Author: Coinbase.
Compiled by: Felix, PANews.
Looking forward to 2025, the crypto market is poised for transformative growth. With increasing rates of institutional adoption and the continual expansion of use cases across various domains, the maturity of the asset class continues to gain momentum. Over the past year, spot ETFs have been approved in the U.S., tokenization of financial products has increased significantly, stablecoins have surged, and further integration into the global payment framework has occurred.
Achieving this is no easy task. While it is easy to view these successes as the result of years of effort, many increasingly believe that this is merely the beginning of a grand journey.
Considering that just a year ago, this asset class was still struggling due to interest rate hikes, regulatory crackdowns, and an uncertain path forward, the progress of cryptocurrencies is even more impressive. Despite all these challenges, cryptocurrencies have established themselves as a solid alternative asset, demonstrating the resilience of the crypto space.
However, from a market perspective, the upward trend in 2024 does indeed show some notable differences from previous bull market cycles. Some of these are superficial: 'Web3' has been replaced with the more appropriate 'onchain.' Others have more profound implications: demand for fundamentals has begun to replace the influence of narrative-driven investment strategies, partly due to increased institutional participation.
Moreover, not only has Bitcoin's dominance surged, but innovations in DeFi have pushed the boundaries of blockchain—bringing the foundations of a new financial ecosystem within reach. Central banks and major financial institutions worldwide are discussing how crypto technology can make asset issuance, trading, and record-keeping more efficient.
Looking forward, the current crypto space presents many promising developments. At the forefront of disruption, we focus on decentralized peer-to-peer exchanges, decentralized prediction markets, and AI (artificial intelligence) agents equipped with crypto wallets. On the institutional front, significant potential exists in stablecoins and payments (tightly integrating crypto and fiat banking solutions), low-collateral on-chain lending (facilitated by on-chain credit scoring), and compliant on-chain capital formation.
Despite high awareness of cryptocurrencies, the technology remains opaque to many due to its novel technical structure. However, technological innovation is expected to change this, with more projects focusing on improving user experience by abstracting blockchain complexity and enhancing smart contract functionality. Success in this area could increase accessibility to cryptocurrencies for new users.
Meanwhile, the U.S. has laid a clearer regulatory foundation for 2024, well ahead of the November elections. This sets the stage for greater progress in 2025, potentially solidifying the position of digital assets within mainstream finance.
As the regulatory and technological landscape evolves, the crypto ecosystem is expected to experience significant growth, as broader adoption will drive the industry closer to realizing its full potential. The year 2025 will be a critical year, with breakthroughs and advancements likely shaping the long-term trajectory of the crypto industry for decades to come.
Theme One: 2025 Macro Roadmap.
What the Federal Reserve wants, what the Federal Reserve needs.
Trump's victory in the 2024 U.S. presidential election is the most significant catalyst for the crypto market in Q4 2024, driving Bitcoin up by 4-5 standard deviations (compared to the three-month average). However, looking ahead, the short-term reactions of fiscal policy are unlikely to be as meaningful as the long-term direction of monetary policy, especially with the Fed's pivotal moments approaching. However, separating the two may not be so easy. The Fed is expected to continue easing monetary policy in 2025, but the pace may depend on the expansiveness of the next set of fiscal policies. This is because tax cuts and tariffs may drive up inflation, although the overall CPI has dropped to 2.7% year-over-year, the core CPI still hovers around 3.3%, above the Fed's target.
Regardless, the Federal Reserve aims to suppress inflation from current levels, which means prices need to rise but should slow down from now on to help achieve its other mission—full employment. On the other hand, households have been calling for lower prices after experiencing the pain of rising prices over the past two years. However, while falling prices may be a political expedient, they could potentially lead to a vicious cycle that ultimately results in economic recession.
