Cycles and narratives have long defined the global cryptocurrency market. Historically, the industry relied on Bitcoin halving events to gauge market cycles and identify major trends. However, with the approval of Bitcoin and Ethereum spot ETFs, the crypto market has become increasingly intertwined with global finance. This integration has introduced more variables influencing market movements.
Amid growing uncertainty, understanding these cycles and anticipating future narratives is crucial. Investment institutions often lead this exploration, seeking to capitalize on emerging trends. This analysis, developed in collaboration with industry experts, examines the current state and future evolution of crypto infrastructure.
Current State of the Crypto Infrastructure Sector
Layer-2 Solutions and Market Dynamics
Data from L2Beat indicates numerous rollup solutions now exist, yet only a few demonstrate activity levels surpassing Ethereum itself. Over the past two years, infrastructure projects dominated primary market investments, particularly during the challenging fundraising period of 2022-2023. However, by late 2023, venture capital preference shifted toward application-based Web3 projects.
This transition raises concerns about resource allocation between infrastructure and applications. Without balance, we risk creating an ecosystem with more Layer-2 solutions than actual users or supporting services. The modular narrative contributes to this phenomenon, where isolated architectural components like data availability, execution layers, and interoperability solutions undergo constant recombination and rebranding as "innovations" without addressing fundamental adoption barriers.
Positive Developments and Ecosystem Maturation
Despite these challenges, significant progress has emerged. Ethereum has shed its "noble chain" reputation with consistently low transaction fees becoming the norm. The DeFi trifecta—decentralized exchanges, perpetual contracts, and lending protocols—alongside asset issuance platforms have become standard across blockchain ecosystems.
Meanwhile, high-performance requirements for AI, social platforms, and gaming applications have spurred new infrastructure solutions. These include parallel EVM implementations, Move-based chains, and zero-knowledge coprocessors. If development continues along this trajectory, we could witness the emergence of truly mass-adoption applications within two to three years.
Diverse Blockchain Ecosystem
The current Web3 infrastructure landscape displays remarkable diversity and innovation. Bitcoin and Ethereum remain the dominant chains, with Ethereum maintaining its position as the most mature smart contract platform. Simultaneously, Layer-1 blockchains like Solana, Aptos, and Cosmos have achieved substantial advancements due to their high performance and cross-chain capabilities.
NEAR Protocol has particularly distinguished itself within AI and on-chain abstraction narratives, significantly increasing its active address count and establishing itself among 2024's top-performing Layer-1 solutions alongside Solana.
DeFi applications continue to generate substantial fee revenue for leading chains, while Rollup-based Layer-2 solutions have dramatically expanded transaction processing capacity and reduced costs through optimized off-chain computation.
The Future Evolution of Crypto Infrastructure
Addressing Fundamental Challenges
The core objectives of infrastructure development remain unchanged: creating faster, more effective systems to serve as state machines and asset settlement layers for real-world applications. In the near term, two significant developments warrant attention as upstream infrastructure trends toward homogenization.
ETF Approval: Opportunities and Challenges
The approval of cryptocurrency ETFs presents both opportunities and challenges. On the challenge side, concerns emerge regarding institutional holdings and professional node operations impacting Proof-of-Stake network decentralization. With Ethereum ETFs, centralized exchanges may become primary custodians for institutional assets, potentially increasing staking centralization.
As Solana's founder noted, "economic security is a meme." With diminishing marginal utility from increased staking, Ethereum must leverage engineering solutions like liquid staking token governance and distributed validator technology to maintain economic security.
On the opportunity side, ETFs provide unprecedented market education moments and create infrastructure for new product-market fit opportunities across payment systems, AI infrastructure, social platforms, and real-world asset tokenization.
Technological Iteration and Enhancement
Mid-to-downstream infrastructure iterations across data availability layers, coprocessors, solver networks, shared sequencers, and chain abstraction solutions promise multidimensional performance improvements. These advancements will enable more seamless cross-chain operations, cheaper financial interactions, and novel application scenarios through proof aggregation.
User-Driven Evolution
Infrastructure evolution will ultimately respond to user needs. As the Web3 user base expands, demands for performance, reliability, and security will intensify. More efficient, lower-cost solutions with user-friendly interfaces and identity management systems will define development directions.
Cross-platform integration and collaboration will become increasingly important, with privacy protection, data sovereignty, and decentralized governance mechanisms evolving to support effective community participation.
