Article reprinted from: Felix
Author: Coinbase
Compiled by: Felix, PANews
Looking ahead to 2025, the crypto market will experience transformative growth. With increasing institutional adoption rates and the expanding use cases across various sectors, the maturity of the asset class continues to gain momentum. In just the past year, spot ETFs have been approved in the U.S., the tokenization of financial products has surged, stablecoins have grown significantly, and further integration into global payment frameworks has occurred.
Achieving this is not easy. While it is tempting to view these successes as the result of years of effort, more and more people believe that this is merely the beginning of a grand journey.
Considering that just a year ago, this asset class was 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 become a solid alternative asset, demonstrating their resilience.
However, from a market perspective, the upward trend in 2024 does have some notable differences compared to previous bull market cycles. Some of these are superficial: 'Web3' has been replaced by the more appropriate 'on-chain'. 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 also pushed the boundaries of blockchain—bringing the foundations of new financial ecosystems within reach. 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 space presents many promising developments. At the forefront of disruption, we focus 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 (bringing crypto and fiat banking solutions closer together), low-collateral on-chain lending (facilitated by on-chain credit scoring), and compliant on-chain capital formation.
Despite the high recognition of cryptocurrencies, this technology still seems opaque to many due to its novel technical structure. However, technological innovations are expected to change this status quo, as more projects focus on improving user experience by abstracting blockchain complexity and enhancing smart contract functionalities. Success in this regard could broaden 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 even greater progress in 2025, potentially solidifying the position of digital assets in mainstream finance.
With the evolution of the regulatory and technological landscape, significant growth is expected in the crypto ecosystem as broader adoption will push the industry closer to realizing its full potential. 2025 will be a key year, with breakthroughs and advancements likely to help shape the long-term development trajectory of the crypto industry for decades to come.
Theme One: Macro Roadmap for 2025
What the Fed wants, what the Fed needs
Trump's victory in the 2024 U.S. presidential election will be the most significant crypto market catalyst in Q4 2024, driving Bitcoin up 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 key moment 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 expansionary nature of the next fiscal policy. This is because tax cuts and tariffs could push inflation higher, and while the overall CPI YoY has dropped to 2.7%, the core CPI remains around 3.3%, above the Fed's target.
In any case, the Fed aims to suppress inflation from its current levels, which means prices need to rise but slow down from now on to help achieve its other mission—full employment. On the other hand, households have been demanding lower prices after suffering through price increases over the past two years. However, while price decreases may be politically expedient, they may risk falling into a vicious cycle that ultimately leads to an economic downturn.
Nonetheless, thanks to declining long-term interest rates and U.S. exceptionalism 2.0, a soft landing seems to be the current baseline. At this point, the Fed’s rate cuts are merely formalities, as credit conditions have already loosened, providing a supporting backdrop for cryptocurrency performance in the coming 1-2 quarters. Meanwhile, as more dollars circulate in the economy, the projected deficit spending of the next government (if realized) should translate into greater risk-taking (crypto purchases).
The most supportive U.S. Congress for cryptocurrency ever
After years of fighting regulatory ambiguity, the next legislative session in the U.S. 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 seeks change. From a market perspective, bipartisan support for cryptocurrencies in both the House and Senate suggests that U.S. regulation may turn from 'headwinds' to 'tailwinds' in 2025.
A new discussion point 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 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 Federal Reserve’s balance sheet.
At the same time, the U.S. is not the only jurisdiction preparing to make regulatory progress. The global demand for crypto is also changing the competitive landscape of regulation internationally. The European Union's crypto asset regulatory market (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 developing rules to adapt to digital assets, creating a more favorable environment for innovation and growth.
Crypto ETF 2.0
The approval of spot Bitcoin and Ethereum exchange-traded products and funds (ETP and ETF) in the United States marks a watershed moment for the crypto economy, with $30.7 billion in net inflows in about 11 months since their inception. 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 positions these tools in the top 0.1% of approximately 5,500 new ETFs launched over 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 now 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 (in November 2024) may strengthen risk management and enhance the cost-effectiveness of these assets.
Looking ahead, the focus of the industry may be on issuers 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 group of assets in the short term. But more importantly, what happens 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 a settlement delay between when authorized participants (AP) receive buy or sell orders and when the issuer can create or redeem the corresponding shares. This delay, in turn, creates a disconnect 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 share prices and net asset values but also help narrow the price spread of ETF shares. This means that authorized participants (AP) do not need to quote cash prices above the trading price of Bitcoin, reducing costs and improving efficiency. The current cash-based model also brings additional implications related to the ongoing buying and selling of BTC and ETH, such as increased price volatility and triggering taxable events that do not apply to physical transactions.
