Macauley Peterson

Skeptics of Ethereum’s rollup-centric roadmap have speculated that layer-2 networks might eventually peel away from the ecosystem. The concern was that rollup teams would grow tired of paying Ethereum’s data availability fees and break off into sovereign layer-1 chains with their own validators.



But so far, that hasn’t happened. Instead, the gravitational pull has flowed the other way: independent layer-1s are re-architecting themselves as <a href="https://blockworks.co/tag/ethereum">Ethereum</a> L2s.



Celo and Lisk are two prominent examples. Celo launched in 2020 aiming to build a mobile-first, payments-centric L1 with its own stablecoins and identity layer. Lisk’s origins go back even further to 2016, when it launched with a focus on onboarding JavaScript developers through a custom SDK and sidechains.



But by the 2022–2023 bear market, both faced a common challenge seen across many mid-tier L1s: limited liquidity, fragmented developer ecosystems, and difficulty attracting and retaining users beyond niche use cases.



Rather than double down on independence, both chains opted to <a href="https://blockworks.co/news/celo-migration-to-ethereum">plug into Ethereum</a>. Celo completed its migration in March 2025, relaunching as an <a href="https://blockworks.co/tag/optimism">OP Stack</a> rollup using <a href="https://blockworks.co/news/eigencloud-launch-a16z-eigenlayer">EigenDA</a> for <a href="https://blockworks.co/news/ethereum-roadmap-data-availability-da">data availability</a>.



“It was the right time to return home to Ethereum,” Rene Reinsberg, Celo co-founder, told Blockworks, citing new infrastructure like rollup-in-a-box stacks. “This allowed Celo to maintain its unique technical advantages like 1-block finality, sub-cent gas fees, and ERC-20 tokens as gas currencies… while gaining Ethereum’s security, community, and network effects.”



Celo says its community overwhelmingly supported the shift, with unanimous votes through onchain governance and proposals reviewed in public calls and open forums.&nbsp;



“Building in the open was, and remains, a core priority,” Reinsberg said.



The results are <a href="https://blockworks.co/analytics/celo">showing in the metrics</a>. According to Celo, daily active users now top 600,000, and stablecoin transfers have reached over 123 million across more than 1.1 million wallets. The chain also reports over $1 billion in monthly stablecoin volume and a 365% increase in protocol revenue since the migration. Celo’s onchain FX platform, Mento, recently processed over $200 million in a single day.



Much of the usage has been driven by real-world applications like MiniPay, a mobile wallet integrated with Opera’s browser.&nbsp;



“MiniPay’s built for everyday users,” the team said, noting that it recently surpassed 8 million activated wallets. Meanwhile, DeFi integrations have accelerated, with <a href="https://blockworks.co/tag/aave">Aave</a> V3 hitting its initial supply caps, prompting governance to raise limits for USDT, ETH, and CELO.



Lisk’s path followed a similar arc. In May 2024, it migrated its <a href="https://blockworks.co/price/lsk">LSK</a> token to Ethereum and relaunched as an OP Stack rollup using Ethereum’s blobspace for DA. Its “DAO Season 1” campaign reportedly attracted over 277,000 new accounts and 48 million transactions. Lisk is now betting on distribution and Ethereum-native interoperability to power its next growth phase.



“The so‑called ‘crisis’ in Ethereum was never truly real, because Ethereum has never been just another ecosystem,” Dominic Schwenter, COO of Lisk, told Blockworks.



“Projects are joining the Ethereum ecosystem to interoperate, not compete…It has set the highest standard for what it means to scale technology at the most decentralized level possible,” he said.



The contrast with the feared L2-to-L1 narrative is stark, with virtually no examples of successful pivots. DYdX <a href="https://blockworks.co/news/ethereum-solana-cosmos-convergence-blockchain-founders">left StarkEx</a> for a Cosmos appchain in 2023. Starknet continues to post data to Ethereum, and every major rollup launched since 2021 — <a href="https://blockworks.co/tag/arbitrum">Arbitrum</a>, <a href="https://blockworks.co/tag/base">Base</a>, OP Mainnet, <a href="https://blockworks.co/tag/zksync">zkSync</a>, <a href="https://blockworks.co/news/unichain-mainnet-is-live">Unichain</a>, Linea — remains anchored to Ethereum.



