As a seasoned crypto investor with over a decade of experience in finance and tech start-ups, I find myself often reflecting on the current state of DeFi. The recent surge in infrastructure investments has been impressive, but I can’t help but feel that we are missing the forest for the trees.
It appears that there’s a common sentiment in the cryptocurrency community: DeFi (Decentralized Finance) has overdeveloped infrastructure but lacks user-friendly applications, or so it seems. In fact, this year alone, venture capitalists and private equity investors have invested hundreds of millions of dollars into crypto projects that prioritize or even solely focus on infrastructure development.
The highlight reel speaks for itself. In the first quarter alone, VC firm a16z committed $100 million to Eigen Layer, a restaking 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 perusal of any crypto news outlet reveals countless similar announcements.
Focus on infrastructure
During and after the Ethereum Community Conferences (EthCC’24) in July, there was a lot of discussion about the strong focus on infrastructure. Many people agreed that it would be beneficial to have more applications and less attention paid to infrastructure.
From my perspective, it seems quite reasonable at first glance. To illustrate this in a metaphorical sense, overemphasizing infrastructure is much like constructing an exquisite theme park – but without the attractions. It’s all well and good if the park boasts lovely pathways, stylish souvenir shops, and gourmet food stalls; however, if there are no thrilling rides (or several to choose from) within its boundaries, no one will be enticed to visit, let alone pay for the experience.
Practical worth and capability might spark a good deal of user adoption, but an extensive range and substantial quantity of applications may serve as bait and keep DeFi users engaged. Having multiple choices available offers users additional incentives and possibilities not just for onboarding but also for delving deeper into the experience.
The problem? Increasing the number of apps can only help the underlying issue (e.g., the long-term growth and sustainability of the DeFi ecosystem) so much. Returning to our metaphor, a good theme park needs a variety of rides to attract guests; however, if those rides are inconvenient to access or unpleasant to experience, interest will taper off sharply.
The real problem: UX
Here, we come to the real problem at the heart of the apps vs. infra debate: user experience.
To say that the DeFi ecosystem (and the emerging BTCFi sector in particular) isn’t intuitive for layperson users would be an almost comical understatement. Even seemingly simple acts such as moving assets between dapps in different ecosystems can become a time-sucking, frustrating exercise for ordinary users. Despite being fundamental to cross-chain transactions, bridging and swapping are virtually impossible for crypto newcomers to figure out without professional guidance. It’s hard to blame a layperson for giving up midway—or opting not to try in the first place.
The purpose of infrastructure is to make it effortless for users to join decentralized applications (dApps), but the BTCfi system continues to face challenges due to division among different Bitcoin (BTC) versions. Although cryptocurrency has made strides in interoperability, the user experience remains intricate. Conventional bridges and platforms still present considerable hurdles and inconveniences related to scalability, slippage, MEV issues, TVL honeypots, and high transaction fees and slow speeds.
In essence, the “apps versus infrastructure” argument overlooks the essential nature of dApp and infrastructure development by trying to place priority on one aspect over another. It’s not about the quantity of infrastructure projects; it’s about the quality and the significant influence they have.
It’s important to understand that most people don’t intentionally design infrastructure projects with minimal environmental impact. Decentralized Finance (DeFi) is unique in this regard, as it fosters a spirit of innovation; many decentralized applications (dApps) are the first of their kind and necessitate their creators to construct essential infrastructure from the ground up.
Just as not every participant can emerge victorious in any race, it’s important to acknowledge that many infrastructure projects today may not yield significant impact and might always remain so. The era of creating projects for DeFi enthusiasts who are willing to invest time in mastering the use of a dapp is gradually becoming obsolete. Instead, we’re moving towards the mainstream era of DeFi where users will demand seamless experiences rather than being concerned about the underlying infrastructure. To put it simply, when you’re hailing an Uber ride, you don’t care if the platform operates on AWS or Google Cloud; all you want is a smooth journey from point A to point B.
Users first
Striving for this objective, our ultimate aim is to establish a dependable infrastructure that is hidden from the user’s perspective, allowing them to fully utilize their dApps effortlessly, without having to delve into how it functions. The experience of navigating the DeFi ecosystem and every app within it should be smooth and intuitive for users. As a minimum requirement, we must streamline interoperability by ensuring swift, zero-slippage, MEV-resistant, secure transactions with consistently outstanding user experiences. Furthermore, infrastructure abstraction needs to be emphasized; users should never have to encounter the internal workings of the system.
In the world of DeFi, it’s feasible to create a user-focused environment using intent-based architecture. Unlike traditional blockchain structures that demand users to navigate through a sequence of intricate procedures to accomplish tasks, this method prioritizes the user experience. Users simply express their aim (such as making a purchase within a BTCFi app using Ethereum-stored funds), and the blockchain protocol takes care of the technical steps automatically to fulfill that objective. If widely implemented, intent-based models could significantly enhance infrastructure abstraction, boost user experiences, and simplify architectural complexities.
Absolutely, an intent-based architecture isn’t a one-size-fits-all solution. Collaboration between projects and protocols is crucial for creating smooth integrations that ensure consistent compatibility and simplify complex operational aspects that might confuse new users. Developers should prioritize novice users in their designs instead of focusing on tech-savvy crypto enthusiasts.
Instead of continually arguing about infrastructure vs. apps, let’s prioritize the needs of our users. Users generally don’t concern themselves with architectural design or the financial investment divide between app and infrastructure projects, as long as they experience high-security standards and seamless functionality. What users truly desire is a user-friendly blockchain finance system that they can comprehend easily. They need to be able to utilize applications for transactions, discover new opportunities in DeFi, and effortlessly navigate this space without feeling perplexed, overloaded, or discouraged. As innovators and champions of DeFi’s potential, it is our responsibility to transform the ecosystem into a welcoming environment that even novice users can explore with confidence.
Let’s stop counting infra projects and start making them count instead.
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2024-09-14 14:20