This article originates from an article written by Jesus Rodriguez, CEO and Co-Founder of IntoTheBlock, and is organized, compiled and written by PANews. (Preliminary summary: RWAfi Ecological Indicator Research: Interpretation of RWA’s bottlenecks and potential) (Background Supplement: A complete explanation of the hottest AI Agent track in recent times: meme coins, issuance platforms and infrastructure) Web3 ecology is usually regarded as the Internet The next generation infrastructure of the Internet. However, nearly 10 years after the release of the Ethereum white paper, there are still few mainstream applications running on this infrastructure. At the same time, new infrastructure building blocks are emerging all the time, including various L1, L2, and L3, Rollup, ZK layers, and more. While we may be building the future of the Internet with Web3, there's no doubt that we're also overbuilding the infrastructure. The current imbalance between infrastructure and applications in Web3 is unique in the history of technology markets. As for why this happens? Simply because building infrastructure on Web3 is profitable. Web3 breaks the application model of some traditional technology infrastructure markets, creating a path to rapid profitability but also bringing unique risks to its development. To explore this further, we need to understand how infrastructure technology trends typically create value, how Web3 deviates from this norm, and the risks of overbuilding infrastructure. Infrastructure and Application Value Creation Cycle in the Technology Market Traditionally, value creation in the technology market fluctuates between the infrastructure layer and the application layer, seeking a dynamic balance between the two. Take the Web1 era as an example. Companies like Cisco, IBM, and Sun Microsystems power the infrastructure layer of the Internet. However, even in those early days, the emergence of applications such as Netscape and AOL brought tremendous value. Cloud infrastructure drove the advent of the Web2 era, which in turn brought SaaS and social platforms, giving birth to new cloud infrastructure. Looking more recently, trends like Generative AI started out as an infrastructure play for model builders, but applications like ChatGPT, NotebookLM, and Perplexity quickly gained momentum. This in turn drives the creation of new infrastructure to support new generations of AI applications, and this cycle is likely to continue multiple times. This constant value-creation balance between the application and infrastructure layers has always been a hallmark of the technology market, making Web3 a clear anomaly. But why is this imbalance so pronounced in Web3? The main difference between Infrastructure Casino Web3 and its predecessor is the rapid capital formation and liquidity of infrastructure projects. In Web3, infrastructure projects often launch tokens that can be traded on exchanges to provide investors, teams, and communities with large amounts of liquidity. This is in stark contrast to traditional markets. In traditional markets, investor liquidity is usually achieved through company acquisitions or public offerings of shares, both of which usually take a considerable amount of time. Generally speaking, the investment cycle of most venture capital firms is ten years or more. longer. While rapid capital formation is one of Web3’s strengths, it often misaligns team incentives and is not conducive to long-term value creation. This "infrastructure casino" is a risk in Web3 that incentivizes builders and investors to prioritize infrastructure projects over applications. After all, who cares about applications when L2 tokens can achieve multi-billion dollar valuations in just a few years with very little usage? This approach presents several challenges, many of which are subtle and difficult to resolve. Challenges of Overbuilding Web3 Infrastructure 1) Building without Adoption Feedback Perhaps the biggest risk of overbuilding infrastructure in Web3 is the lack of market feedback for applications built on top of the infrastructure. Applications are the ultimate expression of consumer and enterprise use cases and regularly guide new use cases in the infrastructure. Without application feedback, Web3 risks building infrastructure for "imaginary" use cases that are out of touch with market reality. 2) Extremely fragmented liquidity. The launch of the new Web3 infrastructure ecosystem is one of the main reasons for the fragmented liquidity in this field. New blockchains often require billions of dollars to initiate liquidity and attract first-tier DeFi projects to their ecosystem. Over the past few months, new L1s and L2s have been established faster than new capital is flooding into the market. As a result, capital in Web3 is more fragmented than ever before, creating huge challenges for adoption. 3) Inevitable growing complexity If you have tried using some of the wallets, DApps, and cross-chain bridges for newer blockchains, then you should know that the user experience is often miserable. Technology infrastructure naturally becomes more complex and sophisticated over time. Applications built on this infrastructure should generally abstract this complexity away from end users. However, in Web3 (lack of application development), users are left to interact with increasingly complex blockchains, leading to friction in adoption. 4) Limited developer community If the development speed of Web3 infrastructure exceeds the speed of capital formation, then the challenge in the developer community will be even greater. DApps are built by developers, and building a new developer community is always a challenge. Most new Web3 infrastructure projects are operating within a very limited developer community, drawing from existing talent pools that are simply not large enough to support the massive amount of infrastructure being built. . 5) The widening gap with Web2 Trends such as generative artificial intelligence are driving the development of a new generation of Web2 applications and redefining areas such as SaaS and mobile. The main trend in Web3 is still to build more blockchains rather than capitalize on the momentum. Ending the Vicious Cycle While launching L1 and L2 is profitable for investors and development teams, it does not necessarily bring long-term benefits to the Web3 ecosystem. Web3 is still in its early stages, and while more infrastructure building blocks are needed, most builders in the industry are currently building infrastructure without market feedback. Market feedback often comes from applications on top of the infrastructure, but these applications are largely absent from Web3. Most usage of Web3 infrastructure comes from other Web3 infrastructure projects. We continue to build infrastructure, launch tokens, raise funds, but we are really flying blind. Related reports AMA Highlights) The surge in TON users is a double-sided sword, and infrastructure upgrading has become a key point) One coin is spent in ten years, HashKey ecological currency HSK flywheel effect analysis Infrastructure provider Blockdaemon plans to IPO in 2026, and Web3 may be listed in the next two years "IntoTheBlock": Web3 infrastructure is oversupplied, are we building blindly?"This article was first published in BlockTempo (Dong District Dongzhu - the most influential blockchain news media).