Challenges and Opportunities Facing Crypto Assets Infrastructure

Current Market Environment

The Crypto Assets infrastructure sector is experiencing significant market fatigue. After years of rapid development, the valuations of infrastructure projects are contracting, and investor sentiment is becoming more cautious. This reflects the increasingly mature market, where relying solely on technological innovation is no longer sufficient to achieve high valuations.

Innovation Bottleneck

Current infrastructure projects face a serious issue of homogenization, with most providing similar functions and lacking differentiation. Despite technological advancements, there have yet to emerge breakthrough use cases capable of supporting entirely new categories of applications. The crypto ecosystem struggles to offer sufficient value propositions to mature Web2 platforms to motivate their migration to the blockchain. Aside from decentralization, these platforms have little incentive to fundamentally change their existing modes of operation. This fundamental adoption gap has led to trading and speculation becoming the dominant applications at the infrastructure layer, limiting the transformative potential of the field.

Overbuilding of Infrastructure

Many infrastructure projects focus too much on forward-looking technological innovations while neglecting the actual needs of developers. They often excessively pursue elements beyond core functionalities, such as privacy protection, trust assumptions, verifiability, and transparency. This advanced technological route overlooks short-term market acceptance and practical applications, not only increasing the difficulty of early promotion but also making it hard for projects to obtain effective user feedback and validation.

The surge in infrastructure projects has created a paradox - too many platforms competing for too few attractive applications. This imbalance has led to a large number of "ghost chains" with extremely low usage rates and almost no revenue, creating an unsustainable economic model that relies primarily on token appreciation rather than actual utility.

For example, although the ZKVM technology is quite advanced, the verifiability it offers does not effectively address the practical challenges faced by blockchain at this stage, nor does it promote the integration of more Web2 applications with blockchain technology. Therefore, ZKVM technology currently appears more as an idealized rather than a practical infrastructure product.

In contrast, cloud computing directly responds to the market-validated demand for efficiently managing server resources with different configurations, times, and locations. This demand itself has a relatively mature market foundation, and cloud computing platforms meet developers' actual needs for rapid deployment, elastic scaling, and cost optimization through modular and interface-based server resources, database management, and storage services. It is precisely because it effectively addresses the pain points of enterprises and developers that cloud computing technology has quickly gained market recognition and ultimately developed into an important infrastructure supporting the internet economy.

Feedback Loop Break

A healthy crypto assets ecosystem requires an efficient feedback loop between application developers and infrastructure builders. Currently, this loop has been broken - application developers are troubled by infrastructure limitations, while infrastructure teams lack clear signals to understand which features can drive actual usage. Restoring this feedback mechanism is crucial for sustainable growth. Despite these challenges, infrastructure development remains lucrative, with 35 of the top 50 crypto assets maintaining their own infrastructure layers. However, the standards for success have significantly increased - new infrastructure projects must showcase specific use cases, substantial user appeal, and compelling narratives to achieve meaningful valuations.

Recent Successful Infrastructure Projects

Blockchain Infrastructure

• Movement: MoveVM Ethereum Layer2
• Berachain: Liquidity Proof, EVM compatible Layer 1
• Monad: High-performance EVM-compatible Layer 1
• Solayer: Heavy re-staking based on the Solana ecosystem, ultra-fast SVM
• Succinct: ZK proof generation network and ZKVM

Emerging Infrastructure

• Walrus: Blob Storage Solution
• Aethir: GPU computing network
• Double Zero: Decentralized Physical Fiber Optic Network Facilities
• Eigenlayer: Provides Ethereum security for new protocols
• Humanity: Digital Identity Protocol Platform

The bridge between Web2 and Web3

• Ondo: RWA Layer2
• Plume: RWAFi Blockchain
• Story: AI-driven IP programmable platform

Core Observations and Analysis

Market Maturity and Valuation Restructuring

The most significant characteristic of the current market is the shift in valuation logic. The early model that solely relied on technical narratives and high FDV to attract investment is facing severe challenges.

Many projects exhibit characteristics of high FDV, low circulating market cap, and low trading volume. This indicates that a large number of tokens being unlocked in the future will bring continuous selling pressure. Even if the project makes technical progress, the price may drop due to token dilution, which in turn erodes user confidence and creates a negative feedback loop. This suggests that a sound and sustainable token economic model is crucial for the long-term health of the infrastructure, being as important as the technology itself.

Even successful projects seem to face an invisible ceiling of around $10 billion in valuation. This means that for investors, achieving excess returns requires entering at a very early stage, highlighting the importance of timing and early judgment. The market is no longer easily paying for pure potential, but rather demands clearer proof of value.

Not all projects that have pioneered new narratives can achieve the highest valuations. For example, although Double Zero, Story, and Eigenlayer are pioneers in their respective fields, many subsequent projects have obtained comparable or even 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 have become increasingly important.