“The Ethereum community has the strongest network effects,” Reinsberg said. “This fact has helped guide the migration.” And rather than see it as a step down in sovereignty, Celo sees its L2 status as a way to scale Ethereum into emerging markets where mobile-first financial access is critical.



The upshot is, Ethereum’s center of gravity is growing stronger. Despite the persistent “L1 premium” reflected in certain token prices, no L2 has broken away to become a sovereign L1 in the <a href="https://blockworks.co/tag/rollups">rollup</a> era, while several L1s have chosen to become L2s.&nbsp;



For users, that means cheaper fees, more stablecoin liquidity, and a better onchain UX. For Ethereum, it signals a future where more of the network forms around a shared security and settlement core.



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Rollup reality check: It’s the L1s that are defecting

Jack Kubinec

This is a segment from the Lightspeed newsletter. To read full editions, <a href="https://blockworks.co/newsletter/lightspeed" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Corporate blockchains have never looked so good.&nbsp;



In rapid succession, news broke that both payments giant Stripe and stablecoin darling Circle would be building their own layer-1 blockchains. While major companies coming onchain theoretically poses a competitive threat to all existing L1s, there may be reason to believe the news is particularly troublesome for <a href="https://www.youtube.com/watch?v=4pK5JGHHrEk">Solana’s vision</a> that “everything can fit in one computer.”



Stripe and Circle’s chains — named Tempo and Arc, respectively — are set to be EVM-based, which some Ethereum <a href="https://x.com/RyanSAdams/status/1955258607353684386">boosters</a> were quick to chalk up as bullish for Ethereum. That’s mostly engagement bait nonsense, in this newsletter writer’s view.&nbsp;



The EVM is a software environment. In my mind, the only way it directly implicates ETH the asset is by way of gas fees, but Circle is <a href="https://www.theblock.co/post/366540/circle-stablecoin-focused-evm-compatible-layer-1-blockchain-arc">using</a> USDC for gas fees. In Stripe’s case, it’s hard for me to imagine that the online payments behemoth won’t fight tooth and nail to pay as little in Ethereum gas fees as possible. Plus, both Stripe and Circle could put in jeopardy Ethereum’s mantle as the blockchain for stablecoins.



You have to squint a little bit to see why initiatives like Robinhood’s layer-2 would necessarily be bullish for ETH the asset. You may have to close your eyes fully to argue these EVM L1s are bullish ETH.



Still, Tempo or Arc seeing significant success could also turn out to be pretty bad for Solana, which is now 0/2 in the sweepstakes for big fintechs coming onchain this market cycle.



“Big companies launching L1s is kind of a rejection of the L2 thesis, but it&#8217;s even more of a rejection of the Solana thesis,” said mteam, the pseudonymous co-founder of Ethereum infrastructure firm Spire Labs.



When I asked them to elaborate further, mteam added: “I think the Solana thesis is more like this: Apps will want a shared state layer and thus will choose not to launch their own chains if they don&#8217;t need to. Any sort of L1 OR L2 premium being important to apps/infra/institutions looks to me like that thesis is even further from the truth vs. Ethereum&#8217;s L2 thesis.”



Basically, if major firms launch blockchains rather than launching apps on Solana’s blockchain, then the L2 thesis — which basically says most blockchain activity will take place on layer-2s settling to Ethereum — is less wrong than the Solana thesis.



“[This] is nonsense,” Helius CEO Mert Mumtaz said in response to mteam’s post. “It’s like saying ‘Yeah, the girl I love didn&#8217;t marry me, but she also didn&#8217;t marry another guy I don&#8217;t like and that&#8217;s worse for him!’&#8221;



I also think the bullish EVM L1 story lacks a value accrual mechanism for ETH — why would Stripe or Circle care about ether as money or a reserve currency? But, sure: The Solana thesis has not exactly been vindicated by where institutions have been deploying recently.



Although it may not really matter. Large firms approach blockchain with a range of seriousness and technical chops, and just because a big name announces a chain does not mean that chain will be a commercial success. <a href="https://blockworks.co/news/soneium-mainnet-censorship-complaints">Remember Soneium</a>?



