Author:Castle Labs
Compiled by: TechFlow
TechFlow Insights: Over the past two years, 14 crypto companies have achieved annual revenues exceeding $200 million, with only one being a public chain—Hyperliquid. When Arbitrum generated $430,000 in monthly revenue while Hyperliquid reached $58 million (a 100x difference), public chains finally realized: the business of selling block space is no longer viable. They must either transform into product studios and application distributors or focus on vertical industries as SaaS providers—the era of neutral infrastructure is coming to an end.
We've spent considerable time recently researching revenue issues, covering both applications and public chains.
Applications have always been strong revenue generators; they directly reach customers and must deliver value.
Public chains have long supported ecosystems through grants and protocol upgrades, but now they too must shift direction toward serving paying customers, or risk depleting their treasuries.
Over the past two years, 14 crypto companies have generated revenues over $200 million, with only one being a public chain.
That is Hyperliquid.
To illustrate the gap between public chains: Arbitrum generated only $430,000 in revenue over the past 30 days, while Hyperliquid generated approximately $58 million (over 100 times more).
But things are changing. Public chains understand that block space is no longer a business model; they need to focus on other revenue sources. We've already seen the first movers striving to become product studios, application distributors, payment rails, or vertical SaaS stacks. This will undoubtedly continue, with more public chains moving away from neutral infrastructure toward ownership in specific verticals.
Ostium Vulnerability Results in Over 40% TVL Loss
Last week, Ostium's LP vault was attacked, resulting in a loss of 23,752,746 USDC. The attacker compromised the off-chain infrastructure that feeds price data into the protocol.
The attacker submitted seemingly valid but illegitimate price reports, then used them to open and immediately close large positions, extracting artificial profits from the vault. Essentially, the attacker found a way to push fake price updates through an approved pathway, making losing trades appear profitable, thereby draining the LP vault.
This is particularly painful for Ostium because its entire product core is bringing off-chain markets on-chain. Stocks, commodities, and forex on Ostium don't have native on-chain prices; the protocol must import them and, more importantly, must trust them.
Contracts on the protocol rely on this trust, as do users, meaning fake prices that pass checks can quickly evolve from bad data to bad execution, bad vault accounting, and real LP losses. For Ostium, oversight of this off-chain to on-chain journey is central to the product.
Ostium stated that trader collateral was isolated and unaffected, and trading contracts were frozen within 60 minutes. That's reasonably fast, but the question is: how much damage should one bad price input be able to cause before the protocol catches it?
Even more frustrating, Ostium was already accepting TradFi trade-offs. Many of the markets it offers aren't truly 24/7 because the underlying assets themselves aren't 24/7. If you've already accepted market trading hours, stale prices, closures, and liquidity gaps, that should make stricter controls around price updates, trade sizes, withdrawals, and timing easier to justify, not harder.
The industry needs to become more comfortable with this, and I think Ostium is leading the way. If authorized pathways can update prices, shouldn't those pathways be tightly controlled and monitored? If new price updates can support large trades or withdrawals, shouldn't there be circuit breakers around size and timing? If an attacker tests the system with small trades first, shouldn't monitoring capture the pattern before the vault is drained?
For protocols bringing off-chain markets on-chain, these controls shouldn't be optional security features; they should be embedded and marketed as part of the product.
Options Need Abstraction
Last week, after publishing our report "The Renaissance of On-Chain Options," we invited Kalshi, Rysk, GammaSwap, and Block Scholes for a live stream. These builders repeatedly mentioned a point: options are powerful, but marketing them as "options" is often the worst sales approach.
Most users don't want to think in Greeks, expiration dates, strike prices, or volatility surfaces; they want yield, leverage, protection, or simple ways to express a view. That's why the products with the most promise in terms of user adoption often aren't vanilla options venues but yield vaults, short-term binary options, structured products, and prediction markets.
Rysk's Dan summarized this almost perfectly: options are not the product; the benefits of options are the product.
Rysk mentioned that its newer products saw over $1 billion in open interest last year, mostly from DeFi-native users seeking asset yield, not from people arriving as options traders. The chart of quarterly notional amounts shows how quickly this product found demand.
Kalshi stated it now handles 86% of global crypto binary options volume and about 70% of global prediction market volume. The 15-minute market appears to be the optimal time window for crypto binary options because users easily understand the payout, time window, and risk.
GammaSwap is an excellent example of abstracting options away from end-users. Its V1 allowed users to borrow liquidity from AMMs, where AMMs behave much like option sellers, but once Greeks, exotic payoffs, and fragmented liquidity had to become part of every user's journey, the product became capital inefficient and hard to use. V2 is in development, moving toward prediction markets, order books, and known payouts, focusing on presenting a clear question that's easier to sell than another complex options product.
Block Scholes brought perspective from the infrastructure side, as they power about 90% of on-chain options volume through venues like Derive. Traditional options exchanges might retain niche user bases through their native UX, but structured products are how more users will interact with them in the future without even knowing they're interacting with options at all.
For options to grow further on-chain, they need to stop being sold as options. The consensus view is that the next wave will likely come from packaging the payoffs into more easily understandable products.
On Our Radar
Flex, Yearn's Fixed-Rate Lending: Yearn's Flex product is a fixed-rate money market where borrowers choose their own fixed rate. Track new protocols on DefiLlama.
How Base is Bouncing Back: Two announcements from Jesse and Brian sparked widespread community dissatisfaction on X. Jesse acknowledged his failed strategy regarding social and creator tokens and is now handing over the Base App to Cobie, the Crypto Twitter trader and founder of Echo (acquired by Coinbase for $400 million). On the other hand, Brian accepted no responsibility for the memecoin pump-and-dump associated with his avatar last week. Posts like this one from Rune summarize the sentiment well. Cobie taking over Base App is essentially their last lifeline to save face with crypto-native users.
Plether, On-Chain Dollar Index Perpetuals: Plether is building a perpetual DEX for the Dollar Index (DXY), allowing users to go long or short synthetic dollar exposure on-chain. Interestingly, positions have a defined maximum payoff at opening, LPs are split into senior and junior tranches, and the protocol prevents new openings if it cannot enforce solvency.
Starknet's Security Focus: Yesterday, we published a report on two major obstacles for the next phase of institutional on-chain growth: privacy and durability against quantum threats. Starknet is a useful perspective here because its recent work touches both areas: privacy improvements affect what institutions can safely disclose on-chain, and quantum durability asks whether today's infrastructure can survive the next security cycle.
