Challenges and Opportunities Facing Encryption Infrastructure

Market Status and Challenges

The cryptocurrency infrastructure sector is experiencing significant market fatigue. After years of rapid development, the valuations of infrastructure projects are shrinking, and investors are becoming more cautious. This reflects the increasing maturity of the market, where high valuations can no longer be achieved solely through technological innovation.

The main dilemma facing current infrastructure projects is severe homogenization and insufficient differentiation. Although technology has made progress, there have yet to be breakthrough use cases that support entirely new categories of applications. The ecosystem struggles to provide enough appeal for mature Web2 platforms to migrate to the blockchain. Apart from decentralization, these platforms have little incentive to fundamentally change their existing operating methods. This fundamental adoption gap has led to trading and speculation becoming the dominant applications in most layers of infrastructure, limiting the transformative potential of the field.

Many infrastructure projects focus too much on forward-looking technological innovation while neglecting the actual needs of developers. They often overemphasize elements beyond core functionality, such as privacy protection and verifiability. This forward-looking technological approach overlooks short-term market acceptance and practical application, increasing the difficulty of early promotion and making it hard to obtain effective user feedback.

The surge in infrastructure projects has created a paradox - too many platforms competing for a limited number of attractive applications. This imbalance has resulted in a large number of "ghost chains" with extremely low usage rates and almost no revenue, creating unsustainable economic models that primarily rely on token appreciation rather than actual value.

A healthy encryption ecosystem requires an efficient feedback loop between application developers and infrastructure builders. Currently, this loop has been broken - application developers are constrained by infrastructure, while infrastructure teams lack clear signals to understand which features can drive actual usage. Restoring this feedback mechanism is crucial for sustainable growth.

Characteristics of Successful Projects

Recent successful infrastructure projects exhibit some common characteristics:

1. Pragmatic technical route: Solutions that focus on solving practical problems, optimizing existing systems, or connecting to the real world are more favored.

2. Performance optimization remains important: Projects that enhance the performance of existing virtual machines (EVM, MoveVM, SVM) have received significant valuations, indicating that improvements in speed, cost, and efficiency are still core value points.

3. Connecting with the real world: Projects that focus on real-world assets ( RWA ), intellectual property ( IP ), programmability, and other areas demonstrate strong market appeal.

4. DeFi and AI become value anchors: Infrastructure that can provide underlying support for these two high-potential areas is more likely to attract capital favor.

5. Ecosystem Construction: Projects dedicated to building or integrating into specialized ecosystems often have higher valuations, reflecting the importance of network effects.

6. Precise market communication: Successful projects can adjust communication strategies for different groups such as end users and developers, effectively conveying their value propositions.

Future Investment Opportunities

1. Target the underserved Web2 market, create a globally accessible marketplace, and introduce improved financialization mechanisms.

2. Create a whole new category of infrastructure, such as intent-based infrastructure and Web3 HTTPS infrastructure that adds privacy to each blockchain.

3. Focus on projects that meet the real needs of users and generate sustainable income. A stable income stream is key to the healthy operation of a project, as it not only needs to cover operational costs but should also provide tangible returns for ecosystem participants.

4. Prioritize blockchain features that can be seamlessly integrated into existing Web2 applications. The most successful infrastructure will enable familiar applications to provide ownership, transactions, and financial functionalities without requiring users to understand complex blockchain concepts.

5. Pay attention to blockchain integration solutions that can create new revenue streams for Web2 companies, such as unlocking new monetization models through tokenization, fractional ownership, and programmable royalties.

As the industry matures, the long-term value of infrastructure will return to its core functions: meeting the real needs of users and generating sustainable income. Projects that can effectively serve users and establish robust economic models will be more likely to succeed in future competition.