Application Cycle: The Golden Age of Asian Developers

Author: Jiawei @IOSG

In the late 1990s, investment in the internet focused heavily on infrastructure. At that time, the capital markets almost completely bet on fiber optic networks, ISP providers, CDN, as well as server and router manufacturers. Cisco's stock price soared, and by 2000 its market value exceeded $500 billion, making it one of the most valuable companies in the world; fiber optic equipment manufacturers such as Nortel and Lucent also became hot commodities, attracting hundreds of billions of dollars in financing.

During this boom, the United States added millions of kilometers of fiber optic cables between 1996 and 2001, with construction scale far exceeding the actual demand at that time. As a result, a severe overcapacity emerged around the year 2000—bandwidth prices for transcontinental connections dropped by more than 90% in just a few years, and the marginal cost of accessing the internet nearly approached zero.

Although this round of infrastructure boom allowed later-born companies like Google and Facebook to take root and sprout in a cheap and ubiquitous network, it also brought growing pains for the enthusiastic investors of the time: the valuation bubble of infrastructure quickly burst, and the market value of star companies like Cisco shrank by more than 70% in just a few years.

Doesn't it sound a lot like Crypto over the past two years?

1. Is the era of infrastructure coming to a temporary end?

The scarcity of block space has turned into abundance

The expansion of block space and the exploration of the blockchain's “impossible triangle” have largely occupied the theme of the early development of the cryptocurrency industry for several years, making it suitable to be presented as a hallmark element.

▲ Source: EtherScan

In the early stages, the throughput of public chains was extremely limited, and block space was a scarce resource. Taking Ethereum as an example, during the DeFi Summer, under the circumstances of various on-chain activities overlapping, the cost per transaction for DEX interactions often ranged from 20 to 50 USD, and during extreme congestion, transaction costs reached hundreds of dollars. By the time of the NFT era, the market's demand and calls for scaling reached their peak.

The composability of Ethereum is one of its major advantages, but it also increases the complexity and gas consumption of single transactions overall, and limited block capacity tends to be prioritized by high-value transactions. As investors, we often discuss the transaction fees and burning mechanisms of L1, using this as a benchmark for L1 valuation. During this period, the market has given high pricing to infrastructure, and the notion of “fat protocols, thin applications”—which suggests that infrastructure can capture most of the value—has gained acceptance, leading to a wave of construction of various scaling solutions, even to the point of creating a bubble.

▲ Source: L2Beats

From the results, Ethereum's key upgrades (such as EIP-4844) have migrated L2 data availability from expensive calldata to lower-cost blobs, significantly reducing the unit cost of L2. The transaction fees of mainstream L2s have generally dropped to the level of a few cents. The introduction of modularity and Rollup-as-a-Service solutions has also significantly reduced the marginal cost of block space. Various Alt-L1s supporting different virtual machines have emerged. The result is that block space has transformed from a singularly scarce asset to a highly interchangeable commodity.

The above chart shows the changes in the on-chain costs of various L2s over the past few years. It can be seen that from 2023 to early 2024, Calldata accounted for the majority of costs, with daily costs even approaching 4 million dollars. Subsequently, in mid-2024, the introduction of EIP-4844 led to Blobs gradually replacing Calldata as the dominant cost, resulting in a significant decrease in overall on-chain costs. Entering 2025, the overall expenses have tended towards a lower level.

In this way, more and more applications can place their core logic directly on the chain, rather than adopting the complex architecture of off-chain processing and then uploading to the chain.

From this point on, we see value capture beginning to migrate from the underlying infrastructure to the application and distribution layer that can directly handle traffic, enhance conversion, and form a cash flow closed loop.

Evolution of Income Level

Building on the discussion in the last paragraph of the previous chapter, we can intuitively verify this viewpoint from the income perspective. In a cycle dominated by infrastructure narratives, the market's valuation of L1/L2 protocols is mainly based on expectations of their technical strength, ecological potential, and network effects, known as “protocol premium.” Token value capture models are often indirect (such as through network staking, governance rights, and vague expectations of transaction fees).

The value capture of applications is more direct: generating verifiable on-chain revenue through transaction fees, subscription fees, service fees, etc. This revenue can be directly used for token buybacks and burns, dividends, or reinvested for growth, forming a tight feedback loop. The sources of application revenue become solid—more from actual service fee revenues rather than token incentives or market narratives.

▲ Source: Dune@reallario

The above chart roughly compares the income of protocols (in red) and applications (in green) from 2020 to now. We can see that the value captured by applications is gradually rising, reaching about 80% this year. The table below lists the 30-day protocol income rankings as counted by TokenTerminal, where L1/L2 accounts for only 20% among the 20 projects. Notably, applications such as stablecoins, DeFi, wallets, and trading tools stand out.

