Building Web3 Super Applications: The Evolution of Fat Applications and Fat Protocols

The concept of the Fat Protocol was proposed by Joel Monegro in 2016. As an investment theme, it has performed well currently, but in the long run, it seems that this concept is not comprehensive enough for protocols that create primary value.

Therefore, we propose the concept of fat application (FAPP) and assume the following:

An application that offers a wide range of products will accumulate the greatest value.

Web2 dominant applications usually start from a specific professional field. Once they gain a dominant position, they will offer a range of different products to leverage network effects and fully utilize user advantages.

"Use tools to attract them, use the network to confine them."

In the field of cryptocurrency, killer applications and products have performed exceptionally well in many aspects. A certain trading platform is a typical example, as it spares no effort in catering to every user and gradually offers all crypto-related products on its custody platform.

From the very beginning, the primary Web 2.1 applications were exchanges that provided a large number of services, and they seem to constitute the gateway to Web 3. We believe that the same logic applies to pure Web 3 on-chain products.

This is the new "paradigm shift"; value accumulators transition from protocol to application ( or a specific application? ). Ironically, exchanges are not Web 3 applications. They are thoroughly Web 2, requiring permission and centralized, yet they extract a significant amount of value from the entire ecosystem.

In the future, on the battlefield for value, we believe that the protocol may lose to Web 3 native applications, with two possible paths:

1. Application Chain ( Appchains )

2. All-encompassing super application

We define a super application as "WeChat of the crypto space." This sounds a bit scary, but this dystopian vision indeed has the potential to come true. The internet follows a long-tail model: at the front are one or two Amazon-level leaders, followed by a multitude of small players competing for the remaining market share.

Historical Review

Many people compare blockchain to a city and Ethereum to modern Manhattan. We have different views. The current construction is still relatively primitive; we would compare blockchain to religion and applications to cities.

We believe that today's applications are like medieval cities, their historical status is still relatively fragile compared to modern Manhattan. In our analogy, blockchain is religion, and Ethereum is the medieval Catholic Church.

Medieval cities were established on the basis of the papal protocol, enjoying only half of their autonomy, with the pope's power being supreme. The pope participated in the formulation of tax policies and guidelines, with the Bible serving as the primary basis for tax law, and various fees flowing to Rome.

In simple terms, later a developer named Martin appeared, nailing a white paper on the church door, which contained 95 lines of code. A few years later, a hard fork occurred. Some validators joined the new protocol that was forked out, while others decided to stay.

As a result, the application ( cities and principalities ) became more independent, and for centuries, the influence of the papacy on the flow of fees gradually diminished. The papacy still played a certain role, but the public began to accept the ideas of nation-states and secularism, giving rise to new economic models.

What we want to say is that the concept of the fat protocol has not become obsolete, because we are still in the early stages of the blockchain era (, namely Web 3). And applications as cities can organize themselves to become powerful value accumulation entities, like nation-states, weakening the clergy's ability to charge on the blockchain (.

In other words, over time, applications, mainly super applications or application chains, will accumulate more value.

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Application Chain and Super Application

The concept of application chains is not new; it first appeared in a project white paper in 2016. It proposed the idea of heterogeneous chains sharing security through a common set of validators. Another project proposed a different approach to heterogeneous chains: each chain is independent and unified only through an SDK.

Since then, most people have accepted the concept of shared security. The latter has also changed its direction. People have concluded that assembling a high-quality validator set from scratch is not easy and may also be meaningless to do so before the product finds a market. It is clear that low-quality block space acts like a parasite, wasting validator resources, and often there are no real use cases.

Application chains are tailor-made: the core chain will be optimized for existing and future use cases built on it. For example, liquidity chains can support decentralized finance applications through various specific designs. Such application chains do not compete with other applications for block space and can advance the execution and fee logic best suited to their use cases.

We believe that ) is the best candidate for becoming a super application in the ( application chain. The development trajectory is roughly as follows:

1. Launch applications on the mainnet of a universal chain to conduct proof of concept and demonstrate whether the product matches the market. Target a known user base.

2. After achieving success, expand to multi-chain, or even launch your own execution environment ) application chain (, to exert greater control and gain more value. A certain DEX project is currently a model that has reached this stage.

3. Eliminate all on-chain traces and execution environments, providing a seamless super application experience. Attract users through a gradual approach, adding features that make people invest more time and money in the product.

4. Congratulations on becoming a super application.

For example, a certain lending protocol seems to be trying to build a super application that integrates social and financial aspects. This integration is expected to create a strong moat ). Think of credit/social scoring ( for unsecured loans. A certain options project also seems to be developing in this direction; they have customized their own rollup and lending market to complement existing options products. The key point of both projects is non-fully collateralized lending, which is expected to unlock true DeFi 2.0.

