The global cryptocurrency market has long revolved around cycles and narratives. Historically, the Bitcoin halving served as a key indicator of market phases, guiding investors toward emerging trends. However, with the recent approval of spot Bitcoin and Ethereum ETFs, the crypto ecosystem is now more intertwined than ever with traditional financial markets. This shift introduces new variables—macroeconomic policies, institutional adoption, and regulatory developments—that shape market dynamics.
In this evolving landscape, understanding cyclical patterns and identifying future narratives is more critical than ever. Investment institutions are at the forefront of this exploration, actively seeking out innovative projects that can define the next wave of growth. To illuminate these shifts, OKX has launched the Crypto Evolution series, collaborating with leading blockchain investment firms to examine market cycles, emerging narratives, and high-potential sub-sectors.
This fourth installment, co-developed by OKX Ventures and Fundamental Labs, dives into one of the most pivotal questions shaping the future of Web3: How should infrastructure evolve in the next stage?
Current State of Web3 Infrastructure
OKX Ventures: From Homogenization to Fragmentation
According to L2Beat data, the number of rollup-based Layer-2 (L2) solutions has exploded—yet only a handful demonstrate on-chain activity surpassing Ethereum’s base layer. Over the past two years, infrastructure has dominated primary market investment, especially during the 2022–2023 bear market when capital was scarce. However, a noticeable pivot occurred by late 2023: venture interest shifted toward application-layer Web3 projects.
While OKX Ventures continues to back infrastructure innovation, we caution against the tendency to "reinvent the wheel." Excessive replication in core tech—such as redundant rollup frameworks or near-identical data availability (DA) layers—risks creating resource imbalances. The result? A proliferation of L2s without corresponding growth in Rollups-as-a-Service (RaaS) providers or daily active users (DAUs), leading to what many call the “ghost town” phenomenon.
A key driver of this trend is the modular blockchain narrative. Components like execution, DA, and interoperability are often recombined under new branding, marketed as breakthroughs without requiring extensive market education. While technically flexible, this approach exacerbates ecosystem fragmentation.
On a positive note, Ethereum has shed its reputation for high fees—single-digit gwei is now common. The core DeFi toolkit—DEXs, perpetual contracts, lending protocols—is now standard across most public chains. Meanwhile, high-demand applications like AI platforms, social dApps, and blockchain games are being supported by next-gen infrastructure: parallel EVMs, Move-based chains, and zk-powered coprocessors.
👉 Discover how next-gen blockchain infrastructure is enabling scalable real-world applications.
If current development trajectories hold, a true Web3 super app—one capable of mass adoption—could emerge within the next two to three years.
Fundamental Labs: Diversity and Innovation Driving Progress
Web3 infrastructure today is marked by rapid innovation and diversification. Ethereum remains the dominant smart contract platform, while Bitcoin continues to anchor the ecosystem as digital gold. Layer-1 blockchains like Solana, Aptos, and Cosmos have gained traction due to their high throughput and cross-chain capabilities.
NEAR has distinguished itself through its focus on AI integration and onchain abstraction, significantly increasing active address counts and ranking among 2024’s top-performing L1s alongside Solana.
DeFi remains central to the ecosystem. DEXs, lending protocols, and liquidity mining platforms generate substantial fees—now a primary revenue stream for leading blockchains. Meanwhile, scaling solutions like rollups have dramatically improved transaction throughput and reduced costs through offchain computation.
The overall picture is one of dynamic progress: diverse technologies co-evolving to strengthen decentralized networks.
The Future of Infrastructure: Key Evolutionary Paths
OKX Ventures: Balancing Decentralization and Institutional Adoption
The core mission of infrastructure remains unchanged: to serve as a fast, secure state machine and asset settlement layer for real-world use. But new challenges—and opportunities—are emerging.
Challenge: Decentralization at Risk
With spot ETF approvals, institutional capital is flooding in. Centralized exchanges like Coinbase may become dominant staking custodians, leading to centralized control over PoS networks. If 33% of Ethereum nodes are controlled via CEX staking, economic security could weaken—echoing Solana founder Toly’s claim that “economic security is a meme.”
To counter this, Ethereum must embrace engineering solutions like liquid staking tokens (LSTs), distributed validator technology (DVT), and protocol-level governance to preserve decentralization.
Opportunity: New Product-Market Fits
ETFs also serve as powerful market education tools. They open doors for infrastructure supporting new use cases: payment rails, AI compute layers, decentralized social networks, and real-world asset (RWA) tokenization.
Additionally, mid-to-downstream innovations—such as data availability layers, zk coprocessors, solver networks, shared sequencers, and chain abstraction—can be integrated like plugins. These enhance cross-chain interoperability, reduce financial interaction costs, and unlock novel application scenarios through proof aggregation.