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Circle

Do Stripe, Circle L1s refute the Solana thesis?

Ben Strack

This is a segment from the Forward Guidance newsletter. To read full editions, <a href="https://blockworks.co/newsletter/forward-guidance" target="_blank" rel="noreferrer noopener">subscribe</a>.



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The most-repeated words on Circle’s first earnings call as a public company came from analysts: “Congrats on the IPO.”



But another prevailing sentiment related to the stablecoin issuer’s upcoming launch of a layer-1 blockchain called Arc. USDC will be the native asset for transaction fees; the blockchain’s litepaper notes the network would also support other local stablecoins.&nbsp;



Designed to let financial institutions build products and services onchain, Arc is set to go live by the year’s end, executives said.&nbsp;&nbsp;



“[With] Arc, we want to underpin all stablecoin finance — payments, FX, capital markets applications,” Circle CEO Jeremy Allaire said on this morning’s call.&nbsp;



This follows a Fortune <a href="https://fortune.com/crypto/2025/08/11/stripe-blockchain-tempo-paradigm/">report</a> that Stripe is building a payments-focused layer-1 blockchain of its own (you might remember <a href="https://fortune.com/crypto/2025/08/11/stripe-blockchain-tempo-paradigm/">Stripe’s purchase</a> of stablecoin platform Bridge last year). And Robinhood <a href="https://blockworks.co/news/robinhood-l2-staking-us">revealing a layer-2 blockchain plan</a> too.&nbsp;



It’s becoming harder to find people denying the growth potential of a stablecoin market that currently stands at $260 billion. USDC in circulation grew to ~$61 billion at the end of Q2 — a 90% year-over-year increase. That figure was ~$65 billion on Aug. 10.



Allaire mentioned more trading firms, asset managers and the like wanting to move between tokenized yield-bearing collateral and digital cash. Our readers have <a href="https://blockworks.co/news/tokenized-yield-funds-complement-stablecoins">heard that before</a>.&nbsp;



Circle got into this game in January via <a href="https://blockworks.co/news/circle-hashnote-deal-tokenized-money">its buy of Hashnote</a>, issuer of the US Yield Coin (USYC). It more recently revealed last month that Binance institutional customers could use USYC as off-exchange collateral for derivatives trades.&nbsp;



“We hope and expect that we will deploy this kind of architecture in more digital asset exchanges and ultimately on major traditional clearinghouses,” Allaire said.



More broadly, Circle’s Q2 revenue/reserve income totaled $658 million. The company attributed its quarterly net loss of $482 million to IPO-related non-cash charges. Circle’s adjusted EBITDA of $126 million was 3% above Wall Street expectations.&nbsp;&nbsp;&nbsp;



CRCL shares were trading around $166 at 1:30 p.m. ET — up 3% on the day. The stock <a href="https://blockworks.co/news/circle-shares-nyse-day-one">quickly surged</a> way above its IPO price but has dropped more than 40% from the nearly $300 peak it reached on June 23.



Compass Point analysts Ed Engel and Abdullah Dilawar said in a Tuesday note that they expected Circle to notch a higher gross margin than the $251 million it tallied in Q2. That was because of Binance’s USDC balances dropping and Coinbase’s on-platform USDC being down from Q1, they noted.



<figure class="wp-block-image is-resized"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXcldVIdgacTgvGtlNfg0uPsREEiZ2InIPT7jLbykaZHbOYhJEH6UceZ_nJ9lP-EXrxndaO6n7gq4AQu7W_R4NTx7CWJyPaNBa8yFM3VuDMj-yh3AeDf-oApYPXqtyuKW11KckeRJQ?key=DujvNo2W2nzBFlIV8EXMUw" alt="" style="width:673px;height:auto"/></figure>



Alongside the Binance USYC news, Circle last month <a href="https://www.circle.com/pressroom/circle-and-okx-partner-to-deepen-usdc-liquidity-worldwide">linked up</a> with OKX and fintech <a href="https://www.circle.com/pressroom/fis-partners-with-circle-to-unlock-stablecoin-money-movement-functionality-for-financial-institution-customers">FIS</a>.&nbsp;



“While CRCL&#8217;s lower margin guidance could be due to conservatism, CRCL&#8217;s recent partnerships don&#8217;t seem to benefitting the near-term margin outlook,” Engel and Dilawar wrote.&nbsp;



Clearly the company continues to build products, with its Circle Payments Network launch in May, and now Arc. As for <a href="https://blockworks.co/news/crypto-ma-mergers-feeding-frenzy-kraken">inorganic growth via M&amp;A</a>, Allaire said the company would be “careful and deliberate.”



