Fat Applications and Fat Protocols: The Rise of Web3 Super Applications Era

The concept of the fat protocol was proposed by Joel Monegro in 2016. Although it is currently a good investment theme, in the long run, this concept is not comprehensive enough for the protocols that are creating most of the value.

We propose the concept of fat application (FAPP) and assume the following:

Applications that offer a wide range of products will accumulate the greatest value.

The dominant applications of Web 2 often start from a specific professional field, and once they achieve dominance, they provide a range of different products to leverage network effects and fully utilize user advantages.

"Attract them with tools, confine them with the network."

In the cryptocurrency field, the killer applications and products to date stand out in many ways. A certain trading platform is a leader in this regard, as it spares no effort in catering to every user and has gradually provided all cryptocurrency-related products within its custody platform.

From the beginning, the main Web 2.1 applications have been exchanges that provide a multitude of services, which seem to constitute a gateway to Web 3. We believe the same logic applies to pure Web 3 on-chain products.

The table below lists the most profitable crypto protocols/applications (, including centralized and decentralized ):

Based on fees:

By profit:

This is the new "paradigm shift"; value accumulators transition from protocol to application ( or a specific application? ). Ironically, exchanges are not Web 3 applications. They are entirely Web 2, requiring permission and centralized, yet they extract a significant amount of value from the entire ecosystem.

In the future, on the battlefield for value, we believe that protocols may lose to Web 3 native applications, and there are two possible paths:

1. Appchains(

2. All-encompassing super application

We define the super application as "the WeChat of the crypto field." This sounds a bit scary, but this dystopian vision is indeed hopeful to come true. The internet follows the long tail model: in the front are one or two Amazon-level leaders, while behind them are a vast number of small players competing for the remaining market share.

Historical Review

Many people compare blockchain to a city and Ethereum to modern Manhattan. We have different views. The current construction is still quite primitive; we would compare blockchain to a religion and applications to cities.

We believe that today's applications are like medieval cities; compared to modern Manhattan, their historical status remains relatively weak. In our analogy, blockchain is religion, and Ethereum is the medieval Catholic Church.

Medieval cities were established on the basis of papal protocols, enjoying only half of their autonomy, with papal power being supreme. The pope participated in the formulation of tax policies and guidelines, with the Bible serving as the main basis for tax law, and various fees flowing to Rome.

In simple terms, a developer named Martin appeared later and nailed a white paper on the church door, which contained 95 lines of code. A few years later, a hard fork occurred. Some validators joined the newly forked protocol, while others decided to stay.

As a result, the application ) city and principality ( became more independent, and for centuries, the influence of the papacy on the flow of fees gradually diminished. The papacy still played a certain role, but the public began to accept the ideas of nation-states and secularism, giving rise to new economic models.

What we want to say is that the concept of the fat protocol has not become invalid because we are still in the early stages of the blockchain era ), which is Web 3(. As applications of the city can organize themselves and become powerful value aggregation entities like nation-states, they weaken the clergy's ability to charge on the blockchain ).

In other words, over time, applications, primarily super applications or application chains, will accumulate more value.

Application Chain and Super Applications

The concept of application chains is not new; it first appeared in a blockchain project white paper in 2016. It proposed the idea of heterogeneous chains sharing security through a common set of validators. Another blockchain project proposed a different approach to heterogeneous chains: each chain is independent and only unified through an SDK.

Since then, most people have accepted the concept of shared security. The latter project also changed its direction. People concluded that it is not easy to build a high-quality validator set from scratch, and doing so before the product finds its market may also be pointless. It is clear that low-quality block space is like a parasite; it wastes validator resources, and many times there are no real use cases.

Application chains are tailor-made: the core chain will be optimized for existing and future use cases built upon it. For example, liquidity chains can support decentralized financial applications through various specific designs. Such application chains will not compete for block space with other applications and can promote execution and fee logic that is best suited for their use cases.

We believe that ( the best ) application chain is to become a candidate for super applications. The development trajectory is roughly as follows:

1. Launch an application on the mainnet of a universal chain, conduct proof of concept, and demonstrate whether the product matches the market. Target an existing user base.

2. After achieving success, expand to multi-chain and even launch your own execution environment ( application chain ) to exert greater control and gain more value. A certain DEX is a model that has reached this stage.

3. Eliminate all on-chain traces and execution environments to provide a seamless super application experience. Attract users in a gradual manner, adding features that encourage people to invest more time and money into the product.

4. Congratulations on becoming a super application.

For example, a certain lending protocol seems to be trying to build a super application that integrates social and financial aspects. This integration is expected to create a strong moat ( Think about credit/social scoring ) for unsecured loans. A certain options project also seems to be moving in this direction, as they have customized their own rollup and lending market to complement existing options products. The key point of both projects is the non-fully collateralized lending, which is expected to unlock the true DeFi 2.0.

