Sophon, which has raised $70 million in total funding, is shutting down its Layer 2 blockchain and moving to Base to build consumer apps, claiming the infrastructure era of crypto is over.
“The bet is that the value has never been in who runs the rails, but rather always been in the products built on top,” Sebastien (Seb), Sophon’s semi-anonymous co-founder, told The Block. “Sophon is choosing to go deep on those products rather than maintain infrastructure.”
Notably, Sophon spent about $3.4 million per year maintaining its blockchain, Seb said, covering the full stack of chain infrastructure, rollup-as-a-service, data, analytics, and tooling vendors. Sunsetting the chain cuts annual burn by an estimated $3 million, Seb noted, extending runway and freeing capital to go directly into app development.
As part of its new strategy, the role of the Sophon (SOPH) token will also change. Seb said the token’s previous role was as the gas token for the Sophon blockchain. As the chain sunsets, the focus shifts to direct value accrual from product revenue.
“The new strategy centres on buyback and burn,” Seb said. “Significant portions of revenues generated by Pyre, XP, SophEarn, SophPlay, SophAI will be used to buy back SOPH on the open market and burn it — tying the token directly to the commercial success of a growing portfolio of consumer products. The more the products win, the more value flows back to SOPH holders.”
The SOPH token is currently trading at around $0.0048, down about 86% over the past year, according to CoinGecko data.
Pyre, XP, SophEarn, SophPlay, and SophAI are the new apps Sophon plans to build on Base, an Ethereum Layer 2 blockchain incubated by crypto exchange Coinbase. Seb said Pyre is a DeFi-enabled, gamified neofinance app where every payment triggers a game that gives users a chance to win money back. The crypto infrastructure remains in the background, and users interact entirely in dollars, he said, adding that the app will launch early next month.
Every transaction above $1 earns a game entry inside the app. At launch, Pyre will include two games: Inferno, where users collect coins while avoiding obstacles, and Splash, a one-tap timing game that can be played against other users or the house. A third game, Scalp It, will launch shortly afterward. Seb said AI agents will also be able to play on behalf of users.
Beyond gamification, Seb said the Pyre app will offer DeFi yield vaults aggregating across leading protocols, fractional tokenized equities trading 24/5 through Dinari, leveraged perpetual futures through Avantis and Hyperliquid, and prediction markets through Polymarket for users outside the U.S. “An AI-powered quant signal system is also in development for paying subscribers,” Seb said.
“Revenue streams are already built in: DeFi vault performance fees, trading fees, swap fees, and a subscription tier with premium perks,” he added.
The Sophon Earn app also launches next month and is the standalone version of the vault infrastructure powering Pyre, Seb said. Sophon Play, expected in the third quarter, will make the gamification technology behind Pyre available to other developers through an API, Seb said. XP.app, planned for the third or fourth quarter, is a payments product aimed at high-net-worth users and will include custom payment hardware.
SophAI, currently under development, is an AI-focused product that Seb said is expected to enter alpha later this year. “We’ve been quietly building in AI since before the pivot. The thesis is that the most interesting problems in AI right now aren’t at the model layer, but elsewhere. We have something in development that we think is genuinely new. More soon,” he said.
When asked how Sophon plans to attract users to these apps, Seb said the company is focusing on product design rather than crypto influencer marketing. He said the goal is to create products people naturally want to share, with gamification attracting users and the overall user experience keeping them engaged.
[The Block]
The biggest takeaway from this news is that Sophon, a crypto project with a $70 million war chest, is bailing on its Layer 2 blockchain and instead focusing on building consumer products on top of Base. By doing so, Sophon is potentially striking a nerve in the crypto industry, where infrastructure has traditionally been the key to success. But Seb, Sophon’s semi-anonymous co-founder, says that the days of making money from who runs the rails (or Layer 2 blockchain) are over, and the value lies in the products built on top. That’s an interesting thesis, especially considering the SOPH token has been underwhelming investors with an 86% price drop in the past year.
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Executive Summary
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Sophon, a $70 million crypto project, is abandoning its Layer 2 blockchain and refocusing on building consumer products on top of Base. This shift is a bold move in the crypto industry, where infrastructure has traditionally been the key to success.
The Core Friction
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Sophon’s transformation is rooted in the idea that the value lies in the products built on top, not in the infrastructure. By making this shift, Sophon aims to reap the rewards of consumer adoption rather than relying on the strengths of its blockchain. This pivot is particularly interesting, considering the SOPH token has suffered an 86% price drop in the past year.
Market Impact & Chain Reaction
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Short-term:
The SOPH token is expected to react to this news, possibly experiencing further decline due to the shift away from the Layer 2 blockchain. However, the potential success of the new consumer products may eventually buoy the token’s price.
Mid-term:
The market impact will be significant, as Sophon’s exit from the blockchain space opens opportunities for other projects to fill the void. Competitors may see this move as a chance to gain traction and grab market share.
RichSilo Verdict
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Sophon’s decision to pivot towards consumer products is a bold move, and its success will depend on the adoption and engagement of its new apps. If Sophon can execute on its plans, the SOPH token may see a rebound. However, the crypto market is notoriously unpredictable, and the success of this pivot is far from guaranteed.
Investors should keep a close eye on how this transformation unfolds and how the new apps perform. The SOPH token’s price may fluctuate in response to the success or failure of Sophon’s new consumer products.
