Challenges Facing Crypto Infrastructure
Market Fatigue and Valuation Decline
The cryptocurrency infrastructure sector is experiencing significant market fatigue. After years of explosive growth, infrastructure project valuations are shrinking, and investors are becoming more discerning. This trend reflects a maturing market where technological innovation alone is no longer sufficient to achieve high valuations.
Innovation Challenges
Today's infrastructure projects face a key dilemma: most provide similar functions with minimal differentiation. Despite technological advances, we have yet to see breakthrough use cases that can support entirely new application categories. Ecosystems struggle to provide compelling value propositions that would motivate established Web2 platforms like X or Instagram to migrate to blockchain. Beyond decentralization, these platforms have little reason to fundamentally change their existing operations. This fundamental adoption gap makes transactions and speculation the dominant applications for most infrastructure layers, limiting the sector's transformative potential.
Infrastructure Overbuilding and Vacancy
Many infrastructure projects tend to focus on pursuing forward-looking technological innovations while overlooking developers' actual needs. They often concentrate on elements beyond core functionality, such as privacy protection, trust assumptions, verifiability, and transparency. This overly advanced technological approach ignores short-term market acceptance and practical application, not only increasing early market promotion difficulties but also making it challenging to obtain effective user feedback and validation.
The proliferation of such infrastructure projects creates a paradoxical situation - too many platforms competing for too few attractive applications. This imbalance has led to numerous "ghost chains" with extremely low actual usage and almost no revenue generation, creating unsustainable economic models primarily dependent on token appreciation rather than genuine utility.
For example, despite advanced ZKVM technology, its verifiability does not effectively address the blockchain's current practical challenges or drive more Web2 application integration. Therefore, ZKVM technology currently appears more idealistic than practical infrastructure.
In contrast, cloud computing directly responds to verified market needs - efficiently managing server resources with different configurations, times, and locations. This need already has a mature market foundation, and cloud computing platforms directly satisfy developers' practical demands for rapid deployment, elastic scaling, and cost optimization through modular, interface-based server resources, database management, and storage services. By genuinely solving enterprise and developer pain points, cloud computing technology quickly gained market recognition and ultimately developed into crucial internet economy infrastructure.
Breaking the Feedback Loop
A healthy crypto ecosystem requires an efficient feedback loop between application developers and infrastructure builders. Currently, this loop is broken - application developers are constrained by infrastructure limitations, while infrastructure teams lack clear signals about which features can drive actual usage. Restoring this feedback mechanism is crucial for sustainable growth. Despite these challenges, infrastructure development remains profitable, with 35 of the top 50 cryptocurrencies maintaining their infrastructure layers. However, success standards have significantly increased - new infrastructure projects must simultaneously demonstrate specific use cases, substantial user attraction, and compelling narratives to achieve meaningful valuation.
Most Successful New Infrastructures in the Past Year
Blockchain Infrastructure Evolution
Previous blockchain infrastructure cycles primarily focused on addressing Ethereum's limitations, with projects positioning themselves as "faster and cheaper" alternatives while offering almost no truly innovative features. Today, the landscape has dramatically changed, with recently successful projects introducing more diverse and specialized infrastructure solutions.