Nevertheless, thanks to declining long-term interest rates and U.S. exceptionalism 2.0, a soft landing seems to be the baseline scenario at present. At this point, the Fed's interest rate cuts are merely a formality, as credit conditions have already eased, providing a supportive backdrop for cryptocurrency performance over the next 1-2 quarters. Meanwhile, as more dollars circulate in the economy, the anticipated deficit spending by the next government (if realized) should translate into a greater risk appetite (cryptocurrency purchases).
The most pro-crypto U.S. Congress in history.
After years of battling regulatory ambiguity, the next legislative session in the U.S. may elevate the regulatory clarity of the crypto industry. This election sends a strong message to Washington that the public is dissatisfied with the current financial system and desires change. From a market perspective, bipartisan support for cryptocurrencies in both the House and Senate suggests that U.S. regulation may shift from 'headwinds' to 'tailwinds' in 2025.
A new discussion point is the possibility of establishing strategic Bitcoin reserves. After the Bitcoin Nashville conference, Senator Cynthia Lummis (WY) not only proposed a Bitcoin bill in July 2024 but also introduced a strategic Bitcoin reserve bill in Pennsylvania. If passed, the latter would allow state treasurers to invest up to 10% of their general funds in Bitcoin or other crypto-based tools. Michigan and Wisconsin have already held cryptocurrencies or crypto ETFs in their pension funds, with Florida following suit. However, creating strategic Bitcoin reserves may face some challenges, such as legal restrictions on the amount of Bitcoin that can be held on the Fed's balance sheet.
Meanwhile, the U.S. is not the only jurisdiction preparing to make regulatory progress. The growing global demand for crypto is also changing the competitive landscape for regulation internationally. The EU's crypto asset regulatory framework (or MiCA) is being implemented in phases, providing a clear framework for the industry. Many G20 countries and major financial centers like the UK, UAE, Hong Kong, and Singapore are also actively formulating rules to adapt to digital assets to create a more favorable environment for innovation and growth.
Crypto ETF 2.0.
The approval of spot Bitcoin and Ethereum exchange-traded products and funds (ETPs and ETFs) in the U.S. represents a watershed moment for the crypto economy, with net inflows of $30.7 billion since inception (around 11 months). This far exceeds the $4.8 billion attracted by the SPDR Gold Shares ETF (GLD) in its first year after launching in October 2004 (adjusted for inflation). According to Bloomberg, this places these instruments in the top 0.1% of approximately 5,500 new ETFs launched in the past 30 years.
ETFs have reshaped the market dynamics of BTC and ETH by establishing new demand anchors, pushing Bitcoin's dominance from 52% at the beginning of the year to 62% by November 2024. According to the latest 13-F filings, almost all types of institutions are holders of these products, including endowment funds, pension funds, hedge funds, investment advisors, and family offices. Meanwhile, the introduction of U.S. regulatory options on these products (November 2024) may strengthen risk management and enhance the cost-effectiveness of these assets.
Looking ahead, the industry's focus is on whether issuers may expand the range of exchange-traded products to include other tokens such as XRP, SOL, LTC, and HBAR, although potential approvals may only have positive effects on a limited asset group in the short term. More importantly, what would happen if the U.S. SEC allows for a staking ETF or removes the authorization for cash rather than physical creation and redemption of ETF shares? The latter authorization introduces settlement delays between the buy or sell orders received by authorized participants (APs) and the issuer's ability to create or redeem the corresponding shares. This delay, in turn, causes a misalignment between the ETF share price on the screen and the actual net asset value (NAV).
Introducing physical creation and redemption can not only improve price consistency between stock prices and net asset value but also help narrow the price spread of ETF shares. In other words, participants (APs) do not need to quote cash above the trading price of Bitcoin, thereby reducing costs and increasing efficiency. The cash-based model currently also brings other implications related to the continuous buying and selling of BTC and ETH, such as increased price volatility and triggering taxable events, which do not apply to physical trading.
Stablecoins, the 'killer app' of cryptocurrency.
