Looking ahead to 2025, the crypto market will experience transformative growth. The maturity of the asset class continues to gain momentum as institutional adoption increases and applications continue to expand across industries. Just in the past year, spot ETFs were approved in the United States, the tokenization of financial products increased significantly, and stablecoins grew significantly and became further integrated into the global payments architecture.
Achieving this goal will not be easy. While it's easy to see these successes as the culmination of years of hard work, there's a growing consensus that this is actually just the beginning of a much bigger journey.
Considering that just a year ago, this asset class was still stumbling due to rising interest rates, regulatory crackdowns, and an uncertain path forward, the progress of cryptocurrencies is even more impressive. Despite all these challenges, cryptocurrencies have become a solid alternative asset, proving their resilience.
However, from a market perspective, the upward trend in 2024 indeed shows some clear differences from previous bull market cycles. Some of these are superficial: 'Web3' has been replaced with the more appropriate 'onchain.' Others have more far-reaching implications: fundamental demand has started to replace the influence of narrative-driven investment strategies, partly due to increased institutional participation.
Furthermore, not only has Bitcoin's dominance surged, but innovations in DeFi have also pushed the boundaries of blockchain—making the foundation of a new financial ecosystem accessible. Central banks and major financial institutions around the world are discussing how crypto technology can make asset issuance, trading, and record-keeping more efficient.
Looking ahead, the current crypto industry presents many promising developments. At the forefront of disruption, we are focusing on decentralized peer-to-peer exchanges, decentralized prediction markets, and AI agents equipped with crypto wallets. On the institutional side, there is immense potential in stablecoins and payments (tightening the integration of crypto and fiat banking solutions), low-collateral on-chain lending (facilitated by on-chain credit scoring), and compliant on-chain capital formation.
Despite the high awareness of cryptocurrencies, their novel technological structure still makes this technology obscure to many. However, technological innovation is expected to alter this status quo, as more and more projects focus on improving user experience by abstracting blockchain complexity and enhancing smart contract capabilities. Success in this area may expand the accessibility of cryptocurrencies to new users.
Meanwhile, the U.S. has already laid a clearer regulatory foundation in 2024, well ahead of the November elections. This sets the stage for greater progress in 2025, potentially solidifying the position of digital assets in mainstream finance.
As the regulatory and technological landscape evolves, significant growth is expected in the crypto ecosystem, as broader adoption will drive the industry closer to realizing its full potential. 2025 will be a critical year, with breakthroughs and advancements likely to help shape the long-term development trajectory of the crypto industry for decades to come.
Source: Bloomberg
Theme One: 2025 Economic Roadmap
What the Fed wants and what the Fed 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 response of short-term fiscal policy may not be as meaningful as the long-term direction of monetary policy, especially with the Fed's critical moments approaching. However, separating the two may not be 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 could push inflation higher, although the overall CPI has fallen to 2.7% year-on-year, with core CPI still hovering around 3.3%, above the Fed's target.
Source: Bloomberg and Coinbase
In any case, the Fed wishes to curb 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 costs over the past two years. However, while falling prices may politically seem like a good move, they could fall into a vicious cycle that ultimately leads to an economic recession.
Nevertheless, thanks to the decline in long-term interest rates and the U.S. exceptionalism 2.0, a soft landing seems to be the current baseline scenario. At this point, the Fed's rate cuts are merely symbolic as credit conditions have already loosened, providing a supportive backdrop for cryptocurrency performance in the next 1-2 quarters. Meanwhile, with more dollars circulating in the economy, the projected deficit spending of the next administration (if realized) should translate into greater risk-taking (cryptocurrency purchases).
Source: Bloomberg and Coinbase
The most crypto-friendly U.S. Congress in history
After years of fighting regulatory ambiguity, the next U.S. legislative session may enhance regulatory clarity for 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 could shift from 'headwinds' to 'tailwinds' in 2025.
A new topic of discussion is the possibility of establishing strategic Bitcoin reserves. Following the Bitcoin Nashville conference, Senator Cynthia Lummis (WY) not only proposed a Bitcoin bill in July 2024 but also introduced a Pennsylvania Bitcoin Strategic Reserve Bill. If passed, the latter would allow the state treasurer to invest up to 10% of the general fund in Bitcoin or other crypto-based instruments. Michigan and Wisconsin have already held cryptocurrency or crypto ETF in their retirement funds, with Florida following suit. However, creating a strategic Bitcoin reserve may face some challenges, such as legal limits on the amount of Bitcoin the Federal Reserve can hold on its balance sheet.
