As competition among blockchains intensifies, Sonic Labs CEO Mitchell Demeter says the old playbook for Layer-1 networks focusing on speed and low fees no longer works. In a new interview with crypto.news, Demeter explains how blockchains can stay relevant in a world where block space is abundant and builders have more options than ever.
“Fast and cheap isn’t a differentiator anymore”
Demeter says that between 2020 and 2021, Layer-1 chains could stand out simply by being faster than Ethereum or offering cheaper fees. That advantage has evaporated.
“Block space has become commoditized. Now the real battle is retaining developers, attracting users, and giving them a reason to stay.”
Demeter, who stepped in as CEO just two months ago, says Sonic is shifting its strategy toward long-term builder retention through protocol-level improvements and Ethereum Improvement Proposal (EIP) enhancements.
Protocol Changes: Bigger Smart Contracts, Better Builder Experience
Demeter says smaller chains can move quickly where Ethereum can’t—experimenting with EIPs that would take years to implement on ETH.
One major example is EIP-7903, which aims to increase the maximum smart contract size beyond the current ~49 KB limit.
“Bigger contract sizes allow developers to build more complex apps. The more they build, the harder it becomes to move their entire stack elsewhere. That’s real ecosystem stickiness.”
He says Sonic’s engineering team is reviewing multiple EIPs and consulting directly with builders to shape its roadmap.
Fixing Tokenomics: “Usage → Fees → Burns → Value Returned”
Demeter says users today want real value creation, not hype cycles. Sonic is restructuring its fee system to reflect that.
Currently:
- 90% of fees go to builders
- 10% to validators
- 0% to token holders
This model improves usability but doesn’t create scarcity for token holders.
Sonic is now working on a sliding-scale fee model, where:
- Builders get ~15%
- Validators get 10%
- The majority is burned
“You move from inflation to deflation. Increased usage must translate into value returning to token holders.”
He compares the shift to tech companies like Tesla, which moved from raising capital via issuance to buybacks once they matured.
Using Sonic’s Tech Beyond Its Own Chain
Sonic is exploring licensing its blockchain technology to:
- Exchanges
- Governments
- Banks
Revenue from licensing would be used for token buybacks and burns, strengthening the ecosystem.
“We’ve spent seven years building world-class tech. Now it’s about turning that into a sustainable business.”
Competing With Ethereum and Layer-2s
Demeter says Layer-2s are ultimately tied to Ethereum, while Sonic operates with its own validator set, giving it more flexibility to innovate rapidly.
On public goods funding, he says Sonic is exploring options but prefers sustainable business models over grant-driven approaches.
Demeter’s First Priorities as CEO
His immediate focus included:
- Overhauling tokenomics
- Building a sustainable grants model with VC partners
- Expanding Sonic beyond a tech-focused culture into a full business operation
- Growing marketing, BD, communications, and institutional relationships
“The industry is maturing. We can’t rely on narratives anymore. We need real businesses.”
State of the Crypto Market: “Most of the pain is behind us”
Demeter believes the crypto industry is transitioning into a more sustainable phase:
“Liquidity is tight, investors are more sophisticated, and builders have more options. But I think most of the pain is behind us. When liquidity returns, it will be fundamentals-based, not speculation-based.”
