81 posts tagged with "DeFi"

Ethereum validators currently process transactions the way a grocery store checkout works with a single lane: one item at a time, in order, no matter how long the line stretches. The Glamsterdam upgrade, scheduled for mid-2026, fundamentally changes this architecture. By introducing Block Access Lists (BAL) and enshrined Proposer-Builder Separation (ePBS), Ethereum is preparing to scale from roughly 21 transactions per second to 10,000 TPS—a 476x improvement that could reshape DeFi, NFTs, and on-chain applications.

More than $3 billion in Maximal Extractable Value (MEV) is siphoned annually from Ethereum, its rollups, and fast-finality chains like Solana—double the figures recorded just two years ago. Sandwich attacks alone constituted $289.76 million, or 51.56% of total MEV transaction volume in recent analysis. As DeFi grows, so does the incentive for sophisticated actors to exploit transaction ordering at users' expense. Oasis Network has emerged as a leading solution to this problem, leveraging Trusted Execution Environments (TEEs) to enable confidential smart contracts that fundamentally change how blockchain privacy and security work.

When the Curve DAO rejected a $17 million CRV grant request from its own founder in December 2025, it wasn't just another governance vote. It was a declaration that the era of founder-controlled DAOs is ending—replaced by something neither idealists nor critics fully anticipated: governance capitalism, where concentrated capital, not community sentiment or founding teams, holds decisive power.

The vote split 54.46% against and 45.54% in favor. On-chain data revealed the uncomfortable truth: addresses associated with Convex Finance and Yearn Finance accounted for nearly 90% of the votes cast against the grant. Two protocols, acting in their own economic interests, overruled the founder of a $2.5 billion TVL platform.

The Anatomy of a $17 Million Rejection​

The proposal seemed straightforward. Curve Finance founder Michael Egorov requested 17.4 million CRV tokens—valued at approximately $6.2 million—to fund Swiss Stake AG, a team that has maintained Curve's core codebase since 2020. The roadmap included advancing LlamaLend, expanding support for PT and LP tokens, developing on-chain forex markets, and continuing crvUSD development.

Just sixteen months earlier, in August 2024, a similar request for 21 million CRV tokens ($6.3 million at the time) had passed with nearly 91% support. What changed?

The answer lies in how governance power shifted during that period. Convex Finance now controls approximately 53% of all veCRV—the vote-escrowed tokens that determine governance outcomes. Combined with Yearn Finance and StakeDAO, three liquid locker protocols dominate Curve's decision-making apparatus. Their votes are influenced by self-interest: supporting proposals that might dilute their holdings or redirect emissions away from their preferred pools serves no economic purpose.

The rejection wasn't about whether Swiss Stake deserved funding. It was about who gets to decide—and what incentives drive those decisions.

The Vote-Escrow Paradox​

Curve's governance model relies on vote-escrowed tokens (veCRV), a mechanism designed to solve two fundamental problems: liquidity and engagement. Users lock CRV for up to four years, receiving veCRV proportional to both token amount and lock duration. The theory was elegant: long-term lockups would filter for stakeholders with genuine protocol alignment.

Reality diverged from theory. Liquid lockers like Convex emerged, pooling CRV from thousands of users and permanently locking it to maximize governance influence. Users receive liquid tokens (cvxCRV) representing their stake, gaining exposure to Curve rewards without the four-year commitment. Convex keeps the governance power.

The result is a concentration pattern that research now confirms across the broader DAO ecosystem. Analysis shows that less than 0.1% of governance token holders possess 90% of voting power in major DAOs. Compound's top 10 voters control 57.86% of voting power. Uniswap's top 10 control 44.72%. These aren't anomalies—they're the predictable outcome of tokenomics designed without adequate safeguards against concentration.

The Curve rejection crystallized what academics call "governance capitalism": voting rights bound to long-term lockup filter for large capital holders and long-term speculators. Over time, governance shifts from ordinary users to capital groups whose interests may diverge significantly from the protocol's broader community.