In 2024, stablecoins achieved significant growth, with total market capitalization increasing by 48% to $193 billion (as of December 1). Some market analysts believe the industry could grow to nearly $3 trillion within the next five years based on current trajectories. While this may seem high, considering this valuation is comparable to the current scale of the entire cryptocurrency market, it represents only about 14% of the U.S. M2 total supply of $21 trillion.
The next wave of true adoption for cryptocurrencies may come from stablecoins and payments, which can explain the surge of interest in this space over the past 18 months. Compared to traditional methods, they facilitate faster and cheaper transactions, leading more payment companies to seek to expand their stablecoin infrastructure, thereby increasing the utilization of digital payments and remittances. In fact, it is likely that we will soon see stablecoins' primary use cases expanding beyond just transactions to global capital flows and commerce. However, beyond broader financial applications, the ability of stablecoins to address the U.S. debt burden has also garnered political interest.
As of November 30, 2024, the stablecoin market has completed nearly $27.1 trillion in transactions, nearly three times the $9.3 trillion of the same period in 2023. This includes a substantial amount of peer-to-peer (P2P) transfers and cross-border business-to-business (B2B) payments. Companies and individuals are increasingly leveraging stablecoins like USDC to meet regulatory requirements and integrate extensively with payment platforms like Visa and Stripe. In October 2024, Stripe acquired the stablecoin infrastructure company Bridge for $1.1 billion, marking the largest deal in the crypto industry to date.
Tokenization Revolution.
According to data from rwa.xyz, tokenization continues to make significant strides in 2024, with the tokenization of real-world assets (RWA) growing from $8.4 billion at the end of 2023 to $13.5 billion on December 1, 2024 (excluding stablecoins), an increase of over 60%. Multiple analysts predict that the industry could grow to at least $20 trillion and possibly up to $30 trillion within the next five years—potentially growing nearly 50 times. Asset management firms and traditional financial institutions such as BlackRock and Franklin Templeton are increasingly accepting the tokenization of government securities and other traditional assets on permissioned and public blockchains, enabling near-instant cross-border settlement and 24/7 trading.
Institutions are attempting to use such tokenized assets as collateral for other financial transactions (e.g., transactions involving derivatives), which can simplify operations (e.g., margin calls) and reduce risks. Furthermore, the RWA trend is expanding beyond assets like U.S. Treasury bonds and money market funds, gaining traction in private credit, commodities, corporate bonds, real estate, and insurance. Ultimately, tokenization can simplify the entire portfolio construction and investment process by bringing it on-chain, although this may still take a few years.
Certainly, these efforts face a range of unique challenges, including liquidity fragmentation across multiple chains and ongoing regulatory hurdles—though significant progress has been made in both areas. Tokenization is expected to be a gradual and ongoing process; however, the recognition of its advantages is clear. This is an ideal period for experimentation, ensuring that enterprises remain at the forefront of technological advancements.
DeFi Revival.
DeFi is dead. Long live DeFi. DeFi suffered significant blows in the last cycle as some applications used token incentives to guide liquidity, offering unsustainable yields. However, a more sustainable financial system has emerged that combines real-world use cases with transparent governance structures.
Changes in the U.S. regulatory landscape could revitalize the prospects for DeFi. This may include establishing a framework for regulating stablecoins and pathways for traditional institutional investors to participate in DeFi, especially as the synergy between off-chain and on-chain capital markets becomes increasingly apparent. In fact, DEXs currently account for about 14% of CEX trading volume, up from 8% in January 2023. Faced with a more friendly regulatory environment, even decentralized applications (dApps) sharing protocol revenues with token holders is becoming more likely.
Additionally, the role of cryptocurrencies in disrupting financial services has been recognized by key figures. In October 2024, Federal Reserve Governor Christopher Waller discussed how DeFi largely complements centralized finance (CeFi), arguing that distributed ledger technology (DLT) can make record-keeping for CeFi faster and more efficient, while smart contracts can enhance CeFi's capabilities. He also noted that stablecoins could be beneficial for payments and serve as 'safe assets' on trading platforms, although they require reserves to mitigate risks such as runs and illicit financing. All of this suggests that DeFi may soon expand beyond the crypto user base and start engaging more with traditional finance (TradFi).
