Why L1 Tokens Must Evolve Beyond Block Space Commoditization

Validators extract $1B+ annually from users via front-running and arbitrage, creating a toxic, inefficient market. This value should accrue to the protocol and its stakers, not opportunistic searchers.

• Value Capture: MEV revenue is externalized, not internalized.
• User Experience: Results in worse slippage and failed transactions.
• Security Risk: Encourages validator centralization for maximal extraction.

Protocols must bake MEV management into the consensus layer, creating a sealed-bid auction marketplace. Revenue is captured and redistributed to stakers or burned, turning a leak into a yield source.

• Internalized Value: Redirects MEV profits to stakers and token holders.
• Fairer Execution: Protects users via transaction privacy bundles.
• Stronger Security: Higher staking yields disincentivize validator exit.

Every new L2 or appchain fragments liquidity, increasing capital inefficiency and user friction. Bridging assets across these silos is slow, expensive, and insecure, with over $2.8B lost to bridge hacks.

• Capital Inefficiency: Locked TVL cannot be utilized across the ecosystem.
• Security Fragility: New trust assumptions at every bridge.
• Poor UX: Users manually manage assets across 5+ chains.

The L1 must provide a canonical liquidity layer and messaging primitive, enabling seamless asset movement. Think native intents and shared security for L2s, similar to EigenLayer's restaking but for liquidity.

• Unified Liquidity Pool: Single canonical pool services all rollups.
• Native Fast Withdrawals: ~1 minute finality via protocol-level guarantees.
• Value Accrual: Fees from cross-chain messaging and liquidity provisioning.

Staked tokens sit idle, solely securing the chain. This represents hundreds of billions in dormant capital that could be leveraged to bootstrap ecosystem applications without additional issuance or dilution.

• Opportunity Cost: Capital is locked without productive yield.
• Ecosystem Bottleneck: New protocols struggle to bootstrap trust and liquidity.
• Inflationary Pressure: Protocols print new tokens to incentivize usage.

Allow staked capital to be restaked to secure additional services (AVSs) like oracles, bridges, and co-processors. This creates a flywheel: more secure apps attract more users, which increases staking demand and token value.

• Capital Efficiency: One stake secures multiple services.
• Ecosystem Bootstrap: Provides instant security to new protocols like EigenDA, Espresso.
• Sustainable Yield: Fees from AVSs provide non-inflationary rewards to stakers.

If Ethereum L2s and Celestia-based rollups succeed, the execution layer becomes a hyper-competitive, low-margin business. L1 tokens like Solana or Avalanche become pure commodities, competing only on TPS and latency, with value accrual shifting entirely to the data availability and settlement layers.

• Risk: Execution becomes a race to the bottom on price.
• Evidence: Arbitrum and Optimism sequencer fees are not captured by their tokens.

Protocols like UniswapX, CowSwap, and Across abstract settlement away from any single chain. Users express an intent ("swap X for Y"), and a network of solvers competes to fulfill it off-chain, often using private mempools. The native L1 is reduced to a finality tool, capturing minimal fees.

• Risk: The most valuable user flow (cross-chain swaps) happens off the L1's books.
• Shift: Value accrues to solver networks and intent infrastructure like Anoma.

If an L1's primary value accrual shifts to staking yields or protocol revenue sharing, regulators (e.g., SEC) may definitively classify it as a security. This triggers debilitating compliance overhead, cripples US exchange listings, and fractures liquidity. The safe harbor becomes providing only pure, utility-based block space.

• Risk: The most logical path for token value (fee capture) is legally forbidden.
• Precedent: Ripple XRP ruling creates persistent uncertainty.

Vertical integration beats horizontal generality. An app-specific chain like dYdX v4 or a Cosmos appchain can offer zero-gas fees, custom throughput, and tailored governance. If major dApps all flee to their own chains, general-purpose L1s are left with low-value, fragmented activity.

• Risk: The "super-app" thesis fails; the best apps build their own home.
• Driver: Celestia makes launching a secure chain trivial and cheap.

Raw compute/bandwidth is a race to the bottom. Ethereum's ~$1M daily fee burn is an outlier; most L1s see negligible demand. Without unique utility, tokens become pure inflation vehicles for validators.

• Result: High FDV/TVL ratios with no sustainable sink.
• Example: Many EVM-alikes compete solely on cheaper gas, a losing game against future L2 scaling.

Follow Solana (SOL) and Sui (SUI). Deeply integrate the native token into DeFi and staking mechanics beyond simple gas.

• Key Benefit: Creates protocol-owned liquidity and a sustainable yield sink.
• Key Benefit: Aligns security (staking) with ecosystem utility (lending, liquidity).
• Mechanism: Use token as primary collateral in native money markets (like Solend on Solana) and for liquidity pool fees.

Become a settlement and data availability layer for app-specific rollups. Celestia pioneered this; Ethereum with EIP-4844 is adapting.

• Key Benefit: Monetizes security and decentralization, not just execution.
• Key Benefit: Creates a recurring revenue stream from rollup sequencers paying for DA.
• Example: A rollup paying $10K/day in DA fees is more valuable than sporadic user gas payments.

Move beyond signaling. Implement fee switches, treasury management, and protocol revenue sharing controlled by token holders. See Compound Grants and Uniswap fee switch proposals.

• Key Benefit: Transforms token from speculative to cash-flow generating asset.
• Key Benefit: Funds ecosystem development, creating a virtuous cycle.
• Mechanism: Direct a percentage of network/application fees to a governed treasury.