockchains are the timekeepers for DApp-generated data, facilitating all onchain transactions and enabling trustless interactions.

The value of a blockchain extends beyond immediate revenue or user adoption metrics. Blockchains provide the underlying infrastructure for building user-facing applications that can generate returns on investment.

The Rise of Modular App Chains

The increasing popularity of modular app chains further highlights the importance of blockchain architecture. App chains address network congestion and scalability issues by operating as independent blockchains, enhancing performance and reducing latency. By providing dedicated computational resources and storage, app chains prevent performance slowdowns caused by competing applications. This demonstrates that apps require a solid blockchain architecture to function effectively.

Consider these points:

• Trust and Security: Blockchains ensure secure and transparent transactions.
• Foundation for DApps: They provide the necessary infrastructure for decentralized applications.
• Scalability Solutions: App chains address network bottlenecks.

Ultimately, the crypto market values blockchains because they are essential for the entire ecosystem. Apps cannot thrive without the underlying infrastructure that blockchains provide. Value extends beyond financial incentives; it also encompasses the recognition of the vital role blockchains play in the industry. Regardless of fees and revenue, blockchains will always be invaluable due to their fundamental nature.

Key Takeaways

• Blockchains are the foundational layer of the crypto ecosystem.
• DApps drive user interaction and generate revenue.
• App chains enhance scalability and performance.
• The value of blockchains extends beyond financial metrics.

This article is for general information purposes only and does not constitute legal or investment advice. The views expressed are solely those of the author.