CEX Investment Research Director: Dedicated blockchain networks are rapidly emerging, reshaping the competitive landscape of crypto infrastructure

On December 29, 2023, CEX Investment Research Director David Duong wrote, “We believe that dedicated blockchain networks are emerging rapidly (including L2, independent L1, and application-specific chains), and are quickly reshaping the competitive landscape of crypto infrastructure. For example, the Arc platform built by Circle, designed specifically for institutional-grade applications centered around USDC, aims to become compliant and the most optimal institutional infrastructure; while the Tempo network incubated by Stripe and Paradigm focuses on connecting institutional payment channels, targeting the massive cross-border payment and international trade markets. Another example is Canton Network, which is building a private, permissioned blockchain environment specifically to unlock the trillions of dollars of institutional capital that are tokenized assets and “locked” in securities exchanges. This resulting infrastructure fragmentation is not accidental but a strategic response by institutions to a core issue: large institutions are generally reluctant to outsource their core business logic to platforms controlled by competitors. The underlying logic is—strategic control. More and more companies are choosing to launch their own blockchains to control their data sovereignty, compliance environment, and the financial value accumulated through network effects. In the short term, this trend may accelerate further, with institutions continuously launching dedicated chains for high-value, heavily regulated capital flows, prioritizing customized governance, fee structures, privacy controls, and compliance features over the use of general-purpose shared infrastructure. But in the long term, we believe the ultimate scenario is not an endless fragmentation into ‘island chains,’ but a network-of-networks architecture: these highly customized blockchains will achieve deep composability through advanced interoperability layers, such as native cross-chain messaging, shared security mechanisms based on staking/re-staking, and privacy-preserving cross-chain bridges. The ultimate winners will be those projects that can balance deep vertical optimization with seamless horizontal connectivity—achieving cross-chain atomic settlement, unified liquidity pools, and synchronized movement of real-world assets (RWA); while laggards may become trapped in isolated ecosystems, gradually marginalized in a market environment that increasingly rewards compliance, liquidity, and free flow of institutional capital.”