Meanwhile, the U.S. is not the only jurisdiction preparing to make regulatory progress. The growth of global crypto demand is also changing the competitive landscape of regulations internationally. The European Union's regulation of crypto assets (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 drafting rules to adapt to digital assets, creating a more favorable environment for innovation and growth.
Source: Stand With Crypto Coinbase
Crypto ETF 2.0
The approval of spot Bitcoin and Ethereum exchange-traded products and funds (ETP and ETF) in the U.S. has been a watershed moment for the crypto economy, with net inflows of $30.7 billion since their inception (about 11 months). This far surpasses the $4.8 billion that the SPDR Gold Shares ETF (GLD) attracted in its first year after launching in October 2004 (adjusted for inflation). According to Bloomberg, this positions these instruments as 'the top 0.1% of the approximately 5,500 new ETFs launched in the last 30 years.'
ETFs have reshaped the market dynamics of Bitcoin and Ether by establishing new demand anchor points, driving Bitcoin's dominance from 52% at the beginning of the year to 62% in November 2024. According to the latest 13-F filings, almost all types of institutions are now holders of these products, including endowment funds, retirement funds, hedge funds, investment advisors, and family offices. Meanwhile, the introduction of optional U.S. regulatory frameworks (November 2024) on these products may enhance risk management and improve the cost-effectiveness of these assets.
Looking ahead, the industry's focus will likely involve publishers expanding the range of exchange-traded products to include other tokens such as $XRP, $SOL, $LTC, and $HBAR, although potential approvals may only have a positive impact on a limited asset group in the short term. But what is more worth noting is what would happen if the U.S. SEC allows for staking ETFs or removes the authorization for cash-based rather than physical creation and redemption of ETF shares. The latter authorization introduces settlement delays between when authorized participants (AP) receive buy or sell orders and when publishers can create or redeem corresponding shares. This delay, in turn, causes a misalignment between the ETF price on the screen and the actual net asset value (NAV).
The introduction of physical creation and redemption can not only improve price consistency between stock prices and net asset values but also help narrow the price gaps of ETF shares. This means that participants (AP) do not need to quote cash prices above the trading price of Bitcoin, thereby reducing costs and increasing efficiency. The current cash-based model also brings additional implications associated with the continuous buying and selling of Bitcoin and Ether, such as exacerbated price volatility and triggering taxable results, which do not apply to physical transactions.
Source: Bloomberg and Coinbase
Stablecoins, the 'killer application' of cryptocurrencies
In 2024, stablecoins saw significant growth, with total market capitalization increasing by 48%, reaching $193 billion (as of December 1). Some market analysts believe that based on the current trajectory, the industry could grow to nearly $3 trillion within the next five years. While this may seem high, considering this valuation is comparable to the current size of the entire cryptocurrency market, it constitutes only about 14% of the U.S. M2 total supply of $21 trillion.
Source: Bloomberg, DeFiLiama and Coinbase
The next wave of true adoption for cryptocurrencies may come from stablecoins and payments, which can explain the surge in interest in the industry 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, we may soon see major applications of stablecoins not just for transactions but also for global capital flows and commerce. Moreover, aside from 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, almost three times the $9.3 trillion recorded in the same 11 months of 2023. This includes a significant 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 widely with payment platforms like Visa and Stripe. Stripe acquired the stablecoin infrastructure company Bridge for $1.1 billion in October 2024, marking the largest deal in the crypto industry to date.
The tokenization revolution
According to data from rwa.xyz, tokenization continues to make significant progress in 2024, with tokenized real-world assets (RWA) growing from $8.4 billion at the end of 2023 to $13.5 billion by December 1, 2024 (excluding stablecoins), representing over 60% growth. Predictions from multiple analysts indicate that the industry could grow to at least $2 trillion and potentially up to $30 trillion within five years—possibly growing nearly 50 times. Asset management firms and traditional financial institutions like BlackRock and Franklin Templeton are increasingly embracing the tokenization of government securities and other traditional assets on permissioned and public blockchains, facilitating near-instant cross-border settlements and 24/7 trading.
Institutions are attempting to use such tokenized assets as collateral for other financial transactions (e.g., involving derivatives), which can simplify operations (e.g., margin calls) and reduce risks. Furthermore, the RWA trend is expanding beyond U.S. Treasury bonds and money market funds, gaining traction in private credit, commodities, corporate bonds, real estate, and insurance industries. Ultimately, tokenization can simplify the construction and investment processes of an entire portfolio by bringing it on-chain, although this may still take several years.
