Author: David Duong & David Han
Compiled by: TechFlow
Key Takeaways
In 2025, the cryptocurrency market will experience transformative growth and continue to advance towards maturity and popularization.
Our four major focus areas for 2025 include: macroeconomic situation, blockchain meta games, disruptive innovation, and upgrades to user experience.
Executive Summary
Looking forward to 2025, the cryptocurrency market is moving towards a transformative growth stage. As this asset class matures, institutional adoption continues to rise and various application scenarios continue to expand. In the past year, the United States approved the first batch of spot ETFs, the tokenization of financial products has developed rapidly, the growth of stablecoins has been even more significant, and it has gradually integrated into the global payment system.
These achievements are hard-won. They may seem like the culmination of years of effort, but they are likely just the starting point for greater changes.
Looking back a year ago, crypto assets were struggling due to interest rate hikes, regulatory pressure, and an unclear outlook. Today's achievements showcase the resilience of cryptocurrencies, proving they have become a robust alternative asset class.
From a market perspective, the upward trend in 2024 shows significant differences from previous bull market cycles. For example, the term 'Web3' is gradually being replaced by the more fitting 'on-chain'. At the same time, market investment strategies have shifted from narrative-driven approaches to a greater focus on fundamental analysis, partly due to the extensive participation of institutional investors.
Moreover, Bitcoin's market share has significantly increased, while innovations in decentralized finance (DeFi) continually expand the application boundaries of blockchain, laying the foundation for building a new financial ecosystem. Central banks and financial institutions around the world are also exploring how to leverage crypto technology to enhance the efficiency of asset issuance, trading, and record management.
Looking to the future, the prospects for the cryptocurrency sector are promising. Cutting-edge innovations include decentralized peer-to-peer exchanges, prediction markets, and AI agents with built-in crypto wallets. In the institutional space, stablecoins and payment solutions (connecting cryptocurrencies with traditional banking systems), on-chain credit scoring-supported unsecured lending, and compliant on-chain capital formation all hold immense potential.
Although crypto technology is widely recognized, its complex technical structure still feels unfamiliar to many. However, technological innovations are working to change this situation. An increasing number of projects are focusing on simplifying the user experience of blockchain and enhancing the functionality of smart contracts. These advancements will make cryptocurrencies easier for new users to adopt.
Meanwhile, the U.S. has laid the groundwork for clearer crypto regulation in 2024, a development that could further consolidate the position of digital assets in the mainstream financial system in 2025.
As regulation and technology advance together, we expect the cryptocurrency ecosystem to experience significant growth in 2025. Broader adoption will push the industry closer to its full potential. This year will be a key milestone, with breakthrough developments potentially laying the foundation for the industry's growth over the next few decades.
Key Theme One: The Macroeconomic Roadmap for 2025
The Federal Reserve's Goals and Demands
In the 2024 U.S. presidential election, Donald Trump's victory became the largest catalyst for the crypto market in the fourth quarter of the year, pushing Bitcoin prices up 4-5 standard deviations compared to the three-month average. However, looking ahead, we believe that the short-term responses of fiscal policy may not be as important as the long-term trajectory of monetary policy, especially in light of the Federal Reserve being at a crucial decision-making moment.
We expect the Federal Reserve to continue easing monetary policy in 2025, but the specific pace may depend on the extent of the next round of fiscal policy expansion. Tax cuts and tariffs may lead to rising inflation, although the overall Consumer Price Index (CPI) has fallen to 2.7% year on year, the core CPI remains high at 3.3%, exceeding the Federal Reserve's target.
The Federal Reserve's current goal is to achieve 'de-inflation', meaning prices continue to rise, but at a slower pace, to fulfill its mission of 'maximum employment'. In contrast, ordinary households hope to see 'deflation', or price decreases, to relieve the high cost pressures of the past two years. However, price declines could pose a risk of economic recession, making it less than ideal.
