Crypto had Downward macro pressure has been hammering software and fintech hitting the broader crypto market for a few months now. Prices have fallen, revenue growth (for many companies) has started to decline, and institutional and retail capital is pulling back.
One area that is weathering the storm well is the “infrastructure” of the crypto space, companies and protocols that help enable the core functionality of other crypto companies. Despite negative price pressures in line with the broader market, these infrastructure companies continue to generate sustainable revenue by serving emerging but clear, sustainable use cases.
Additionally, many of these companies are expanding horizontally and vertically with true enterprise-grade infrastructure, a process accelerated by the massive influx of capital and Web 2.0 talent in the space.
Looking forward, we expect companies and protocols focused on building critical infrastructure to stand out and create attractive investment opportunities.
Six-layer cake model
To better understand the crypto landscape, we’ve broken down the sector into its core technology layers, a six-layer crypto stack, from the basic settlement/mining layer to the consumer-facing decentralized application and access layer.
We see great value in tools that abstract and enable fundamental activities in crypto.
Between these two extremes is a spectrum of infrastructure providers, hybrid infrastructure applications known as primitives, and hybrid applications that map, enable, and access various use cases in the crypto ecosystem.
Imagine a consumer exchanging ETH for another Ethereum-based token on a decentralized exchange – an exchange protocol that allows two assets to trade with each other without an order book.
The first set of steps for this consumer is in the access layer. This layer focuses on providing tools for individuals or institutions to interact with decentralized applications and networks. For our exchange example, the access layer equips consumers with a few key essentials: