Public chains must find new revenue models as block space sales decline.

Author: Castle Labs

Compiled by DeepChain TechFlow

DeepChain Summary: Over the past two years, 14 crypto companies have achieved annual revenues exceeding $200 million, with only one being a public chain—Hyperliquid. While Arbitrum generated $430,000 in monthly revenue, Hyperliquid reached $58 million (a 100-fold difference). Public chains have finally realized: the business of selling block space is no longer viable. Either transition into product studios or app distributors, or focus on vertical industries with SaaS solutions—the era of neutral infrastructure is coming to an end.

We have recently spent considerable time researching revenue issues, covering both the application and blockchain layers.

Apps have always been strong revenue generators, directly reaching customers and must deliver value.

Public blockchains have long supported their ecosystems through funding and protocol upgrades, but they now must shift focus toward serving paying customers to avoid depleting their treasuries.

Over the past two years, 14 crypto companies generated over $200 million in revenue, with only one being a public blockchain.

That's Hyperliquid.

To illustrate the gap between public blockchains: Arbitrum generated only $430,000 in revenue over the past 30 days, while Hyperliquid generated approximately $58 million (over 100 times more).

But the situation is changing. Public blockchains recognize that block space is no longer a viable business model—they must focus on alternative revenue streams. We’ve already seen early movers strive to become product studios, app distributors, payment rails, or vertical SaaS stacks. This trend will undoubtedly continue, as more public blockchains move away from neutral infrastructure toward ownership in specific verticals.

Last week, Ostium's LP vault was compromised, resulting in a loss of 23,752,746 USDC, as the attacker infiltrated the off-chain infrastructure responsible for feeding price data to the protocol.

The attacker submitted seemingly valid but fraudulent price reports, then used them to open and immediately close large positions, extracting artificial profits from the treasury. Essentially, the attacker found a way to push false price updates through an approved pathway, making losing trades appear profitable and depleting the LP treasury.

This is particularly painful for Ostium, as the core of its entire product is bringing off-chain markets on-chain. Stocks, commodities, and forex on Ostium do not have native on-chain prices; the protocol must import them—and, more importantly, trust them.

Contracts on the protocol rely on this trust, as do users, meaning that falsified prices that pass verification can quickly escalate from bad data to bad executions, incorrect treasury records, and real LP losses. For Ostium, overseeing this off-chain to on-chain journey is central to the product.

Ostium indicates that the trader's collateral has been isolated and remains unaffected, and the trading contract has been frozen within 60 minutes. This is quite fast, but the question is: how much damage could a bad price input cause before the protocol catches it?

More frustratingly, Ostium is already accepting the trade-offs of TradFi. Many of the markets it offers are not truly 24/7 because the underlying assets themselves are not 24/7. If you have already accepted market trading hours, outdated prices, closures, and liquidity gaps, it should make it easier—not harder—to justify stricter controls around price updates, trade sizes, withdrawals, and timing.

The industry needs to adapt more to this, and I believe Ostium is leading the way. If the authorization pathway can update prices, shouldn’t this pathway be strictly controlled and monitored? If new price updates can enable large transactions or withdrawals, shouldn’t there be circuit breakers based on size and timing? If an attacker tests the system with small transactions first, shouldn’t monitoring detect the pattern before the treasury is depleted?

For protocols bringing off-chain markets on-chain, these controls should not be optional security features; they should be embedded and marketed as core product capabilities.

Last week, after releasing the report "The Renaissance of On-Chain Options," we invited Kalshi, Rysk, GammaSwap, and Block Scholes to a live stream. These builders consistently emphasized one point: options are powerful, but marketing them as "options" is often the worst sales approach.

Most users don’t want to think in terms of Greek letters, expiration dates, strike prices, or volatility surfaces; they want simple ways to achieve yield, leverage, protection, or express their views. That’s why the most promising products for user adoption are often not traditional options markets, but yield vaults, short-term binary options, structured products, and prediction markets.

Dan from Rysk summed it up almost perfectly: Options are not the product; the benefits of options are the product.

Rysk stated that its newer product surpassed $1 billion in open interest last year, primarily driven by DeFi-savvy users seeking asset yields, rather than those coming in as options traders. The quarterly notional volume chart illustrates how quickly this product found demand.

Kalshi states that it now handles 86% of global trading volume in crypto binary options and approximately 70% of global prediction market volume. The 15-minute market appears to be the optimal time window for crypto binary options, as users easily understand the returns, time frame, and risks.

GammaSwap is an excellent example of abstracting options away from end users. Its V1 allowed users to borrow liquidity from an AMM, where the AMM behaved similarly to an options seller—but once Greeks, exotic payoffs, and fragmented liquidity became part of every user’s journey, the product became capital-inefficient and difficult to use. V2 is under development, shifting toward predictive markets, order books, and known payoffs, focusing on solving a clear problem that is easier to sell than another complex options product.

Block Scholes brings a perspective from the infrastructure side, as they support approximately 90% of on-chain options trading volume through venues like Derive. While traditional options exchanges may retain niche user bases through their native UX, structured products are the way more users will access them without even realizing they are engaging with options.

For options to grow further on-chain, they need to move beyond being sold as options. The prevailing view is that the next wave may be achieved by packaging returns into more easily understood products.

Flex, Yearn’s Fixed-Rate Lending: Yearn’s Flex product is a fixed-rate money market where borrowers select their own fixed interest rate. Track the new protocol on DefiLlama.

How Base is bouncing back: Jesse and Brian’s two announcements sparked widespread community backlash on X. Jesse acknowledged the failure of his strategy around social and creator tokens, and has now handed over the Base App to Cobie, a Crypto Twitter trader and founder of Echo (acquired by Coinbase for $400 million). On the other hand, Brian refuses to take any responsibility for last week’s memecoin pump-and-dump tied to his avatar. Rune’s post encapsulates this sentiment well. Cobie taking over the Base App is essentially their last chance to save face with crypto-native users.

Plether, On-Chain Dollar Index Perpetual Contract: Plether is building a decentralized perpetual contract DEX for the Dollar Index (DXY), enabling users to go long or short synthetic USD exposure on-chain. Notably, positions have a defined maximum return upon opening, and liquidity providers are divided into senior and junior tranches; the protocol prevents new position openings if it cannot enforce solvency.

Starknet’s Security Focus: Yesterday, we released a report on the two major barriers to the next phase of institutional on-chain growth: privacy and quantum resistance. Starknet offers a valuable perspective here, as its recent work addresses both areas: enhancing privacy to enable institutions to securely disclose on-chain information, and questioning whether today’s infrastructure can survive the next security cycle.