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The Risks of Overbuilding Crypto Infrastructure

The Risks of Overbuilding Crypto InfrastructureUnlike previous eras of the internet, Web3 infrastructure has far outpaced applications development. Jesus Rodriguez explains why that could be a problem.By Jesus Rodriguez|Edited by Benjamin SchillerUpdated Dec 17, 2024, 11:12 p.m. UTCPublished Dec 17, 2024, 11:09 p.m. UTC The Web3 ecosystem is often regarded as the next infrastructure of the internet. However, nearly 10 years after the release of the Ethereum white paper, we have very few mainstream applications running on that infrastructure. Meanwhile, we continue to see the emergence of new infrastructure building blocks everywhere: L1, L2, and L3 blockchains, rollups, ZK layers, DeFi protocols, and many others. While we might be building the future of the internet with Web3, there is little doubt that we are overbuilding the infrastructure layer. Currently, the ratio between infrastructure and applications in Web3 has no parallels in the history of technology markets.Why is this happening? Simply because it’s profitable to build infrastructure in Web3.Powered By 00:03/47:17106.2K 0Cango, Halliburton’s Bitcoin Mining Play, Rhodium Lawsuit, and Strategic BTC Reserve .stlp0{fill:#FF3E5F;} .st1{fill:#fffffe;} .st2{fill:#FF3E5F;}Share.clsx-1{isolation:isolate;}.clsx-2{fill:#ff3e5f;}.clsx-3{fill:#fff;}NextStayStory continues belowDon't miss another story.Subscribe to the The Node Newsletter today.See all newslettersSign me upBy signing up, you will receive emails about CoinDesk products and you agree to our terms of use and privacy policy.Web3 defies some of the conventional market adoption patterns in tech infrastructure, creating both a rapid path to profitability and unique risks for its evolution. To explore this thesis further, we must understand how value is typically created in infrastructure technology trends, how Web3 diverges from this norm, and the risks posed by overbuilding infrastructure.The Infrastructure-Application Value Creation Cycle in Tech MarketsTraditionally, value creation in tech markets fluctuates between the infrastructure and application layers, finding a dynamic balance between the two.Take the Web1 era as an example. Companies such as Cisco, IBM, and Sun Microsystems powered the infrastructure layer of the internet. But, even during those early days, applications like Netscape and AOL emerged to capture significant value. The Web2 era was driven by cloud infrastructure, which then triggered SaaS and social platforms, catalyzing the creation of new cloud infrastructure.More recently, trends like generative AI began as an infrastructure play with model builders, but applications such as ChatGPT, NotebookLM, and Perplexity quickly captured momentum. This, in turn, drove the creation of new infrastructure to support a new generation of AI applications — a cycle that is likely to continue for several iterations.This constant value-creation balance between application and infrastructure layers has been a hallmark of technology markets, making Web3 a notable anomaly. But why is this imbalance so evident in Web3?The Infrastructure CasinoThe main difference between Web3 and its predecessors is the rapid path to capital formation and liquidity in infrastructure projects. In Web3, infrastructure projects typically launch tokens that become tradable on exchanges, providing substantial liquidity for investors, teams, and communities. This contrasts with traditional markets, where investor liquidity is typically... https://www.coindesk.com/opinion/2024... #crypto #bitcoin #ethereum #cryptocurrency #news #blockchain #litecoin #cryptonews #cryptonewstoday #cryptoworld #cryptonewstoday ***NOT FINANCIAL, LEGAL, OR TAX ADVICE! JUST OPINION! I AM NOT AN EXPERT! I DO NOT GUARANTEE A PARTICULAR OUTCOME I HAVE NO INSIDE KNOWLEDGE! YOU NEED TO DO YOUR OWN RESEARCH AND MAKE YOUR OWN DECISIONS! THIS IS JUST ENTERTAINMENT! This information is what was found publicly on the internet. This information could’ve been doctored or misrepresented by the internet. All information is meant for public awareness and is public domain. This information is not intended to slander harm or defame any of the actors involved but to show what was said through their social media accounts. Please take this information and do your own research. bitcoin, blockchain, crypto, cryptocurrency, altcoin, investment, ethereum, bitcoin crash, xrp, cardano, ripple