Infrastructure As Alpha: Building The Foundations Of Future DeFi Innovations – Crypto News Flash

Crypto is a world characterized by hype, where the hottest new tokens and protocols dominate the headlines and social media buzz. Yet the biggest innovations these days are taking place with the underlying infrastructure, where startups are racing to build out the backbone of a more sophisticated DeFi ecosystem. 

Infrastructure is critical to helping blockchains scale, remain secure and connect seamlessly with other networks. Without the underlying execution layers, consensus mechanisms and oracles to link everything together, the blockchain industry wouldn’t be able to function, let alone evolve into something bigger and better. 

This is well understood by crypto’s biggest players, with the likes of Binance Labs investing in novel blockchain infrastructure startups such as AltLayer, a decentralized protocol for launching application-specific rollups, and Initia, a Layer-1 network on Cosmos for building L2s that use Optimistic rollups to enable dApps to scale. Coinbase’s acquisition of Bison Trails, a pioneer in fully-managed blockchain infrastructure, and its latest deal to buy Deribit, the institutional-friendly derivatives trading platform, are similar examples. Even Stripe, a traditional fintech player, is getting in on the act, recently snapping up the stablecoin infrastructure startup Bridge for $1.1 billion. 

These moves underscore a growing realization that infrastructure is critical for blockchain’s evolution. It’s the most critical factor shaping crypto’s development, providing a foundation for more secure, scalable and efficient protocols that will transform its applications. By investing in cutting-edge infrastructure, crypto organizations are constructing a springboard for innovation, trying to gain competitive edge over their rivals. 

In Blockchain, Infrastructure Is Alpha 

As crypto’s adoption increases, the industry is seeing growing demand for more efficient and scalable networks. More advanced infrastructure helps to optimize network performance, enabling them to handle an increasing amount of transactions without any impact on their speed or efficiency. 

Each blockchain and dApp is unique, with its own consensus mechanisms and structures, which makes it difficult for them to interoperate seamlessly with one another. Interoperability is an area that’s ripe for innovation, as developers seek more efficient and composable ways for dApps to share assets and data. With streamlined compatibility comes increased developer velocity, greater collaboration and simpler user experiences, accelerating the rate of innovation. 

Advances in infrastructure hold the key to the mass adoption of tokenized real-world assets, where traditional financial products such as stocks, shares, bonds and commodities are represented on-chain, unlocking new opportunities in everything from finance to real estate to supply chains. With the right infrastructure in place, developers can experiment with RWAs faster, increasing the rate at which new products are made. 

Infrastructure investment will also aid financial inclusion, especially among underserved and unbanked populations, meaning more people gain access to banking services and the ability to invest and build wealth. And with new infrastructures, researchers can experiment with ever-more efficient consensus mechanisms to increase scalability and enhance privacy, making blockchain more accessible and versatile. With more infrastructure, we see more protocols arising and newer use cases. 

Who Are The Key Infrastructure Builders Today?

There’s a lot going on under the hood in blockchain infrastructure development today. One of the most intriguing projects is Orbs, which is building a decentralized architecture to improve smart contract execution for Web3 dApps. 

It can be thought of as Layer-3 “backend” for dApps that works in concert with existing Layer-1 blockchains such as Ethereum and BNB Chain, as well as Layer-2s such as Polygon and Arbitrum. It introduces the concept of a “tiered” blockchain architecture where dApps can execute smart contracts on a dedicated L3 without moving liquidity off-chain. It enables more complex logic, including the use of scripts that cannot be executed by traditional smart contracts, paving the way for more advanced trading tools such as sophisticated order types, aggregated liquidity and decentralized derivatives. 

There’s also Socket, which offers a complete interoperability stack for assets and data to be transferred between any blockchain, supporting the creation of multichain applications that live on many networks but operate as if they were only on one. At its core, Socket uses developer-friendly plug-and-play SDKs that make it possible for dApps to execute smart contract logic before they run on-chain, abstracting away the complexities of bridging funds across networks.

Meanwhile, Tenderly bills itself as the “Swiss army knife” for Web3 developers, offering a DevOps platform for monitoring, debugging, alerting and transaction simulation for smart contracts. With Tenderly, developers have a simple way to test their dApps on more than 30 blockchain networks through virtual testnets and devnets and its RPC node infrastructure. 

We must also give a nod to ChainLink Functions, a key component of ChainLink’s decentralized oracle networks, which allows smart contracts to access off-chain data, execute transactions based on real-world events and communicate with other blockchain and systems. ChainLink Functions are the secret sauce that allows dApps to tap into any kind of data, API or web service. 

Infrastructure Supports A New Generation Of DeFi

The impact of these decentralized blockchain infrastructure developments cannot be overstated, leading to advancements that will be essential for the technology to become mainstream. For instance, the likes of Orbs and Tenderly are playing a key role in the development of newer “intent-based protocols”, which can dramatically simplify the complexity of DeFi interactions. 

They focus on the user’s desired outcome, enabling them to state what it is they’re trying to achieve, without worrying about how they need to go about reaching that objective. Currently in DeFi, users have to input detailed instructions for each step of a transaction, navigating through multiple approvals, bridges and wallets to send funds from one destination to another. It’s the cause of enormous frustration and leaves users vulnerable to exploitation from bad actors.

With intent-based architectures, this fragmented user experience dissipates. The user simply expressed what they’re trying to accomplish, with the intricacies of the transaction are handled by the underlying protocol. 

Advanced infrastructure is also responsible for “programmable liquidity”, or digital assets that can move across chains. These are tokens that can execute transactions autonomously while enforcing rules and reacting to real-world events without any intervention from humans, meaning liquidity becomes more dynamic, adapting to market conditions. 

 With this kind of automation, dApp builders will be able to create user interfaces that are very different from the mind-bogglingly complex DeFi applications we know today. They’ll be able to integrate advanced functionality while leveraging the familiar navigation systems we’ve become accustomed to in traditional financial applications. 

DeFi’s functionality will also become more dynamic, with projects like ChainLink supporting the implementation of real-time pricing in everything from derivatives trading platforms to RWA-based stock markets and decentralized insurance policies. The streamlined blockchain interoperability provided by Orbs and Socket will enable users to send digital assets anywhere, without any of the complexity that exists today. And dApps will become more secure thanks to the efforts of projects like Tenderly. 

Funding The Foundation Of Next-Gen DeFi

During the initial rise of DeFI, the most significant investments in blockchain infrastructure were focused on those projects that could bolster decentralized networks with accelerated transaction speeds. Those investments were critical in the early days, helping DeFi protocols to establish traction among users and illustrate the potential of crypto beyond basic payments. 

Now though, most blockchains are striving to demonstrate more superior capabilities besides speed alone. The goal is to build the most efficient and sustainable economic model and show how it can provide better value to developers and end users. 

That’s why investors have switched focus to backend plays with long-term defensibility, projects that will support the rollout of more sophisticated smart contracts and dApps. At the same time, the decentralized autonomous organizations that govern many blockchain projects and dApps are also looking to boost infrastructure in order to protect their ecosystems and expand their influence into others. 

On The Shoulders Of Giants

In such a dynamic industry as crypto, where fortunes rise and fall together with innovation cycles, infrastructure becomes the invisible glue that holds everything else together, laying the foundations for the next generation of DeFi advances. We don’t know who the next DeFi unicorns will be, but one thing is for sure – they’ll be standing on the shoulders of today’s middleware builders, leveraging their technical capabilities to power a new wave of blockchain innovation.