He added: “I don’t think our strategy here is to go try and do big, complex acquisitions to kind of throw additional business lines next to what we do. I think we take a full-stack integrated platform view…and so we only want to do things that really fit clearly in that kind of product mandate.”



Circle obviously remains a top stock to watch amid a growing universe of public crypto firms.



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Takeaways from Circle’s first post-IPO earnings call

Donovan Choy

This is a segment from the 0xResearch newsletter. To read full editions, <a href="https://blockworks.co/newsletter/0xresearch" target="_blank" rel="noreferrer noopener">subscribe</a>.



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Blockchains inflate their tokens to pay their validators as rewards.



I guess this is ironic, given how much contempt the industry has for inflationary fiat.



But there’s a crucial difference:



Tokens exist in a vastly competitive marketplace; fiat doesn’t.



If a token has too much inflation, holders simply swap to a less dilutive option. Fiat users don’t get that choice.



That is what the economist Ludwig von Mises argued in his magnum opus Human Action: “Free banking keeps credit expansion within narrow limits.”&nbsp;



But of course, token issuers don’t need to read a thousand-page treatise on economics to know that their tokens don’t enjoy the same privilege of fiat’s political monopoly.



Of late, a slew of L1s are looking to reduce their inflationary token schedules in a bid to stave off sell-side pressure on their tokens.



Two weeks ago, NEAR L1 <a href="https://gov.near.org/t/reduce-inflation-for-near-protocol/41140">proposed</a> to halve its 5% annual inflation rate (60m NEAR) to 2.5%.



The proposal by HOT DAO cites the lack of fee burns (0.1% in reality vs. an expected 2-3%) as one of the main causes, claiming “high inflation without high usage is unsustainable.”



Just two days prior to NEAR’s proposal, Celestia co-founder John Adler also <a href="https://x.com/jadler0/status/1936813032140636643">proposed</a> an ambitious overhaul of the network’s consensus from proof-of-stake to “proof-of-governance.”&nbsp;



It’s a long and highly technical proposal, but here’s the rough idea:&nbsp;



Rather than having Celestia validators take a commission on delegated stake from TIA liquid stakers, the plan is to phase out liquid staking entirely, handpick validators via off-chain governance, then pay them a flat rate.



If passed, TIA issuance will plunge 20x, from 5% to 0.25%.



Earlier this year in March, Solana too attempted to cut SOL inflation by revising its fixed inflation curve as part of the widely publicized SIMD-228 proposal.



The proposal <a href="https://blockworks.co/news/what-simd-0228-failing-means-for-solana">was unsuccessful</a>. Had it passed, SOL inflation would’ve reduced from its existing ~4.4% to an ~1% per annum.



My colleague Carlos over at Blockworks Research reminded me that Galaxy has an alternative proposal (<a href="https://app.blockworksresearch.com/flashnotes/solana-april-2025-update#simd-279-mesa-vote-for-reducing-inflation">SIMD-279</a>) to reduce SOL inflation, but it doesn’t seem to have picked up much traction.



Tron, on the other hand, successfully <a href="https://www.ainvest.com/news/tron-halves-block-rewards-8-trx-aiming-1-29-deflation-rate-2506/">halved</a> its block rewards to validators. As part of Committee Proposal 102 passed in mid-June, block and voting rewards were reduced, thereby increasing its deflationary rate to ~1.29%.



How about Ethereum?



No major changes to its monetary policy in its <a href="https://blockworks.co/news/fusaka-ethereum-fork-updates">upcoming Fusaka</a> or Glamsterdam hard forks, it seems.



But of course, Ethereum already got the job done in 2022 as part of the Merge upgrade. ETH inflation was slashed by about ~90% — the equivalent of three Bitcoin halvings — when Ethereum moved to proof-of-stake consensus.



