The key themes for 2025 include the macro environment, blockchain metagaming, transformative innovation, and changes in user experience.
Article Authors: David Duong & David Han
Source: Coinbase
Article Translation: Wu Says Blockchain
Looking towards 2025, the cryptocurrency market is on the brink of transformative growth. As the asset class matures, institutional adoption continues to rise, and use cases across various fields are expanding. In just the past year, the US has approved spot ETFs, tokenization of financial products has surged, stablecoins have seen tremendous growth, and further integration into global payment frameworks has occurred.
Achieving these accomplishments has not been easy. However, while these results may seem like the pinnacle of years of effort, increasing signs indicate that they might just be the starting point for greater transformations.
Looking back over the past year, the cryptocurrency market has demonstrated remarkable resilience, emerging from interest rate hikes, regulatory crackdowns, and uncertain prospects. Despite these challenges, cryptocurrencies have established themselves as a reliable alternative asset class, showing enduring vitality.
From a market perspective, the upward trend in 2024 is significantly different from previous bull market cycles. Some differences are surface-level: for example, the term 'web3' has been replaced with the more accurate 'on-chain.' Others are deeper: fundamental demand is gradually replacing narrative-driven investment strategies, partly due to increased institutional involvement.
Moreover, not only has Bitcoin's dominance risen, but innovations in decentralized finance have also pushed the boundaries of blockchain possibilities, laying the foundation for establishing new financial ecosystems. Central banks and financial institutions worldwide are discussing how to leverage cryptocurrencies to improve the efficiency of asset issuance, trading, and record-keeping.
Looking ahead, the current crypto market showcases many promising developments. At the forefront of transformation, decentralized peer-to-peer exchanges, decentralized prediction markets, and AI agents equipped with crypto wallets are on the rise. In the institutional realm, stablecoins and payments (more closely integrating crypto with fiat banking solutions), on-chain credit scoring-supported unsecured on-chain lending, and compliant on-chain capital formation all show tremendous potential.
Despite the widespread recognition of cryptocurrencies, their innovative technological structure still seems complex and difficult to understand for many. However, technological innovation is changing this status quo, with an increasing number of projects dedicated to improving user experience by simplifying blockchain complexity and enhancing smart contract functionalities. This success may open the doors of the crypto world to a new class of users.
At the same time, earlier in 2024, the US laid the groundwork for regulatory clarity, which is expected to accelerate further in 2025 and may consolidate digital assets' position in mainstream finance.
As the regulatory and technological landscape evolves, we expect the crypto ecosystem to witness significant growth, and broader adoption will drive the entire industry closer to its full potential. 2025 will be a defining year, with breakthroughs and advancements that may shape the long-term development trajectory of the crypto industry for decades to come.
Theme One: The Macro Roadmap for 2025
The Fed's Demand and Goals
The victory of Donald Trump in the 2024 US presidential election became the most significant catalyst for the crypto market in the fourth quarter of 2024, pushing Bitcoin prices above the three-month average by 4-5 standard deviations. However, looking ahead, we believe the influence of short-term fiscal policy responses will not be as significant as the importance of the long-term direction of monetary policy, especially given the Fed's impending critical moment. Nevertheless, distinguishing between the two is not easy. We expect the Fed to continue easing policies in 2025, but the specific pace may depend on the strength of the next round of expansionary fiscal policies. This is because tax cuts and tariffs could push inflation levels higher, and while the overall CPI has decreased year-on-year to 2.7%, the core CPI still hovers around 3.3%, above the Fed's target.
What the Fed aims to achieve is a disinflation from current levels, meaning prices need to continue rising but at a slower pace, to assist in achieving its other mandate—maximum employment. In other words, they want to control the pace of price increases. On the other hand, after two years of high spending, households hope to see deflation, that is, falling prices. However, while falling prices may be more politically popular, they could trigger a vicious cycle that ultimately leads to economic recession.
Nevertheless, the current baseline scenario still points to a soft landing, supported by lower long-term interest rates and 'American Exceptionalism 2.0.' The Fed's rate cuts have essentially become a formal issue since credit conditions have already loosened, creating a favorable environment for cryptocurrency performance in the next 1-2 quarters. At the same time, if the anticipated deficit spending of the new government materializes, it could lead to a greater risk appetite (including purchases of crypto assets) as more dollars circulate in the economy.