As shown in the above chart, a certain DEX and a certain NFT platform are currently the largest applications by fees. They both started with a single use case in which they excelled, accumulating a key user base of ( and bots of ), and users are willing to pay ETH to use these applications. They later also acquired NFT aggregators to strengthen their core products or achieve horizontal expansion of their products.

Regardless of whether the chicken or the egg came first, as long as there is liquidity, users can be acquired. Once there are users, more products and customized experiences can be offered to them. One method is to provide your own product wallet to the user base and improve the user experience. ( Not only better UI/UX but also tailored wallet features for the products. ) Successfully launching product suites ( platforms ) and seamlessly absorbing consumer-facing applications will stand out.

If we consider that not just various financial use cases, liquidity is not the key to the rise of all super applications, but even so, it must rely on other things. Taking games as an example, it requires engaging gameplay and a vibrant player economy.

Trojan Middleware

The above describes a user-centric approach to the development of super applications. Simple DeFi applications with outstanding user experiences can capture market share and improve profit methods through horizontal integration with traditional financial products and/or other on-chain products, while building a moat. On a technical level, these applications will evolve from simple smart contract interfaces to mature super applications with their own application chains.

Trojan middleware is another option that can pass through the front door of applications amidst a welcome sound, bringing a better developer experience and various advanced features, such as account abstraction, front-running protection, and MEV cashback. Trojan middleware is the top trading memory pool (mempool), which can dominate block construction by accessing the order flow from applications.

By building the blockchain, the Trojan middleware can provide functions that the application itself cannot easily replicate, such as on-chain abstract transaction execution. Ultimately, by creating an outstanding wallet/application store experience, it can achieve control over touchpoints. Some blockchain builders have already demonstrated the ability to access exclusive order flows, on which we can build the things we mentioned.

But aside from being deceived by Trojan horses, there is another option. We believe that the ultimate state of any ambitious super application is to become a primary block builder. This can provide the best experience for super application users and offer the best guarantees for transaction execution in the way that the super application deems appropriate.

In the Web2 space, major consumer enterprises tend to seek to build their own payment channels to avoid over-reliance on a single provider. Similarly, Web 3 super applications will also seek to impose control over users' financial operations.

Super applications are expected to eventually serve as wrappers for Ethereum and other blockchains, hosting all future "applications" as terminals, with these "applications" becoming various functions of the super applications. Even now, exchanges can be seen as applications that encapsulate blockchains to provide a better user experience. Most users do not need to leave a particular trading platform to access a wide array of content.

If native applications can span all reasonable base layers and achieve seamless bridging, it can effectively realize extreme homogeneity of block space, that is, commoditization. The best path for optimal execution will naturally emerge, and users may not even know the specific execution trajectory. Of course, there are limitations here. It relies on the quality of the deployed blockchain and whether the security level ( is high enough.

In this sense, a super application requires different blockchains to provide services. Furthermore, an application chain is merely another way to enhance execution control. However, in this sense, a super application will ultimately be a centralized place.

Users and developers can directly access the blockchain, but super applications, as blockchain abstractions, will excel in many aspects:

1. Lower transaction fees

2. A smoother application development process

3. Better user experience

Super apps will become Amazon, and in addition, users can still directly use a large number of blockchains, just like vendors and buyers use Shopify.

![Paradigm Shift: Is the Era of Web3 Super Applications Coming?])https://img-cdn.gateio.im/webp-social/moments-234466ab333e4f4f414446c9566daa44.webp(

The Blockchain Space War of the 2020s

The power struggle between applications and the underlying layer is inevitable. The underlying layer captures value through transaction fees ) even as the fees themselves are dwindling, making it increasingly difficult to maintain currency premiums (, and provides security and user base in return.

Successful applications with a loyal user base will also seek their own ways of value acquisition and exert greater control over how to best serve users. In other words, applications want to share the successful foundation of blockchain: reflected in the monetary premium found in the demand for native tokens.

This puzzle has several key components: Where does the transaction occur ) starting point (? Who controls the block construction process ) turning externalities into value capture (? What is the user's intent? And who is setting the monetary rules?

The transactions that create value for the blockchain begin at the application ) or wallet ( level. What users need is the application, not the blockchain, as they are not idealists, but primarily pragmatists. This force will inevitably lead to a situation: blockchains specifically targeting applications will become an execution option.

This provides a broader ability to acquire value, allowing for better trade-offs in design, thus being able to better meet user needs compared to the standardized layer. The base layer currently only has advantages in the last factor, namely monetary rules. And this advantage is also temporary. Please see another historical segment:

In many ways, we can compare the base layer to the British Empire and the pound. In the late 18th century, the American colonies rose up against oppressive taxes and fees.