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Sonic Labs' Vertical Integration Play: Why Owning the Stack Beats Renting Liquidity

· 10 min read
Dora Noda
Dora Noda
Software Engineer

When Fantom rebooted as Sonic Labs in late 2024, the blockchain world noticed the 400,000 TPS and sub-second finality. But buried in the technical specs was a strategic shift that could rewrite how Layer-1 protocols capture value: vertical integration. While most chains chase developers with grants and hope for ecosystem growth, Sonic is building—and buying—the applications themselves.

The announcement came in February 2026 via a post on X: Sonic Labs would acquire and integrate "core protocol applications and primitives" to drive revenue directly to the S token. It's a radical departure from the permissionless-at-all-costs ethos that has dominated DeFi since Ethereum's rise. And it's forcing the industry to ask: What's the point of being a neutral infrastructure layer if all the value flows to applications built on top of you?

The $2 Million Question: Where Does Value Actually Accrue?​

Since Sonic's mainnet launch in September 2025, its Fee Monetization (FeeM) program has distributed over $2 million to dApp developers. The model is simple: developers keep 90% of the network fees their applications generate, 5% gets burned, and the remainder flows to validators. It's the YouTube revenue-sharing playbook applied to blockchain.

But here's the tension. Sonic generates transaction fees from DeFi activity—trading, lending, stablecoin transfers—yet the protocols capturing that activity (DEXes, lending protocols, liquidity pools) often have no financial stake in Sonic's success. A trader swapping tokens on Sonic pays fees that enrich the dApp developer, but the protocol itself sees minimal upside beyond marginal gas fees. The real value—the trading spreads, the lending interest, the liquidity provisioning—accrues to third-party protocols.

This is the "value leakage" problem plaguing every L1. You build fast, cheap infrastructure, attract users, and watch as DeFi protocols siphon off the economic activity. Sonic's solution? Own the protocols.

Building the DeFi Monopoly: What Sonic Is Acquiring​

According to Sonic Labs' February 2026 roadmap, the team is evaluating strategic ownership of the following DeFi primitives:

  • Core trading infrastructure (likely a native DEX competing with Uniswap-style AMMs)
  • Battle-tested lending protocols (Aave and Compound-style markets)
  • Capital-efficient liquidity solutions (concentrated liquidity, algorithmic market-making)
  • Scalable stablecoins (native payment rails similar to MakerDAO's DAI or Aave's GHO)
  • Staking infrastructure (liquid staking derivatives, restaking models)

The revenue from these vertically integrated primitives will fund S token buybacks. Instead of relying on transaction fees alone, Sonic captures trading spreads, lending interest, stablecoin issuance fees, and staking rewards. Every dollar flowing through the ecosystem compounds inward, not outward.

It's the inverse of Ethereum's neutrality thesis. Ethereum bet on being the world computer—permissionless, credibly neutral, and indifferent to what's built on top. Sonic is betting on being the integrated financial platform—owning critical infrastructure, controlling value flow, and internalizing profit margins.

The DeFi Vertical Integration Playbook: Who Else Is Doing This?​

Sonic isn't alone. Across DeFi, the largest protocols are swinging back toward vertical integration:

  • Uniswap is building Unichain (an L2) and its own wallet, capturing MEV and sequencer revenue instead of letting Arbitrum and Base take it.
  • Aave launched GHO, a native stablecoin, to compete with DAI and USDC while earning protocol-controlled interest.
  • MakerDAO is forking Solana to build NewChain, seeking performance improvements and infrastructure ownership.
  • Jito merged staking, restaking, and MEV extraction into a single vertically integrated stack on Solana.

The pattern is clear: any sufficiently large DeFi application eventually seeks its own vertically integrated solution. Why? Because composability—the ability to plug into any protocol on any chain—is great for users but terrible for value capture. If your DEX can be forked, your liquidity can be drained, and your revenue can be undercut by a competitor offering 0.01% lower fees, you don't have a business—you have a public utility.

Vertical integration solves this. By owning the trading venue, the stablecoin, the liquidity layer, and the staking mechanism, protocols can bundle services, cross-subsidize features, and lock in users. It's the same playbook that turned Amazon from a bookstore into AWS, logistics, and streaming video.

The $295K DeFAI Hackathon: Testing AI Agents as Protocol Builders​

While Sonic acquires DeFi primitives, it's also running experiments to see if AI agents can build them. In January 2025, Sonic Labs partnered with DoraHacks and Zerebro (an autonomous AI agent) to launch the Sonic DeFAI Hackathon with $295,000 in prizes.

The goal: create AI agents capable of performing both social and on-chain actions—autonomously managing liquidity, executing trades, optimizing yield strategies, and even deploying smart contracts. Over 822 developers registered, submitting 47 approved projects. By March 2025, 18 projects had pushed the boundaries of what AI-blockchain integration could achieve.