Theme Two: Disruptive Paradigms.
Telegram Trading Bots: The Hidden Profit Center of Cryptocurrency.
After stablecoins and native L1 trading fees, Telegram trading bots became the most profitable area in 2024, even surpassing major DeFi protocols like Aave and MakerDAO (now Sky) in terms of net protocol revenue. This is largely a result of increased trading and memecoin activity. In fact, meme tokens have consistently been the best-performing crypto sector in 2024 (measured by total market cap growth), with meme token trading activity (on Solana DEXs) soaring throughout Q4 of 2024.
Telegram bots are a chat-based interface for trading these tokens. Custodial wallets are created directly in the chat window, and then they can be funded and managed via buttons and text commands. As of December 1, 2024, bot users are primarily focused on Solana tokens (87%), followed by Ethereum (8%), and then Base (4%).
Like most trading interfaces, Telegram bots earn a percentage fee from each transaction, up to 1% of the transaction amount. However, due to the volatility of the underlying assets they trade, users may not be deterred by high fees. As of December 1, the top-earning bot, Photon, accumulated fees totaling $210 million year-to-date, nearly matching Solana's largest memecoin launcher, Pump, at $227 million. Other major bots, such as Trojan and BONKbot, also reported substantial profits of $105 million and $99 million, respectively. In comparison, Aave's net protocol revenue for the entire year of 2024 was $74 million after fees.
The appeal of these applications stems from their ease of use in DEX trading, especially for tokens that have not yet been listed on exchanges. Many bots also offer additional features, such as 'sniping' tokens at launch and integrated price alerts. The trading experience on Telegram is quite attractive to users, with nearly 50% of Trojan users retained for four days or longer (only 29% of users stop using it after one day), bringing in a high average revenue of $188 per user. While the increasingly fierce competition among Telegram trading bots may eventually lower trading fees, by 2025, Telegram bots (and other core interfaces discussed below) will still be significant profit centers.
Prediction Market: Betting
Prediction markets may be one of the biggest winners in the 2024 U.S. elections, as platforms like Polymarket outperformed poll data, which predicted campaign outcomes closer to the final results. This is a victory for broader crypto technology, as blockchain-based prediction markets show significant advantages over traditional polling data and demonstrate the technology's potential differentiated use cases. Prediction markets not only showcase the transparency, speed, and global access provided by crypto technology but also allow for decentralized dispute resolution and automated result-based payment settlements.
While many believe that the relevance of these dapps may fade after the elections, their utility has expanded to other areas such as sports and entertainment. In finance, they have proven to be more accurate sentiment indicators compared to traditional surveys released alongside economic data such as inflation and non-farm employment data, which may continue to play a role and remain relevant after the elections.
Games.
Games have long been a core theme in the crypto space due to the transformative potential of on-chain assets and markets. However, so far, attracting a loyal user base for crypto games (a hallmark of most traditionally successful games) has been a challenge, as many crypto game users are profit-driven and may not be playing for entertainment. Additionally, many crypto games are browser-based, often limiting the audience to cryptocurrency enthusiasts rather than the broader gaming community.
However, compared to the previous cycle, integrated cryptocurrency games have made significant progress. At the heart of this trend is a shift from the early crypto punk spirit of 'owning your game entirely on-chain' to selectively placing assets on-chain, unlocking new features without compromising gameplay itself. In fact, many prominent game developers now see blockchain technology more as a convenience than a marketing tool.
The first-person shooter and battle royale game (Off the Grid) exemplifies this trend. At launch, the game's core blockchain component (Avalanche subnet) was still in the test network, yet it has already become the top free game on Epic Games. Its core appeal lies in its unique game mechanics rather than its blockchain tokens or item trading market. Crucially, this game also paves the way for expanding distribution channels for crypto-integrated games to gain broader market appeal and is available on Xbox, PlayStation, and PC (via Epic Games Store).
