Crypto Isn’t Modular Anymore, It’s Vertical
Author: Altan Tutar — CEO & co-founder of MoreMarkets
Crypto was supposed to be modular.
Interoperable money legos, composable layers, shared infrastructure. That was the dream.
But the projects winning today? They’re not modular. They’re vertical.
@HyperliquidX, @ethena_labs, and even @pumpdotfun are building like @Apple and @Amazon.
Full-stack products that control everything, from infrastructure to UX.
Just like in traditional tech, vertically-integrated product experiences are making a comeback on-chain.
But what are these vertical stacks?
It means one entity owning the “full stack” of its business, from the underlying components to the end-user experience.
In traditional technology companies, vertical integration has provided the power to deliver seamless experiences and take advantage of operational efficiencies.
For example, @Apple famously manages everything from its custom silicon chips to its retail stores under one roof, and @amazon built its entire empire by moving large portions of its supply chain in-house.
These “vertical stacks” allow companies to move faster, more closely control product quality, and capture more value in general.
Now, a similar playbook is emerging in crypto.
Historically, crypto projects were built in a modular fashion:
- A clear separation was established between the application layer and the infrastructure layer. Ex: Ethereum as the base layer, with apps like Aave transacting on top of it. This separation made composability easy
- Next came modularization, and the promise of optimized performance across each layer of the architecture stack. Execution, settlement, data availability, and consensus became decoupled. Ex: Rollups built on Ethereum could use their own execution environments (even the @Solana VM).
- This made technical experimentation easier, but fractured liquidity across ecosystems, complicated the UX, and failed to deliver strong token performance.
Modularity made sense in theory.
But in practice? It didn’t create sticky products or dominant tokens.
Rethinking the Crypto Stack: The Case for the Vertical Stack
As of recently, the crypto ecosystem has mostly followed the modular approach. This is analogous to the horizontal specialization seen in tech (one company makes the OS and another makes the hardware).
Now that the technology is beginning to mature, with good-enough, battle-tested consensus algorithms, blockchains, message-passing protocols, and other infrastructure components, projects are increasingly adopting vertical stacks.
The motivation is similar to the traditional world: improve performance, control the user experience end-to-end, and create a world-class experience.
Crucially, crypto verticalization often means building the blockchain (infrastructure layer) with the UX (application layer), and sometimes bringing other products face-to-face with your own product experience (partnerships).
Hyperliquid: A Vertical Stack for On-Chain Trading
@HyperliquidX is a decentralized cryptocurrency exchange (focused on perpetual swaps and now also spot trading) that has taken a radically verticalized approach to building.
Launched in 2023, Hyperliquid chose not to build on an existing blockchain like Ethereum or Solana.
Instead, the team built its own Layer-1 blockchain explicitly to support the exchange, creating a unified platform for trading.
In effect, Hyperliquid fused the business model of an exchange with the technical architecture of blockchain.
By operating its own chain, Hyperliquid consolidates liquidity across spot and derivatives markets on a single network, rather than fragmenting liquidity across multiple ecosystems or relying on external parties.
In traditional finance terms, this is like putting a stock exchange and transaction clearinghouse under the same roof, integrating what is usually separate and creating operational synergies as a result.
From a business model and UX standpoint, Hyperliquid’s vertical stack is aimed at delivering a centralized exchange experience in a fully on-chain, self-custodial environment.
By not depending on an external blockchain, Hyperliquid avoids the typical friction of an on-chain DeFi experience (unpredictable gas fees, network congestion, slow transaction times) that users will generally face on Ethereum-based DEXs.
Instead, traders on Hyperliquid get near-instant trade execution and finality, much like on Binance or Coinbase, but with the transparency and security of on-chain settlement.
This has resonated with users. Hyperliquid quickly captured over 60% of the on-chain perps trading market by late 2024, and its volumes have surged, making it one of the top DEXs by volume globally despite only launching last year.
Hyperliquid’s model draws clear parallels to the likes of Apple or Amazon. Just as Apple combined hardware and software to create a differentiated product, Hyperliquid combined the blockchain layer with the exchange application to deliver an unmatched trading experience.
Ethena: A Vertically Integrated Stablecoin Stack
Ethena has built a vertically integrated stablecoin stack that combines multiple layers of the crypto value chain under one umbrella. At Ethena’s core is USDe, a fully backed, on-chain synthetic dollar stablecoin.
Unlike fiat-backed stablecoins (USDC, USDT) or over-collateralized crypto dollars (DAI), USDe maintains its peg through a delta-neutral strategy using crypto collateral and derivatives.
When a user mints USDe by depositing assets like staked ETH, the Ethena protocol immediately opens short futures or perpetuals on those assets, hedging out price volatility.
A hallmark of Ethena’s vertical stack is that yield generation is baked into the design of its stablecoin system. Ethena not only issues a dollar-pegged token, but also provides a native yield-bearing version, sUSDe, through the same platform.
When users stake USDe, they receive sUSDe, a token accruing yield from multiple sources that Ethena’s stack captures. These sources include staking rewards (e.g. the ETH collateral is often in the form of staked ETH, so it earns Ethereum staking yield) and basis trade yields from the perpetual/futures markets.
All of this yield is aggregated by Ethena’s protocol, and passed on to sUSDe holders as interest. Importantly, Ethena controls this entire flow, from collateral selection to hedge execution to yield distribution, within one vertically integrated system.
To further consolidate control over its stack and reduce reliance on external infrastructure, Ethena is now planning to launch its own Layer 1 blockchain, optimizing for its stablecoin and yield ecosystem.
In parallel, it also intends to launch a perpetual DEX, bringing the derivatives leg of its strategy fully on chain.
These moves signal a deeper commitment to vertical integration, where Ethena not only issues its own money (USDe), manages its reserves and yield (sUSDe), and orchestrates hedging, but also owns the trading venue and supporting settlement layer.
In essence, Ethena is bringing a crypto-native bank, asset manager, and exchange all into one product experience.
Parallels and the Path Forward
Verticalized stacks, whether in traditional industries or crypto, ultimately serve the same goal: deliver a better, more cohesive product to users and capture the most value by doing so.
The parallels between traditional examples and crypto are striking.
Just as Apple’s control of chip design and software yielded a smoother phone experience, Hyperliquid’s control of its chain and exchange yields a smoother trading experience.
Amazon built a logistics network to ensure fast delivery; similarly, a crypto exchange building its own chain ensures fast transactions for trading.
Of course, vertical integration isn’t a silver bullet. It demands significant resources and expertise in multiple domains. As noted in the tech industry, if you try to integrate too many disparate businesses, you will ultimately lose focus.
The same caution applies to crypto: running an L1 blockchain, user-facing application, and wallet interface fragments product focus. Projects must ensure each layer is world-class. There are also trade-offs with openness; a highly vertical crypto ecosystem might be less composable with others.
Historically, companies have had more success starting on one part of the stack, becoming the market leader of it, and building vertically. This is true in the case of Hyperliquid.
But, an important observation here is that crypto is becoming fairly competitive, and the infrastructure is also becoming commodified. Most importantly:
- Most L1s and L2 are offering similar user experiences, as transaction fees trend towards zero
- Most consensus algorithms are starting to look similar
- Most infrastructure, such as bridges are becoming commodified as well, as bridge fees are also trending to zero.
There are too many similar applications on every new blockchain, and it’s hard to differentiate those.
Infra across chains is now good enough, cheap enough, and indistinguishable.
What matters next is UX as the moat, liquidity as the power law, and in this paradigm, vertical stacks will win.
More vertical stacks.