The Most Pro-Crypto Congress in US History
For years, the US has faced political ambiguity in the crypto space, but we believe the next legislative session could be an opportunity for the US to establish regulatory clarity for the crypto industry. This election has sent a strong signal to Washington: the public is dissatisfied with the current financial system and is eager for change. From a market perspective, the bipartisan majority supporting crypto in the House and Senate may shift the US regulatory stance from being unfavorable to supportive of crypto, potentially boosting crypto market performance in 2025.
A new discussion focus is the possibility of creating strategic Bitcoin reserves. In July 2024, Senator Cynthia Lummis (Wyoming) proposed the Bitcoin Bill following the Bitcoin Nashville conference, while the Pennsylvania legislature also introduced the Pennsylvania Bitcoin Strategic Reserve Act. If passed, this bill would allow the state treasurer to invest 10% of Pennsylvania's general fund in Bitcoin or other crypto-based instruments. Currently, pension funds in Michigan and Wisconsin hold crypto assets or crypto ETFs, with Florida also following suit. However, establishing strategic Bitcoin reserves may face some challenges, such as legal restrictions on the assets held on the Fed's balance sheet.
Meanwhile, the US is not the only jurisdiction making progress in regulation. The global demand for crypto is also driving more meticulous regulatory competition internationally. Looking overseas, the EU's Markets in Crypto-Assets (MiCA) is being phased in, providing a clear framework for the industry. Many G20 countries, as well as major financial centers like the UK, UAE, Hong Kong, and Singapore, are also actively crafting rules to accommodate the development of digital assets, thereby creating a more favorable environment for innovation and growth.
Crypto ETF 2.0
The approval of spot Bitcoin and Ethereum (ETH) exchange-traded products (ETP and ETF) in the US is an important milestone for the crypto economy, with net inflows reaching $30.7 billion since their launch (about 11 months ago). This figure far exceeds the inflation-adjusted $4.8 billion attracted by the SPDR Gold Shares ETF (GLD) in its first year after launching in October 2004. According to Bloomberg data, the performance of these ETFs places them among the top 0.1% of best-performing ETFs in the past 30 years, out of approximately 5,500 listings.
These ETFs have changed the market dynamics for BTC and ETH, by establishing new demand anchors, raising Bitcoin's market share from 52% at the beginning of the year to 62% by November 2024. According to the latest 13-F filings, nearly all types of institutional investors hold these products, including endowment funds, pension funds, hedge funds, investment advisors, and family offices. Meanwhile, relevant options launched in November 2024 under US regulations may further enhance risk management capabilities and provide a more cost-effective asset exposure.
Looking ahead, the market's focus is on whether issuing authorities will expand the scope of exchange-traded products to cover other tokens, such as XRP, SOL, LTC, and HBAR. While potential approvals may only benefit a limited asset portfolio in the short term, what is more noteworthy is the possible implications if the US Securities and Exchange Commission (SEC) allows staking to be included in ETFs or lifts its requirements for creating and redeeming cash-based rather than physical ETF shares.
Introducing a physical creation and redemption mechanism can not only improve price consistency between ETF shares and actual net asset value (NAV) but also help narrow the price spread of ETF shares. This means that authorized participants (APs) no longer need to quote prices in cash that exceed the trading price of Bitcoin, thus reducing costs and increasing efficiency. The current cash-based model has also raised some issues, such as increased price volatility due to continuous buying and selling of BTC and ETH, as well as triggering taxable events, which do not apply in physical transactions.
Stablecoins: The Killer Application in the Crypto Space
In 2024, stablecoins experienced significant growth, with a total market cap increasing by 48% to $193 billion as of December 1. Some market analysts predict that the industry could grow to nearly $3 trillion in the next five years, based on current trends. Although this valuation seems enormous, equivalent to the current size of the entire crypto market, it only constitutes about 14% of the US $21 trillion M2 money supply.
We believe the next wave of real adoption in the crypto space may come from stablecoins and payments, which also explains the surge of interest in this area over the past 18 months. Compared to traditional methods, stablecoins enable faster and cheaper transactions, leading to increased usage in digital payments and cross-border remittances, with more payment companies expanding their stablecoin infrastructure. In fact, we might be getting closer to a day when the primary use case for stablecoins is no longer trading, but rather global capital flows and business activities. Additionally, the potential political significance of stablecoins should not be overlooked, especially regarding their potential to address the US debt burden.
