‘Fat App’ Thesis Gains Ground as Hyperliquid Surge Sparks Debate on Crypto Value Capture

Contents

Quick Breakdown

The Fat App thesis argues apps, not blockchains, will capture most crypto value.
Hyperliquid’s 1,636% annual surge is fueling belief in the narrative.
While app tokens outperform, some analysts caution against writing off major L1s.

The “Fat App” thesis, the idea that crypto applications, rather than base layer blockchains, will capture the lion’s share of value, is gaining momentum, with Hyperliquid’s explosive rise fueling the debate.

Bitwise CIO Matt Hougan said in an X post on Wednesday that the thesis could become a “dominant theme” in the coming months as investors reconsider how to value blockchain tokens versus application tokens.

Just read through 10 research reports and crypto newsletters. My big takeaway: All the cool kids are talking about the “fat app” thesis. Feels like that could be a dominant theme in the coming months.

— Matt Hougan (@Matt_Hougan) September 10, 2025

Challenging the ‘Fat Protocol’ Narrative

First introduced in 2016 by Joel Monegro, the “Fat Protocol” thesis argued that most value in crypto would accrue at the protocol layer, benefiting networks like Ethereum, Solana, or Avalanche more than the apps built on top.

But the Fat App thesis flips that view, suggesting that applications are increasingly where revenue, user adoption, and token demand are concentrated. If more investors buy into this model, it could trigger a repricing of application tokens relative to layer-1 tokens.

Industry Split Over Value Capture

Jeff Dorman, CIO at digital asset firm Arca, has long been skeptical of the Fat Protocol thesis. He argued in 2021 that layer-1 valuations may have more to do with investor behaviour than actual value capture, with retail traders treating them as simple index bets and VCs preferring large, scalable plays.

Dorman has since doubled down, saying in February that the thesis has “done major damage” by pushing apps to reinvent themselves as layer-1s and funneling disproportionate venture capital into base chains.

Market Already Signaling a Shift

Institutional investor Starkiller Capital noted this week that token performance over the past year reflects the Fat App narrative in action. Application tokens have outperformed, while major chains have lagged behind Bitcoin.

For example, Solana’s SOL has lost over 16% against BTC in the last 12 months, according to TradingView. Meanwhile, app tokens like Hyperliquid (HYPE) have surged, climbing 1,636% over the same period to trade at $55.56, per CoinMarketCap.

Bitwise Exec: Don’t Write Off L1s Yet

While acknowledging the rise of the Fat App thesis, Hougan cautioned against dismissing major blockchains.

Hougan pointed to Hyperliquid’s rally as proof that apps can embody real usage-driven demand, unlike L1 tokens that function more as generalized tolls for blockspace.

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