Of course, these efforts face a range of unique challenges, including liquidity fragmentation across multiple chains and ongoing regulatory hurdles—although significant progress has been made on both fronts. Tokenization is expected to be a gradual and ongoing process; however, the recognition of its advantages is clear. This period is the best time for experimentation, ensuring that businesses stay at the forefront of technological advances.
Source: Rwa.xyz
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, combining real-world applications with transparent governance structures.
A shift in the U.S. regulatory landscape may revitalize the prospects for DeFi. This could include establishing a framework for managing stablecoins and pathways for traditional institutional investors to engage with DeFi, especially given the increasingly apparent synergies between off-chain and on-chain capital markets. In fact, DEXs currently account for about 14% of CEX trading volume, up from 8% in January 2023. In the face of a more favorable regulatory environment, the potential for even decentralized applications (dApps) to share protocol revenue with token holders is also becoming increasingly likely.
Moreover, the role of cryptocurrencies in disrupting financial services has also been recognized by key figures. In October 2024, Fed Governor Christopher Waller discussed how DeFi largely complements centralized finance (CeFi), positing 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 suggested that stablecoins could be beneficial for payments, serving as a 'safe asset' on trading platforms, although they require reserves to mitigate risks such as runs and illicit financing. All these indicate that DeFi may soon expand its functionalities beyond the crypto user base and begin to engage more with traditional finance (TradFi).
Theme Two: Disruptive Paradigms
Telegram Trading Bots: The Hidden Profit Center of Cryptocurrencies
After stablecoins and native L1 transaction fees, Telegram trading bots emerged as the most profitable industry in 2024, surpassing even major DeFi protocols like Aave and MakerDAO (now Sky) in terms of net protocol revenue. This is largely a result of increased trading and meme coin activity. In fact, meme tokens have been the best-performing crypto track of 2024 (assessed by total market cap growth), with meme token trading activity (on Solana DEXs) skyrocketing 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 can be funded and managed through buttons and text commands. As of December 1, 2024, bot users primarily focus on Solana tokens (87%), followed by Ethereum (8%) and then Base (4%).
Like most trading interfaces, Telegram bots earn a percentage fee from each trade, 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 highest-grossing bot Photon has charged $210 million year-to-date, nearly matching Solana's largest meme coin launcher Pump's $227 million. Other major bots, such as Trojan and BONKbot, have also amassed substantial profits of $105 million and $99 million, respectively. In contrast, Aave's net protocol revenue for the entire year of 2024 was $74 million after deducting fees.
The appeal of these applications stems from their ease of use in DEX trading, particularly for tokens not yet 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 retaining for four days or more (only 29% of users stop using it after one day), with each user generating a high average revenue of $188. While competition among Telegram trading bots may ultimately reduce trading fees, by 2025, Telegram bots (and other core interfaces discussed below) will still serve as major profit centers.
Source: DeFiLiama and Coinbase
Prediction market: betting
Prediction markets may be one of the biggest winners in the 2024 U.S. elections, as platforms like Polymarket have outperformed polling data, with the predicted campaign outcomes being 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 potential differentiated applications of this technology. Prediction markets not only showcase the transparency, speed, and global access provided by crypto technology but also allow for decentralized dispute resolution and automated payments based on outcomes.
Although many believe the relevance of these dapps may fade after the election, their utility has already expanded to other industries such as sports and entertainment. In the financial industry, they have proven to be more accurate sentiment indicators compared to traditional surveys associated with the release of economic data such as inflation and non-farm payroll figures, which may continue to play a role and remain relevant after the election.
Games
Gaming has long been a core theme in the crypto industry due to its potential transformative impact on on-chain assets and markets. However, to date, 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 their audience to cryptocurrency enthusiasts rather than the broader gaming population.
However, compared to the previous cycle, the integration of cryptocurrencies into games has made significant progress. The core of this trend is the shift from the early crypto-punk ethos of 'owning your game entirely on-chain' to selectively placing assets on-chain to unlock new features without compromising gameplay itself. In fact, many outstanding game developers now view blockchain technology more as a convenient tool rather than a marketing tool.
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 testing phase, although 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 markets. Crucially, this game has also paved the way for crypto-integrated games to expand their distribution channels for broader market appeal and is available on Xbox, PlayStation, and PC (through the Epic Games Store).
Mobile devices are also an important distribution channel for crypto games, including native apps and embedded applications (like Telegram mini-games). Many mobile games also 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 entry barriers for those unfamiliar with crypto.
The boundaries between crypto and traditional gaming may continue to blur. Upcoming mainstream 'crypto games' may combine with crypto technology rather than focus on it, emphasizing refined gameplay and distribution over game-earning mechanisms. This means that while this may lead to a 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.