Currently, a soft landing remains the main expectation, supported by lower long-term interest rates and 'American exceptionalism 2.0'. The Federal Reserve's interest rate cuts seem almost certain, while the loosening of credit conditions provides a favorable backdrop for cryptocurrency performance in the next 1-2 quarters. At the same time, if the next government implements deficit spending policies, this could further boost market risk appetite and benefit the cryptocurrency market.
The Most Crypto-Friendly Congress in U.S. History
After years of policy uncertainty, we believe the next U.S. Congress is likely to bring true regulatory clarity to the cryptocurrency industry. This election sent a clear signal to Washington, D.C.: public dissatisfaction with the existing financial system is growing, and there is a desire for change. From a market perspective, the bipartisan support for cryptocurrencies in both the House and Senate suggests that the U.S. regulatory environment may shift from past resistance to becoming a driving force for cryptocurrency development.
A new hot topic is the possibility of a 'strategic Bitcoin reserve'. In July 2024, following the Bitcoin Nashville conference, Wyoming Senator Cynthia Lummis proposed the Bitcoin bill, while the Pennsylvania legislature suggested passing the Pennsylvania Bitcoin Strategic Reserve bill. If passed, this bill would allow the state treasurer to invest up to 10% of Pennsylvania's general fund in Bitcoin or other cryptocurrency tools. Currently, pension funds in Michigan and Wisconsin have begun holding cryptocurrencies or related ETFs, and Florida is also planning to follow suit. However, creating a 'strategic Bitcoin reserve' may face legal hurdles, such as whether the Federal Reserve's balance sheet allows for holding such assets.
Meanwhile, the U.S. is not the only country making progress in cryptocurrency regulation. The growing demand for cryptocurrencies globally has also spurred competition among countries in regulation. For example, the European Union's Markets in Crypto-Assets Regulation (MiCA) is being implemented in phases, providing a clear operational framework for the industry. Major financial centers like the UK, UAE, Hong Kong, and Singapore are also actively formulating rules to create a more favorable environment for the innovation and growth of digital assets.
Cryptocurrency ETF 2.0
The approval of spot Bitcoin and Ethereum exchange-traded funds (ETFs) is an important milestone in the crypto economy. Since their launch (about 11 months ago), these products have attracted $30.7 billion in inflows, far exceeding the $4.8 billion attracted by the SPDR Gold Shares ETF (GLD) in its first year (adjusted for inflation) when it was launched in 2004. According to Bloomberg data, this positions these ETFs among the top 0.1% of approximately 5,500 new ETFs launched over the past 30 years.
The launch of ETFs has reshaped the market ecosystem for Bitcoin (BTC) and Ethereum (ETH), establishing new support points for demand. Bitcoin's market dominance has increased from 52% at the beginning of the year to 62% in November 2024. According to the latest 13-F reports, nearly all types of institutional investors—including endowment funds, pension funds, hedge funds, investment advisors, and family offices—have participated in investing in these products. Additionally, the regulated options launched in November 2024 provide investors with more flexible risk management tools and lower-cost asset exposure.
Looking ahead, the market's focus is on whether ETFs covering more tokens (such as XRP, SOL, LTC, and HBAR) will be launched. However, we believe that in the short term, these approvals may be limited to a few assets. In contrast, we are more concerned with whether the SEC will allow staking in ETFs or lift the restrictions on cash transactions, changing to allow physical creation and redemption. This change could not only improve the consistency between ETF share prices and net asset value (NAV) but also reduce trading costs and enhance market efficiency.
The current cash-based model can trigger price volatility and tax issues, while physical transactions can avoid these problems, providing investors with greater stability and transparency.
Stablecoins: The 'killer application' of cryptocurrencies
In 2024, the stablecoin market achieved explosive growth, with total market capitalization increasing by 48% to $193 billion (as of December 1). Market analysts predict that following the current growth trajectory, the stablecoin market could reach nearly $3 trillion in the next five years. Although this figure may seem large, it actually only accounts for about 14% of the total U.S. M2 money supply ($21 trillion).