As far as I can tell, neither BNB Chain nor Avalanche are doing anything on the front of cutting network inflation.



What these chains are counting on, however, is reducing total supply via token burning.



(L1 blockchains typically have some kind of mechanism that permanently removes tokens from the supply the more its chain is used.)



In Avalanche’s case, 100% of C-Chain fees are burned — about 16.4% of AVAX issuance is offset by a burn in the last month.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdgjMz7IDQHU97nAmYnxKZKweZ5w98qxbaO4l-dXiPpE57AacTgLafWgA1QZX3zyjhY5y8ZG0XFbtJdqJfoAP1XofLUGGn6iZhXhq_RGMfQoIAILh33WS-yxwRSkqH1peNjuwLULw?key=AiZrvwmW0t5Aeleqe4xdVA" alt=""/></figure>



For BNB Chain, the chain conducts a quarterly burn of BNB through a series of <a href="https://www.binance.com/en/square/post/7732625721697">different burn mechanisms</a>. In the last burn event, ~1.6 million BNB ($916 million) was <a href="https://www.bnbchain.org/en/blog/31st-bnb-burn">burned</a>. Another 1.6 million BNB is slated to be burned in the next quarter, according to <a href="https://bnbburn.info/">Bnbburn’s</a> dashboards.



Since BNB’s token generation event, net supply of BNB has been cut down from 202 million to 141 million today.



Then finally, there is Bitcoin.



Obviously, the Bitcoin network has its famous block-subsidy halving every ~four years, currently at an annual issuance rate of ~0.85%.



Aside from that, no protocol mechanism burns BTC. 



But I guess Bitcoin is a special snowflake, so it’s immune from the kinds of economic laws that economists have debated for hundreds of years. (<a href="https://x.com/drakefjustin/status/1928025981270519924">Or is it?</a>)



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0xResearch Newsletter

L1s are overpaying for security, but change is coming

This is a segment from the Lightspeed newsletter. To read full editions, <a href="https://blockworks.co/newsletter/lightspeed" target="_blank" rel="noreferrer noopener">subscribe</a>.



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As Solana continues to cement itself as the most performant layer-1 blockchain by speed and cost, some crypto developers have gained an interest in using the technology underpinning Solana to launch new blockchains of their own.



To wit, there are around two dozen of these Solana Virtual Machine chains — counting layer-1s, layer-2s built on various other blockchains, and application-specific chains. But for simplicity’s sake, here are the layer-1s trying to out-Solana Solana:



<h2 class="wp-block-heading">Fogo</h2>



Fogo is a <a href="https://blockworks.co/news/solana-chain-running-pure-firedancer">forthcoming layer-1</a> that says it wants to push the SVM’s performance to its limits by only running the Firedancer validator client on a permissioned validator set with multi-local consensus.



If that sounds like word salad, just know that Fogo’s bet is that with a fork of Jump’s open-source Firedancer code and a couple tradeoffs around decentralization, Solana’s software can be even more performant.



The layer-1 raised $8 million at a $100 million valuation via the crypto crowdfunding platform Echo.



<h2 class="wp-block-heading">Pythnet</h2>



The popular Solana oracle Pyth runs an SVM app chain where Pyth operators who provide price data run validators, and the protocol aggregates prices.&nbsp;



Pythnet is the oldest on the list: Remarkably, Pyth shipped its SVM chain in August of 2022.



Since it’s a blockchain for data, this chain is less consumer-facing than others, but it’s an interesting decentralized way to stream price data — and the product has been live for nearly three years.&nbsp;



<h2 class="wp-block-heading">Solayer</h2>



Solayer initially fundraised and launched as a Solana restaking protocol, but after Jito entered the <a href="https://blockworks.co/news/jito-releases-code-for-solana-restaking-network">restaking race</a> — and as restaking became less buzzy, to put it bluntly — Solayer pivoted to launching its own layer-1 powered by its InfiniSVM.



Solayer’s documentation and leadership have claimed that it can achieve one million transactions per second at points, although some Solana developers <a href="https://x.com/trentdotsol/status/1917328407878328470">dispute</a> Solayer’s performance figures.



<h2 class="wp-block-heading">JupNet</h2>



The Solana DeFi giant Jupiter began teasing JupNet in January as an “omnichain network that aims to aggregate all of crypto in one single decentralized ledger.”