Why does this matter for vertical integration? Because if AI agents can autonomously manage DeFi protocols—rebalancing liquidity pools, adjusting lending rates, executing arbitrage—then Sonic doesn't just own the infrastructure. It owns the intelligence layer running on top of it. Instead of relying on external teams to build and maintain protocols, Sonic could deploy AI-managed primitives that optimize themselves in real-time.

At ETHDenver 2026, Sonic previewed Spawn, an AI platform for building Web3 apps from natural language. A developer types "Build me a lending protocol with variable interest rates," and Spawn generates the smart contracts, front-end, and deployment scripts. If this works, Sonic could vertically integrate not just protocols but protocol creation itself.

The Counterargument: Is Vertical Integration Anti-DeFi?​

Critics argue that Sonic's strategy undermines the permissionless innovation that made DeFi revolutionary. If Sonic owns the DEX, the lending protocol, and the stablecoin, why would independent developers build on Sonic? They'd be competing with the platform itself—like building a ride-sharing app when Uber owns the operating system.

There's precedent for this concern. Amazon Web Services hosts competitors (Netflix, Shopify) but also competes with them through Amazon Prime Video and Amazon Marketplace. Google's search engine promotes YouTube (owned by Google) over Vimeo. Apple's App Store features Apple Music over Spotify.

Sonic's response? It remains an "open and permissionless network." Third-party developers can still build and deploy applications. The FeeM program still shares 90% of fees with builders. But Sonic will no longer rely solely on external teams to drive ecosystem value. Instead, it's hedging: open to innovation from the community, but ready to acquire or build critical infrastructure if the market doesn't deliver.

The philosophical question is whether DeFi can survive long-term as a purely neutral infrastructure layer. Ethereum's TVL dominance (over $100 billion) suggests yes. But Ethereum also benefits from network effects no new L1 can replicate. For chains like Sonic, vertical integration might be the only path to competitive moats.

What This Means for Protocol Value Capture in 2026​

The broader DeFi trend in 2026 is clear: revenue growth is broadening, but value capture is concentrating. According to DL News' State of DeFi 2025 report, fees and revenue increased across multiple verticals (trading, lending, derivatives), but a relatively small set of protocols—Uniswap, Aave, MakerDAO, and a few others—took the majority share.

Vertical integration accelerates this concentration. Instead of dozens of independent protocols splitting value, integrated platforms bundle services and internalize profits. Sonic's model takes this a step further: instead of hoping third-party protocols succeed, Sonic buys them outright or builds them itself.

This creates a new competitive landscape:

  1. Neutral infrastructure chains (Ethereum, Base, Arbitrum) bet on permissionless innovation and network effects.
  2. Vertically integrated chains (Sonic, Solana with Jito, MakerDAO with NewChain) bet on controlled ecosystems and direct revenue capture.
  3. Full-stack protocols (Flying Tulip, founded by Yearn's Andre Cronje) unify trading, lending, and stablecoins into single applications, bypassing L1s entirely.

For investors, the question becomes: Which model wins? The neutral platform with the largest network effects, or the integrated platform with the tightest value capture?

The Road Ahead: Can Sonic Compete With Ethereum's Network Effects?​

Sonic's technical specs are impressive. 400,000 TPS. Sub-second finality. $0.001 transaction fees. But speed and cost aren't enough. Ethereum is slower and more expensive, yet it dominates DeFi TVL because developers, users, and liquidity providers trust its neutrality and security.

Sonic's vertical integration strategy is a direct challenge to Ethereum's model. Instead of waiting for developers to choose Sonic over Ethereum, Sonic is making the choice for them by building the ecosystem itself. Instead of relying on third-party liquidity, Sonic is internalizing it through owned primitives.

The risk? If Sonic's acquisitions flop—if the DEX can't compete with Uniswap, if the lending protocol can't match Aave's liquidity—then vertical integration becomes a liability. Sonic will have spent capital and developer resources on inferior products instead of letting the market decide winners.

The upside? If Sonic successfully integrates core DeFi primitives and funnels revenue to S token buybacks, it creates a flywheel. Higher token prices attract more developers and liquidity. More liquidity increases trading volume. More trading volume generates more fees. More fees fund more buybacks. And the cycle repeats.

Sonic Labs calls vertical integration "the missing link in L1 value creation." For years, chains competed on speed, fees, and developer experience. But those advantages are temporary. Another chain can always be faster or cheaper. What's harder to replicate is an integrated ecosystem where every piece—from infrastructure to applications to liquidity—feeds into a cohesive value capture mechanism.

Whether this model succeeds depends on execution. Can Sonic build or acquire DeFi primitives that match the quality of Uniswap, Aave, and Curve? Can it balance permissionless innovation with strategic ownership? Can it convince developers that competing with the platform is still worth it?

The answers will shape not just Sonic's future, but the future of L1 value capture itself. Because if vertical integration works, every chain will follow. And if it fails, Ethereum's neutral infrastructure thesis will have won decisively.

For now, Sonic is placing the bet: owning the stack beats renting liquidity. The DeFi world is watching.

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