We believe that the next wave of true adoption of cryptocurrencies may come from stablecoins and payments. This also explains the rapid development in this area over the past 18 months. Compared to traditional payment methods, stablecoins offer faster and lower-cost advantages, which is gradually increasing their application in digital payments and cross-border remittances. Many payment companies are also expanding their stablecoin infrastructure. In the future, the primary use of stablecoins may not be limited to transactions but may extend to global capital flows and commercial payments. However, beyond broader financial applications, the ability of stablecoins to address the U.S. debt burden has also attracted political interest.
As of November 30, 2024, the trading volume of the stablecoin market has approached $27.1 trillion, nearly three times that of the same period in 2023. This includes a large number of peer-to-peer (P2P) transfers and cross-border corporate payments. Stablecoins like USDC are increasingly being adopted by more businesses and individuals due to their extensive payment platform integrations and compliance.
The Tokenization Revolution
In 2024, significant progress has been made in the tokenization space. According to data from rwa.xyz, the market size of tokenized real-world assets (RWA) has grown from $8.4 billion at the end of 2023 to $13.5 billion as of December 1, 2024, an increase of over 60% (excluding stablecoins). Analysts predict that this sector may grow to between $2 trillion and $3 trillion in the next five years, with a potential growth rate of up to 50 times.
An increasing number of asset management companies and traditional financial institutions (such as BlackRock and Franklin Templeton) are beginning to adopt the tokenization of government securities and other traditional assets on permissioned chains or public blockchains. This technology not only enables almost instantaneous cross-border settlement but also supports round-the-clock trading.
In addition, companies are exploring the use of tokenized assets as collateral for financial transactions (such as derivatives trading), thereby simplifying operational processes (such as margin management) and reducing risk. The application scope of RWAs is also expanding, from U.S. Treasury bonds and money market funds to private credit, commodities, corporate bonds, real estate, and insurance. We believe that in the future, tokenization will further optimize the construction and management processes of investment portfolios, moving the entire investment process on-chain, although realizing this vision may take several more years.
Of course, tokenization also faces some challenges, such as liquidity fragmentation across multiple chains and regulatory hurdles. However, significant progress has been made in both areas in recent years. We expect tokenization to be a gradual process, but its advantages have been widely recognized. The current stage provides valuable testing opportunities for companies, helping them stay ahead in the wave of technological innovation.
The Revival of DeFi
In the last market cycle, decentralized finance (DeFi) was severely hit. Some projects attracted liquidity through token incentives but offered unsustainable high yields. With the market adjustment, a more robust DeFi ecosystem is now forming, characterized by application scenarios that are closer to actual needs and transparent governance structures.
We believe the changes in the U.S. regulatory environment may become a key driving force for the revival of DeFi. For instance, establishing a regulatory framework for stablecoins and providing clear pathways for traditional institutional investors to participate in DeFi. The synergy between on-chain and off-chain capital markets continues to strengthen, with the trading volume of decentralized exchanges now accounting for 14% of centralized exchanges, a significant increase from 8% in January 2023. At the same time, the possibility of decentralized applications (dApps) sharing protocol revenues with token holders is also increasing.
Additionally, the potential of DeFi has also been officially recognized. In October 2024, Federal Reserve Governor Christopher Waller pointed out that DeFi can complement centralized finance (CeFi), with distributed ledger technology (DLT) improving the record-keeping efficiency of CeFi, and smart contracts enhancing its functionality. He also mentioned that stablecoins have potential in payments and as 'safe assets' but need to address risks such as bank runs and illegal financing. All these signs indicate that DeFi is gradually transcending its traditional crypto user base, establishing closer ties with traditional finance (TradFi).
Theme Two: Disruptive Paradigms
Telegram Trading Bots: A Hidden Profit Center
Beyond stablecoin and native L1 transaction fees, Telegram trading bots have emerged as the most profitable sector in the cryptocurrency space in 2024. In terms of net protocol revenue, they even surpassed top DeFi protocols like Aave and MakerDAO (now known as Sky). This phenomenon is primarily due to the growth in trading activity and the explosive performance of meme tokens. In fact, meme coins are the best-performing cryptocurrency sector in 2024 (measured by total market cap growth), with trading activity for meme coins experiencing a significant surge in the fourth quarter of 2024 (particularly on Solana DEX).