Little is yet known about JupNet, but Jupiter co-founder meow said in a blog <a href="https://meow.bio/jupnet.html">post</a> that its so-called Jupiter SVM has validators come to agreement on both internal Solana transactions and external transactions from other blockchains.



Jupiter has greatly expanded its business via acquisitions in recent months, but JupNet may be its most ambitious venture yet.



<h2 class="wp-block-heading">Cube</h2>



Cube Exchange is building an SVM L1, co-founder Bartosz Lipinski confirmed to me in a Telegram message.



Lipinski and co. <a href="https://www.youtube.com/watch?v=vo3nhdIra6M">forked the SVM</a> as part of a product they’ve <a href="https://blockworks.co/news/cube-exchange-crypto-mpc">described as</a> a hybrid centralized-decentralized exchange.



<h2 class="wp-block-heading">Thru</h2>



This one barely counts since Thru will be built on a new virtual machine called the ThruVM, but a <a href="https://blockworks.co/news/unto-vc-raise-thru-blockchain-l1">lot of the intrigue</a> around this brand new project comes from the fact that its co-founder, Liam Heeger, was previously a core engineer working on Solana’s Firedancer client.



So with the Firedancer credentials, Thru ekes out a spot on the list.



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Solana’s software underpins these layer-1s

This is a segment from the 0xResearch newsletter. To read full editions, <a href="https://blockworks.co/newsletter/0xresearch" target="_blank" rel="noreferrer noopener">subscribe</a>.



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We call this industry the “blockchain” industry. But people are fed up with too many chains.



If you’re launching a new chain in 2025, expect plenty of skepticism on Twitter. It’s what all the L1 blockchain raises in the last week had to confront.



<ul class="wp-block-list">
<li><a href="https://x.com/campnetworkxyz/status/1917227468458443116">Camp Network</a>, an intellectual property-focused L1, raised $30 million at a valuation of $400 million.</li>



<li><a href="https://blockworks.co/news/unto-vc-raise-thru-blockchain-l1">Unto</a>, an SVM-based L1, raised $14.4 million at a valuation of $140 million.</li>



<li><a href="https://x.com/0xMiden/status/1917202501910098321">Miden</a>, a zk rollup, raised $25 million (undisclosed valuation).</li>
</ul>



“Another chain, why?”



The easiest explanation is “greed.” It&#8217;s the fabled L1 premium!



Look at SUI’s price performance lately — what explains a $6.8 billion-market-cap token almost doubling in half a month?



We can all agree that it’s not based on fundamentals. Fees generated on Sui are at paltry lows compared to its highs last December.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeSyUs7NQcpRz3N6u0THgnme2_QFYBGECH_RZmZrs1yvW8AV4QEQ6I8LEJqXqmakL2Xj_Jw6ZE2Y4VadW_rO1MCH8hqBNbL2iM9_WgUqsOtUspa_JPvT6bRaLAs8Vh4pH5hTmMV-w?key=t1odmGaVblT5NpC6JTUK0g" alt=""/></figure>



Maybe I’m cherry-picking, and SUI is an anomaly. Maybe the L1 premium is dying, but it’s not quite dead yet.



Until then, the incentives to launch new L1s still exist.



The second (and charitable) explanation is simply that founders launching chains have competing visions of how a chain should be optimized.



How should the execution environment be designed? How is MEV captured? What data availability layer to use? Should there be a standardized oracle or gas token?



These things aren’t trivial. They determine where application developers go to build, and make or break the long-term success of a chain.



Expecting protocol builders to agree is like getting a hundred people to agree on a buffet’s menu.



It’s not all technical, either — there are social layer considerations. Take for example <a href="https://x.com/fede_intern/status/1846035499799978475">Rogue</a>, @fede_intern’s upcoming zk rollup that wants to have zero VCs, insider allocation, and a completely fair launch like Bitcoin did.



Builders have different opinions. They launch their own chains. It’s as simple as that. That’s economic freedom. We should celebrate it.



<h2 class="wp-block-heading">A solution?</h2>



Yet, there may be some consolation in the fact that L1 valuations are already compressing.