Most Influential New Projects
Over the past year, some infrastructure projects achieved remarkable results through TGE or major financing rounds. According to Cryptorank data, these projects represent the most influential new infrastructures in primary and secondary markets:
Blockchain Infrastructure
- Movement: MoveVM Ethereum Layer2
- Berachain: Liquidity Proof, EVM-compatible Layer1
- Monad: High-performance EVM-compatible Layer1
- Solayer: Solana ecosystem re-staking, ultra-high-speed SVM
- Succinct: ZK Proof Generation Network and ZKVM
Emerging Infrastructure
- Walrus: Blob Storage Solution
- Aethir: GPU Computing Network
- Double Zero: Decentralized Physical Fiber Network Infrastructure
- Eigenlayer: Providing Ethereum Security for New Protocols
- Humanity: Digital Identity Protocol Platform
Web2 and Web3 Bridges
- Ondo: RWA Layer2
- Plume: RWAFi Blockchain
- Story: AI-Driven Programmable IP Platform
Project Data Overview (Data as of 2024/4, for reference only):
Core Observations and Analysis
Based on the analysis of recent successful infrastructure projects and the current market environment, the following core observations can be distilled:
Market Maturity and Valuation Reshaping: From Technical Enthusiasm to Value Return
The most significant characteristic of the current market is the transformation of valuation logic. Early models that relied solely on technological narratives and high FDV (Fully Diluted Valuation) to attract investment are facing severe challenges.
Unsustainable Token Economic Models
Many projects exhibit high FDV, low circulating market cap (MC), and low trading volumes. This suggests that future massive token unlocks will bring continuous selling pressure. Even if projects achieve technological progress, token dilution may cause price declines, eroding user confidence and creating a negative feedback loop. This indicates that a sound, sustainable token economic model is crucial for long-term infrastructure health, almost as important as the technology itself.
Valuation Ceiling and Exit Challenges
Even successful projects seem to face an invisible ceiling of around $10 billion in valuation. This means that for investors to obtain excess returns (like 100x), they need to enter extremely early (with valuations below $50 million), highlighting the importance of timing and early judgment. The market no longer easily pays for pure potential but demands clearer value proof.
Execution Trumps First-Mover Advantage
Not all projects that pioneered new narratives achieved the highest valuations. For instance, while Double Zero, Story, and Eigenlayer were first in their respective domains, many subsequent projects obtained equal or higher valuations through stronger execution, better market timing, or more optimized solutions. This indicates that in an increasingly crowded market, high-quality execution, effective market strategies, and timing are becoming increasingly prominent.
Technical Pragmatism Emerges: Focus on Optimization, Integration, and Real Needs
The technological development direction of infrastructure shows a clear pragmatic tendency, with the market favoring solutions that can solve practical problems, optimize existing paradigms, or effectively connect the real world.
Continued Value of "Faster and Cheaper"
Despite the market seeking breakthrough innovations, the demand for optimizing core blockchain performance remains strong. Projects like Monad, Movement, Berachain, and Solayer have gained significant valuations by improving the performance of existing virtual machines (EVM, MoveVM, SVM) rather than introducing entirely new paradigms. This indicates that improvements in speed, cost, and efficiency are still the core value proposition of infrastructure before finding the next killer application. Network layer optimizations (such as Double Zero) and security enhancements (such as Succinct, Eigenlayer) also fall into this category. Embracing the Real World and Connecting Web2 Projects aligning with real-world applications and assets demonstrate strong market appeal. Ondo and Plume focus on RWA (Real World Assets), while Story concentrates on the programmability of IP (Intellectual Property), all of which have received high valuations. They apply blockchain technology to proven Web2 concepts (such as asset management and IP commercialization), infusing them with programmability, global liquidity, and new financial possibilities, lowering user understanding barriers and expanding application scenarios. DeFi and AI as Value Anchors From the perspective of target use cases, finance (DeFi, RWA) and artificial intelligence (AI) are the two areas most recognized by the market and capable of supporting high-valuation infrastructure. This suggests that infrastructure that can provide underlying support for these two high-potential fields is more likely to gain capital and market favor. Some New Narratives Cooling Down Meanwhile, some infrastructure narratives that were once highly anticipated, such as pure gaming chains, Rollup-as-a-Service (RaaS), dedicated verification layers, multi-VM chains, Agent chains, some DePIN and Desci, have not yet produced billion-dollar leading projects in this cycle. This may reflect either insufficient technological maturity or the lack of