Source: Footprint Analytics
Decentralized Realities
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 can theoretically overcome the initial economies of scale typically 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.
The most typical example is Helium, which distributes tokens to individuals providing local cellular hotspots. By issuing tokens to hotspot providers, Helium has been able to launch coverage maps in major urban areas in the U.S., Europe, and Asia without the expense of building and distributing cellular towers or spending significant upfront capital. Instead, early adopters' motivation was to gain early exposure and stake 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 greatly. For instance, pursuing decentralized strategies may not be applicable to a particular industry, or it may only address a small portion of issues within that industry. There can be significant differences between network adoption, token utility, and generated revenue—all of which may relate to the underlying industry they target rather than the underlying technology networks they use.
Source: DePIN Ninja
Artificial Intelligence, Real Value
Artificial intelligence (AI) has been a focal point for both traditional and crypto market investors. However, the impact of AI on cryptocurrency is multifaceted, with its narratives frequently changing. In the early stages, blockchain technology aimed to address issues related to the authenticity of data sources for AI-generated content and users (i.e., tracking the veracity of data). AI-driven intent-driven architectures are also seen as potential improvements to the crypto user experience. Later, the focus shifted to decentralized training and computational networks for AI models and crypto-driven data generation and collection. Recently, attention has turned to autonomous AI agents capable of controlling crypto wallets and communicating through social media.
The overall impact of artificial intelligence on cryptocurrency is unclear, as evidenced by the rapid cycling of various narratives. However, this uncertainty does not diminish the potential transformation that AI could bring to cryptocurrencies, as AI technology continues to achieve new breakthroughs. Non-technical users are also finding it increasingly easier to use AI applications, further accelerating the development of creative applications.
The biggest question is how to translate these shifts into the persistent value accumulation of tokens versus company equity. For example, many AI agents operate on traditional technology, and short-term 'value accumulation' (i.e., market attention) flows to meme coins rather than any underlying infrastructure. While tokens associated with infrastructure layers have also seen price increases, their usage growth often lags behind concurrent price increases. The speed of price increases relative to network indicators reflects a lack of strong consensus among investors on how to capture AI growth in cryptocurrencies.
Blockchain Metaverse
Multi-chain future or zero-sum game?
One major theme returning from the last 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 quality block space remains scarce, L1 space has expanded to the point of now experiencing an oversupply of generic block space.
Additional block space itself 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, despite no increase in its mainnet execution capability since 2021.
Despite this, investors are still drawn to the potential differentiated ecosystems of these new networks, even as the barriers to differentiation are rising. High-performance chains like Sui, Aptos, and Sei are competing with Solana for market share.
Historically, DEX trading has been the largest driver of on-chain fees, necessitating strong user logins, wallets, interfaces, and capital—forming a cycle of increasing activity and liquidity. This concentration of activity often leads to a winner-takes-all scenario 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 optimizations and lower costs for specific applications, a multi-chain ecosystem allows for specialization while still benefiting from the broader network effects and innovations of the entire blockchain industry.
Source: DefiLiama
Upgrading L2s
Despite the exponential growth in the scalability of L2s, debates surrounding Ethereum's rollup-centric roadmap continue. Criticisms include the 'extraction' of L1 activity by L2s, as well as their fragmented liquidity and user experience. In particular, L2s are seen as the source of reduced Ethereum network fees and the fading narrative of 'ultrasound money.' New focal points in the L2 debate are also gradually emerging, including decentralized trade-offs and potential fragmentation of different virtual machine environments (EVM).
Nevertheless, L2s have achieved some success from the perspective of increasing block space and reducing costs. The introduction of blob transactions in Ethereum's Dencun (Deneb + Cancun) upgrade in March 2024 reduced average L2 costs by over 90% and increased activity on Ethereum L2s by tenfold. Additionally, multiple execution environments and architectures are able to experiment within Ethereum-based environments, which is a long-term advantage of the L2-centric approach.
However, this roadmap also has some drawbacks in the short term. Cross-rollup interoperability and general user experience are becoming increasingly difficult to navigate, especially for newcomers who may not fully understand the differences between Ethereum's various L2s or how to establish cross-chain connections between them. In fact, while cross-chain speed and cost have improved, requiring users to interact with cross-chain bridges first reduces the overall on-chain experience.
While this is a practical issue, the community is seeking many different solutions, such as interoperability between superchains in the Optimism ecosystem, instant proofs and super transactions using zkRollups, resource locks, ordering networks, and more. Many of these challenges are being addressed at the infrastructure and network layer, but these improvements may take time to receive feedback at the user interface level.