▲ Source: ASXN

In addition, due to the market response brought about by the buyback, the correlation between the price performance of the tokens and their revenue data is also gradually strengthening.

Hyperliquid has a daily repurchase scale of about 4 million USD, providing significant support for the token price. Repurchases are considered one of the important factors driving price rebounds. This indicates that the market is beginning to directly associate protocol revenue with repurchase behavior related to token value, rather than solely relying on sentiment or narrative. Moreover, the author expects this trend to continue to strengthen.

2. Embrace the New Cycle with Application as the Main Theme

The Golden Age of Asian Developers

▲ Source: Electric Capital

▲ Source: Electric Capital

The Electric Capital 2024 Developer Report shows that the proportion of blockchain developers in Asia has reached 32% for the first time, surpassing North America to become the largest developer hub in the world.

In the past decade, global products like TikTok, Temu, and DeepSeek have proven the outstanding capabilities of Chinese teams in engineering, product development, growth, and operations. Asian teams, especially Chinese teams, possess a strong iteration rhythm, are able to quickly validate needs, and achieve overseas expansion through localization and growth strategies. Crypto aligns perfectly with these characteristics: it requires rapid iteration and adjustment to adapt to market trends; it must serve global users, cross-lingual communities, and multiple market regulations.

Therefore, Asian developers, especially Chinese teams, have a structural advantage in the Crypto application cycle: they possess strong engineering capabilities, as well as sensitivity to market speculation cycles and strong execution ability.

Against this backdrop, Asian developers have a natural advantage, as they can deliver Crypto applications with global competitiveness more quickly. This cycle we see Rabby Wallet, gmgn.ai, Pendle, etc. as representatives of Asian teams on the global stage.

We expect to see this shift happening soon in the future: the market trend will change from being dominated by the American narrative in the past to a new path where Asian products lead the way, followed by an expansion into the European and American markets. The Asian teams and markets will hold more influence during the application cycle.

First-level market investment under application cycle

Here are some insights on investing in the primary market:

1. Trading, asset issuance, and financial applications still have the best PMF and are almost the only products that can survive a bear market. The corresponding products are Hyperliquid and other perp platforms, Pump.fun and other Launchpads, as well as products like Ethena. The latter packages the funding rate arbitrage into products that can be understood and used by a broader user base.
2. For investments in niche tracks with significant uncertainty, consider investing in the Beta of the track, thinking about which projects will benefit from the development of that track. A typical example is prediction markets — there are approximately 97 publicly available prediction market projects on the market, with Polymarket and Kalshi being the more obvious winners, making the odds of betting on long-tail projects overtaking very low. On the other hand, investing in tool-type projects in prediction markets, such as aggregators, chip analysis tools, etc., is more certain and can yield the dividends of the track's development, turning a very difficult multiple-choice question into a single-choice question.
3. After having the product, the next core step is how to make these applications truly reach the public. Apart from common entry points like Social Login provided by Privy, I believe that an aggregated trading front-end and mobile end are also quite important. During the application cycle, whether it's perp or prediction markets, the mobile end will be the most natural touchpoint for users. Whether it's the user's first deposit or daily high-frequency operations, the experience on mobile will be much smoother.

The value of aggregating the front end lies in the distribution at the traffic end. The distribution channels directly determine the conversion efficiency of users and the cash flow of the project.

Wallets are also an important part of this logic.

The author believes that wallets are no longer merely tools for asset management, but have a positioning similar to Web2 browsers. Wallets directly capture order flow, distributing that flow to block builders and searchers, thereby monetizing traffic; at the same time, wallets serve as distribution channels, integrating built-in cross-chain bridges, built-in DEXs, and connecting to third-party services like Staking, becoming a direct gateway for users to interact with other applications. In this sense, wallets hold the authority over order flow and traffic distribution, making them the primary entry point for user relationships. 4. For the infrastructure throughout the entire cycle, I believe that some public chains created out of thin air have lost their meaning of existence; while the infrastructure that provides basic services around applications can still capture value. The specific points are as follows:

• Provide customized multi-chain deployment and application chain construction infrastructure for applications, such as VOID;
• Companies providing User Onboarding services (covering login, wallets, deposits and withdrawals, etc.), such as Privy, Fun.xyz; this can also include wallet and payment layers (fiat-on/off ramps, SDK, MPC custodianship, etc.)
• Cross-chain bridge: As the multi-chain world becomes a reality, the influx of application traffic will urgently require secure and compliant cross-chain bridges.