Stablecoins, the 'killer application' of cryptocurrencies
In 2024, stablecoins achieved significant growth, with total market capitalization increasing by 48% to $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 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 of cryptocurrencies may come from stablecoins and payments, which explains the surge of interest in this area over the past 18 months. Compared to traditional methods, they facilitate faster, cheaper transactions, prompting more payment companies to expand their stablecoin infrastructure, thereby increasing the utilization of digital payments and remittances. In fact, we may soon see stablecoins' primary use cases extend beyond transactions to global capital flows and business. 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 during the same 11 months in 2023. This includes a significant amount of peer-to-peer (P2P) transfers and cross-border business-to-business (B2B) payments. Businesses and individuals increasingly use stablecoins like USDC to meet regulatory requirements and integrate widely with payment platforms like Visa and Stripe. In October 2024, Stripe acquired stablecoin infrastructure company Bridge for $1.1 billion, making it the largest transaction in the crypto industry to date.
The Tokenization Revolution
According to data from rwa.xyz, tokenization continued 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 on December 1, 2024 (excluding stablecoins), an increase of over 60%. Multiple analyst predictions suggest that the industry could grow to at least $2 trillion in the next five years, with potential growth reaching up to $30 trillion—possibly increasing nearly fiftyfold. Asset management firms and traditional financial institutions like BlackRock and Franklin Templeton are increasingly adopting tokenization of government securities and other traditional assets on permissioned and public blockchains, enabling 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., trades involving derivatives), which can simplify operations (e.g., margin calls) and reduce risk. Additionally, the trend of RWA is expanding beyond U.S. treasury bonds and money market funds, gaining traction in areas like 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 years.
Of course, these efforts face a range of unique challenges, including liquidity fragmentation across multiple chains and ongoing regulatory obstacles—although significant progress has been made in both areas. Tokenization is expected to be a gradual and ongoing process; however, recognition of its advantages is clear. This period is the best time to experiment and ensure that businesses remain at the forefront of technological advancements.
DeFi Renaissance
DeFi is dead. Long live DeFi. DeFi suffered significant setbacks in the last cycle as some applications used token incentives to drive liquidity, offering unsustainable yields. However, a more sustainable financial system has emerged, combining real-world use cases with transparent governance structures.
The shift in the U.S. regulatory landscape could revitalize the prospects for DeFi. This might include establishing a framework for governing stablecoins, as well as pathways for traditional institutional investors to participate in DeFi, particularly in light of the increasing synergy 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. With a more favorable regulatory environment, even decentralized applications (dApps) sharing protocol revenues with token holders is becoming increasingly 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), noting that distributed ledger technology (DLT) could make record-keeping in CeFi faster and more efficient, while smart contracts could enhance CeFi's capabilities. He also stated that stablecoins could be beneficial for payments and serve as a 'safe asset' on trading platforms, although they need reserves to mitigate risks like bank runs and illicit financing. All of this suggests that DeFi may soon expand 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 Cryptocurrency
After stablecoin and native L1 transaction 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 protocol net revenue. This is largely due to increased trading and memecoin activity. In fact, meme tokens have been the best-performing crypto category in 2024 (measured by total market cap growth), with trading activity for meme tokens (on Solana DEXs) soaring throughout Q4 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 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 certain percentage of fees 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 highest-earning bot, Photon, has charged a cumulative $210 million year-to-date, close to the $227 million of Solana's largest memecoin launcher, Pump. Other major bots like Trojan and BONKbot also garnered significant profits of $105 million and $99 million, respectively. In contrast, Aave's protocol revenue for the entire year of 2024, after fees, amounted to $74 million.
The appeal of these applications lies in their ease of use for DEX trading, particularly 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 appealing to users, with nearly 50% of Trojan users retained for four days or more (only 29% stop using it after one day), generating a high average revenue of $188 per user. While the increasing competition among Telegram trading bots may eventually lower trading fees, by 2025, Telegram bots (as well as the other core interfaces discussed below) will still be major profit centers.
Prediction Markets: Betting
Prediction markets may be one of the biggest winners of the 2024 U.S. elections, as platforms like Polymarket have outperformed polling data, which predicted campaign outcomes that were closer to the final results. This is a victory for broader crypto technology, as blockchain-based prediction markets demonstrate significant advantages over traditional polling data and showcase the technology's potential differentiated use cases. Prediction markets not only highlight the transparency, speed, and global access offered by crypto technology but also allow for decentralized dispute resolution and outcome-based automated payment settlements.
