Article source: YBB Capital
Author: YBB Capital Researcher Zeke
Preface
Starting with the boom of inscriptions and ending with the election of the first crypto president, 2024 is about to draw to a close. This year, Crypto has experienced an extremely unusual 'bull market,' with altcoins performing weakly, memes dominating the discourse, and ultimately everything converging back to BTC. Overall, although there have been some lows and discontent, Crypto is indeed moving in a more positive direction. In the upcoming year of 2025, there are many directions worth paying attention to, and in this article, we will provide a brief outlook for next year based on recent viewpoints.
One, About AI
At the current stage, chain abstraction projects often become excessively complicated in their technical implementation process due to an over-pursuit of conceptual perfection, ultimately affecting the user experience. Projects that include intent architecture tend to have relatively complex implementation methods, whether based on centralized (like TG Bot), structured (a combination of on-chain and off-chain preprocessing), or distributed designs (like Solver + Executor architectures). These intent projects often share some common issues. For example, users still need to have a considerable understanding of DeFi, and the expression of intent must be clear, accurate, and simple. Current intent projects show a powerlessness in dealing with complex and ambiguous user intents, and their scope of implementation is quite limited. Therefore, from the middle of 2023 when Paradigm proposed this concept to today, so-called intent-centered projects have shown to be more noise than signal, providing little help in guiding new users and lowering operational thresholds. However, we all know that based on the development path of Ethereum Layer 2, the market's demand for both remains urgent.
Let’s review the development of Layer 2 over the past few months. Among the leading projects, the Layer 2 alliance represented by OP Superchain has been steadily growing, while Zksync's Elastic Chain and Arbitrum Orbit will also form their own alliances along this path. These alliances will be able to realize direct interoperability through solutions like interoperable clusters in the future, alleviating the current issues of excessive fragmentation and lack of interoperability in the Ethereum Layer 2 ecosystem. The competition among dozens of chains will also shrink into competition among multiple forces. However, from a broader perspective, as the crypto market improves, new architecture Layer 2 projects such as Movement and Fuel are also competing to launch their mainnets to capture scarce liquidity in the altcoin market. For projects below the first tier, fragmentation and lack of interoperability continue to intensify, with virtual machines based on different architectural designs potentially not even being compatible with wallet plugins. Let alone bringing in new users; for average blockchain users, the entire Layer 2 ecosystem is extremely complicated, and the development of non-financial application chains will face significant resistance under these circumstances.
For Ethereum to attract new users, ecosystem alignment is the biggest prerequisite. An ecosystem that requires users to be semi-geeks to get started will never welcome 'Mass Adoption.' Looking at the opposing development of Solana and Ton this year, it is evident that strategies aimed at lowering user thresholds and providing a consistent, more Web2-like user experience have played a significant role in ecological growth. To put it more directly, what these two ecosystems have done, aside from promotional efforts, is simply reduce the difficulty of asset issuance, making the use of the chain feel more seamless. Therefore, for Ethereum, a comprehensive solution prioritizing experience is essential, but given the consistently open attitude of Ethereum's core developers, it is naturally impossible to align the entire Layer 2 ecosystem through coercion.
I believe that the only solution capable of solving this problem first is the AI browser agent. Even in the early days of ChatGPT, many people envisioned that AI would revolutionize the interaction of apps, enabling operations across multiple apps and forming a comprehensive super app. Taking travel as a common example, once AI receives a user's travel needs, it can automatically complete ticket bookings, customize travel routes, arrange meals, and plan schedules based on what the user expresses. If this AI possesses long-term memory capability, it can also arrange solutions that are more suitable for the user based on this memory.
Now, Google is about to launch the AI browser agent powered by Gemini, Project Mariner. In an example demonstrated by Jaclyn Konzelmann, the director of Google Labs, after installing the AI agent extension in the Chrome browser, a chat window pops up on the right side of the browser. Users can instruct the agent to perform tasks such as 'create a shopping cart from the grocery store based on this list.' Then, the AI agent will automatically navigate to a grocery platform and add the items to the cart before proceeding to the checkout interface. Once everything is confirmed, the user will check out on their own (the agent does not have payment authority). Similar products will also be launched by OpenAI next month.