The $40 Billion Accountability Question​

The stakes extend far beyond Curve. Total DAO treasury assets have grown from $8.8 billion in early 2023 to over $40 billion today, with more than 13,000 active DAOs and 5.1 million governance token holders. Optimism Collective commands $5.5 billion, Arbitrum DAO manages $4.4 billion, and Uniswap controls $2.5 billion—figures rivaling many traditional corporations.

Yet accountability mechanisms haven't kept pace with asset growth. The Curve rejection exposed a pattern: tokenholders demanded transparency about how previous allocations were used before approving new funding. Some suggested future grants be distributed in installments to reduce market impact on CRV. These are basic corporate governance practices that DAOs have largely failed to adopt.

The data is sobering. Over 60% of DAO proposals lack consistent audit documentation. Voter participation averages 17%, with participation concentrated among the top 10% of token holders who control 76.2% of voting power. This isn't decentralized governance—it's minority rule with extra steps.

Only 12% of DAOs now employ on-chain identity mechanisms to improve accountability. More than 70% of DAOs with treasuries above $50 million require layered audits, including flash-loan protection and delayed execution tools. The infrastructure exists; adoption lags.

Solutions That Might Actually Work​

The DAO ecosystem isn't blind to these problems. Quadratic voting, which makes additional votes exponentially more expensive, has been adopted by over 100 DAOs including Gitcoin and Optimism-based projects. Adoption rose 30% in 2025, helping balance influence and reduce whale dominance.

Research proposes integrating quadratic voting with vote-escrow mechanisms, demonstrating mitigation of whale problems while maintaining resistance to collusion. Ethereum Layer-2s like Optimism, Arbitrum, and Base have cut DAO gas fees by up to 90%, making participation more accessible for smaller holders.

Legal frameworks are emerging to provide accountability structures. Wyoming's DUNA framework and the Harmony Framework introduced in February 2025 offer pathways for DAOs to establish legal identity while maintaining decentralized operations. States like Vermont, Wyoming, and Tennessee have introduced legislation recognizing DAOs as legal entities.

Milestone-based disbursement models are gaining traction for treasury allocation. Recipients receive funding in stages upon meeting predefined goals, mitigating misallocation risk while ensuring accountability—exactly what Curve's tokenholders demanded but the proposal lacked.

What the Curve Drama Reveals About DAO Maturity​

The rejection of Egorov's proposal wasn't a failure of governance. It was governance working as designed—just not as intended. When protocols like Convex accumulate 53% of voting power by design, their ability to override founder proposals isn't a bug. It's the logical outcome of a system that equates capital commitment with governance authority.

The question facing mature DAOs isn't whether concentrated power exists—it does, and it's measurable. The question is whether current mechanisms adequately align whale incentives with protocol health, or whether they create structural conflicts where large holders benefit from blocking productive development.

Curve remains a prominent DeFi player with over $2.5 billion in total value locked. The protocol won't collapse because one funding proposal failed. But the precedent matters. When liquid lockers control sufficient veCRV to override any founder proposal, the power dynamic has fundamentally shifted. DAOs built on vote-escrow models face a choice: accept governance by capital concentration, or redesign mechanisms to distribute power more broadly.

On May 6th, 2025, Curve lifted its whitelist restriction on veCRV locking, allowing any address to participate. The change democratized access but didn't address the concentration already locked into the system. Existing power imbalances persist even as entry barriers fall.

The Road Ahead​

The $40 billion in DAO treasuries won't manage itself. The 10,000+ active DAOs won't govern themselves. And the 3.3 million voters won't spontaneously develop accountability mechanisms that protect minority stakeholders.

What the Curve rejection demonstrated is that DAOs have entered an era where governance outcomes depend less on community deliberation and more on the strategic positioning of large capital holders. This isn't inherently bad—institutional investors often bring stability and long-term thinking. But it contradicts the founding mythology of decentralized governance as democratized control.

