Selling Block Space Is No Longer Profitable, Arbitrum and MegaETH Venture into Applications
Selling block space is no longer a sustainable core business for blockchains, as it is easily commoditized and generates insufficient revenue to support their valuations, especially when compared to the high fees generated by applications built on them. This report, following up on the "Verticalization" thesis, examines how chains like Arbitrum, Polygon, MegaETH, and Sophon are adapting. It categorizes their strategies into two main paths: **Ecosystem Expansion** and **Product Expansion**.
**Ecosystem Expansion** involves chains extending their reach by offering their technology stack to others. Examples include Arbitrum, which earns revenue from chains like Robinhood's L2 built on Arbitrum Stack, and Polygon, which is positioning itself as a payment chain for fintech. However, this model faces challenges, as seen with Optimism's revenue drop after Base left its Superchain, and often fails to translate chain success into sustained token value due to ongoing emissions.
**Product Expansion** sees chains vertically integrating by building their own applications to capture more value internally. MegaETH shifted focus to developing first-party consumer apps and launched a native stablecoin, USDm, to capture yield. Similarly, Sophon pivoted from being an independent chain to becoming an application builder on Base. The goal is to directly own the lucrative application fee streams that typically don't flow back to the underlying chain.
The conclusion is that with hundreds of chains offering similar block space, differentiation through liquidity alone is not enough. To justify high valuations and ensure sustainability, chains are moving beyond their foundational role. They are evolving into broader ecosystems or application builders themselves, actively working to internalize the value generated within their networks. This represents a pragmatic shift towards utility, where chains are becoming more than just infrastructure providers in a highly competitive landscape.
marsbitIeri 05:02