While many believe the relevance of these dapps may wane after the elections, their utility has expanded to other areas such as sports and entertainment. In finance, they have been shown to be more accurate sentiment indicators compared to traditional surveys released with economic data like inflation and non-farm payrolls, which may continue to play a role and remain relevant after the elections.
Games
Due to the potentially transformative impact of on-chain assets and markets, gaming has long been a core theme in the crypto space. However, thus 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 play games for entertainment. Additionally, many crypto games are browser-based, often limiting their audience to cryptocurrency enthusiasts rather than the broader gaming public.
However, compared to the previous cycle, games that integrate cryptocurrencies have made significant progress. The core of this trend is shifting from the early crypto-punk ethos of 'fully owning your game on-chain' to selectively placing assets on-chain to unlock new features without impacting gameplay itself. In fact, many prominent game developers now view blockchain technology more as a convenient tool than as a marketing gimmick.
Games like the first-person shooter and battle royale game (Off the Grid) exemplify this trend. At the time of release, the game's core blockchain component (Avalanche subnet) was still in the testnet, yet it has 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 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 applications and embedded applications (like Telegram mini-games). Many mobile games selectively integrate blockchain components, with most activities running on centralized servers. Generally, these games can be played without setting up any external wallets, reducing entry barriers and allowing those unfamiliar with crypto to engage in these games.
The lines between crypto and traditional gaming may continue to blur. Upcoming mainstream 'crypto games' may integrate with crypto technology rather than focusing solely on it, emphasizing refined gameplay and distribution instead of game-earn mechanisms. That said, while this may lead to broader adoption of cryptocurrencies as a technology, it is unclear how this will directly translate into demand for liquid tokens. In-game currencies are likely to remain siloed across different games.
Decentralized Real World
Decentralized Physical Infrastructure Networks (DePIN) could potentially change the distribution issues of the 'real world' by guiding the creation of resource networks. That is to say, DePIN can theoretically overcome the initial economies of scale typically associated with such projects. The scope of DePIN projects ranges 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 has been able to launch coverage maps in major urban areas in the U.S., Europe, and Asia without the costs of building and distributing cellular towers, or incurring substantial upfront capital expenditures. Instead, early adopters are motivated by the opportunity to gain early exposure and stake in the network itself.
The long-term revenues and sustainability of these networks should be evaluated on a case-by-case basis. DePIN is not a panacea for resource allocation, as industry pain points can vary significantly. For instance, pursuing decentralized strategies may not be suitable for a given industry, or it may only address a small portion of the issues within that industry. There may be wide discrepancies in network adoption, token utility, and generated revenue—all of which may relate more to the underlying industry they target rather than the underlying technology network they use.
AI, Real Value
Artificial intelligence (AI) has been a focal point for both traditional and crypto market investors. However, the impact of AI on cryptocurrencies is multi-faceted, with its narrative frequently changing. In the early stages, blockchain technology was aimed at addressing the data sourcing issues of AI-generated content and users (i.e., tracking the authenticity of data). AI-driven intent-based architectures were also seen as potential improvements to the crypto user experience. Later, the focus shifted to decentralized training and computation networks for AI models, as well as 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 comprehensive impact of artificial intelligence on cryptocurrencies remains unclear, as seen in the rapid cycling of various narratives. However, this uncertainty does not diminish the potential transformative impact AI may have on crypto, as breakthroughs in AI technology continue to be made. Non-technical users are also finding it increasingly easier to use AI applications, which will further accelerate the development of creative use cases.
The biggest question is determining how these shifts will manifest as 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 to memecoins rather than any underlying infrastructure. While tokens related to the infrastructure layer have also seen price increases, their usage growth typically lags behind corresponding price rises. The speed of price increases relative to network metrics reflects a lack of strong consensus among investors on how to capture AI growth within cryptocurrencies.
Theme Three: Blockchain Metagames
Is the multi-chain future a zero-sum game?
One major theme returning from the last bull market cycle is the popularity of L1 networks. Newer networks are increasingly competing on reducing transaction costs, redesigned execution environments, and minimizing latency. Even as high-quality block space remains scarce, L1 space has expanded to a point of general block space surplus.
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 earn extra fees. For example, Ethereum remains the center of high-value DeFi activity, even though its mainnet execution capacity has not increased since 2021.
Nevertheless, investors are drawn to the potential differentiated ecosystems on these new networks, even as the barriers to differentiation are rising. High-performance chains like Sui, Aptos, and Sei are competing for market share against Solana.