As of November 30, 2024, the stablecoin market has completed nearly $27.1 trillion in transactions, nearly three times the $9.3 trillion in the same period of 2023. This includes a substantial amount of peer-to-peer (P2P) transfers and cross-border business-to-business (B2B) payments. Businesses and individuals are increasingly using stablecoins like USDC due to their good compliance and widespread integration into payment platforms like Visa and Stripe. For instance, 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
In 2024, the tokenization space continued to make significant progress. According to data from rwa.xyz, tokenized real-world assets (RWA, excluding stablecoins) grew over 60% from $8.4 billion at the end of 2023 to $13.5 billion as of December 1, 2024. Analysts predict that the industry could grow to at least $2 trillion in the next five years, potentially reaching as high as $30 trillion, with a potential growth close to 50 times. Asset management firms and traditional financial institutions like BlackRock and Franklin Templeton are increasingly focusing on tokenizing government securities and other traditional assets on permitted chains and public blockchains, enabling near-instant cross-border settlements and 24/7 trading.
Companies are trying to use such tokenized assets as collateral for other financial transactions (such as derivatives trading), which could optimize operations (such as margin calls) and reduce risks. Furthermore, the trend of Real World Assets (RWA) is extending beyond US Treasury securities and money market funds, expanding into private credit, commodities, corporate bonds, real estate, and insurance. Ultimately, we believe tokenization has the potential to optimize processes by fully bringing portfolio construction and investment processes on-chain, but this vision may take years to realize.
Of course, these efforts also face unique challenges, including the dispersion of liquidity across multiple chains and ongoing regulatory hurdles. However, significant progress has already been made on both fronts. Ultimately, we expect tokenization to be a gradual and ongoing process; however, its advantages are already widely recognized. We are currently in a golden period for experimentation and exploration, ensuring that businesses stay ahead in technological advancements.
The Revival of Decentralized Finance (DeFi)
DeFi is dead. Long live DeFi. In the previous cycle, decentralized finance suffered significant blows as certain applications proved unsustainable by guiding liquidity through token incentives that offered unsustainable high yields. However, since then, a more sustainable financial system has gradually emerged, integrating real-world use cases and transparent governance structures.
We believe that changes in the US regulatory environment may inject new vitality into the prospects of DeFi. This may include establishing a regulatory framework for stablecoins and providing pathways for traditional institutional investors to participate in DeFi, particularly against the backdrop of increasing synergy between off-chain capital markets and on-chain capital markets. In fact, decentralized exchanges (DEXs) currently account for about 14% of trading volume compared to centralized exchanges (CEXs), showing significant growth from 8% in January 2023. More importantly, under a friendlier regulatory environment, the possibility of decentralized applications (dApps) sharing protocol income with token holders is also continually increasing.
Moreover, the role of crypto technology in disrupting financial services has also been recognized by key figures. In October 2024, Federal Reserve Governor Christopher Waller pointed out in a speech that DeFi could greatly complement centralized finance (CeFi). He believes that distributed ledger technology (DLT) can accelerate the record-keeping speed of CeFi and enhance its efficiency, while smart contracts can bolster CeFi's capabilities. He also noted that stablecoins may have potential benefits in payments and as 'safe assets' on trading platforms, but measures need to be taken to mitigate risks such as runs and illicit financing.
All these signs indicate that the influence of DeFi may soon extend beyond its primarily crypto user base, beginning to merge and interact more deeply with traditional finance (TradFi).
Theme Two: Disruptive Paradigms
Telegram Trading Bots: Hidden Profit Centers in the Crypto Space
After stablecoins and native L1 transaction fees, Telegram trading bots became one of the most profitable industries in crypto in 2024, with net protocol income even surpassing major DeFi protocols like Aave and MakerDAO (now rebranded as Sky). This profitability is largely attributed to a surge in trading and memecoin activities. In fact, in 2024, meme tokens became the best-performing sector in cryptocurrencies, measured by total market cap growth. Trading activity for memecoins on Solana's decentralized exchange (DEX) continued to soar in the fourth quarter of 2024.
Telegram trading bots are a chat-based token trading interface that allows users to create custodial wallets directly in the chat window and manage funds by funding their wallets through buttons and text commands. As of December 1, 2024, bot users are primarily focused on Solana tokens (87% share), followed by Ethereum (8%) and Base (4%). (Note: Most Telegram trading bots operate independently of Telegram's native wallet, The Open Network, or TON.) This also reflects the focus of high-revenue bots like Photon, Trojan, and BONKbot, which primarily integrate Solana.
Like most trading interfaces, Telegram trading bots charge a certain percentage fee for each trade, up to 1% of the trade amount. However, due to the extreme volatility of the assets users trade, we believe these high fees have little impact on user attractiveness. As of December 1, the Photon bot's cumulative year-to-date fee income reached $210 million, nearing the $227 million charged by Solana's largest memecoin launch platform Pump. Other major bots like Trojan and BONKbot also reported substantial earnings, reaching $105 million and $99 million, respectively. In comparison, Aave had a protocol income of $74 million in 2024 after expenses.
