Challenges and Opportunities Facing Crypto Assets Infrastructure

Market Status and Challenges

The Crypto Assets infrastructure sector is experiencing significant market fatigue. After years of rapid growth, the valuations of infrastructure projects are contracting, and investors are becoming more cautious. This reflects a gradually maturing market, where relying solely on technological innovation has become difficult to achieve high valuations.

A core dilemma facing current infrastructure projects is that most projects offer similar functionalities with low differentiation. Despite technological advancements, there has yet to be a breakthrough use case that supports entirely new categories of applications. The ecosystem struggles to provide sufficient attraction for mature Web2 platforms to migrate to blockchain. Aside from the characteristic of decentralization, these platforms have little motivation to fundamentally change existing operating models. This fundamental adoption gap has led to trading and speculation becoming the dominant applications of most infrastructure layers, limiting the transformative potential of the field.

Many infrastructure projects focus too much on cutting-edge technological innovation while neglecting the actual needs of developers. They often overly emphasize elements beyond core functionalities, such as privacy protection, trust assumptions, verifiability, and transparency. This forward-looking technological approach ignores the importance of short-term market acceptance and practical application, increasing the difficulty of early promotion and making it hard for projects to obtain effective user feedback and validation.

The surge in infrastructure projects has created a paradox - numerous platforms competing for a limited number of high-quality applications. This imbalance has resulted in many "empty chains" with extremely low usage rates and almost no revenue, forming an unsustainable economic model that primarily relies on token appreciation rather than actual utility.

For example, although ZKVM technology is advanced, its provided verifiability has not effectively addressed the actual challenges faced by blockchain, nor has it promoted the integration of more Web2 applications with blockchain technology. Therefore, ZKVM technology currently resembles more of an idealized rather than a practical infrastructure product.

In contrast, cloud computing directly meets the verified market demand for efficiently managing server resources with different configurations, times, and locations. This demand has a mature market foundation, and cloud computing platforms directly satisfy developers' actual needs in rapid deployment, elastic scaling, and cost optimization through modular and interface-based server resources, database management, and storage services. Because it effectively addresses the pain points of enterprises and developers, cloud computing technology has rapidly gained market recognition, ultimately developing into a key infrastructure supporting the internet economy.

The Key to Breaking the Status Quo

A healthy crypto ecosystem requires an efficient feedback loop between application developers and infrastructure builders. Currently, this loop has broken down - 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 risen significantly - new infrastructure projects must simultaneously demonstrate specific use cases, mass user appeal, and compelling narratives to achieve meaningful valuations.

Recent Successful New Infrastructure Projects

The previous cycle of blockchain infrastructure mainly focused on addressing the limitations of Ethereum, with various projects positioning themselves as "faster and cheaper" alternatives, while providing little in terms of truly innovative features. Today, the landscape has changed dramatically, with recently successful projects introducing more diversified and specialized infrastructure solutions.

In the past year, several infrastructure projects have achieved significant results through TGE or large-scale financing rounds. These projects represent the most influential new infrastructure in the primary and secondary markets:

Blockchain Infrastructure

• Movement: MoveVM Ethereum Layer2
• Berachain: Liquidity Proof, EVM compatible Layer 1
• Monad: High-performance EVM-compatible Layer 1
• Solayer: Heavy 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: Providing Ethereum security for new protocols
• Humanity: Digital Identity Protocol Platform

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 infrastructure projects and the current market environment, the following core observations can be distilled:

Market Maturity and Valuation Restructuring

The most significant characteristic of the current market is the shift in valuation logic. The earlier model of attracting investments solely based on technical narratives and high FDV ( fully diluted valuation ) is facing severe challenges.

Many projects exhibit characteristics of high FDV, low circulating market cap (MC), and low trading volume. This indicates that a large number of tokens unlocking in the future will bring continuous selling pressure. Even if the project makes technical progress, it may still experience a price 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, and its importance is no less than that of the technology itself.

Even successful projects seem to face an invisible cap of about 10 billion USD in valuation. This means that for investors, obtaining excess returns like 100 times requires entering at an extremely early stage with a valuation below 50 million USD, highlighting the importance of timing and early judgment. The market is no longer willing to pay for pure potential easily, but rather demands clearer proof of value.

Not all projects that have created new narratives can achieve the highest valuations. For example, while some projects are pioneers in their respective fields, many subsequent projects have achieved comparable or even higher valuations through stronger execution, better market timing, or more optimized solutions. This indicates that in an increasingly crowded market, the importance of high-quality execution, effective market strategies, and an understanding of timing is becoming increasingly prominent.

( 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's pursuit of breakthrough innovations, the demand for optimization of core blockchain performance remains strong. Some projects 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 finding the next generation of killer applications. Network layer optimization and security enhancements also fall under this category.

Projects that connect with real-world applications and assets demonstrate strong market appeal. Projects focusing on RWA) real world assets### and the programmability of IP( intellectual property) have received high valuations. They apply blockchain technology to verified Web2 concepts( such as asset management and IP commercialization), 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 currently the two areas most recognized by the market, capable of supporting high valuation infrastructure. This indicates that infrastructure capable of providing underlying support for these two high-potential areas 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), specialized validation layers, multi-VM chains, Agent chains, partial DePIN, and Desci, have not yet produced billion-dollar leading projects in this cycle. This may reflect either insufficient technological maturity in these areas or the absence of clear, large-scale market demand and sustainable business models.

( Ecological Collaboration and Precise Narrative

In addition to technology and market positioning, building a strong ecosystem and conducting 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 is 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 both end users and developers, two core groups with vastly different needs and concerns. For end users, complex technology needs to be transformed into intuitive "experience" stories, such as fast transaction speeds, low costs, and ease of use, emphasizing the direct benefits brought by technology. For developers, a deep explanation of the technology's "capabilities" is required, such as performance metrics, development tools, scalability, and security, providing professional and precise information for evaluation. Successful projects are often able to adjust their communication strategies based on different audiences to effectively convey their value propositions.

Future Investment Opportunities in Blockchain Infrastructure

) Targeting the underserved Web2 market

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

( Create a new category of infrastructure

Compared to progressively improving existing infrastructure, a 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, automatically handling execution optimization.
• Add privacy to every 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 the real needs of users 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 operational costs but should also provide actual returns for ecological participants ### such as token holders and validators (, for example, for token buybacks, incentivizing participants, etc. 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 income and valuation. Currently, the FDV of leading Layer 2s is 500 times the annual protocol revenue. They are working to correct 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 of the market's ability to solve practical problems and provide effective services. For developers, infrastructure can achieve widely applied complex use cases with a hundredfold efficiency or realize functions that were previously unattainable; for end users, it can bring a smoother experience, lower usage costs, and richer functionalities.

![From narrative fatigue to valuation shrinkage, analyzing the current challenges and opportunities of Crypto Assets infrastructure])