Mobile devices are also an important distribution channel for crypto games, including native applications and embedded applications (like Telegram mini-games). Many mobile games selectively integrate blockchain components, with most activities actually running on centralized servers. Generally, these games can be played without setting up any external wallets, reducing the entry barrier and allowing those unfamiliar with crypto to engage with these games.
The line between crypto and traditional gaming may continue to blur. Upcoming mainstream 'crypto games' may integrate with crypto technology rather than focus solely on it, emphasizing polished gameplay and distribution instead of game-earn mechanics. That said, while this may lead to broader adoption of cryptocurrencies as a technology, it is less clear how this will directly translate into demand for liquid tokens. In-game currencies are likely to remain isolated across different games.
Decentralized Reality.
Decentralized Physical Infrastructure Networks (DePIN) have the potential to change the allocation issues of the 'real world' by guiding the creation of resource networks. In other words, DePIN could theoretically overcome the initial economies of scale usually associated with such projects. DePIN projects range from computing power to cellular towers to energy, creating a more resilient and cost-effective way to integrate these resources.
A typical example is Helium, which distributes tokens to individuals providing local cellular hotspots. By issuing tokens to hotspot providers, Helium is able to launch coverage maps in urban areas across the U.S., Europe, and Asia without the overhead of building and distributing cellular towers, nor incurring significant upfront costs. Instead, early adopters are motivated by early exposure and equity in the network through tokens.
The long-term revenue and sustainability of these networks should be assessed on a case-by-case basis. DePIN is not a panacea for resource allocation, as industry pain points may vary significantly. For example, pursuing decentralized strategies may not be suitable for a particular industry, or it may only address a small portion of issues within that industry. There may be significant variation in network adoption, token utility, and revenue generated—all of which may relate more to the underlying industry they target rather than the underlying technology network they use.
Artificial Intelligence, Real Value.
Artificial intelligence (AI) has been a focal point for investors in both traditional and crypto markets. However, the impact of AI on cryptocurrencies is multifaceted, with narratives frequently changing. In the early stages, blockchain technology was aimed at addressing issues of authenticity in AI-generated content and users' data sources. AI-driven intent-driven architectures are also seen as potential improvements to the crypto user experience. Later, the focus shifted to decentralized training and computing networks for AI models, as well as crypto-driven data generation and collection. Recently, attention has turned to autonomous AI agents that can control crypto wallets and communicate via social media.
The overall impact of artificial intelligence on cryptocurrencies remains unclear, as evidenced by the rapid cycling of narratives. However, this uncertainty does not diminish the potential transformation AI may bring to cryptocurrencies, as breakthroughs in AI technology continue to emerge. Non-technical users are also finding it increasingly easy to use AI applications, which will further accelerate the development of creative use cases.
The biggest question is how to determine how these shifts materialize as a persistent value accumulation for tokens versus company equity. For example, many AI agents operate on traditional technology, with short-term 'value accumulation' (i.e., market attention) flowing into memecoins rather than any underlying infrastructure. While tokens associated with the infrastructure layer have also seen price increases, their usage growth often lags behind concurrent price increases. The speed of price increases relative to network metrics reflects a lack of strong consensus among investors on how to capture AI growth in cryptocurrencies.
Theme Three: Blockchain Metagame
A multi-chain future or a zero-sum game?
A major theme returning from the previous bull market cycle is the popularity of L1 networks. Newer networks are increasingly competing to lower transaction costs, redesign execution environments, and minimize latency. Even though high-quality block space remains scarce, the L1 space has expanded to the point of general block space surplus now.
Additional block space alone is not necessarily more valuable. However, a vibrant protocol ecosystem, coupled with an active community and dynamic crypto assets, can still allow certain blockchains to command additional fees. For example, Ethereum remains the center of high-value DeFi activity, even though its mainnet execution capacity has not improved since 2021.
