Layer One: Spencer Bogart on the onchain revenue "tug of war"

Welcome to Layer One: the newsletter and podcast on the intersection of crypto and the real world. Hosted by The Block's Kelvin Sparks and John Wu, President of Ava Labs, Layer One brings you inside the institutional conversations driving blockchain forward.

This week on the podcast, we were joined by Spencer Bogart, General Partner at Blockchain Capital, to discuss novel blockchain financial products, the shifting patterns of onchain value, and how to succeed as an early-stage crypto investor.

In this week's newsletter, we're taking a look at how onchain revenue distribution has been turned on its head, and how major blockchains are responding.

Onchain revenue “tug of war” driving majority of value to a select few blockbuster applications

For the first decade and a half of the crypto industry's existence, value primarily accrued to the blockchain networks at its foundation. The revenues generated by the likes of Ethereum and Solana outstripped those of the applications deployed on top of them. Some took it for granted that this would always naturally be the case, but within the past two years, this distribution pattern has flipped dramatically.

According to data from crypto VC firm 1kx, two-thirds of the total fees generated across the sector in 2025 went to DeFi and finance applications, while just 19% went to the blockchain networks themselves. This represents a major drop from 2021, when blockchains commanded a comfortable 56% share. Bogart described this shift as part of an ongoing "tug of war between the infrastructure layer, application layer, and middleware."

In a sense, the public Layer 1 chains at the foundation of crypto are victims of their own success. Scalability was for a long time their most pressing problem, with blockspace at a premium and network fees skyrocketing during periods of high activity. This is no longer the case.

In fact, transaction fees have been trending down across the board. According to data from The Block, the average fees on Ethereum plummeted to record lows this year, currently sitting at $0.13. This represents a dramatic drop from the 2021 peak, when heavy network congestion pushed the average fee above $50. Avalanche likewise saw its average transaction fee drop over 99% across that same period, now at just a fraction of a cent.

While this increase in cost-effectiveness was essential for widespread adoption, it has also meant that blockchains are capturing a smaller relative share of the value generated by the ecosystems they sustain.

The majority of revenue generation is now happening further up the tech stack, concentrated around a select few blockbuster applications. Over the twelve months leading up to the start of June, the top twenty revenue-generating protocols — which brought in a total of $17.2 billion — accounted for approximately 70% of the total fees. Only four of these were blockchains, with the rest representing various categories of middleware and end-user applications.

Stablecoins are the clear leaders, with Tether (USDT) generating just shy of $6 billion in revenue and Circle (USDC) in second place at over $2 billion. DeFi protocols Aave and Lido are also among the top revenue generators, yielding ~$950 million and ~$780 million respectively.

Of the remaining sixteen, exactly half are decentralized exchanges. Hyperliquid Perps leads the pack, having generated almost $1 billion in revenue year-to-date — a figure that could soon be eclipsed as its commodities and equities continue to draw in billions of dollars in volume. In just the first two weeks of June, trading volume on SpaceX (SPCX) perps alone reached almost $19 billion, becoming the biggest market on the platform.

The question remains, then: if transaction fees are dropping to effective parity across many major Layer 1 chains, how can infrastructure builders differentiate themselves and recapture some of that revenue?

Bogart predicts that the pendulum will eventually swing backwards. One tactic he highlights is infrastructure builders "moving up the stack to get closer to the end user." Hyperliquid itself is a standout example of this, since it functions both as a trading platform and its own purpose-built Layer 1. This vertically integrated approach saw the chain command around a 43% share of all blockchain transaction fees last month.

Others are moving to implement novel fee mechanisms or establish alternative moats to meet the demands of the institutional era; with the scalability question largely settled, privacy, interoperability, and compliance are the new distinguishing factors.

Podcast Recap: Blockchain Capital’s contrarian bet on crypto’s next decade

In the Headlines: The stories driving the conversation this week

• Pump.fun logged a 25% drop in monthly revenue, amid a wider Solana ecosystem slowdown. The memecoin launch platform — ranked 14th on our year-to-date revenue charts — suffered from a drop-off in user activity as speculators shifted their focus to fresh opportunities in onchain perpetuals. The Solana network has likewise seen a reported 84% decrease in its average daily fee collection since January.
• The FIFA World Cup is driving record volume to prediction market platforms. A total of $4.8 billion was staked across these platforms on the day of the United States' first match in the tournament, with Polymarket's daily revenue spiking up to nearly $2 million. FIFA itself has embraced blockchain technology in recent years, operating its own custom Avalanche Layer 1 chain to power its ticketing and collectibles systems.
• Standard Chartered predicted Uniswap (UNI) could reach $100 by 2030. The bank initiated coverage of the token this week, forecasting that it could rise by as much as 4,000% over the next four years. Geoffrey Kendrick, the firm's head of digital assets, added that "the next opportunity for generational wealth in digital assets is going to come via the DeFi protocols." Uniswap remains one of the top revenue-generating protocols, having raked in $515 million year-to-date.

Top of the Charts: Stablecoins and DEXs dominated the onchain revenue rankings over the past twelve months

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