Telegram trading bots provide users with a simple chat-based interface for trading these tokens. Users can create custodial wallets directly in the chat window and manage funds and execute trades via buttons and text commands. As of December 1, 2024, the trading focus of most bot users is on Solana tokens, accounting for up to 87%, followed by Ethereum (8%) and Base (4%). It is worth noting that most of these bots are largely unrelated to the open network (TON) integrated within the Telegram native wallet. High-revenue bots like Photon, Trojan, and BONKbot are primarily deeply integrated with the Solana network, which also reflects their users' preferences.
Similar to other trading interfaces, Telegram bots charge a certain percentage fee per transaction, up to 1% of the transaction amount. However, due to the high volatility of the assets users are trading, these higher fees seem to have little impact on users. As of December 1, 2024, the cumulative annual revenue of the highest-earning bot Photon has reached $210 million, close to the $227 million from Solana's largest meme coin issuance platform, Pump. Additionally, other well-known bots Trojan and BONKbot have generated revenues of $105 million and $99 million, respectively. In comparison, Aave's net protocol revenue for 2024 was only $74 million.
The appeal of Telegram trading bots lies in their convenience, especially for trading tokens that are not yet available on exchanges. Additionally, these bots provide extra features like 'snapping up' new tokens and price alerts. Data shows that nearly 50% of Trojan users repeat usage over four days or longer, with each user contributing an average of $188 in revenue. Although future competition among bots may reduce trading fees, we expect Telegram bots to continue being a major source of profit in the crypto space in 2025.
Prediction Markets: Showcasing the Potential of Blockchain
In the 2024 U.S. election cycle, prediction markets emerged as one of the biggest winners. Platforms like Polymarket significantly outperformed traditional polling data, which had predicted a tighter race, while the actual results diverged significantly. This achievement is not only a victory for prediction markets but also for blockchain technology. Blockchain-based prediction markets demonstrate significant advantages over traditional polling, becoming a unique application scenario for blockchain technology. These markets provide greater transparency, transaction speed, and global accessibility, while their blockchain foundation supports decentralized dispute resolution and outcome-based automatic payment settlement, making them clearly superior to non-blockchain versions.
While some believe that the excitement around prediction markets may wane after the elections, we have already seen their applications expand into sports and entertainment. In the financial sector, prediction markets have proven to more accurately reflect market sentiment on economic data (such as inflation and non-farm payroll data) than traditional surveys, giving them lasting value and relevance beyond elections.
Gaming: From Player Appeal to Mainstream Market
Gaming has always been an important application area for cryptocurrency technology due to the significant potential of on-chain assets and trading markets. However, to date, many crypto games still face challenges in cultivating loyal players. This is mainly because many players' motivations lean towards profit rather than pure entertainment. Additionally, many crypto games rely on web browser distribution and require users to set up self-custody wallets, limiting the audience mainly to crypto enthusiasts rather than a broader mainstream player base.
However, compared to the last cycle, crypto-integrated games have made significant progress. Nowadays, developers are no longer pursuing the extreme idea of being 'fully on-chain' but selectively placing certain assets on-chain to unlock new features without affecting the core gaming experience. Many developers have also begun to view blockchain as an auxiliary tool rather than the core selling point of marketing.
For example, Off the Grid is a first-person shooter and battle royale game, and its blockchain component (Avalanche subnet) was still in testing when it launched, yet the game itself has become the number one free game on Epic Games. The main reason the game attracts players is due to its unique gameplay, rather than blockchain tokens or trading markets. Furthermore, this game has also broadened the distribution channels for crypto-integrated games, and is now available on Xbox, PlayStation, and PC platforms (through the Epic Games store).
Mobile has also become an important distribution channel for crypto-integrated games, including native applications and embedded applications (such as Telegram mini-games). Many mobile games selectively adopt blockchain components while running most activities on centralized servers. These games typically do not require users to set up external wallets, significantly lowering the entry barrier for users, allowing players unfamiliar with cryptocurrencies to easily get started.
