Sonic Labs pursues vertical integration to enhance S Token utility

Sonic Labs wants its Layer 1 network to start generating value for the S token rather than hosting activity that primarily benefits external applications. 

The blockchain development entity (formerly the Fantom Foundation) posted an article on X titled “Vertical Integration: The Missing Link in L1 Value Creation,” where it explained that it wants to strengthen its token and keep revenue inside the Sonic network.

Sonic Labs builds key products to keep more value within the Sonic network

Sonic Labs’ theory is that they need more people to use the chain for transactions, which will generate more gas fees and strengthen its token over time. The only problem is that many other blockchains have cheaper fees, so the “gas fees only” model won’t create lasting value in return.

The company says a blockchain can host a popular app with millions of users, but the chain’s own token may still not benefit as much. Sonic used Polymarket as an example because it became one of the largest prediction apps on Polygon, but most of the profits remain within the application rather than the base-layer token.

According to the blockchain development company, such a situation creates value leakage from the chain because external teams will build apps, earn revenue, and take it with them. The company argues that Layer 1 networks struggle to create lasting value, even if they host a lot of activity.

To prove its point, the company made up a scenario in which an external, decentralized exchange builds on a chain and earns $2 million per year, yet the chain collects only $15,000 in gas fees, which is less than 1% of the total value. 

Sonic then said that if they built or owned an integrated exchange directly within its ecosystem, they could retain the same $2 million within its network and reinvest it in liquidity, infrastructure, partnerships, and the S token itself.

The company presented a solution in which it owns the major economic activity at the top of the chain to ensure that usage creates demand and strengthens the S token. Sonic said it’s the only way Layer 1 can generate real value. 

Sonic Labs acquires teams and generates revenue to strengthen the S token

Sonic Labs says there’s a lot of competition, and many networks keep offering fast, cheap transactions because new scaling technologies have made blockspace widely available across Layer 1 chains, rollups, and modular systems. As a result, chains earn less gas over time.

The company also said infrastructure alone, like speed or low fees, is no longer enough to create lasting value for tokens because networks copy technical developments so fast that companies that seem ahead today become average the next day. 

And since networks don’t lock people into their systems, users will be more than happy to switch chains if another offers better incentives or smoother apps. 

Sonic now wants to own a larger share of the economic activity on its network so that value remains tied to the S token. It referred to successful examples like Binance Smart Chain, which closely integrates with Binance’s exchange and directs users, liquidity, and trading volume into BNB’s ecosystem.

Sonic also said Hyperliquidmade made the main trading application to be the chain itself, so every trade and fee strengthens the HYPE token directly. This kind of design is what Sonic says vertical integration makes possible. 

Sonic Labs plans to create a single, integrated app layer that will handle trading, lending, payments, settlements, credit systems, and risk markets. The company may even consider acquiring competent application teams from across the industry and bringing them on board to create flagship building blocks internally, ensuring that the value created doesn’t leave Sonic.

At the same time, Sonic Labs explained that its existing Fee Monetization system, called FeeM, could integrate with apps to scale the network faster while strengthening the S token economy. 

Sonic Labs claims these revenue streams can support sustainable buybacks of the S token, driven by real revenue from integrated primitives that scale with the network.

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