A new chain launches. The team has funding, a roadmap, validators coming online. They need developers. Developers need data infrastructure—a way to query chain state, index events, build applications that actually work.

So the foundation calls an indexer. The conversation is short. Six figures a year, paid monthly, just for the indexer to process their data. Non-negotiable. And that's before any developer has made a single query—those get billed separately.

The foundation pays. They don't have a choice.

Meanwhile, the validators who actually run this chain's infrastructure are watching. They process every transaction. They store the data. They've staked capital and taken on slashing risk. And a company that showed up with an API and a sales team is now collecting more predictable revenue from this ecosystem than they are.

This is happening everywhere. Major protocols spending millions annually on indexing. DAOs allocating treasury funds just to access their own ecosystem's data. Developers burning runway on API fees that flow straight out of the communities they're building in.

The money doesn't go to validators, protocol development, or ecosystem growth. It leaves entirely.

This extraction pattern isn't new. We've watched it play out before—and understanding where helps clarify what's actually happening here.

The Weather Data Parallel

Consider how weather data works in the United States. The National Weather Service collects atmospheric data using taxpayer-funded infrastructure. That data is public, and companies are free to build services on top of it. Weather.com, AccuWeather, and dozens of others have done exactly that.

There's nothing inherently wrong with this. These companies add value—better interfaces, forecasting models, localized alerts. They've built businesses serving weather data, and they charge for it.

But here's what's worth noticing: every dollar those companies earn leaves the system that created the underlying data. The revenue doesn't flow back to NOAA. It doesn't fund better satellites or more weather stations. It enriches shareholders of companies whose interests are entirely separate from improving public weather infrastructure.

The value extraction isn't illegal. It isn't even unethical. It's just extractive. The companies capturing value have no alignment with the system generating it.

Blockchain indexers operate the same way—except the misalignment runs deeper.

Extraction Without Contribution

When you pay Alchemy or The Graph for API access, that revenue goes to their shareholders. Not to the validators who secured the network. Not to the protocol's development fund. Not to the ecosystem that generated the data being monetized.

It exits the system completely.

Blockchain ecosystems were designed differently. They're circular economies where value flows back to participants who contribute. Validators secure the network and earn fees. Developers build applications and capture usage. Token holders govern and benefit from growth. The system rewards contribution.

Indexers sit outside this loop. They've built infrastructure that blockchain ecosystems depend on, but they contribute nothing to network security, governance, or protocol development. They don't stake tokens, run validators, or participate in the economic system they monetize.

They're pure extractors—capturing value generated by others and routing it out of the ecosystem.

The crypto community has strong opinions about this dynamic in other contexts. MEV extraction, front-running, predatory trading—there's a general ethos that value should flow to participants, not to extractors positioned at chokepoints. Indexing is the same pattern wearing infrastructure clothing. Why does it get a pass?

The Numbers Add Up

Scale this across the industry and the capital outflow becomes significant.

Major protocols spend millions annually on indexing services. DAOs allocate treasury funds for data access. Venture-backed applications dedicate runway to API costs. All of this capital—generated within blockchain ecosystems—flows to companies that view any given chain as one revenue line among many.

For smaller or newer chains, the dynamics are particularly brutal. Indexers don't just wait for query revenue to materialize—they demand ongoing monthly fees just to index the chain at all. We've heard from ecosystems paying six figures annually simply for an indexer to be willing to process their data. If a foundation wants to give their developers options—multiple indexers for redundancy or different feature sets—multiply that cost accordingly. Hundreds of thousands of dollars a year, month after month, before a single developer has made a single query.

And then those developers still have to pay for access.

The ecosystem gets squeezed on both ends. Pay to get indexed. Pay again to read the data. The indexer captures value coming and going, while contributing nothing to the network's security or governance. And as the chain grows, as data volumes increase, those monthly fees have a way of growing too. The more successful the ecosystem becomes, the more it pays its extractors.

This extraction flows downstream to everyone building in the ecosystem. Developers pay the tax through API fees, which increases their cost to build, which raises the bar for what projects are economically viable. The ecosystem loses applications that could have existed but couldn't pencil out because infrastructure costs ate the margin. How many projects never got built because the data layer alone made them unprofitable?

Meanwhile, the validators who actually secure these chains are left to make do with token incentives. They already run the infrastructure. They already process every transaction. But their costs are real and denominated in dollars: hardware, bandwidth, operations. Their revenue comes in native tokens. To pay bills, they sell.

This is where validator pain becomes ecosystem pain.

