Cool idea! I really like this, and I think it's pretty original and fresh.
There are many things that can be improved, in particular the graphics and the information (e.g., how many steps are needed to clear the level, i.e. how close am I when I fail). The UI could also be improved: it's tedious to first erase a block and then build a new one. It should be possible to just replace one with a new element. I am sure, you're working on these things already.
This might become a real gem!
EDIT: I've cleared all levels of the demo. The difficulty ramps up quickly, as you have said, but, yes, it's a demo, so it's good that you demonstrate that levels can become difficult, too. ;)