Sonic Labs, the development team behind the high-throughput Layer 1 blockchain Sonic (formerly Fantom), has announced a major strategic shift to enhance the utility and value accrual of its native S token. The plan centers on a model of vertical integration, where Sonic will build or acquire core protocol applications to retain more economic value within its own ecosystem.
In a detailed statement titled "Vertical Integration: The Missing Link in L1 Value Creation," the team argued that the traditional "Gas Fee Only" model is insufficient in today's competitive landscape. The proliferation of rollups, modular architectures, and other Layer 1 networks has expanded blockspace supply, compressing fees and reducing scarcity. This allows capital and users to move freely, meaning a chain can host popular applications without its native token capturing significant value—a phenomenon Sonic calls "value leakage."
The company illustrated this with a hypothetical example: an external decentralized exchange building on a chain might earn $2 million annually, while the chain itself collects only $15,000 in gas fees—less than 1% of the total value generated. To combat this, Sonic plans to own major economic activities, such as trading, lending, and payments, at the top of its chain. By building or acquiring these "integrated primitives," Sonic aims to retain revenue that can be reinvested into network liquidity, infrastructure, partnerships, and direct support for the S token.
Sonic cited successful models like Binance Smart Chain's integration with the Binance exchange and Hyperliquid's design, where the main trading application is the chain itself, directly strengthening the native HYPE token. The company's existing Fee Monetization system, FeeM, is also expected to play a role in scaling the network and supporting the token economy.
In a related development, key Sonic contributor Andre Cronje raised $25.5 million in a private token round for his new onchain exchange, Flying Tulip, which now carries a reported valuation of $1 billion. While separate, this highlights the ongoing activity and investment within the Sonic ecosystem.