clear, large-scale market demand and sustainable business models. Ecosystem Synergy and Precise Narrative: Dual Engines of Value Amplification Beyond technology and market positioning, building a robust ecosystem and conducting effective market communication have become key levers for infrastructure project success. Network Effects of Ecosystems The vast majority of projects valued over $1 billion are dedicated to building or integrating into a dedicated ecosystem. Whether L1/L2 attracting developers to build applications or Eigenlayer providing shared security for other protocols, this demonstrates the importance of network effects. Ecosystems with multiple composable projects can create value far beyond isolated solutions, forming a positive cycle that attracts more users, developers, and capital. Layered Narrative, Precise Communication Infrastructure needs to simultaneously address two core groups: end-users and developers, whose needs and focus are entirely different. For end-users, complex technology must be transformed into an intuitive "experience" story (such as fast transaction speed, low cost, ease of use), emphasizing the direct benefits of technology. For developers, the "capabilities" of technology need to be explained in depth (such as performance metrics, development tools, scalability, security), providing professional, precise information for assessment. Successful projects often adjust communication strategies based on different audiences, effectively conveying value propositions. Future Investment Opportunities in Blockchain Infrastructure Targeting Underserved Web2 Markets The most promising infrastructure opportunities will target large Web2 markets not yet fully served by blockchain solutions. These projects can create globally accessible markets while introducing improved financialization mechanisms. Creating New Infrastructure Categories Compared to incremental improvements to existing infrastructure, entirely new infrastructure categories will generate significant value, such as: - Intent-based infrastructure: Protocols that enable users to express desired outcomes rather than specific transactions, automatically optimizing execution. - Privacy addition for each blockchain, HTTPS infrastructure for Web3 Meeting User Needs, Stable Income Infrastructure As the blockchain industry matures, the long-term value of infrastructure is gradually returning to its core function: meeting real user needs and generating sustainable income. The early market's enthusiasm may have been based on expectations and technological narratives, but ultimately, infrastructure that cannot effectively serve users and establish robust economic models will struggle to sustain. Continuous income streams are the lifeblood of project health, which not only need to cover high operating costs but also provide actual returns for ecosystem participants (such as token holders and validators), such as token buybacks and participant incentives. Currently, some top L2s like Base and Arbitrum have achieved significant protocol revenue. Base's annual fees are $27.5M, while Arbitrum and OP are around $7M. However, due to changes in investor preferences in this cycle, their token prices remain relatively low, reflecting a mismatch between income and valuation. The current top Layer2 FDV is 500x annual protocol revenue. They are working to repair this mismatch through measures like token buybacks. Infrastructure lacking income support relies more on token sales to maintain team operations. This strategy is difficult to withstand market cycle fluctuations. Stable income is direct proof of the market's recognition of solving actual problems and providing effective services. For developers, infrastructure can achieve complex, widely-used use cases with hundred-fold efficiency or enable previously impossible functionalities; for end-users, it brings smoother experiences, lower usage costs, and richer features. Web2 Apps Actively Integrating Blockchain Creating revolutionary applications from scratch requires significant time and resources. A more efficient approach mimics the recent AI revolution: directly integrating blockchain functionality into existing Web2 applications. The remarkable adoption speed of AI was primarily driven not by standalone AI applications but by thousands of established platforms integrating AI functionality into existing user experiences. Therefore, blockchain infrastructure must prioritize seamless integration pathways, allowing Web2 applications to gradually implement blockchain functionality without disrupting their core user experience. The most successful infrastructure will enable familiar applications to offer ownership, transaction, and financial capabilities without requiring users to understand complex blockchain concepts or navigate entirely new interfaces. Financial incentives may drive this integration wave. Just as AI functionality helps Web2 companies create advanced tiers and new revenue streams, blockchain integration can unlock new monetization models through tokenization, partial ownership, and programmable royalties. Infrastructure that makes these benefits easy to obtain while minimizing technical complexity will catalyze the next phase of blockchain adoption in mainstream applications.
