In monetary markets, startups have lengthy sought to market themselves as “tech companies” hoping traders will worth them with tech-company multiples. And infrequently, they do — not less than for some time.
Conventional establishments discovered this the arduous manner. All through the 2010s, many companies scrambled to reposition themselves as expertise firms. Banks, fee processors and retailers started calling themselves fintechs or information companies. However few earned the valuation multiples of true tech companies — as a result of the basics hardly ever matched the narrative.
WeWork was among the many most notorious examples: an actual property firm dressed up as a tech platform that finally collapsed underneath the burden of its personal phantasm. In monetary providers, Goldman Sachs launched Marcus in 2016 as a digital-first platform to rival shopper fintechs. Regardless of early traction, the initiative was scaled again in 2023 after persistent profitability points.
JPMorgan famously declared itself “a expertise firm with a banking license,” whereas BBVA and Wells Fargo invested closely in digital transformation. But few of those efforts produced platform-level economics. In the present day, there’s a graveyard of such company tech delusions — a transparent reminder that no quantity of branding can override the structural constraints of capital-intensive or regulated enterprise fashions.
Crypto is now confronting the same identification disaster. DeFi protocols wish to be valued like Layer 1s. Actual-world asset (RWA) dApps are presenting themselves as sovereign networks. Everyone seems to be chasing the Layer 1 “expertise premium.”
And to be honest — that premium is actual. Layer 1 networks like Ethereum, Solana and BNB persistently command increased valuation multiples, relative to metrics like Complete Worth Locked (TVL) and charge era. They profit from a broader market narrative — one which rewards infrastructure over purposes, and platforms over merchandise.
This premium holds even when controlling for fundamentals. Many DeFi protocols display robust TVL or charge era, but nonetheless battle to realize comparable market capitalizations. In distinction, Layer 1s entice early customers by means of validator incentives and native token economics, then develop into developer ecosystems and composable purposes.
In the end, this premium displays Layer 1s’ capability for broad native token utility, ecosystem coordination and long-term extensibility. Moreover, as charge quantity grows, these networks usually see disproportionate will increase in market capitalization — an indication that traders are pricing in not simply present utilization, however future potential and compounding community results.
This layered flywheel, transferring from infrastructure adoption to ecosystem development, helps clarify why Layer 1s persistently command increased valuations than dApps, even when underlying efficiency metrics seem comparable.
This mirrors how fairness markets distinguish platforms from merchandise. Infrastructure firms like AWS, Microsoft Azure, Apple’s App Retailer or Meta’s developer ecosystem are greater than service suppliers — they’re ecosystems. They allow 1000’s of builders and companies to construct, scale and work together. Traders assign increased multiples not only for current revenues, however for the potential to assist emergent use instances, community results and economies of scale. In contrast, even extremely worthwhile SaaS instruments or area of interest providers hardly ever entice the identical valuation premium — their development is constrained by restricted API composability and slim utility.
The identical sample is now taking part in out amongst giant language mannequin (LLM) suppliers. Most are racing to place themselves not as chatbots, however as foundational infrastructure for AI purposes. Everybody desires to be AWS — not Mailchimp.
Layer 1s in crypto comply with the same logic. They’re not simply blockchains; they’re coordination layers for decentralized computation and state synchronization. They assist a variety of composable purposes and belongings. Their native tokens accrue worth by means of base-layer exercise: gasoline charges, staking, MEV and extra. Crucially, these tokens additionally function mechanisms to incentivize builders and customers. Layer 1s profit from self-reinforcing loops — between customers, builders, liquidity and token demand — and so they assist each vertical and horizontal scaling throughout sectors. Learn the total article right here.
Most protocols, against this, will not be infrastructure. They’re single-purpose merchandise. So including a validator set doesn’t make them Layer 1s — it merely clothes up a product in infrastructure optics to justify the next valuation.