For builders, the lesson is clear: governance design determines governance outcomes. Vote-escrow models concentrate power by design. Liquid lockers accelerate that concentration. Without explicit mechanisms to counteract these dynamics—quadratic voting, delegation caps, milestone-based funding, identity-verified participation—DAOs trend toward oligarchy regardless of their stated values.

The Curve drama wasn't the end of DAO governance evolution. It was a checkpoint revealing where we actually stand: somewhere between the decentralized ideal and the plutocratic reality, searching for mechanisms that might bridge the gap.

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Building on decentralized infrastructure requires understanding the governance dynamics that shape protocol evolution. BlockEden.xyz provides enterprise-grade API services across 20+ blockchains, helping developers build applications that can navigate the complex landscape of DAO-governed protocols. Explore our API marketplace to access the infrastructure powering the next generation of decentralized applications.

Ethereum captured over 40% of all on-chain fees in 2021. By 2025, that number collapsed to less than 3%. This isn't a story of Ethereum's decline—it's a story of where value actually flows when transaction fees drop to fractions of a penny.

The fat protocol thesis, introduced by Joel Monegro in 2016, promised that base layer blockchains would capture the lion's share of value as applications built on top of them. For years, this held true. But something fundamental shifted in 2024-2025: applications started generating more fees than the blockchains they run on, and the gap is widening every quarter.

The Numbers That Flipped the Script​

In H1 2025, $9.7 billion was paid to protocols across the crypto ecosystem. The breakdown tells the real story: 63% went to DeFi and finance applications—led by trading fees from DEXs and perpetual derivatives platforms. Only 22% went to blockchains themselves, primarily L1 transaction fees and MEV capture. L2 and L3 fees remained marginal.

The shift accelerated throughout the year. DeFi and finance applications are on track for $13.1 billion in fees for 2025, representing 66% of total on-chain fees. Meanwhile, blockchain valuations continue to command over 90% of total market cap among fee-generating protocols, despite their share of actual fees declining from over 60% in 2023 to just 12% in Q3 2025.

This creates a striking disconnect: blockchains are valued at Price-to-Fee ratios in the thousands, while applications trade at ratios between 10 and 100. The market still prices infrastructure as if it captures the majority of value—even as that value migrates upward.

The Fee Collapse That Changed Everything​

Transaction costs on major chains have plummeted to levels that would have seemed impossible three years ago. Solana processes transactions for $0.00025—less than one-tenth of a cent. Ethereum mainnet gas prices hit record lows of 0.067 gwei in November 2025, with sustained periods below 0.2 gwei. Layer 2 networks like Base and Arbitrum routinely process transactions for under $0.01.

The Dencun upgrade in March 2024 triggered a 95% drop in average gas fees on Ethereum mainnet. The effects compounded throughout 2025 as major rollups optimized their batching systems to take full advantage of blob-based data posting. Optimism cut DA costs by more than half by switching from call data to blobs.

This isn't just good for users—it fundamentally restructures where value accumulates. When transaction fees drop from dollars to fractions of pennies, the protocol layer can no longer capture meaningful economic value through gas alone. That value has to go somewhere, and increasingly, it flows to applications.

Pump.fun: The $724 Million Case Study​

No example illustrates the app-over-infrastructure shift more clearly than Pump.fun, the Solana-based memecoin launchpad. As of August 2025, Pump.fun generated over $724 million in cumulative revenue—more than many Layer 1 blockchains.

The platform's business model is simple: a 1% swap fee on all tokens traded and 1.5 SOL when a coin graduates after hitting a $90,000 market cap. This captured more value than Solana itself earned in network fees during many periods. In July 2025, Pump.fun raised $1.3 billion through a token offering—$600 million public, $700 million private.

Pump.fun wasn't alone. Seven Solana applications generated more than $100 million in revenue during 2025: Axiom Exchange, Meteora, Raydium, Jupiter, Photon, and Bullx joined the list. Total app revenue across Solana reached $2.39 billion, up 46% year over year.

