Analyst Notes: Cracks in the Fat Protocol Theory
In August 2016, Union Square Ventures’ Joel Monegro dropped arguably the most infamous cryptothesis this side of the Bitcoin whitepaper: the Fat Protocol Thesis (FPT).
The Fat Protocol thesis suggested that value in blockchains would accrue at the base protocol layer, instead of at the application layer. This was the opposite of what happened with the internet — Google and Facebook became worth trillions, while protocols like TCP/IP accrued little to no value.
Investors who bought into Monegro’s thesis have since produced returns that were once thought reserved for the gods. Ethereum, Solana, Avalanche, Cosmos — the list of smart contracts have been amidst the best-performing assets within crypto or have returned venture funds on their own for the earliest investors.
Source: USV, Joel Monegro
Overturning the Fat Protocol Thesis
Chia Jeng Yang from Saison Capital recently wrote a piece explaining why he believes the FPT is outdated and what cracks are emerging in the thesis. Yang gives the following reasons driving the theory’s decline:
Sami Kassab is an Enterprise Research Analyst focusing primarily on Web3 Infrastructure and Bitcoin. Sami previously spent 5 years as an Aerospace Engineer designing aircraft engines and missile & defense systems.