That is the place the appchain pattern enters the image. Appchains mix utility, protocol logic and a settlement layer right into a vertically built-in stack. They promise higher charge seize, consumer expertise and “sovereignty.” In a number of instances — like Hyperliquid — they ship. By controlling the total stack, Hyperliquid has achieved fast execution, wonderful UX and significant charge era — all with out counting on token incentives. Builders may even deploy dApps on its underlying Layer 1, leveraging its high-performance decentralized alternate infrastructure. Whereas its scope stays slim, it provides a glimpse of some degree of broader scaling potential.
However most appchains are merely protocols making an attempt to rebrand, with little utilization and no ecosystem depth. They’re preventing a two-front battle: making an attempt to construct each infrastructure and a product concurrently, usually with out the capital or workforce to do both properly. The result’s a blurry hybrid — not fairly a performant Layer 1, and never a category-defining dApp.
We’ve seen this earlier than. A robo-advisor with a slick UI was nonetheless a wealth supervisor. A financial institution with open APIs was nonetheless a balance-sheet enterprise. A coworking firm with a sophisticated app was nonetheless simply renting workplace area. Ultimately, the hype wears off — and the market reprices accordingly.
RWA protocols are actually falling into the identical entice. Many are positioning themselves as infrastructure for tokenized finance — however with out significant differentiation from present Layer 1s, or sustainable consumer adoption. At finest, they’re vertically built-in merchandise with no compelling want for a sovereign settlement layer. Worse, most haven’t achieved product-market match of their core use case. They bolt on infrastructure and lean into inflated narratives, hoping to justify valuations their economics can’t assist.
So what’s the trail ahead?
The reply isn’t to pretend infrastructure standing. It’s to personal your position as a services or products — and execute it exceptionally properly. In case your protocol solves an actual drawback and drives significant TVL development, that’s a robust basis. However TVL alone gained’t make you a profitable appchain.
What issues most is actual financial exercise: TVL that drives sustainable charge era, consumer retention and clear worth accrual to the native token. As well as, if builders construct in your protocol as a result of it’s genuinely helpful — not as a result of it claims to be infrastructure — the market will reward you. Platform standing is earned, not claimed.
Some DeFi protocols — like Maker/Sky and Uniswap — are following this path. They’re evolving towards appchain-style fashions that enhance scalability and cross-network entry. However they’re doing so from a place of energy: with established ecosystems, clear monetization and product-market match.
In distinction, the rising RWA area has but to display sturdy traction. Almost each RWA protocol or centralized service is dashing to launch an appchain — usually backed by fragile or untested economics. As with main DeFi protocols transitioning in the direction of an appchain mannequin, the perfect path ahead for RWA protocols is to first leverage present Layer 1 ecosystems, construct consumer and developer traction that results in TVL development, display sustainable charge era and solely then evolve towards an appchain infrastructure mannequin — with a transparent function and technique.
Subsequently, within the case of an appchain, the utility and economics of the underlying utility should come first. Solely as soon as these are confirmed does a transition to a sovereign Layer 1 change into viable. This stands in distinction to the expansion trajectory of general-purpose Layer 1s, which might initially prioritize constructing a validator and dealer ecosystem. Early charge era is pushed by native token transactions, and over time, cross market scaling broadens the community to incorporate builders and finish customers — finally driving TVL development and diversified charge streams.
As crypto matures, the fog of storytelling is lifting, and traders have gotten extra discerning. Buzzwords like “appchain” and “Layer 1” not command consideration on their very own. With no clear worth proposition, sustainable token economics and a well-defined strategic trajectory, protocols lack the foundational parts required for any credible transition to true infrastructure.
What crypto wants — particularly within the RWA sector — isn’t extra Layer 1s. It wants higher merchandise. And the market will reward those that deal with constructing precisely that.
Determine 1. Market Cap vs TVL for DeFi and Layer 1s
Determine 2. Layer 1s are clustered round increased charges and dApps round decrease charges