Historically, DEX trading has been the largest driver of on-chain fees, which requires robust user logins, wallets, interfaces, and capital—creating a cycle of increasing activity and liquidity. This concentration of activity often leads to winner-takes-all situations across different chains. However, the future may still be multi-chain, as different blockchain architectures provide unique advantages to meet various needs. While application chains and L2 solutions can offer tailored optimizations and lower costs for specific use cases, a multi-chain ecosystem allows for specialization while still benefiting from broader network effects and innovations across the blockchain space.
Upgrading L2s
Despite the exponential growth capacity of L2s, debates surrounding the Ethereum 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 perceived as the root cause of the decline in Ethereum network fees and the demise of the 'ultrasound money' narrative. New focal points in the L2 debate are also emerging, including decentralized trade-offs and the potential fragmentation of different virtual machine environments (EVM).
Nonetheless, from the perspective of increasing block space and reducing costs, L2s have achieved some success. The introduction of blob transactions in the March 2024 Ethereum Dencun (Deneb+Cancun) upgrade reduced average L2 costs by over 90% and increased Ethereum L2 activity tenfold. Additionally, multiple execution environments and architectures can experiment within ETH-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 have become more difficult to navigate, especially for newcomers who may not fully understand the differences between ETH across various L2s or how to bridge between them. In fact, while bridging speeds and costs have improved, the need for users to first interact with cross-chain bridges can lower the overall on-chain experience.
While this is a real issue, the community is seeking many different solutions, such as super-chain interoperability in the Optimism ecosystem, real-time proofs in zkRollups, super trades, resource-locking, sorter networks, and more. Many of these challenges are being addressed at the infrastructure and network layers, and these improvements may take time to reflect in the user interface.
Meanwhile, the growing Bitcoin L2 ecosystem is becoming more challenging to navigate, as there is no unified security standard and roadmap. In contrast, Solana's 'network expansion' tends to be more targeted at specific applications, and its disruption to current user workflows may be less significant. Overall, L2s are being implemented across most major crypto ecosystems, although their forms vary widely.
Everyone has a chain
The convenience of deploying customized networks is steadily increasing, prompting more applications and companies to build chains where they have more control. Mainstream DeFi protocols like Aave and Sky have clear goals to release blockchains on 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 a new chain called Soneium.
As the blockchain infrastructure stack matures and increasingly commoditizes, 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 mainly utilized Cosmos or Polkadot Substrate SDK. Moreover, 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. Likewise, Avalanche subnets may see increased adoption due to their 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, Ethereum blob usage has reached saturation (three blobs per block), increasing by over 50% since mid-September. Demand does not seem to be slowing, as existing L2s (like Base) continue to expand throughput, with new L2s launching on the mainnet, although the upcoming Pectra upgrade in Q1 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 emphasis is rapidly shifting toward simplified user experiences. In particular, the entire industry is pushing to abstract the technical aspects of cryptocurrencies into the background of applications. Many 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 mnemonic phrases and recovery keys) invisible to most end users—similar to the seamless security experiences of today's internet (e.g., https, OAuth, and keys). Key login and in-app wallet integration trends 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 challenges to crypto experiences in the short term. While cross-chain abstraction remains a focus of infrastructure-level research (e.g., ERC-7683), it is still far from front-end application integration. Improvements in this area require enhancements at the smart contract application level and wallet level. Protocol upgrades are necessary for unifying liquidity, while wallet improvements are essential for providing users with a clearer experience. The latter will ultimately be more important for expanding adoption, although current research efforts and industry debates are focused on the former.
Owning Interfaces
The most critical shift in the user experience of crypto will come from efforts to 'own' user relationships through better interfaces. This will happen in two ways. First, there will be improvements to independent wallet experiences, as mentioned 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 integrated wallets to compete for user relationships. This includes trading tools, gaming, on-chain social applications, and membership applications that automatically provide wallets to users registered 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 costs of their on-chain operations. Although the latter cost continues to decline as blockchain expands, it also forces crypto applications to consider which data components to submit on-chain.
Overall, there will likely be intense competition to attract and retain users in the crypto space. 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, establishing user relationships outside of trading is also expected to become a focal point of protocol attention.
Decentralized Identity
As regulatory transparency continues to improve, 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 long-term on-chain experiences.
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 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 recognition services has accelerated.
The second core component is building attributes for on-chain identities. This includes confirming KYC verification and other jurisdictional data that can subsequently be viewed by protocols to ensure compliance. At the heart of this technology is the Ethereum certification service, a flexible service allowing 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 example, Coinbase's on-chain verification uses 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, 2024 Crypto Market Review and 2025 Predictions