A certain DEX and a certain NFT marketplace are currently the largest applications by fee. They both started with a single use case in which they excelled, accumulating a critical number of users ) and bots (, all willing to pay ETH to use these applications. They later also acquired NFT aggregators to strengthen their core products or achieve horizontal expansion of their offerings.

Regardless of whether the chicken or the egg came first, as long as there is liquidity, users can be acquired; as long as there are users, more products and customized experiences can be offered to them. One method is to provide your own product wallet to the user base and improve the user experience. ) This includes not only better UI/UX but also wallet functions tailored for the products. ( Successfully launching a product suite ) platform ( and seamlessly absorbing user-facing applications will stand out.

If we consider not just various financial use cases, liquidity is not the key to the rise of all super applications. Nevertheless, it must rely on other factors. Taking games as an example, engaging gameplay and a vibrant player economy are necessary.

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Trojan Middleware

The above text describes a user-centered approach to the development of super applications. Simple DeFi applications with outstanding user experiences can capture market share and improve profit methods by horizontally integrating with traditional financial products and/or other on-chain products, while also building a moat. On a technical level, these applications will evolve from simple smart contract interfaces to mature super applications with their own application chains.

Trojan middleware is another option that can walk through the front door of applications amidst a welcoming sound, bringing a better developer experience and various advanced features such as account abstraction, front-running protection, and MEV cashback. Trojan middleware is a top-tier trading memory pool )mempool( that can dominate block construction by accessing order flow from applications.

Through blockchain construction, the Trojan middleware can provide functions that applications themselves cannot easily replicate, such as on-chain abstract transaction execution. Ultimately, by creating an outstanding wallet/application store experience, control over touchpoints can be achieved. Some blockchain builders have already demonstrated the ability to access exclusive order flows, on which we can build the things we talk about.

But aside from being deceived by the Trojan horse, there is another option. We believe that the ultimate state of any ambitious super application is to become a major blockchain builder. This can provide the best experience for super application users and offer the best guarantees for transaction execution in a manner deemed appropriate by the super application.

In the Web2 space, major consumer enterprises often seek to build their own payment channels to avoid over-reliance on a single provider. Similarly, Web 3 super applications will also seek to exert control over users' financial operations.

Super applications are ultimately expected to become enablers for Ethereum and other blockchains, while hosting terminals for all future "applications", which will serve as individual features of the super applications. Even now, exchanges can be seen as applications that encapsulate blockchains to provide a better user experience. Most users do not have to leave the trading platform to access a wide variety of content.

If native crypto applications can span all reasonable base layers and achieve seamless bridging, it can effectively realize extreme homogeneity of block space, that is, commoditization. The best path for optimal execution will naturally arise, and users may not even know the specific execution trajectory. Of course, there are also limitations. It relies on the quality of the deployed blockchain and whether its security level is high enough.

In this sense, a super application requires different blockchains to provide services. Additionally, an application chain is just another way to enhance execution control. But in this sense, a super application will ultimately be a centralized place.

Users and developers can directly access the blockchain, but super applications, as blockchain abstractions, will excel in many aspects:

1. Lower transaction fees

2. A smoother application development process

3. Better user experience

Super apps will become Amazon, and aside from that, users can still directly use a large number of blockchains, just like vendors and buyers use Shopify.

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The Blockchain Space War of the 2020s

The power struggle between applications and the base layer is inevitable. The base layer acquires value through transaction fees ) even as the fees themselves are dwindling, and the currency premium becomes increasingly difficult to maintain (, providing security and a user base in return.

Successful applications with a loyal user base will also seek their own ways to obtain value and exert greater control over how to best serve their users. In other words, applications want to share the foundational success of blockchain: reflected in the monetary premium found in the demand for native tokens.

This puzzle has several key parts: Where does the transaction happen ) starting point (? Who controls the block construction process ) turning externalities into value capture (? What is the user's intention? And who is setting the currency rules?

The transactions that create value for blockchain begin at the application level ) or wallet (. What users need is the application, not the blockchain, as they are not idealists but primarily pragmatists. This power will inevitably lead to a situation where blockchains specifically targeting applications become an execution option.

This provides a broader capability for value acquisition, allowing for better trade-offs in design, thus better meeting user needs than the standardized layer. The base layer currently only has an advantage in the last factor, which is the monetary rules. And this advantage is also temporary. Please look at another historical segment:

In many ways, we can compare the base layer to the British Empire and the pound. In the late 18th century, the American colonies rose up against British rulers due to heavy taxes and tariffs. This led to the Boston Tea Party and the American Revolutionary War, giving birth to the greatest "super application" in world history.

Nearly 200 years later, the British Empire after World War II