Meanwhile, Solana's network REV (realized extractable value) climbed to $1.4 billion—impressive growth, but increasingly overshadowed by the applications running on top of it. The apps are eating the protocol's lunch.

The New Power Centers​

The concentration of value at the application layer has created new power dynamics. In DEXs, the landscape shifted dramatically: Uniswap's dominance fell from roughly 50% to around 18% in a single year. Raydium and Meteora captured share by riding Solana's surge, while Uniswap lagged on Ethereum.

In perpetual derivatives, the shift was even more dramatic. Jupiter grew its fee share from 5% to 45%. Hyperliquid, launched less than a year ago, now contributes 35% of subsector fees and became a top-three crypto asset by fee revenue. The decentralized perpetuals market exploded as these platforms captured value that might otherwise flow to centralized exchanges.

Lending remained the domain of Aave, holding 62% of DeFi lending market share with $39 billion in TVL by August 2025. But even here, challengers emerged: Morpho increased its share to 10% from nearly zero in H1 2024.

The top five protocols (Tron, Ethereum, Solana, Jito, Flashbots) captured approximately 80% of blockchain fees in H1 2025. But that concentration obscured the real trend: a market once dominated by two or three platforms capturing 80% of fees is now far more balanced, with ten protocols collectively accounting for that same 80%.

The Fat Protocol Thesis on Life Support​

Joel Monegro's 2016 theory proposed that base layer blockchains, like Bitcoin and Ethereum, would accrue more value than their application layers. This inverted the traditional internet model, where protocols like HTTP and SMTP captured no economic value while Google, Facebook, and Netflix extracted billions.

Two mechanisms were supposed to drive this: shared data layers that reduced barriers to entry, and cryptographic access tokens with speculative value. Both mechanisms worked—until they didn't.

The emergence of modular blockchains and the abundance of blockspace fundamentally changed the equation. Protocols are becoming "thinner" as they outsource data availability, execution, and settlement to specialized layers. Applications, meanwhile, focus on what makes them successful: user experience, liquidity, and network effects.

Transaction fees trending toward zero make it harder for protocols to capture value. The 180-day cumulative revenue data backs this argument: seven of the ten largest revenue generators are now applications, not protocols.

The Revenue Redistribution Revolution​

Major protocols that historically avoided explicit value distribution are changing course. While only around 5% of protocol revenue was redistributed to holders before 2025, that number has tripled to roughly 15%. Aave and Uniswap, which long resisted direct value sharing, are moving in this direction.

This creates an interesting tension. Applications can now share more revenue with token holders because they're capturing more value. But this also highlights the gap between L1 valuations and actual revenue generation.

Pump.fun's approach illustrates the complexity. The platform's value accrual mechanism relies on token buybacks rather than direct dividends. Community members increasingly call for mechanisms like fee burns, validator incentives, or revenue redistribution that translate network success more directly into tokenholder benefits.

What This Means for 2026​

Projections suggest 2026 on-chain fees could reach $32 billion or more—60% year-over-year growth from 2025's projected $19.8 billion. Nearly all of that growth is attributable to applications rather than infrastructure.

Infrastructure tokens face continued pressure despite regulatory clarity in key markets. High inflation schedules, insufficient demand for governance rights, and concentration of value at the base layer suggest further consolidation ahead.

For builders, the implications are clear: application-layer opportunities now rival or exceed infrastructure plays. The path to sustainable revenue runs through user-facing products rather than raw blockspace.

For investors, the valuation disconnect between infrastructure and applications presents both risk and opportunity. L1 tokens trading at Price-to-Fee ratios in the thousands while applications trade at 10-100x face potential repricing as the market recognizes where value actually flows.

The New Equilibrium​

The infrastructure-to-application shift doesn't mean blockchains become worthless. Ethereum, Solana, and other L1s remain critical infrastructure that applications depend on. But the relationship is inverting: applications increasingly choose chains based on cost and performance rather than ecosystem lock-in, while chains compete on being the cheapest and most reliable substrate.