It is worth mentioning that although Google's Project Mariner is currently only available to selected testers, I have already experienced some similar agents developed by certain projects in Crypto targeted at ordinary users. From a few hours of testing, the current agent can achieve an accuracy level of about 60-70% for complex and ambiguous intents (cursor operation speed is relatively slow), and can autonomously complete tasks such as token trading within various DEXs across public chains and even cross-asset transactions from Ethereum to Layer 2. During this process, all I needed to do was inform it of my intent and input my wallet password.
Of course, this foundation still needs to call the APIs of centralized models. So what collisions can Crypto generate with it? I believe that AI browser agents, besides becoming a better experience solution, will also drive the explosion of AI wallets, decentralized computing power, and decentralized data projects next year.
Consider a simple question: why has it only been until today that the beautiful concept of Agents has been realized during these years of rapid development in AI? In fact, looking back at the development process of OpenAI, it is not difficult to find that the development of pure language models always outpaces that of models like image generation. This is because the internet itself is a massive corpus that provides endless text materials for training; the limitations on the development of language models are more about computing power and energy. Agents require a large amount of manual labeling and feedback, and the reasoning process is costly. Crypto naturally has the ability to acquire labor through incentives. In this economic system, upper-level users can provide a large amount of labeled data and feedback in a decentralized manner to obtain tokens, while the lower levels can integrate decentralized computing power and data projects. Once training is completed, they can also be integrated with wallets and DeFi projects through SDKs to achieve a true AI wallet, ultimately forming a closed loop. Ideas for other AI agents can also be derived from this because any AI agent suitable for Web3 will need computing power, labeling, and feedback to 'grow.'
Two, Stablecoins
Stablecoins are always a battleground and also a sector in Crypto with extremely high thresholds. Regarding their application value, they have gained quite broad recognition even outside the industry. For example, this year, several giants in traditional finance have also entered the stablecoin market, including PayPal's PYUSD, BlackRock's collaboration with Ethena for USDb, and VanEck's AUSD (serving Argentina, Southeast Asia, and other regions).
As Tether and Circle's dominance in this sector continues to deepen, new entrants among stablecoin issuers are gradually diversifying into two categories. Firstly, issuers of fiat-backed stablecoins are beginning to turn their attention to emerging markets in South America and specific application scenarios, while algorithmic stablecoins are generally shifting to stablecoins with low-risk financial products as underlying assets, such as the Ethena and Usual mentioned in our previous article. From a trend perspective, next year will see more delta-neutral stablecoins competing for short liquidity in centralized exchanges, while hedge assets will gradually expand from BTC and ETH to higher-risk, lower-liquidity public chain tokens to compete for the remaining sinking market. As for Usual-type stablecoins based on short- to medium-term U.S. Treasury bonds, I believe there will be more innovation in protocol tokens and yield methods, as there are no better options than short- to medium-term Treasury bonds in terms of RWA asset types. However, compared to the limited liquidity in centralized exchanges, competition for such stablecoins will be smaller and there will be greater upper limit potential.
Overall, the development of stablecoins is gradually moving towards pursuing more stable underlying assets and decentralized governance. However, I hope that next year will see the emergence of some fully decentralized and non-overcollateralized stablecoin protocols.
Three, Payment
With the compliance and accelerated adoption of stablecoins in various countries, the downstream payment track of stablecoins will also become a new focus of competition. Heterogeneous public chains like Solana and Move, which have high TPS and low gas fees, will become the main infrastructure for payment applications. Traditional payments are now an extremely mature and competitive red ocean market; what transformation can blockchain provide? Firstly, two points that are relatively simple and often mentioned are: optimizing cross-border payments to eliminate pre-financing requirements, making cross-border remittances faster, cheaper, and easier, addressing the issue of hundreds of billions of dollars in prepaid funds in traditional systems. Secondly, serving emerging markets, which I have mentioned in previous articles. In regions such as Asia, Africa, and Latin America, the application value of stablecoins has already been realized. The strong financial inclusivity allows residents of third-world countries to effectively cope with high inflation caused by government instability, and through stablecoins, they can also participate in global financial activities and subscribe to the world's cutting-edge virtual services.
