The Shift from Speed to Sustainability
Mitchell Demeter, who took over as CEO of Sonic Labs just two months ago, believes the blockchain landscape has fundamentally changed. He thinks the era where layer 1 networks competed primarily on transaction speed and low fees is over. Back in 2020 and 2021, being faster and cheaper than Ethereum was a major selling point that attracted developers and users. But now, with so many fast and cheap chains available, block space has essentially become a commodity.
Demeter explains that the real challenge today isn’t just attracting builders and users—it’s keeping them. Builders, users, and capital can move between chains with relative ease these days. Being fast and cheap is no longer enough to maintain a competitive edge. Chains need to create what he calls a “moat” that makes it harder for developers to leave.
Protocol-Level Changes for Developer Stickiness
Sonic Labs is now focusing on protocol-level changes and Ethereum Improvement Proposals (EIPs) to make their chain more appealing to developers. Demeter notes that while Ethereum moves slowly due to its massive ecosystem, smaller chains like Sonic can experiment more freely with these improvements.
One specific example he mentions is EIP-7903, which would increase the smart contract size limit from the current 49 kilobytes. This might seem like a technical detail, but it has significant implications. Larger contract limits make it easier to build complex applications and create what Demeter calls “stickiness”—it becomes more difficult for developers to migrate their entire infrastructure to another chain.
Redesigning Tokenomics for Value Capture
Perhaps the most significant shift Demeter is implementing involves Sonic’s fee model and tokenomics. He acknowledges that the crypto industry is moving away from pure speculation toward sustainable business models. Investors now want to see clear mechanisms for value creation and value capture.
The current fee model returns 90% of fees to builders and 10% to validators. While this approach simplifies the user experience—allowing applications to handle gas fees behind the scenes—it doesn’t benefit token holders. Demeter points out that if this model became widespread, nothing would leave the circulating supply, and no scarcity would be created.
Sonic is now working on a sliding-scale model where builders might receive around 15%, validators get 10%, and the remaining fees are burned. This creates a deflationary mechanism that benefits token holders as network usage increases. Demeter compares this transition to how technology companies like Tesla shifted from issuing stock to buybacks once they reached critical mass.
Beyond Grants: Building Sustainable Infrastructure
When it comes to funding public goods and infrastructure, Demeter takes a pragmatic approach. While Sonic has run grant programs in the past, he notes that builders can be transitory. Instead of trying to play venture capitalist, the company is building relationships with VCs to help fund sustainable businesses.
Demeter believes the ideal scenario is when public infrastructure has real business models and entrepreneurs behind it, rather than relying solely on grants. He’s also exploring licensing Sonic’s technology to exchanges, governments, and banks wanting their own blockchains, using that revenue to fund token buybacks and burns.
The Bigger Picture
Looking at the broader crypto market, Demeter sees a transition underway. Liquidity has tightened, investors have become more sophisticated, and builders have more options than ever. He thinks most of the market pain is behind us, but when liquidity returns, it will be driven more by fundamentals than blind speculation.
For Sonic specifically, Demeter’s priorities include fixing tokenomics, building sustainable grant models with partners, and shifting the company from a tech-only culture to a real business with marketing, communications, and institutional sales. After seven years of building world-class technology, he believes it’s the right time to focus on sustainability and real business value.