Fragmentation and Interoperability Challenges
The constant emergence of new public chains and Layer-2 networks provides more choices but also加剧es ecosystem fragmentation. Enhancing interoperability between different blockchains remains critical. Simultaneously, evolving regulatory frameworks require infrastructure that ensures compliance while protecting user rights.
Long-term infrastructure development will focus on performance improvements, computational parallelization, modularization, technology integration, management abstraction, usability enhancements, cost efficiency, and regulatory compliance.
Investment Perspectives and Industry Insights
Changing Public Chain Landscape
The modular concept has significantly transformed public chain infrastructure compared to previous cycles. Current project evaluation typically categorizes solutions into execution layers, data availability layers, settlement layers, and interoperability middleware.
Investment across the technology stack has concentrated largely within the past two years. In execution layer scaling, attention has focused not only on leading Layer-2 projects but also emerging concepts like parallel EVM, represented by projects such as Sei, Monad, and MegaETH.
For non-EVM chains like Solana and Move, Layer-2 concepts remain relatively immature. Investments in cross-VM execution layer solutions face uncertainty regarding market acceptance. However, based on blockchain's open principles, closed, monopolistic Layer-2 and Layer-3 solutions are unlikely to prevail long-term.
Data Availability Layer Developments
The data availability layer has experienced relatively limited technological innovation with pronounced Matthew effects. Current investments have concentrated primarily on Celestia and Avail (spun off from Polygon). Within this sector, Bitcoin's ecosystem deserves special mention.
Bitcoin's Layer-1 doesn't support complex smart contracts, limiting its utility as a settlement layer. Most Bitcoin Layer-2 projects like Merlin, B2, and Bitlayer use BTC primarily as a data availability layer, with the exception of UTXO-based solutions like RGB++. The core mission for Bitcoin Layer-2 solutions remains embedding concepts of non-custodial native yield generation and on-chain asset issuance into user consciousness—particularly encouraging Bitcoin supporters to embrace DeFi ecosystem development on Bitcoin.
Settlement Layer Innovations and Coprocessors
Recent settlement layer innovations, while still early-stage, show promise. Investments in fully homomorphic encryption and proof aggregation coprocessors continue because these plug-in facilities potentially drive broader blockchain adoption.
Strategic Investment Approach
From an investment perspective, strategic positioning across infrastructure layers remains paramount. In the underlying public chain sector, investments span Bitcoin mining, Layer-1 chains like NEAR, Avalanche, Polkadot, Nervos, and Platon, plus emerging DePIN (decentralized physical infrastructure networks) including Peaq Network.
Middleware investments include Filecoin, Chainlink, and Stratos, while application layer investments cover marketplaces and development frameworks like Metaplex and Mintbase. At the user access layer, investments include Math Wallet, Mask Network, and RSS3. Regulated centralized exchanges also form critical industry infrastructure.
Compared to traditional Web2, Web3's fundamental value proposition remains greater decentralization and user autonomy—the core driving force behind infrastructure development.
Frequently Asked Questions
What are the current major trends in crypto infrastructure?
The infrastructure sector is experiencing several key trends: modular architecture allowing specialized components for data, execution, and settlement; Layer-2 scaling solutions maturing and diversifying; and increasing integration between AI and blockchain technologies. Additionally, Bitcoin ecosystem development has accelerated following ETF approvals.
How will ETF approvals affect crypto infrastructure development?
ETF approvals bring both institutional capital and regulatory scrutiny. This development accelerates professionalization but may challenge decentralization principles. Infrastructure must balance compliance with core blockchain values while providing institutions with necessary security and transparency. 👉 Explore more strategies for institutional adoption
What problems does modular blockchain architecture solve?
Modular architecture addresses the blockchain trilemma—balancing security, decentralization, and scalability. By separating concerns into specialized layers, developers can optimize each component independently. This approach enables greater flexibility but also introduces interoperability challenges between modules.
Why is interoperability between blockchains important?
Interoperability prevents ecosystem fragmentation and improves user experience by enabling seamless asset and data transfer across networks. Without effective interoperability solutions, the proliferation of blockchains creates isolated silos that limit innovation and adoption.
How does infrastructure support real-world asset tokenization?
RWA tokenization requires robust infrastructure for legal compliance, secure custody, accurate pricing, and efficient settlement. Specialized chains and Layer-2 solutions are emerging to meet these requirements while maintaining blockchain's transparency and security benefits.
What role does infrastructure play in decentralized AI development?
Decentralized AI requires specialized infrastructure for distributed computation, verifiable results, and tokenized data and model marketplaces. Blockchain infrastructure provides the trust layer ensuring AI operations remain transparent and accountable without centralized control.