In the future, we believe the boundaries between crypto games and traditional games will further blur. Mainstream 'crypto games' that will soon be launched may lean more towards crypto integration rather than being entirely crypto-centric. Their focus will be on quality gaming experiences and broad distribution channels rather than simple 'play-to-earn' mechanisms. However, while this trend may promote the adoption of crypto technology, whether it will directly increase the demand for liquidity tokens remains to be seen. In-game currencies may continue to remain isolated across games, and ordinary players may not welcome external investors' interference in the game economy.
Decentralized Reality: The Potential and Limitations of DePIN
Decentralized Physical Infrastructure Networks (DePIN) are expected to address distribution challenges in the real world by guiding the creation of resource networks. Theoretically, DePIN can overcome common initial economies of scale issues in such projects. Currently, DePIN projects cover various fields, from computing power to cellular networks to energy, creating a more resilient and cost-effective way to aggregate resources.
Helium is a representative case of DePIN. By distributing tokens to individuals providing local cellular hotspots, Helium successfully built a network covering major cities in the U.S., Europe, and Asia without investing in the construction of cellular towers or significant upfront capital. Instead, early participants were incentivized by obtaining network tokens.
However, we believe that the long-term revenue and sustainability of such networks need to be assessed on a case-by-case basis. Not all industries are suitable for decentralized strategies, and the pain points of certain industries may be limited to specific areas. We believe there may be significant differences between the network adoption rates, token utility, and revenue generation of DePIN projects.
Artificial Intelligence: Exploring Real Value
Artificial Intelligence (AI) continues to capture the attention of investors in both traditional and crypto markets. However, AI's impact in the crypto space is diverse, and its narrative is constantly changing. Initially, it was believed that blockchain technology could solve issues related to the authenticity of AI-generated content and user data (such as verifying the source of data). Subsequently, AI-driven user intent recognition architectures were proposed as a way to improve the crypto user experience. The focus then shifted to decentralized AI model training and computation networks, as well as crypto-driven data generation and collection. Recently, the market's focus has shifted to autonomous AI agents that can control crypto wallets and interact through social media.
Currently, the overall impact of AI on the cryptocurrency industry remains unclear, as can be seen from the rapid changes in narratives. However, this uncertainty has not diminished AI's potential to transform the cryptocurrency industry. With ongoing breakthroughs in AI technology and the increasing user-friendliness of applications for non-technical users, we believe that more innovative application scenarios will emerge in the future.
The biggest challenge is how these technological changes translate into lasting value between liquidity tokens and company equity. For example, many AI agents operate on traditional technological frameworks, and their recent 'market attention' has been more directed towards Meme Tokens rather than the underlying technological infrastructure. Although prices of infrastructure-related liquidity tokens have risen, the growth in usage often lags behind price increases. This disconnect between price and network metrics, coupled with investor focus on AI Meme Tokens, reflects a lack of consensus in the market on how to capture AI growth with crypto.
Theme Three: Meta Games of Blockchain
Multichain Ecosystem or Zero-Sum Competition?
Since the last bull market cycle, the popularity of alternative Layer-1 (L1) networks has become an important theme again. Emerging networks are increasingly competing through lower transaction costs, redesigned execution environments, and minimized latency. Nevertheless, we believe the L1 space has expanded to the point where there is now an oversupply of general block space, even though high-value block space remains scarce.
In other words, additional block space does not necessarily have more value in itself. However, a vibrant protocol ecosystem, combined with an active community and dynamic crypto assets, can still allow certain blockchains to achieve fee premiums. For example, despite Ethereum not having increased its mainnet execution capacity since 2021, it remains the center of high-value DeFi activity.
Nevertheless, we believe investors are still attracted to the differentiated ecosystems that new networks may form, even as the barriers to differentiation are increasing. High-performance chains like Sui, Aptos, and Sei are competing for market attention with Solana, while the upcoming Monad is also seen as a strong contender for developers.