The appeal of these applications mainly stems from their convenience in DEX trading, especially for tokens that have not yet been listed on exchanges. Many bots also offer additional features, such as 'sniping' at the time of token listings and integrated price alerts. The trading experience on Telegram is quite attractive to users, with nearly 50% of Trojan users returning within four days or longer (only 29% of users stop using it after one day), contributing to an average revenue per user of up to $188. Although the increasingly fierce competition among Telegram trading bots may eventually lower trading fees, we believe Telegram bots (and other core interfaces discussed below) will continue to be leading profit centers in 2025.
Prediction Markets: Fundamental Capabilities
During the 2024 US election cycle, prediction markets emerged as one of the biggest winners. Platforms like Polymarket outperformed traditional polling data, which had predicted closer election results. This is a victory for the crypto industry, as prediction markets leveraging blockchain technology demonstrated significant advantages over traditional polls, while showcasing the unique applications of this technology. Prediction markets not only exhibit the transparency, speed, and global access capabilities provided by blockchain, but their underlying blockchain also enables decentralized dispute resolution and outcome-based automatic payment settlements, distinguishing them from non-blockchain versions.
Although many believe the relevance of such dApps may diminish after the election, we have already seen their applications extend into other areas such as sports and entertainment. In finance, these markets are more accurate than traditional surveys in reflecting the release of economic data (like inflation and non-farm payroll data), potentially maintaining their significance and utility post-election.
Gaming: Focusing on Entertainment
Gaming has always been one of the core themes in the crypto space due to the potentially transformative impact of on-chain assets and markets. However, cultivating a loyal user base for crypto games has always been a challenge. Compared to the player base of traditionally successful games, many crypto game users are more motivated by profit rather than pure entertainment. Additionally, many crypto games are distributed via web browsers and require self-custody wallet setups, limiting the audience to crypto enthusiasts rather than a broader gaming demographic.
However, compared to the previous cycle, games integrating crypto technology have made significant progress. The core trend is gradually moving away from the early 'fully on-chain ownership games' crypto-punk ideology, towards selectively tokenizing assets to unlock new features without impacting the gaming experience. In fact, we believe many well-known game developers now view blockchain more as a supportive tool than a core marketing feature.
(Off the Grid) is a typical representative of this trend. When this first-person shooter battle royale game launched, its core blockchain components (Avalanche subnet) were still in the testing phase, yet it became the top free game on the Epic Games platform. Its appeal mainly stems from unique gameplay rather than blockchain tokens or item trading markets. Notably, this game is paving the way for crypto-integrated games to expand distribution channels, with releases covering Xbox, PlayStation, and PC (through the Epic Games Store).
Mobile devices have also become an important distribution channel for crypto-integrated games, whether native or embedded applications (such as Telegram mini-games). Many mobile games selectively integrate blockchain components, while most activities actually run on centralized servers. These games often do not require external wallets to play, lowering the entry barrier and making it easy for players unfamiliar with crypto to get started.
We believe the boundaries between crypto games and traditional games may continue to blur. The main future 'crypto games' may be crypto-integrated rather than crypto-centric, focusing more on refined gaming experiences and distribution channels than on mechanisms for earning tokens. However, while this may drive broader adoption of crypto technology, how it translates directly into demand for liquid tokens remains unclear. In-game currencies may continue to remain isolated across games, and non-crypto players may not welcome external investors' intervention in the in-game economy.
Decentralized Real World
Decentralized Physical Infrastructure Networks (DePIN) have the potential to revolutionize the allocation issues in the real world by guiding the creation of resource networks. Theoretically, DePIN can overcome the initial economies of scale challenges that such projects typically face. The scope of DePIN projects encompasses areas such as computing power, cellular communication towers, and energy, providing a more resilient and cost-effective way to aggregate resources.
The most typical example is Helium, which operates by distributing tokens to individuals providing local cellular hotspots. By issuing tokens to hotspot providers, Helium is able to establish coverage networks in most metropolitan areas in the US, Europe, and Asia without bearing the significant upfront capital costs of building and distributing communication towers. Conversely, early adopters gain early rights to the network through tokens, thus being incentivized.