Nevertheless, investors are drawn to the potential differentiated ecosystems on these new networks, even as the bar for differentiation is raised. High-performance chains like Sui, Aptos, and Sei are competing for market share with Solana.
Historically, DEX trading has been the largest driver of on-chain fees, requiring strong user logins, wallets, interfaces, and capital—thus forming a cycle of increasing activity and liquidity. This concentration of activity often leads to winner-takes-all scenarios across different chains. However, the future may still be multi-chain, as different blockchain architectures offer unique advantages to meet various needs. While application chains and L2 solutions can provide tailored optimization and lower costs for specific use cases, multi-chain ecosystems allow for specialization while still benefiting from the broader network effects and innovations of the entire blockchain field.
Upgrading L2s.
Despite the exponential scaling capabilities of L2s, debates around Ethereum's rollup-centric roadmap continue. Criticisms include L2s' 'extraction' of L1 activity and their fragmented liquidity and user experience. In particular, L2s are viewed as the source of Ethereum network fee declines and the fading narrative of 'ultrasound money.' New focal points in the L2 debate are also gradually emerging, including decentralized trade-offs, different virtual machine environments (potential fragmentation of EVM), and more.
Nonetheless, L2s have achieved some success from the perspective of increasing block space and lowering costs. The introduction of blob transactions in Ethereum's Dencun (Deneb+Cancun) upgrade in March 2024 reduced the average L2 cost by over 90%, resulting in a tenfold increase in activity for Ethereum L2s. Additionally, various execution environments and architectures are able to experiment within ETH-based environments, which is a long-term advantage of L2-centric approaches.
However, this roadmap also faces some drawbacks in the short term. Cross-rollup interoperability and general user experience are becoming more challenging to navigate, especially for newcomers who may not fully understand the differences between ETH across different L2s or how to bridge between them. In fact, while the speed and cost of bridging have improved, the requirement for users to first interact with cross-chain bridges diminishes the overall on-chain experience.
While this is a real issue, the community is seeking many different solutions, such as superchain interoperability in the Optimism ecosystem, real-time proofs and super trades of zkRollups, resource lock-based solutions, sorter networks, and more. Many of these challenges are being addressed at the infrastructure and network layers, and these improvements may take time to provide feedback at the user interface level.
Meanwhile, the growing Bitcoin L2 ecosystem is becoming harder to navigate, as there are no unified security standards and roadmaps. In contrast, Solana's 'network expansion' tends to be more targeted toward specific applications, potentially causing less disruption to current user workflows. Overall, L2s are being implemented in most major crypto ecosystems, although their forms vary widely.
Everyone has a chain.
The convenience of deploying customized networks is continuously increasing, prompting more applications and companies to build chains over which they have more control. Mainstream DeFi protocols, such as Aave and Sky, have clear goals of incorporating blockchain releases into their long-term roadmaps, and the Uniswap team has also announced plans for a DeFi-focused L2 chain. Even more traditional companies are getting involved. Sony has announced its new chain, the Soneium project.
As the blockchain infrastructure stack matures and becomes increasingly commoditized, owning block space is seen as increasingly attractive—especially for regulated entities or applications with specific use cases. The technology stack to achieve this is also changing. In previous cycles, application-centric chains primarily leveraged the Cosmos or Polkadot Substrate SDK. Additionally, the evolving RaaS industry, represented by companies like Caldera and Conduit, is driving more projects to launch L2s. These platforms facilitate easy integration with other services through their marketplaces. Similarly, the Avalanche subnet may see increased adoption due to its managed blockchain service AvaCloud, which simplifies the launch of customized subnets.
The growth of modular chains may have corresponding effects on the demand for Ethereum blob space and other data availability solutions (such as Celestia, EigenDA, or Avail). Since early November, Ethereum blob usage has reached saturation (three blobs per block), growing by over 50% since mid-September. Demand does not seem to be slowing down, as existing L2s (like Base) continue to expand throughput and new L2s are launched on the mainnet, although the upcoming Pectra upgrade in the first quarter of 2025 may increase the target number of blobs from three to six.