This mirrors the traditional tech stack. AWS and Google Cloud are enormously valuable, but the applications built on top of them—Netflix, Spotify, Airbnb—capture outsized attention and, increasingly, outsized value relative to their infrastructure costs.

The $2.39 billion in Solana app revenue versus sub-penny transaction fees tells the story. The value is there. It's just not where the 2016 thesis predicted it would be.

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The infrastructure-to-application shift creates new opportunities and challenges for builders. BlockEden.xyz provides enterprise-grade API services across 20+ blockchains, helping developers build the applications capturing value in this new landscape. Explore our API marketplace to access the infrastructure powering the next generation of revenue-generating applications.

Every second, AI systems worldwide harvest terabytes of publicly available blockchain data—transaction histories, smart contract interactions, wallet behaviors, DeFi protocol flows—and transform this raw information into billion-dollar intelligence products. The irony is striking: Web3's foundational commitment to transparency and open data has become the very mechanism enabling AI companies to extract massive value without paying a single gas fee in return.

This is the invisible tax that AI levies on the crypto ecosystem, and it's reshaping the economics of decentralization in ways most builders haven't yet recognized.

Crypto venture capital doesn't just fund companies—it telegraphs where the industry is headed. In 2025, that signal was unmistakable: $49.75 billion poured into blockchain projects, a 433% surge from 2024's depressed levels. The money wasn't distributed evenly. DeFi captured 30.4% of all funding. Infrastructure projects absorbed $2.2 billion. And a handful of mega-deals—Binance's $2 billion raise, Kraken's $800 million equity round—reshaped the competitive landscape.

But behind the headline numbers lies a more nuanced story. While total funding exploded, many projects faced down rounds and valuation compression. The days of raising at 100x revenue multiples are over. VCs are demanding profitability paths, real user metrics, and regulatory clarity before writing checks.

This is the state of crypto venture capital in 2026—who's funding what, which narratives attracted capital, and what builders need to know to raise in this environment.

Jump Crypto spent three years building Firedancer, a validator client capable of processing over one million transactions per second. Instead of waiting for Solana to fully deploy it, a team of former Jump engineers, Goldman Sachs quants, and Pyth Network builders decided to launch their own chain running Firedancer in its purest form.

The result is Fogo—a Layer 1 blockchain with sub-40ms block times, ~46,000 TPS in devnet, and validators strategically clustered in Tokyo to minimize latency for global markets. On January 13, 2026, Fogo launched mainnet, positioning itself as the infrastructure layer for institutional DeFi and real-world asset tokenization.

The pitch is simple: traditional finance demands execution speeds that existing blockchains cannot deliver. Fogo claims it can match them.

2025 became the year L2s went from blockchain's great hope to its greatest embarrassment. Most new rollups launched to fanfare, attracted millions in TVL during airdrop farming cycles, then collapsed into ghost towns within weeks of their token generation events. The mercenary capital moved on. The genuine users never arrived.

Yet amid this L2 fatigue, Initia launched its mainnet in April 2025 with a radically different proposition: what if instead of building yet another isolated L2, you built an entire network of interconnected rollups from the ground up—with native interoperability, shared liquidity, and VM flexibility baked into the architecture?

The market took notice. Initia raised $24 million from Delphi Ventures, Hack VC, Binance Labs, and Nascent—reaching a $350 million valuation before mainnet. Their token hit $1.44 within weeks of launch. More than a dozen L2s are already building on their infrastructure.

This is the story of Initia's bet that the L2 problem isn't too many chains—it's that those chains were never designed to work together.

The tokenized real-world asset market just crossed $33 billion. But if you look beneath the headline number, a striking imbalance emerges: private credit commands 58% of all tokenized RWA flows, treasuries take 34%, and equities—the asset class most people would expect to lead—barely registers at 2%.

This isn't a random distribution. It's the market telling us exactly which assets are ready for tokenization and which face structural barriers that no amount of blockchain innovation can immediately solve.