CandleFocus

The Risks of Overbuilding Crypto Infrastructure

Author: Content Editor
The Web3 ecosystem, which is considered the next infrastructure of the internet, is currently experiencing an imbalance between infrastructure and applications. While there are numerous infrastructure building blocks being developed in Web3, there are very few mainstream applications running on this infrastructure. The profitability of building infrastructure in Web3 has led to this overbuilding phenomenon. Unlike traditional technology markets, where value creation fluctuates between the infrastructure and application layers, Web3 has seen a rapid path to capital formation and liquidity in infrastructure projects through the launch of tokens. This incentivizes builders and investors to prioritize infrastructure over applications, leading to several challenges. These challenges include building without adoption feedback from applications, extreme liquidity fragmentation, increasing complexity for users, limited developer communities, and a widening adoption gap with Web2. The lack of application development in Web3 means that market feedback is missing and infrastructure is being built without a clear understanding of real-world use cases. The industry needs to strike a balance between infrastructure and applications to ensure the long-term success of the Web3 ecosystem.

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