Technological Pragmatism Rises

The technological development direction of infrastructure shows a clear pragmatic tendency, with the market favoring solutions that can solve real problems, optimize existing paradigms, or effectively connect with the real world.

Despite the market seeking breakthrough innovations, the demand for optimization of core blockchain performance remains strong. Projects such as Monad, Movement, Berachain, and Solayer have achieved significant valuations by enhancing the performance of existing virtual machines (EVM, MoveVM, SVM) rather than introducing entirely new paradigms. This indicates that improvements in speed, cost, and efficiency remain core value points of infrastructure before the next generation of killer applications is found. Network layer optimization and security enhancements also fall into this category.

Projects that connect with real-world applications and assets demonstrate strong market appeal. Projects focusing on RWA and attention to the programmability of IP have received high valuations. They apply blockchain technology to validated Web2 concepts, injecting programmability, global liquidity, and new financial possibilities, lowering the user understanding threshold and expanding application scenarios.

From the perspective of target use cases, finance ( DeFi, RWA ), and artificial intelligence ( AI ) are currently the two most recognized areas in the market that can support high valuation infrastructure. This indicates that infrastructure capable of providing underlying support for these two high-potential fields is more likely to attract capital and market favor.

At the same time, some infrastructure narratives that were once highly anticipated, such as pure gaming chains, Rollup-as-a-Service (RaaS), dedicated validation layers, multi-VM chains, Agent chains, and parts of DePIN and Desci, have not yet produced billion-dollar leading projects in this cycle. This may reflect that these fields either lack technological maturity or have not yet found clear, large-scale market demand and sustainable business models.

Ecological Coordination and Precise Narration

In addition to technology and market positioning, building a strong ecosystem and effective market communication have become key levers for the success of infrastructure projects.

The vast majority of projects valued at over $1 billion are dedicated to building or integrating a dedicated ecosystem. Whether it's L1/L2 attracting developers to build applications or providing shared security for other protocols, it reflects the importance of network effects. An ecosystem with multiple composable projects can create value far beyond isolated solutions, forming a positive feedback loop that attracts more users, developers, and capital.

Infrastructure needs to cater to two core groups: end users and developers, whose needs and concerns are vastly different. For end users, it is necessary to translate complex technology into intuitive "experience" stories, emphasizing the direct benefits brought by the technology. For developers, a deep explanation of the technology's "capabilities" is required, providing professional and precise information for assessment. Successful projects often adjust their communication strategies based on different audiences to effectively convey their value propositions.

Future Investment Opportunities

Targeting the underserved Web2 market

The most promising infrastructure opportunities will target the large Web2 markets that blockchain solutions have not yet fully serviced. These projects can create globally accessible markets while introducing improved financialization mechanisms.

Create a new category of infrastructure

Compared to gradually improving existing infrastructure, the new category of infrastructure will generate significant value, such as:

• Intent-based infrastructure: A protocol that allows users to express desired outcomes rather than specific transactions, automating execution optimization.
• Add privacy to each blockchain, the HTTPS infrastructure of Web3

Infrastructure that meets user needs and provides stable income.

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 revenue. The early market frenzy 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 itself.

A continuous stream of income is the lifeblood of a project's healthy operation. It not only needs to cover high operating costs but should also provide actual returns to ecological participants, such as for token buybacks and incentivizing participants. Currently, some leading L2s have achieved considerable protocol income. However, due to changes in investor preferences during this cycle, their token prices remain relatively low, reflecting a mismatch between income and valuation. Currently, the FDV of leading Layer2s is 500 times their annual protocol income. They are addressing this mismatch through measures such as token buybacks.

Infrastructure lacking income support relies more on selling tokens to maintain team operations. This strategy is difficult to withstand the fluctuations of market cycles. Stable income is a direct proof that the market addresses real problems and provides effective services. For developers, infrastructure can achieve widely adopted complex use cases with a hundred times the efficiency or realize functionalities that were previously unattainable; for end users, it can bring a smoother experience, lower usage costs, and richer features.

Web2 applications actively integrate blockchain

Creating revolutionary applications from scratch requires a significant amount of time and resources. A more efficient approach mimics the recent AI revolution: directly integrating blockchain functionality into existing Web2 applications. The astonishing speed of AI adoption is primarily driven not by standalone AI applications, but by thousands of established platforms integrating AI capabilities into existing user experiences.

Therefore, blockchain infrastructure must prioritize seamless integration pathways, allowing Web2 applications to gradually implement blockchain functionalities without disrupting their core user experience. The most successful infrastructure will enable familiar applications to provide ownership, transaction, and financial functionalities without requiring users to understand complex blockchain concepts or navigate entirely new interfaces.

Financial incentives may drive this wave of integration. Just as AI capabilities help Web2 companies create advanced tiers and new revenue streams, blockchain integration can unlock new monetization models through tokenization, fractional ownership, and programmable royalties. Infrastructure that makes these benefits easily accessible while minimizing technical complexity will catalyze the next phase of blockchain adoption in mainstream applications.

![From narrative fatigue