DeFi needs more interoperability, not apps or infra

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DeFi has too much infrastructure and not enough apps—or at least that seems to be the consensus in the crypto town square. This year alone, venture capitalists and private equity investors have poured hundreds of millions of dollars into crypto projects that have made infrastructure a priority, even an exclusive focus.

The highlights speak for themselves. 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 solely on blockchain infrastructure and DeFi. These headlines are just a few of many; a quick browse through any crypto news outlet will reveal countless similar announcements.

Focus on infrastructure

The focus on infrastructure sparked significant discussion during and after the Ethereum Community Conferences, or EthCC’24 for short, held in mid-July, with many coming to the same conclusion: We need more applications and less emphasis on infrastructure.

On the surface, it’s a valid point. To put the problem in perspective, a disproportionate focus on infrastructure is like building the best theme park ever built — without the rides. Who cares if the park has beautiful paths, fancy gift shops, and well-stocked food stalls? If your facility doesn’t have a roller coaster (or five), no one will come, let alone pay to play.

Theoretical value and potential can only inspire a certain amount of customer adoption. A wide variety of deep-volume applications can help engage and retain DeFi users. With more options on offer, users will have more reasons and opportunities to not only participate but also explore.

What’s the problem? Increasing the number of applications can only do so much to help the underlying problem (i.e., the long-term growth and sustainability of the DeFi ecosystem). Going back to our metaphor, a good theme park needs a variety of rides to attract guests; however, if those rides are difficult to access or unpleasant to experience, interest will decline sharply.

The real problem: UX

This is where we come to the real issue at the heart of the debate between applications and infrastructure: user experience.

To say that the DeFi ecosystem (and the emerging BTCFi sector in particular) is unintuitive for amateurs would be an almost comical understatement. Even seemingly simple actions like moving assets between dapps in different ecosystems can become a time-consuming, frustrating exercise for casual users. Despite being fundamental to cross-chain transactions, bridging and swapping are nearly impossible for crypto beginners to understand without professional guidance. It’s hard to blame an amateur for giving up halfway through or choosing not to try in the first place.

The infrastructure is designed to allow dApps to seamlessly integrate users, but the BTCfi ecosystem is still plagued by fragmentation issues between various Bitcoin (BTC) variants. While crypto has made progress in interoperability, the user experience remains complex. Traditional bridges and platforms still present significant limitations and frustrations around scalability, slippage, MEV issues, TVL honeypots, and slow and expensive transactions.

The “we need apps, not infrastructure” argument fundamentally misses the point of dApp and infrastructure development by trying to prioritize one over the other. The number of infrastructure projects is not important; what matters is their quality and impact.

To be fair, few have attempted to create a low-impact infrastructure project. DeFi is characterized by its pioneering culture; many dApps are the first of their kind, requiring their innovators to build proper infrastructure rails from scratch.

However, as in any race, not everyone can be a winner, and unfortunately, many infrastructure projects today are not and never will be effective. For DeFi enthusiasts willing to invest the time to learn how to use a dapp, the days of developing projects are quickly becoming a thing of the past. DeFi is approaching mainstream, and the amateur users we are trying to attract will not tolerate bad UX or care about the underlying infrastructure. To reframe a common experience: If you’re booking 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 that in mind, our ultimate goal should be to have a solid infrastructure and abstract it away from users so they can fully utilize it without thinking too much about how their dApps work. Navigating the DeFi ecosystem and every application within it should feel seamless enough to be intuitive for users. At the very least, we should simplify interoperability by enabling fast, zero-slip, MEV-resistant, secure exchanges with consistently great UX. Next, infrastructure abstraction should be prioritized; users should never need to see the cogs in the metaphorical machine.

This is possible, and intent-based architecture provides a model for user-centric development in DeFi. Unlike traditional blockchain architecture, which often requires users to follow a complex series of steps to achieve a goal, intent-based architecture aims to put users first. With this approach, users can specify their goals (for example, make a purchase on a BTCFi app using funds stored in Ethereum) and trust the blockchain protocol to autonomously complete the technical steps required to achieve that goal. If widely implemented, intent-based models could go a long way in providing infrastructure abstraction while improving user experiences and simplifying architecture.

Of course, intent-based architecture is not a stand-alone solution. Projects and protocols must collaborate closely to develop integrations that abstract away operational complexities that users may find overwhelming and ensure seamless interoperability. Innovators will need to build with amateur users in mind, rather than technically savvy crypto natives.

It’s time to put aside the debate between infrastructure and applications and focus on what matters most: users. Most users probably don’t pay attention to architectural design or care about the investment difference between application and infrastructure projects as long as they meet high security standards and get the job done. They want blockchain-based finance to be accessible and easy to understand; consumers need to be able to use applications, process transactions, and find new ways to make and use money with DeFi. As innovators and advocates for the potential of DeFi, it’s up to us to (re)create the ecosystem where even novice users can explore without feeling confused, overwhelmed, or discouraged.

Let’s stop counting infrastructure projects and start making them count.

Jeroen Develler

Jeroen Develter is the chief operating officer at Persistence Labs and a seasoned professional in both finance and technology startup environments. With ten years of international experience in consulting, management, entrepreneurship, and leadership, Jeroen excels at analyzing complex business cases, building streamlined operations, and building scalable processes. Jeroen oversees all product and engineering efforts with Persistence and has a deep passion for advancing Bitcoin defi or BTCfi adoption and using intent to develop scalable, fast, secure, and user-friendly solutions. His work at Persistence Labs addresses key interoperability challenges between Bitcoin L2s. Additionally, Jeroen is the co-host of the Stacked Podcast, a platform for learning about Bitcoin and crypto from leading Bitcoin creators.