Every validator covering costs adds sell pressure on the token. If you're holding, you feel that. Lower token prices mean validator incentives are worth less, so foundations compensate by increasing emissions—diluting your stake further. Builders watching token prices slide start questioning whether to build here or somewhere else. Investors see the downward pressure and hesitate to fund ecosystem projects. The narrative shifts from growth to survival.

The extraction doesn't just hit validators. It hits everyone with skin in the game.

The ecosystem bleeds value just to maintain basic infrastructure. Treasury funds that could go toward grants, developer relations, or protocol development get redirected to subsidize validator operations or pay indexer fees. Every dollar sent to an external indexer is a dollar not spent on ecosystem growth. Every token sold by a struggling validator is downward pressure felt by everyone holding that asset.

And through all of this, the validators who could provide all the data their ecosystem needs—who are already aligned through staking and long-term commitment—watch revenue flow to external companies that showed up with leverage and extracted a toll.

The indexers aren't just extracting from validators. They're extracting from the entire system.

The Bootstrapping Trap

New chains face the sharpest version of this problem.

You can't attract developers without data infrastructure. Developers need to query chain state, index events, build applications that read data reliably. Without that, you don't have an ecosystem—you have a chain nobody can build on.

Indexers know this. And they price accordingly.

The leverage is maximal precisely when the ecosystem is weakest. A new chain has no query volume to offer, no established developer base, no proof that the investment will pay off. So indexers demand guaranteed payment—ongoing monthly fees that extract value from treasuries before the ecosystem has generated any.

Foundations face an impossible choice: pay the extraction tax or watch developers go elsewhere. Most pay. They don't have an alternative.

This is the bootstrapping trap. The chains most vulnerable to extraction are the ones who can least afford it. And every dollar spent on indexer fees during this critical phase is a grant program that didn't happen, a hackathon that got cut, a dev rel hire that got delayed. The opportunity cost compounds. Ecosystems don't just lose the money—they lose what that money could have built.

Lock-In by Design

The dependency didn't happen accidentally. Early blockchain infrastructure was genuinely hard to work with. Indexers solved real problems with developer experience, and in doing so, became load-bearing walls in application architectures everywhere.

Now switching costs are enormous. Your data layer is built around specific API formats, query languages, and transformation logic. Moving means significant rewrites—assuming alternatives even exist for your chain.

This is platform capture. Solve a problem, become essential, then extract once leaving is too expensive. We watched Web2 companies perfect this playbook. Blockchain was supposed to route around these dynamics, but here we are—dependent on extractors who've optimized their position for maximum leverage.

Who Should Capture This Value?

Monetizing blockchain data infrastructure isn't the issue. The work is real. The costs are real. Someone should be compensated.

The question is whether that someone should be aligned with the ecosystems they serve.

Validators already run infrastructure. They already have an economic stake through tokens and staking. When the chains they support thrive, they thrive. Their incentives point toward ecosystem health, not extraction.

If the value of serving blockchain data flowed to validators instead of external companies, the revenue stays in the ecosystem. Validators can reinvest in better infrastructure. They can participate more actively in governance. They can reduce costs for users, driving more adoption, generating more data, and creating more opportunities.

That's a flywheel. What we have now is a drain.

There's another dimension here that doesn't get discussed enough: resilience during downturns. When markets contract, validator economics get squeezed. Transaction volumes drop. Token prices fall. Suddenly, the validators securing your network are operating at a loss, and foundations face pressure to distribute additional tokens just to keep infrastructure operators afloat. That means dilution, treasury depletion, ecosystem resources burned on survival instead of growth.

Validators with diversified revenue streams—including data infrastructure—are better positioned to weather these cycles without emergency support. The ecosystem becomes more resilient precisely because the entities securing it aren't single-threaded on transaction fees and token inflation.

The Alignment Question

Every blockchain community should be asking: why are we routing significant revenue to companies with no stake in our success?

The infrastructure serving blockchain data should share blockchain values. The entities capturing value should be the ones contributing to network security and governance. The economics should strengthen ecosystems, not extract from them.

Indexing isn't going away. The need for structured, queryable blockchain data is only growing. The question is whether that need continues to be met by external extractors—or by infrastructure aligned with the networks it serves.

We built these systems to eliminate rent-seeking middlemen. We should probably stop funding new ones.

We're not the only ones who see this problem. If you're a validator, builder, or ecosystem contributor who's fed up with funding your own extraction, we're building the alternative at Shinzo. Join the conversation.
X · Telegram · Discord · GitHub ·  shinzo.network