Channel dividends have reached their end. How can DeFi protocols resist being harvested by giants?

Original text by: Thejaswini M A

Compiled by: Saoirse, Foresight News

There's a line in *Goodfellas* by Ray Liotta: "F**k you, pay me." This line tears apart the romanticized mafia code of honor seen in movies like *The Godfather*, revealing the cold, parasitic, and purely profit-driven nature of organized crime. Following similar logic, let's talk about big tech companies.

To control value, you must control the profit. To achieve this, you don't even need to build a public chain protocol or a project. It's a profit grab without rules. But we can't fault Coinbase, Stripe, or Kraken for making these choices.

From a fundamental business logic perspective, their moves are akin to a savvy real estate play: securing the prime distribution channels for traffic. Now holding the leverage of these channels, they look down and ask, "Who holds the bargaining power now?"

Coinbase built its own blockchain; Stripe spent $1.1 billion acquiring infrastructure it could have rented; Kraken spent $1.5 billion acquiring a derivatives trading platform; Apple built the App Store. The logic of this strategy is: let others develop the market and bear the early risks, and once the sector becomes sufficiently profitable, take over the underlying infrastructure. The core question this article explores: Where is the industry headed when the traffic distribution channel no longer holds core value?

Coinbase holds 110 million verified users. For years, its lending products offered to users were built on the open-source protocol Morpho, with all protocol fees going to Morpho. Later, Coinbase launched its own Layer 2 blockchain, Base. Morpho chose to deploy on Base solely because of the transaction volume generated by Coinbase's massive user base. Now, every transaction on Base generates sequencer fees that flow entirely to Coinbase, not Morpho.

Base generated $76 million in net sequencer fee revenue in 2024, and $74 million in 2025. Before February 2026, according to the licensing agreement, Coinbase was required to share a portion of these revenues with Optimism. However, Coinbase eventually cut ties, switched to its own internally developed underlying architecture, and now fully retains the $64 million in revenue. Meanwhile, Morpho remains rooted on Base, performing well with a protocol Total Value Locked (TVL) of $2.5 billion. The key difference is that now every transaction Morpho processes on Base yields a share of revenue for Coinbase.

Base monthly sequencer fee revenue, data source: DeFiLlama

Leveraging Morpho's underlying architecture, Coinbase launched a $300 million Bitcoin-backed lending product. Its wrapped Bitcoin, cbBTC, is the largest collateral asset within Morpho, accounting for 38% of the protocol's total TVL. This creates an interdependent dynamic: Morpho provides the core underlying capabilities for Coinbase's credit products, while Coinbase extracts revenue share from all of Morpho's business on its chain, making it difficult for either party to sever ties.

Now consider the Stripe case: In early 2025, it acquired Bridge for $1.1 billion. Previously, Stripe's stablecoin operations relied on Circle's infrastructure. Circle controlled the issuance of the stablecoin and earned the floating-rate interest from the reserve collateral assets. At that time, all the revenue from Stripes hundreds of billions of dollars in stablecoin transaction volume flowed to Circle. Acquiring Bridge completely changed this dynamic. Bridge issues its own stablecoin, USDB, backed by BlackRock money market funds. After switching to USDB, the substantial interest from these reserves stays entirely within Stripe's ecosystem. With Stripe processing $1.4 trillion in annual payment volume, long-term rental of a competitor's underlying profit base would cost hundreds of millions in lost annual profits.

Patrick Collison once called stablecoins "room-temperature superconductors for finance." Spending $1.1 billion to wholly own this underlying tool is far cheaper than continually paying tolls to a competitor.

Pure spot exchanges have a natural growth ceiling, allowing users to trade only hundreds of tokens. But Kraken aims to attract institutional and professional retail investors, who primarily trade via futures and clearing derivatives. Operating a derivatives business requires registration with the Commodity Futures Trading Commission (CFTC), membership in the National Futures Association (NFA), and a broker-dealer license—a compliance framework that takes years to build. Even if built from scratch, regulators could reject the application for various unforeseen reasons.

This is why Kraken targeted NinjaTrader. The $1.5 billion acquisition on January 15, 2025, not only brought 1.7 million funded trading accounts but, more critically, immediately secured the complete set of broker-dealer licenses that Kraken would have struggled to develop in-house quickly.

By acquiring ready-made compliance credentials, Kraken completely eliminated its dependence on external partners. It now wholly owns the entire technology stack and licenses, free from reliance on others and without waiting years for regulatory approval.

Some might argue: Big companies swallowing smaller protocols is the norm in this industry. What's new about this?

