A growing thesis in crypto argues that most of the industry’s value today lies in applications rather than blockchains—a view gaining traction with the rise of Hyperliquid and one that could influence investor behavior in the coming months, according to a crypto executive.
“Everyone’s talking about the ‘fat app’ thesis right now. It feels like it could become a dominant theme in the months ahead,” Bitwise CIO Matt Hougan wrote on X Wednesday. The fat-app theory posits that crypto applications, not the base blockchain protocols, will capture the majority of future value.
“This is the kind of thesis I expect will hit mainstream coverage within the next one to three months. It’s a useful framework to keep in mind as crypto continues to evolve,” Hougan said.
A shift from protocols to applications
The Fat App thesis, still a relatively new idea, challenges Joel Monegro’s 2016 Fat Protocol thesis, which argued that most value would accrue to the base layer — blockchains like Ethereum, Solana, or Avalanche.
In contrast, the Fat App thesis suggests that value is increasingly concentrated at the application layer, with apps capturing more revenue and user attention than the chains they’re built on.
If this perspective gains wider adoption, it could reshape how investors weigh the value of layer-1 tokens relative to application tokens.
The Fat Protocol thesis has long been a source of debate in the crypto community.
In a 2021 report, Jeff Dorman, CIO of digital asset investment firm Arca, argued that the thesis had yet to be proven correct — and that its shortcomings might stem from factors unrelated to actual value capture.
According to Dorman, retail investors often treat layer-1 tokens as a simple index-style bet, while venture capital firms gravitate toward the biggest plays in the space. “Digital asset investing is still largely driven by early-stage VC funds, which focus more on total addressable market (TAM) than on current financial metrics, and prioritize what ‘could be’ over what ‘is,’” he wrote.
More recently, on Feb. 9, Dorman went further, saying the “Fat Protocol thesis has done major damage to crypto.”
“It’s nonsense, it causes every app to try to become an L1, it drives all VC dollars to L1s, and it makes dead L1s worth $1 bn+.”
Crypto Market May Be Leaning Toward Apps, Says Investment Firm
“A few L1s will succeed, but none will outweigh the combined value of the apps,” one investor noted.
Institutional investment firm Starkiller Capital echoed this view in a report Tuesday, arguing that the Fat App narrative is already showing up in market trends.
“Over the past year, the price action of core blockchain tokens versus application tokens tells the story. Ethereum, Solana, Avalanche — take your pick — have mostly traded sideways or underperformed against BTC,” the firm wrote.
According to TradingView, Solana’s SOL/BTC ratio has fallen 16.11% in the last 12 months. “The market has already started voting,” Starkiller added. “The strongest token performance has come from applications, not protocols.”
Bitwise Pushes Back
Bitwise CIO Matt Hougan pushed back on what he called an “anti-L1 take.”
“I think major L1s are actually well-positioned for the next year,” he said. “But it’s a well-argued case and worth considering.”
Hougan pointed to Hyperliquid (HYPE) as a standout, calling its recent performance “no accident.”
“HYPE is a pure expression of application-level demand — real users, real flows, real token velocity tied to usage — not just a generalized blockspace toll,” he said.
Hyperliquid is currently trading at $55.56, up 1,636% over the past year, according to CoinMarketCap.