Fundamental Labs: User Needs as the North Star
Infrastructure evolution will be driven by user demands: higher performance, lower fees, better UX, stronger privacy, and seamless identity management.
As the user base grows, so will expectations for reliability and security. Interoperability across chains must improve to reduce fragmentation. Equally important is compliance—infrastructure must adapt to evolving regulations while protecting user sovereignty.
Long-term trends include:
- Performance optimization through parallel computation
- Modular architecture adoption
- Technology integration (e.g., AI + blockchain)
- Management abstraction for easier developer access
- Cost efficiency and regulatory alignment
From an investment standpoint, we focus on solving real industry pain points. We prioritize projects that drive meaningful progress—not just technical novelty.
We’re particularly optimistic about:
- Bitcoin infrastructure: With ETF-driven liquidity and trust, scaling solutions like Lightning Network, Taproot Assets, RGB, and BitVM gain momentum.
- NEAR Protocol: Its chain abstraction and security aggregation simplify cross-chain interactions.
- Compliant DeFi: As regulations clarify, AML/KYC-compliant platforms and stablecoins will become essential.
- AI + Blockchain Convergence: Decentralized AI compute, tokenized training data, MachineFi, and compliant RWA platforms represent high-potential frontiers.
Investment Strategies and Industry Insights
OKX Ventures: Layered Evaluation and Strategic Bets
The modular blockchain concept has reshaped how we assess infrastructure projects. We now categorize them into:
- Execution layers
- Data availability (DA) layers
- Settlement layers
- Interoperability middleware
Our investments over the past 1–2 years reflect this framework:
- Execution Layer: Beyond dominant L2s from the last cycle, we backed parallel EVM projects like Sei, Monad, and MegaETH.
- Non-EVM Chains: We invested in SonicSVM (Solana SVM) and Lumio (zkEVM on non-EVM), though cross-VM adoption remains uncertain.
- DA Layer: Limited innovation here has led to a Matthew effect. We’ve backed Celestia and Avail (from Polygon).
- Bitcoin Ecosystem: BTC’s lack of native smart contracts means L2s use it primarily as a DA layer (e.g., Merlin, B2, Bitlayer). Exceptions like RGB++ (UTXO-based) show promise.
We believe BTC L2s must instill two core ideas in users:
- Non-custodial yield generation on native BTC
- Onchain asset issuance
This vision drove our investments in Babylon (staking layer for BTC) and BTC LSDfi projects like Lombard.
We’re also exploring fully homomorphic encryption (FHE) and proof aggregation—plug-in technologies that could enable mass blockchain adoption.
Fundamental Labs: Full-Stack Infrastructure Focus
Our investment strategy spans the entire technology stack:
- Base Layer: Investments in BTC hashpower and L1s like NEAR, Avalanche, Polkadot, Nervos, and Platon.
- DePIN: Early backer of Peaq Network (2022).
- Middleware: Filecoin (storage), Chainlink (oracles), Stratos (data layer).
- dApp Layer: Metaplex (NFT frameworks), Mintbase (marketplaces).
- User Access: Math Wallet, Mask Network, RSS3.
- Compliance Infrastructure: Coinbase (regulated exchange).
Web3’s value over Web2 lies in greater decentralization and user ownership—this principle guides all our infrastructure investments.
Frequently Asked Questions
Q: Why is infrastructure still important if applications are gaining more attention?
A: Applications rely on robust infrastructure to scale. Without efficient L2s, DA layers, or interoperability tools, even the best dApps will face performance bottlenecks and poor UX.
Q: What risks do ETFs pose to blockchain decentralization?
A: ETFs bring institutional capital but may concentrate staking power in centralized custodians. This threatens PoS network decentralization unless mitigated by DVT or LST governance.
Q: How can blockchain support AI applications?
A: Through decentralized compute networks, verifiable training data markets, and privacy-preserving techniques like FHE—enabling trustless AI model training and inference.
Q: Is Bitcoin’s ecosystem evolving beyond just being “digital gold”?
A: Yes. With solutions like Lightning Network and BitVM, Bitcoin is expanding into payments, smart contracts, and DeFi—especially through LSDfi and native yield projects.
Q: What is chain abstraction?
A: Chain abstraction hides blockchain complexity from users—enabling seamless cross-chain interactions without requiring users to manage gas or network switches manually.
Q: Will modular blockchains replace monolithic ones?
A: Not entirely. While modularity offers flexibility, monolithic chains like Solana still deliver high performance. The future likely involves hybrid models leveraging strengths from both.