Challenges and Opportunities Facing Encryption Infrastructure

The cryptocurrency infrastructure sector is experiencing market fatigue, project valuations are shrinking, and investors are becoming more cautious. This reflects the gradual maturation of the market, where relying solely on technological innovation has become insufficient to achieve high valuations.

The main issue facing infrastructure projects today is severe homogenization, lacking breakthrough use cases that can support entirely new categories of applications. It is difficult to provide sufficient value propositions for mature Web2 platforms to migrate to blockchain. This results in transactions and speculation remaining the dominant applications of most infrastructure, limiting transformative potential.

Many projects focus excessively on cutting-edge technology, neglecting the actual needs of developers. Overly advanced technology routes increase the difficulty of early promotion and make it hard to obtain effective user feedback. A large number of platforms compete for limited applications, resulting in extremely low usage rates of "ghost chains" and creating an unsustainable economic model.

A healthy encryption ecosystem requires an efficient feedback loop between application developers and infrastructure builders. Currently, this loop has been broken, with application development being constrained by infrastructure limitations, while infrastructure teams lack clear signals to understand demand. Restoring this mechanism is crucial for sustainable growth.

Despite these challenges, infrastructure development remains profitable. However, the standards for success have risen significantly - new projects must simultaneously demonstrate concrete use cases, user appeal, and compelling narratives to achieve meaningful valuations.

Recent Successful Infrastructure Projects

In the past year, some infrastructure projects have achieved remarkable results through token issuance or large-scale financing. Here are some representative 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

Based on the analysis of recent successful projects and in combination with the current market environment, the following core observations can be made:

Market Maturity and Valuation Restructuring

The most significant feature 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 suggests that future token unlocks will bring ongoing selling pressure, and even if the project makes technological progress, price declines may occur due to token dilution, creating a negative feedback loop. A sound and sustainable token economic model is crucial for the long-term health of the infrastructure.

Even successful projects face an invisible cap on valuation of about $10 billion. This means that investors need to enter at a very early stage to achieve excess returns, highlighting the importance of timing and early judgment. The market is no longer easily willing to pay for pure potential, but requires clearer proof of value.

Execution Power Overwhelms First-Mover Advantage

Not all projects that create new narratives can achieve the highest valuations. Many subsequent projects have obtained comparable or even higher valuations through stronger execution, better market timing, or more optimized solutions. In an increasingly crowded market, high-quality execution, effective market strategies, and an understanding of timing are becoming increasingly important.

Technological Pragmatism Rises

The technological development direction of infrastructure shows a明显的务实倾向, the market prefers those solutions that can solve practical 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 that enhance the performance of existing virtual machines, rather than introducing entirely new paradigms, have achieved significant valuations. This indicates that improvements in speed, cost, and efficiency remain the core value points of infrastructure before the next generation of killer applications is found.

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

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

Ecological Synergy and Precise Narrative

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

The vast majority of high-valuation projects are dedicated to building or integrating into specialized ecosystems. Whether it is 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.

Infrastructure needs to cater to both core groups: end users and developers. For end users, it is necessary to transform complex technologies into intuitive "experience" stories; for developers, a deep explanation of the technology's "capabilities" is required. Successful projects often adjust their communication strategies based on different audiences to effectively convey their value propositions.

Future Investment Opportunities

Targeting Untapped Web2 Market

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

Create a new category of infrastructure

Compared to gradually improving existing infrastructure, a new category of infrastructure will generate significant value, for example:

• Intent-based infrastructure: A protocol that allows users to express desired outcomes rather than specific transactions, automatically handling execution optimization.
• Add privacy for 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. Early market excitement may have been based on expectations and technological narratives, but ultimately, infrastructure that cannot effectively serve users and establish a robust economic model will struggle to sustain itself.

A continuous revenue stream is the lifeblood of a project's healthy operation; it not only needs to cover high operating costs but should also provide actual returns for ecosystem participants. Currently, some leading L2s have achieved considerable protocol revenue. However, due to changes in investor preferences during this cycle, their token prices remain relatively low, reflecting a mismatch between revenue and valuation.

Infrastructure lacking income support relies more on selling tokens to maintain team operations. This strategy is difficult to withstand market cycle fluctuations. Stable income is a direct proof that the market is solving real problems and providing effective services. For developers, infrastructure can efficiently achieve complex use cases or realize previously unattainable functionalities; for end users, it can bring a smoother experience, lower usage costs, and richer features.

Web2 APP Actively Integrates Blockchain

Creating revolutionary applications from scratch requires a significant amount of time and resources. A more efficient approach is to emulate 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, enabling Web2 applications to gradually implement blockchain functionalities without disrupting their core user experience. The most successful infrastructure will allow familiar applications to offer 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. Making these benefits easily accessible while minimizing the technical complexity of the infrastructure will catalyze the next phase of blockchain adoption in mainstream applications.