Meanwhile, the growing Bitcoin L2 ecosystem is becoming more challenging to navigate due to the lack of unified security standards and roadmaps. In contrast, Solana's 'network scalability' tends to be more application-specific and may disrupt current user workflows less. Overall, L2s are being implemented in most major crypto ecosystems, although their forms vary significantly.
Source: growthepie.xyz and Coinbase
Everyone has a chain
The convenience of deploying customized networks is continuously increasing, prompting more applications and companies to build chains where they have more control. Mainstream DeFi protocols, such as Aave and Sky, have clear goals of listing blockchain launches on their long-term roadmaps, and the Uniswap team has also announced plans for an L2 chain focused on DeFi. Even more traditional companies are getting involved. Sony has announced plans for a new chain called Soneium.
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 evolving. In previous cycles, application-centric chains primarily leveraged Cosmos or Polkadot Substrate SDK. Additionally, the evolving RaaS industry, represented by companies like Caldera and Conduit, is driving more projects to launch L2. These platforms facilitate easy integration with other services through their marketplaces. Similarly, Avalanche subnets may see increased adoption due to its managed blockchain service AvaCloud, which simplifies the launch of custom subnets.
The growth of modular chains may correspondingly impact the demand for Ethereum blob space and other data availability solutions (such as Celestia, EigenDA, or Avail). Since early November, the usage of Ethereum blobs has reached saturation (3 blobs per block), growing more than 50% since mid-September. Demand does not seem to be slowing, as existing L2s (like Base) continue to expand throughput, and new L2s are launched on the mainnet, although the upcoming Pectra upgrade in Q1 2025 may increase the target number of blobs from 3 to 6.
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 emphasis is rapidly shifting towards simplified user experiences. In particular, the entire industry is pushing to abstract the technical aspects of cryptocurrencies into the background of applications. Recent technological breakthroughs have made this shift possible, such as adopting account abstraction to simplify onboarding and using session keys to reduce signature friction.
The adoption of these technologies will make security components of crypto wallets (such as seed phrases and recovery keys) invisible to most end users—similar to the seamless security experiences of today’s web (e.g., https, OAuth, and keys). Trends toward keyless logins and in-app wallet integrations are expected to be seen more in 2025. Early signs include key logins for Coinbase Smart Wallet and Google integration logins for Tiplink and Sui Wallet.
The abstraction of cross-chain architectures may continue to pose the biggest challenge to the crypto experience in the short term. While cross-chain abstraction remains the focus of network and infrastructure-level research (e.g., ERC-7683), it is still far from front-end applications. The industry improvements need to be made at the smart contract application level and wallet level. Protocol upgrades are necessary for unifying 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 and industry debates focus on the former.
Interface ownership
The most critical shift for the user experience in cryptocurrency will come from efforts to 'own' user relationships through better interfaces. This will happen in two ways. First, as mentioned above, there will be improvements to the independent wallet experience. Onboarding processes are 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 into the background through wallet integration to compete for user relationships. This includes trading tools, games, on-chain social applications, 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 the payer, with costs ultimately borne by the application owner. This creates a unique dynamic where each user's revenue needs to align with the cost of their on-chain operations. Although the latter cost continues to decrease as blockchain scalability improves, it also forces crypto applications to consider which data components to submit on-chain.
Overall, there will be fierce competition in the crypto industry to attract and retain users. As evidenced 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. In the coming year, building user relationships is also expected to become a key focus for protocols beyond the trading industry.
Source: Dune and Coinbase
Decentralized identity
With increasing regulatory transparency, more and more assets are being tokenized off-chain, making the simplification of KYC and anti-money laundering (AML) processes increasingly important. For example, certain assets may only be available to qualified investors located in specific regions, making identity verification and certification a core pillar of the long-term on-chain experience.
There are two key components to this. The first is the creation of on-chain identities themselves. The Ethereum Name Service (ENS) provides a standard for resolving human-readable '.eth' names to one or more wallets across chains. This change now exists in networks like Basenames and 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 verifying KYC information and other jurisdictional data that can subsequently be viewed to ensure compliance. At the core of this technology is the Ethereum attestation service, a flexible service available for entities to assign attributes to other wallets. These attributes are not limited to KYC; they can be freely expanded to meet the needs of the attester. For example, 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.
Source: Dune and Coinbase
[Disclaimer] The market carries risks; investment should be approached with caution. This article does not constitute investment advice, and users should consider whether any opinions, views, or conclusions in this article align with their specific situations. Invest at your own risk.
This article is republished with permission from: (PANews)
Original author: Coinbase
‘Coinbase's latest report: In-depth analysis of the development of each track next year based on four major themes’ was first published in ‘Crypto City’