Historically, trading on decentralized exchanges (DEX) has been the biggest driver of on-chain fees, requiring strong user onboarding, wallets, interfaces, and capital support, thus forming a cycle of growing activity and liquidity. This concentration of activity often leads to a winner-takes-all situation between different chains. However, we believe the future may still be multichain, as different blockchain architectures offer unique advantages to meet various needs. While application chains and Layer-2 solutions can provide customized optimizations and lower costs for specific use cases, a multichain ecosystem allows for specialization while still benefiting from the broader network effects and innovations in the blockchain space.
The upgrade path of Layer-2
Despite Layer-2 (L2) having exponential scaling capabilities, debates surrounding the Ethereum Rollup-centered roadmap continue. Criticisms include L2's 'extractive' nature towards L1 activities and the liquidity fragmentation and user experience fragmentation it causes. Specifically, L2 is seen as the root cause of declining Ethereum network fees and the fading narrative of 'ultrasound money'. New focal points of L2 controversy also include decentralization trade-offs, different virtual machine environments (which may lead to EVM fragmentation), and the differences between 'based' and 'native' Rollups.
Nevertheless, we believe that from the perspective of increasing block space and reducing costs, L2 has already achieved great success. In March 2024, Ethereum's Dencun (Deneb+Cancun) upgrade introduced blob transactions, reducing the average cost of L2 by over 90% and driving Ethereum L2 activity growth by 10 times. Furthermore, we believe that allowing multiple execution environments and architectures to experiment within the ETH ecosystem is a long-term advantage of the L2 centralized approach.
This roadmap has also brought short-term trade-offs. For example, interoperability across Rollups and overall user experience have become more complex, especially for newcomers who may not fully understand the differences between ETH on different L2s or how to bridge between them. Although the speed and cost of bridging have improved, we believe that the fact that users need to interact with the bridge reduces the overall quality of the on-chain experience.
While this is a current issue, the community is actively exploring various solutions to address user experience challenges, such as (1) superchain interoperability in the Optimism ecosystem, (2) real-time proofs and super transactions for zkRollup, (3) Rollup-based sorters, (4) resource locking, (5) sorter networks, etc. Of course, these challenges mainly focus on improvements at the infrastructure and network layers, which may take time to reflect at the user interface layer.
Meanwhile, the growing Bitcoin L2 ecosystem seems more difficult to navigate, as there are no unified Rollup security standards and roadmaps. In contrast, Solana's 'network expansion' is more application-specific and may interfere less with current user workflows. Overall, L2 is gradually being implemented in most major cryptocurrency ecosystems, although the forms vary significantly.
Everyone can have their own blockchain
With the technical threshold for deploying customized blockchain networks continually lowering, more applications and companies are beginning to build their own blockchains that they can control independently. Major DeFi protocols such as Aave and Sky (formerly MakerDAO) have already made it clear in their long-term development plans to launch independent chains, while the Uniswap team has also announced plans to launch a DeFi-focused Layer-2 chain. Even some traditional businesses have joined this trend, such as Sony announcing the launch of a new chain called Soneium.
As blockchain infrastructure technology matures and becomes commoditized, we believe the appeal of owning block space is increasing, especially for regulated institutions or scenarios with specific application needs. At the same time, the technology stack supporting this trend is also evolving. In previous cycles, application-centric blockchains often relied on Cosmos or Polkadot Substrate SDK. Now, the rise of 'Rollups as a Service' (RaaS), companies like Caldera and Conduit, is helping more projects quickly launch their own Layer-2 chains. These platforms provide convenient service integration through their integrated marketplace. Similarly, Avalanche's managed blockchain service AvaCloud simplifies the creation process of customized subnets, potentially further driving its adoption.
The rapid growth of modular chains may significantly increase the demand for Ethereum Blob space while also driving the development of other data availability solutions (such as Celestia, EigenDA, and Avail). Since early November, Ethereum's Blob usage has reached saturation (3 Blobs per block), representing an increase of over 50% compared to mid-September. Nevertheless, with existing Layer-2 networks (such as Base) continuing to expand throughput and new Layer-2s coming online, the demand continues to grow.