Theme Four: User Experience.
User Experience Improvements.
A simple user experience is one of the most important drivers of mass adoption. While cryptocurrencies have traditionally focused on deep technology, the current focus is rapidly shifting to simplified user experiences. In particular, the entire industry is pushing to abstract the technical aspects of cryptocurrency into the background of applications. Many recent technological breakthroughs have made this shift possible, such as the adoption of account abstraction to simplify onboarding and the use of session keys to reduce signature friction.
The adoption of these technologies will make the security components of crypto wallets (such as mnemonic phrases and recovery keys) invisible to most end users—similar to today's seamless security experiences on the internet (e.g., https, OAuth, and keys). Trends of key login and in-app wallet integration are expected to be seen more in 2025. Early signs include key login for Coinbase Smart Wallet and Google-integrated login for Tiplink and Sui Wallet.
The abstraction of cross-chain architecture may continue to pose the greatest challenge to the crypto experience in the short term. Cross-chain abstraction, while still a focus of research at the network and infrastructure level (e.g., ERC-7683), is still far from front-end applications. Improvements in this field require enhancements at the smart contract application level and wallet level. Protocol upgrades are necessary to unify liquidity, while wallet improvements are also essential for providing a clearer experience for users. The latter will ultimately be more important for expanding adoption, although current research work and industry debates are focused on the former.
Own Interface.
The most critical shift for the crypto user experience will come from efforts to 'own' user relationships through better interfaces. This will occur in two ways. First, improvements to the independent wallet experience as described above. The onboarding process is becoming increasingly streamlined to meet user needs. Direct integration of applications (such as trading and lending) within wallets may also lock users into a familiar ecosystem.
Meanwhile, applications are increasingly abstracting blockchain technology components to the background through wallet integration to vie for user relationships. This includes trading tools, games, on-chain social, and membership applications that automatically provide wallets for users registering through familiar methods like Google or Apple OAuth. Once logged in, on-chain transactions are funded by payers, with costs ultimately borne by application owners. This brings a unique dynamic where the revenue per user needs to align with the costs of paying for their on-chain operations. While the latter cost continuously decreases as blockchains scale, it also forces crypto applications to consider which data components to submit on-chain.
Overall, attracting and retaining users in the crypto space will be fiercely competitive. As illustrated by the average revenue per user (ARPU) of Telegram trading bots mentioned earlier, many retail crypto traders tend to be relatively price insensitive compared to existing TradFi entities. Over the next year, establishing user relationships is expected to become a key focus for protocols beyond trading.
Decentralized Identity.
As regulatory transparency increases, more and more assets are being tokenized off-chain, making it increasingly important to simplify KYC and Anti-Money Laundering (AML) processes. For example, certain assets are available only to qualified investors located in specific regions, making identification and verification a core pillar of the long-term on-chain experience.
This has two key components. The first is creating on-chain identity itself. The Ethereum Name Service (ENS) provides a standard for resolving human-readable '.eth' names to one or more wallets across chains. This change is now present in networks like Basenames and the Solana Name Service. With major traditional payment providers like PayPal and Venmo now supporting ENS address resolution, the adoption of these core on-chain identity services has accelerated.
The second core component is building attributes for on-chain identities. This includes confirming KYC verifications and other jurisdictional data that protocols can subsequently view to ensure compliance. The core of this technology is Ethereum's verification service, a flexible service that allows entities to attribute properties to other wallets. These attributes are not limited to KYC; they can be freely expanded to meet the needs of the prover. For instance, Coinbase's on-chain verification utilizes this service to confirm that a wallet is associated with a user who has a Coinbase trading account and is located in certain jurisdictions. Some new permissioned lending markets for real-world assets on Base will control usage through these verifications.
Related Reading: Presto: From Chaos to Clarity, A Review of the 2024 Crypto Market and Predictions for 2025.