Morpho's total TVL is $6.4 billion, with $3.308 billion deployed on Ethereum and $2.488 billion on Base. If Coinbase decided to delist Morpho and switch to an in-house lending protocol, Morpho would immediately lose 39% of its TVL. However, it would still retain 52% of its assets on Ethereum while continuously expanding to other chains like Hyperliquid L1, Monad, and Arbitrum, ensuring its overall operations remain stable.

Morpho TVL distribution across public chains, data source: DeFiLlama

The case of Aerodrome on the Base blockchain vividly demonstrates the industry impact when a chain operator nurtures its own competing projects. Aerodrome is a native decentralized exchange on Base, with its architecture specifically optimized for it. Coinbase Ventures holds approximately $20 million in AERO tokens, its single largest liquid token investment. Meanwhile, the project team locks AERO tokens to vote, directing liquidity towards Coinbase's own products, including cbBTC liquidity pools. Aerodrome captures roughly 51% of the DEX trading volume on Base, peaking at 77% in September 2024. Uniswap, deployed across 44 chains, is the second-largest DEX on Base, holding 30% of the volume. Even losing its top spot on a single chain, Uniswap hasn't died: it processed $212 billion in trading volume on Base in 2025, with an estimated monthly cross-chain trading volume of $73 billion.

DEX trading volume share on Base, data source: DeFiLlama

This case confirms that multi-chain deployment is a natural moat for protocols. Projects deployed on only a single chain are completely at the mercy of the chain operator—who can support a competitor to squeeze their space at any time. In contrast, a multi-chain protocol can continue operating normally in other sectors, even if it loses the market on one particular chain. After witnessing Uniswap's traffic being diverted by Aerodrome on Base, Morpho quickly expanded its deployment to multiple chains. Large traffic platforms can integrate downwards to control the base layer, while open-source protocols can expand horizontally across multiple chains to diversify risk.

If you rely on underlying infrastructure you don't own, you don't truly control your business. The party controlling the base layer holds overwhelming bargaining power, can define your product experience, and ultimately dictates your operational stability. For companies of this scale, this dependency results in real profit erosion every single day. This business logic isn't unique to the crypto industry: Amazon built its moat with AWS; Apple, once constrained by Intel's chip roadmap, spent years developing custom silicon to break free.

Anyone can see in real-time how much Coinbase earns from Base's sequencer fees, and clearly track Morpho's TVL across different chains. This value capture is entirely transparent, a stark contrast to the opaque internal infrastructure profits of traditional internet giants like Amazon.

One potential trajectory for the industry is complete control by a few giants like Coinbase, Stripe, Kraken, and a handful of banks. They would control the entire value chain from underlying protocols to payment cards, with open-source protocols merely filling niche gaps the giants haven't yet decided to exploit. This is a very plausible development path for fintech. Open-source technology ceases to be a vast, free space for innovation and becomes merely a patch for the tiny crevices where massive corporations haven't figured out how to monetize yet. As the saying goes: "Look at this quality little open-source protocol, we can just build a commercial system right on top of it to capture the traffic."

However, I lean towards the optimistic view: given the current acquisition cases, the probability of this complete monopolistic scenario isn't as high as it seems. Underlying protocols are harder for giants to monopolize exclusively like traffic channels. Morpho can deploy on a new chain in just weeks; a battle-tested lending protocol deeply embedded in institutional operations has extremely high switching costs that are hard for outsiders to perceive. Coinbase's $300 million Bitcoin lending product still relies on Morpho because replicating its security framework from scratch would take years and introduce risks Coinbase prefers to avoid.

Protocols that survive this wave of consolidation by giants share one core condition: achieving complete multi-chain deployment before the traffic giants build their own ecosystems, becoming deeply embedded in the backend systems of large enterprises to the point where the economic cost of replacement is prohibitively high. Even Robinhood, a traffic giant with millions of users, chose to integrate with a third-party zero-knowledge proof perpetual exchange, Lighter, as its trading backend. Robinhood Ventures participated in Lighter's $68 million funding round, and founder Vlad Tenev maintains close communication with the project team.

If traffic channels alone were sufficient to build a moat, Robinhood could have built everything in-house like Coinbase. But it didn't: achieving the transaction speed of a centralized exchange combined with zero-knowledge verifiable matching logic is an exceptionally difficult niche technical challenge that took Lighter's team over a year to solve. Robinhood calculated that directly purchasing the rights to use mature technology was far more cost-effective than building from scratch.

Currently, Morpho occupies this advantageous position of mutual checks and balances, with Uniswap being the pioneer on this path. The speed of institutional expansion versus the speed of open-source protocols' horizontal multi-chain expansion is competing, and the final outcome will determine the industry's structural landscape.

The underlying operations of giants like Stripe and Coinbase still rely on open-source technology for now. In the short term, open-source protocols can hold their ground. Let's reassess the industry landscape in two years.