Why does the value of applications in the era of "Fat Streaming" become concentrated in distribution channels?

The evolution of the crypto industry shows a clear cycle pattern. From the “Fat Protocol Theory” in 2016 to the “Fat App Theory” in 2022, and now in 2025, the industry has entered a new turning point. The essence of this shift is that applications themselves are transforming into standardized interchangeable commodities.

The Rapid Decline of Marginal Utility of Technological Innovation

The crypto ecosystem has invested enormous resources into infrastructure and technological optimization over the past few years. Complex Automated Market Maker (AMM) algorithms, innovative clearing mechanisms, customized consensus protocols, cost reductions in zero-knowledge proofs—all are now facing diminishing marginal utility.

At first glance, these technological improvements seem significant. Oracle data costs decrease by 1 basis point, lending interest rates increase by 10 basis points, price accuracy on decentralized exchanges improves. But the reality is harsh. End users do not notice these subtle technological advances at all. What they truly seek is the familiar, trusted, and user-friendly interface they already rely on and are accustomed to.

Rapid Shift Toward B2B Strategies

This change in perception is reflected in the actual actions of the industry. Major applications like Polymarket, Kalshi, Hyperliquid, Aave, Morpho, and Fluid are beginning to allocate more operational resources toward B2B collaborations.

Their choices are strategic. Instead of focusing solely on onboarding 25 million new users through browser plugin downloads, they are gradually guiding users from private key management, gas fee preparation, cross-chain asset transfers, to mastering complex on-chain processes. It is far more practical to add “revenue” features to platforms like Robinhood and directly channel user deposits into lending markets.

Integration and cooperation are winning, distribution channels are winning, and front-end interfaces are winning. Crypto applications are descending into mere traffic pipes.

The Power of Distribution Demonstrated by Coinbase

The most compelling evidence of this phenomenon is Coinbase. Users can borrow USDC collateralized by Bitcoin (cbBTC) on the platform, and this transaction flow directly connects to the Morpho lending market on Base.

Interestingly, despite Aave and Fluid on Base offering clearly better interest rates for stablecoin loans collateralized by cbBTC than Morpho, Morpho still maintains market dominance. The reason is simple: Coinbase users are willing to pay extra costs for visible, convenient operations.

This phenomenon suggests that market dominance cannot be achieved solely through technological superiority or interest rate differences; user experience and distribution capability are ultimately the decisive factors.

Rebuilding the Application Layer

Of course, not all applications retreat to the infrastructure layer. Some are fully committed to the B2C market. However, they need to undertake fundamental rebuilding.

Reprioritizing core functions, reconstructing revenue logic, creating competitive barriers, optimizing marketing and development strategies, and re-recognizing the core pathways for users to enter the crypto space—all are unavoidable.

Future Competitive Landscape

This does not mean that infrastructure-based applications will lose their value creation ability. Rather, it indicates that front-end platforms that control actual user traffic will hold a larger share of value.

Future barriers to competition will focus less on liquidity or native crypto user experience and more on the strength of distribution capabilities. The crypto market is shifting from speculators aiming for bottom-fishing to large platforms controlling distribution channels. In this era of “Fat Distribution,” whoever holds user access rights will determine the distribution of all economic value.