Ethereum private order flow accounts for half of the total, and the fat application theory is gradually taking effect

author:Mason Nystrom

Compiled by: Xiaobai Navigation coderworld

Update: August 19, corrected Orderflow data

In the past 30 days, Ethereum’s order flow exceeded $12 billion, of whichNearly halfof order flow comes from private or proprietary applications. Click here to readFull Article.

source:Orderflow.art

The privatization of order flow will continue to expand as the commodity value of blockspace grows and pave the way for large-scale applications.

But how did we get here, and where are we going?

In short, the reason we are here is foodcoins. A slightly more detailed explanation is that the DeFi summer gave rise to a large number of professional users and retail trading, which subsequently led to the birth of trading aggregators (such as 1inch) that provide users with better price execution through private order routing.walletApps such as MetaMask quickly followed suit, realizing that user convenience could be monetized by adding in-app exchange functionality, proving that any app that controls the end-user’s attention (and orders) has a valuable business model.

source:Dune

Over the past two years, we have seen two additional categories of players enter the private order flow space - Telegram bots and solver networks. Telegram bots align with MetaMask’s “convenience fee” and provide users with an easy way to trade long-tailed crypto assets in group chats. As of July, Telegram bots accounted for ~17% andTrading volumeOf the 6%, most of them were conducted through private mempools.

On the other hand, in the main part of the market, solver networks (such as Cowswap and UniswapX) have also emerged as core venues for trading highly liquid pairs (such as stablecoins and ETH/BTC). Solver networks change the order flow market structure by outsourcing the task of finding the best route for a given trade to solvers (market makers) who compete in the market.

As a result, there has been an initial differentiation in trading venues, with convenient front-end tools (including TG robots,walletExchanges and Uniswap’s front end) are primarily used for longer-tail, lower-value (less than $100k) trades, while aggregators and solver networks are the go-to venues for larger trades, which often involve stablecoins and major currencies (ETH/BTC).

在更细致的分析中，你会发现大部分私人订单流来自聚合器（如 1inch）和前端工具（TG 机器人、钱包和前端）。

The privatization of order flow becomes even more pronounced when we consider that, by trade, only 30% of Ethereum transactions pass through private mempools, meaning that a small number of trades contribute to 50% of private order flow.Xiaobai NavigationSignificant proportion.

source:Dune

In other words, valuable order flow is more important than the quantity of order flow. The power law relationship between users and order flow leads to an inevitable conclusion -The application will accumulate the largest proportion of the overall value.In other words, the theory of fat apps still exists.

Towards fat applications

Uniswap’s protocol clearly has value, but the more interesting story is happening at the application layer, as Uniswap works to become a consumer application — by vertically integrating key components of its technology stack, expanding the capabilities of its interface, mobile wallet, and aggregation layer. For example, Uniswap Labs’ application — UniswapX, Uniswap’s frontend, wallet, and aggregator — has generated about 16% of $8 billion in private order flow in the past 30 days, accounting for almost 18% of total order flow (private and public).

existcryptocurrencyIn the field, applications like Worldcoin account for nearly 50% of Optimism mainnet activity, which has prompted them toroll outIts own application chain further highlights the power of fat application theory and control requirements (such as users and transactions).

Even top NFT projects with strong brands like Pudgy Penguins are building their own chains.CEO Luca explains, controlling the block space on which distribution depends is beneficial to the value accumulation of Pudgy’s brand and intellectual property rights.

Going forward, applications should aim to create new types of order flow, whether by creating new assets (e.g. Pump and memecoins), by building applications that provide new user utility, such as identity (e.g. Worldcoin, ENS), or by building betterConsumer experiences that are vertically integratedand supports valuable transactions such as Farcaster and frames, Solana Blinks, Telegram and TG applications, or on-chain games.

Final Thoughts on Fat Apps

It is worth noting that since the end of the last cycle, the fat app theory has beenThe focus of many crypto people, because application chain theory was developed as part of the consensus view.

My current view of the fat app theory is that we will see most value accrue to the application layer of the technology stack, where control of users and order flow puts applications in a privileged position. These applications will likely be combined with on-chain protocols and primitives, similar to today’s UniswapX and Uniswap Protocol, Warpcast and Farcaster, Worldcoin and Worldchain. Eventually, these protocols, especially those that are most on-chain (such as Maker) will become the most popular protocols.DAO), can still accrue significant value, but applications are likely to capture more value due to their proximity to users and off-chain components, thus forming a more defensible moat.

Fat App Theory and Value Accumulation in Crypto Investment

Finally, I still believe in Layer 1 Blockchain(e.g. Bitcoin, Ethereum, Solana) can capture significant value as non-sovereign reserve assets, where the underlying asset (e.g. ETH) accumulates enormous value. Given enough time, applications may try to build their own L1, just as they build their own L2 Same, but start the product L2 Block space and start L1 andTokenTransforming into a commodity and a mortgage asset is very different, so this may be a distant future.

The core takeaway is that as more and more consumer applications create and own valuable order flow, the crypto world will re-evaluate applications as people will come to the inevitable conclusion - fat applications are inevitable.

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