One of the highest profile L1 raises last year <a href="https://blockworks.co/news/evm-compatible-layer-1-blockchain-vc-interest">was Monad</a>. Valuations were undisclosed, but it was rumored to be at unicorn status <a href="https://pitchbook.com/news/articles/monad-labs-225m-paradigm-series-a-unicorn">according to</a> Pitchbook, so that puts Monad in the range of a billion.



Or consider <a href="https://blockworks.co/news/initia-mainnet-launch-appchain-l1">the Initia L1</a>, which was <a href="https://x.com/Xangle_official/status/1839198484152635649">valued</a> at $350 million last year.



These raises are nothing like what was seen in the last cycle.&nbsp;



Contrast this to when Avalanche reportedly <a href="https://coincheckup.com/blog/avalanche-developer-ava-labs-to-raise-350m-at-5-25b-valuation/?utm_source=chatgpt.com">raised</a> at a valuation of $5.25 billion in 2022. Or Flow, which <a href="https://www.coindesk.com/business/2021/09/22/dapper-labs-said-to-reach-76b-valuation-in-250m-funding-round">raised</a> at a valuation of $7.6 billion.



These numbers are dramatically down for L1s.



Public markets have responded to the distaste for more chains, and private markets are correcting overtime. The free market is <a href="https://x.com/MikeIppolito_/status/1919053350990934323">working</a>.



The data checks out when we zoom out. The below chart shows a downward trajectory for total funding raised for blockchains.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXeFnfCgcQw9HlPAeqXDU-PXFk44jC1ULXaEmdYe3ZDQPoRBM6GbJv0aI7WX4j0t6FwdY8tKv38SdMv-9wdwXKIY1lqcrvrq9ObWIQiZEQ3HX2A8wdSCLYcxWijGXSUpDC7lt0Zg?key=t1odmGaVblT5NpC6JTUK0g" alt=""/></figure>



For those frustrated with “too many chains” who would like to see none at all, it’s probably not a satisfying answer.



Tied to that frustration is also an underlying desire to see more applications.



Fun fact: Consumer apps ironically received the lion’s share of venture funding vs. infrastructure back in 2013-2017 (Joel Monegro’s <a href="https://www.usv.com/writing/2016/08/fat-protocols/">Fat Protocol thesis</a> was written in 2016).&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXdE_6rt6n3rOD8TrPoX_FvhrPeX-ygfofNuFVExWc0VmU5W77YyAXvI5QzKHCJ9_onfFw47g2x7rxK3jitq7jObQFm4cOnX4cnX5HSAr4pIvmfz9umAYam81ZpLU5n9uC9TYrsTIQ?key=t1odmGaVblT5NpC6JTUK0g" alt=""/><figcaption class="wp-element-caption">Source: <a href="https://cheekyrolo.substack.com/p/web3-fundraising-in-focus-the-truth">Outlier Ventures</a></figcaption></figure>



That has, of course, flipped today. Is there some reason why application funding has fallen out of favor with VCs?



Take it from 1kx, which <a href="https://x.com/pet3rpan_/status/1917288546324697325">claims</a> to be one of the most active investors in consumer apps.



1kx partner Peter Pan told me: “Applications live and die by their traction and follow through — it’s an immediate feedback loop. Whereas with infrastructure, you can continue to find funding in a pre-launch state based off existing market comps, and push reality further and further out.”



Pudgy Penguins, Axie Infinity, Off The Grid, Rodeo and Layer3 are some examples of apps that have surmounted that feedback loop, Peter said.



Application revenues are also collectively outpacing the underlying protocol’s revenue (measured by REV) on most chains today.



<figure class="wp-block-image"><img decoding="async" src="https://lh7-rt.googleusercontent.com/docsz/AD_4nXc6FqIKnaLBnQV1HMDRg0dbAyerrBZ8vugrzGtTyJgQDFGU2xUoK1lX3zL5OAd8_KDCRzsr9mXkVrMJMqhVi9Quu-eEt6s2kY7cDD9j0UK5Pxq0GHemhb4SpsPj4Bp0ROzKKEC2?key=t1odmGaVblT5NpC6JTUK0g" alt=""/></figure>



If free markets worked to correct L1 overvaluations, maybe the reverse can happen for application funding, too.



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