Theme Four: User Experience
Optimization of user experience
In our view, an easy-to-use user experience is one of the key factors driving the mass adoption of crypto technology. Although the crypto industry has historically focused on technical details due to its 'crypto-punk' background, we believe the focus is now rapidly shifting towards simplifying user experience. In particular, the entire industry is striving to hide the complexities of crypto technology in the background of applications. Some of the latest technological breakthroughs are driving this transformation, such as the adoption of account abstraction technology, which makes the user onboarding process smoother, and reducing cumbersome steps for signatures through session keys.
The widespread adoption of these technologies will make security components in crypto wallets (such as mnemonic phrases and recovery keys) 'invisible' to most users, similar to the seamless security experience of today's internet (e.g., HTTPS, OAuth, and Passkey). In fact, we anticipate that by 2025, Passkey onboarding and in-app wallet integration will become a major trend. Current cases include the Passkey onboarding feature of Coinbase's smart wallet and Google's integrated login solutions for Tiplink and Sui Wallet.
However, we believe that the complexity of cross-chain architectures will remain a major challenge for cryptocurrency user experience in the short term. Although the abstraction of cross-chain architectures remains an important topic for the research community at the network and infrastructure levels (e.g., ERC-7683), these technologies are still quite far from front-end applications. Improvements in this area require dual optimization of smart contract application layers and wallet layers. Protocol upgrades are crucial for unifying liquidity, while improvements in wallets need to provide a more intuitive user experience. We believe that while current industry research and discussions mainly focus on the protocol layer, optimizing wallets will be more important for driving user adoption in the long run.
Dominance of user interfaces
In our view, the key shift in cryptocurrency user experience will come from further strengthening relationships with users through optimized interface design. This transformation is reflected in two main areas. The first is the improvement of the independent wallet experience. Nowadays, the user onboarding process has become more streamlined, better meeting their actual needs. At the same time, integrated features directly within the wallet (such as token swapping and lending) allow users to perform operations within a familiar ecosystem, thus improving user retention.
Secondly, through the integration of wallets, the complexities of blockchain technology are hidden in the background. This strategy is particularly common in scenarios such as trading tools, games, on-chain social applications, and membership applications. For example, users can register accounts through familiar methods like Google or Apple OAuth, and the system will automatically configure wallets for them. After going online, the user's on-chain transactions are paid for by a 'payer', and these costs are ultimately borne by the application's operator. This model presents a new challenge: applications need to ensure that the revenue generated by each user can cover the costs of their on-chain operations. Although these costs are gradually decreasing as blockchain technology expands, it also prompts developers to rethink which data truly needs to be submitted on-chain.
Overall, the future competition in the cryptocurrency sector will revolve around attracting and retaining users. As reflected in the average revenue per user (ARPU) of Telegram trading bots, cryptocurrency traders are relatively less sensitive to price compared to traditional financial users. We expect that in the coming year, 'owning user relationships' will become a key focus for protocols beyond the trading space.
Decentralized Identity
As the regulatory environment becomes clearer and more assets are tokenized off-chain, simplifying Know Your Customer (KYC) and Anti-Money Laundering (AML) processes is becoming increasingly important. For example, some assets are only open to qualified investors in specific regions, making identity verification and qualification validation core elements of future on-chain experiences.
In our view, building decentralized identities mainly consists of two key parts.
The first is the creation of on-chain identities themselves. The Ethereum Name Service (ENS) provides a standard for mapping human-readable '.eth' names to one or more cross-chain wallet addresses. Similar services have emerged on other networks, such as Basenames and Solana Name Service. As traditional payment giants like PayPal and Venmo begin to support ENS address resolution, the popularity of these on-chain identity services is accelerating.
Second is adding attributes to on-chain identities. These attributes include KYC verification and jurisdiction information for other protocols to view to ensure compliance. The Ethereum Attestation Service is at the core of this technology, providing entities with a flexible way to endow specific attributes to other wallets. These attributes are not limited to KYC and can be expanded based on different needs. For example, Coinbase uses this service to validate whether a wallet is associated with a user of a Coinbase trading account and to confirm whether the user is located in a specific jurisdiction. Some new permissioned lending markets based on Base are also using this service to verify on-chain identities related to real assets.
