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DeFi has too much infrastructure and not enough applications, or at least that seems to be the consensus in the crypto public square. This year alone, venture capitalists and private equity investors have poured hundreds of millions of dollars into crypto projects that make infrastructure a priority, if not an exclusive, focus.
The headlines speak for themselves. In the first quarter alone, venture capital firm a16z committed $100 million to Eigen Layer, a re-staking protocol and infrastructure layer for the Ethereum network; private equity firms Bridgewater Capital and Deus X Capital joined forces to fund a $250 million infrastructure platform; and RW3 Ventures raised $60 million for a fund focused exclusively on blockchain infrastructure and DeFi. These headlines are just a few of many; a quick scan of any cryptocurrency news outlet reveals countless similar announcements.
Focus on infrastructure
The focus on infrastructure sparked many conversations during and after the Ethereum Community Conference, or EthCC’24, in mid-July, and many came to the same conclusion: We need more apps and less emphasis on infrastructure.
On the surface, this is a valid perspective. To put the problem metaphorically, focusing disproportionately on infrastructure is like building the best amusement park ever, without the rides. Who cares if the park has beautiful trails, fancy gift shops, and well-equipped food stalls? If you don’t have a roller coaster (or five) on site, no one will come, much less pay to ride it.
The theoretical value and potential can only inspire limited customer adoption. A large variety and volume of applications could help hook and retain DeFi users. With more options on offer, users will have more reasons and opportunities to not only sign up, but also explore.
The problem? Increasing the number of applications can only help solve the underlying problem (e.g., the long-term growth and sustainability of the DeFi ecosystem). To return to our metaphor, a good amusement park needs a variety of attractions to attract visitors. However, if these attractions are inconvenient to access or unpleasant to experience, interest will decrease significantly.
The real problem: UX
This brings us to the real issue at the heart of the apps vs. infrastructure debate: user experience.
To say that the DeFi ecosystem (and the emerging BTCFi sector in particular) is unintuitive to lay users would be an almost comical understatement. Even seemingly simple acts, like transferring assets between dapps in different ecosystems, can become a time-consuming and frustrating exercise for ordinary users. While fundamental to cross-chain transactions, bridging and swapping are nearly impossible for newcomers to crypto to understand without professional guidance. It’s hard to blame a layperson for giving up halfway through or choosing not to try in the first place.
The infrastructure is supposed to allow dApps to seamlessly onboard users, but the BTCfi ecosystem still struggles with fragmentation issues between different Bitcoin (BTC) variants. While crypto has made strides in interoperability, the user experience remains complex. Traditional bridges and platforms still pose significant limitations and frustrations when it comes to scalability, slippage, MEV issues, TVL honeypots, and slow and expensive transactions.
The debate that “we need apps, not infrastructure” fundamentally misses the point of dApp and infrastructure development by seeking to privilege one over the other. The number of infrastructure projects doesn’t matter; their quality and impact do.
To be honest, few people are going to start a low-impact infrastructure project. DeFi is characterized by its pioneering culture; many dApps are first-of-the-kind and require their innovators to build proper infrastructure rails from scratch.
But, like any race, not everyone can win, and unfortunately, many infrastructure projects are not and may never be successful. The days of building projects for DeFi enthusiasts willing to spend time learning how to use a dapp are fading. DeFi is approaching its mainstream era, and the hobbyist users we’re trying to attract aren’t going to tolerate a bad user experience or care about the underlying infrastructure. To reframe the experience in a common way: if you book an Uber ride, you don’t care whether the Uber platform runs on AWS or Google Cloud; you just want to get from point A to point B.
Users First
With this in mind, our ultimate goal should be to have a robust infrastructure. And It needs to be abstracted so that the user can fully utilize their dApps without thinking too much about how they work. Navigating the DeFi ecosystem—and each application within it—needs to be seamless to the point of being intuitive for users. At a minimum, we need to simplify interoperability by enabling fast, slippage-free, MEV-resistant, and secure exchanges with a great user experience. Then, abstracting the infrastructure needs to be a priority; users should never need to see the inner workings of the metaphorical machine.
This East Intent-based architecture provides a user-centric development model in DeFi. Unlike conventional blockchain architecture, which requires users to follow a series of often complex steps to achieve a goal, intent-based architecture seeks to put users first. With this approach, users can state their goal (e.g., making a purchase in a BTCFi app using funds stored on Ethereum) and rely on the blockchain protocol to autonomously perform the technical steps required to achieve that directive. Intent-based models, if widely applied, could go a long way toward ensuring infra-abstraction while improving the user experience and simplifying the architecture.
Of course, intent-based architecture is not a silver bullet. Projects and protocols must work closely together to develop integrations that ensure seamless interoperability and eliminate operational complexities that users may find overwhelming. Innovators will need to design projects with hobbyist users in mind, rather than technically savvy crypto natives.
It’s time to put aside the infrastructure/application debate and focus on what matters most: users. Most users probably don’t care about the architecture design or the investment difference between application and infrastructure projects as long as they adhere to high security standards and get the job done. They want blockchain-based finance to be accessible and easy to understand; consumers should be able to use applications, process transactions, and find new ways to use and earn money with DeFi. As innovators and advocates for the potential of DeFi, it’s our job to (re)create the ecosystem into a welcoming world that even amateur users can explore without feeling confused, overwhelmed, or demoralized.
Let’s stop counting infrastructure projects and start making them count.