The concept of 'PayFi,' proposed by Lily Liu, manager of the Solana Foundation, at the 7th EthCC conference, provides more imagination for the combination of blockchain and payments. This concept involves two cores: first, timely settlement, namely T+0 settlement. PayFi can achieve same-day settlements, and even multiple settlements in a single day, eliminating the delays and complexities of the traditional financial systems involved, significantly improving the speed of fund flow. Secondly, buy now, pay never (BNPL), for example, a user deposits $50 into a lending product to purchase a $5 coffee. Once the accumulated interest reaches $5, that interest will be used to pay for the coffee, and the funds will be unlocked and returned to the user's account.
Moreover, there are many ideas that can be extended from this, such as in usage scenarios where the financing needs of emerging projects can create a more secure and transparent entry and exit through PayFi in blockchain, currency exchanges during travel no longer needing to rely on various physical financial institutions, and the free control of payment and receipt times (delayed receipts to earn interest, early payments to obtain discounts). The ways of earning will also become more diverse; besides the aforementioned depositing stablecoins into lending products to earn interest, I personally believe that the types of stablecoins should also allow for easy conversion. In the future, with the significant emergence of new stablecoins, users can choose the most suitable type of stablecoin based on their personal risk tolerance, allowing them to simultaneously obtain stablecoin protocol tokens and higher stablecoin interest. For DeFi, if this payment system can become mainstream, its growth potential will be unimaginably vast.
Four, Dex
As we mentioned in the first section, the fragmentation and lack of interoperability of Layer 2 still pose a problem. This development path also presents another issue: an oversupply of block space, where Infra's development far exceeds that of Dapps. This issue will lead to a substantial number of long-tail chains being naturally eliminated within a few years, which is also a significant headache for Ethereum, where DA pricing missteps are not receiving positive feedback from Layer 2.
Looking back at this round of counter-cyclical growth, public chains primarily rely on their strong community, ecosystem, and promotional advantages, providing these advantages to asset issuance platforms to achieve rapid growth in overall TVL. Therefore, not every Layer 2 can replicate this attention economy; the lack of super applications remains a reality to face next year. Following the trend, besides the previously mentioned factors, the demand for future AI agents may be a way out. Other evident short-term trends include on-chain order book Dex, privacy, payment-related stacks, and decision-making tools.
Personally, I am optimistic that on-chain order book Dex will become the mainstream in the next generation of Dex. After all, looking at the development of AMM, the complexity of its technological path is continually increasing, while the efficiency gains are becoming more limited, which we have also mentioned in related articles about Uni. However, the limitations of performance and gas are still quite evident for layer two, and improvements in matching algorithms and innovations in gas solutions will become key challenges.
Five, asset issuance remains the main theme.
From the year 2023 to today, from inscriptions to the current AI Meme platforms, the methods of asset issuance have been a hot topic over the past year. If we extend this time span a bit, in fact, since the ICO era, asset issuance can be considered the only main theme in the crypto space. However, the external packaging and the thresholds for issuance are changing. From a positive perspective, the user's gaming demands have driven the advanced development of Infra and DeFi. With this technology becoming known and recognized by the world, blockchain has been able to enter the mainstream and integrate into reality. From a negative perspective, this game has become purer and more absurd; the ease of asset issuance also means that this dark forest is becoming more dangerous. Now, it only takes a simple click accompanied by an image and a few words to start a grand zero-sum game. Why not steer it back to a more positive side? To promote industry progress through this game.
For example, some current AI Memes have begun to shift towards practical agents, rather than the early versions of nonsensical AI agents. The recently popular DeSci can also be referred to as a 'scientific version of ICO.' Although the current kernel is driven by memes, in the long run, combining the various advantages of blockchain, DeSci can promote greater transparency, ease of dissemination, financing, and communication in traditional research. However, whether it can ultimately take root and how it will evolve still needs to be questioned.
In fact, similar to the concept of DeSci, I have also mentioned it in my article about GameFi. For example, the situation of funding and personnel shortages in independent games - how to effectively promote the development of independent games through blockchain. The issue with blockchain financing is that the threshold for asset issuance is too low, with too few restrictions, and fundraising capabilities are too strong (or it can be said that the entry barrier on the chain is extremely low). How to impose rules to restrict the use of funds and compel project parties to continuously create truly valuable things is also a key point we should consider.
Let the players play, and let the builders move forward; this is the premise for blockchain to continue developing. Next year, we may see more versions of 'ICO,' but what I hope is that this gaming feast can lead to the emergence of the next 'DeFi Summer.'