Nevertheless, we believe that the long-term revenue and sustainability of these networks need to be analyzed on a case-by-case basis. DePIN is not a panacea for resource allocation issues, as the pain points vary significantly across different industries. Decentralized strategies may not be applicable to certain sectors or may only address specific issues within those sectors. We believe that significant differences in network adoption, token utility, and revenue generation may exist in this field, more likely determined by the target industry itself rather than the underlying technology network used.
Artificial Intelligence: Creating Real Value
Artificial Intelligence (AI) continues to attract investor attention in both traditional and crypto markets. However, we believe the impact of AI in the crypto space is multifaceted, with its narrative direction frequently changing. In the early stages, blockchain technology was seen as a solution to issues of credibility in AI-generated content and user data (for example, verifying data authenticity). AI-driven intent-oriented architectures were viewed as potential user experience improvement tools. The focus then shifted to decentralized AI model training and computational networks, as well as crypto-based data generation and collection. Recently, attention has turned to autonomous AI agents capable of controlling crypto wallets and communicating through social media.
We believe that the full impact of AI on the crypto space is not yet clear, as reflected in the frequently changing narratives. However, this uncertainty has not diminished the potential for AI to bring transformation to the crypto field, as AI technology continues to achieve breakthroughs. AI applications are also becoming increasingly user-friendly for non-technical users, which may further accelerate the development of creative use cases.
We believe the biggest suspense lies in how these transformations will create lasting value for liquid tokens rather than company equity. For instance, many AI agents operate on traditional technology tracks, and short-term 'value realization' (such as market attention) is more directed towards memecoins rather than underlying infrastructure. While liquidity tokens related to the infrastructure layer have also experienced price increases, their usage growth typically lags behind price surges. We believe that this divergence between price and network metrics, coupled with the market's rotating focus on AI memecoins, reflects that investors have yet to reach a strong consensus on how to capture AI growth in the crypto space.
Theme Three: Blockchain Metagaming
Is the multi-chain future a zero-sum game?
In the aftermath of the last bull market cycle, the popularity of alternative Layer-1 (L1) networks has once again become an important theme. Emerging networks are competing on lower transaction costs, redesigned execution environments, and minimized latency. However, we believe that the expansion of L1 space has reached the point of general block space surplus, even though high-value block space remains scarce.
In other words, additional block space itself does not have intrinsic high value. However, a vibrant protocol ecosystem, active community, and dynamic crypto assets can still enable certain blockchains to charge premium fees. For instance, Ethereum remains the core of high-value DeFi activity even though its mainnet execution capabilities have not improved since 2021.
Nevertheless, we believe that investors are still attracted to the differentiated ecosystems that these new networks may foster, even though the barriers to such differentiation are continually rising. High-performance chains like Sui, Aptos, and Sei are competing with Solana for market awareness, while the upcoming release of Monad is also seen as a strong competitor capturing developer attention.
Historically, DEX trading has been the largest driver of on-chain fees, requiring strong user onboarding, wallets, interfaces, and capital support to form a continuously growing cycle of activity and liquidity. This concentration of activity often leads to a 'winner-takes-all' scenario across different chains. However, we believe the future could still be multi-chain, as different blockchain architectures offer unique advantages to meet diverse needs. While appchains and Layer-2 solutions can provide custom optimizations and lower costs for specific use cases, multi-chain ecosystems allow for specialization while benefiting from broader network effects and innovation across the blockchain space.
Enhancing the capabilities of Layer-2
Despite Layer-2 (L2) having exponential scaling capabilities, debates surrounding Ethereum's rollup-centric roadmap continue. Criticisms include the 'predatory' impact of L2 on L1 activity, fragmentation of liquidity and user experience, particularly as L2s are seen as a reason for declining Ethereum network fees and the unraveling of the 'ultrasound money' narrative. New controversies around L2 include trade-offs in decentralization, fragmentation of different virtual machine environments (such as potential fragmentation of EVM), and choices between 'based' and 'native' rollups.
Nevertheless, from the perspective of increasing block space and lowering costs, L2 has achieved tremendous success. The introduction of binary large objects (blob) transactions in Ethereum's Dencun (Deneb + Cancun) upgrade in March 2024 reduced average L2 costs by over 90%, leading to a 10-fold increase in Ethereum L2 activity. Furthermore, we believe allowing multiple execution environments and architectures to experiment within the Ethereum environment is a long-term advantage of the rollup-centric approach.
This roadmap also comes with short-term trade-offs. Interoperability across rollups and the overall user experience is becoming more complex, especially for new users who do not fully understand the differences between various L2s or how to bridge across them. Despite improvements in bridging speed and costs, we believe that the need for users to interact with bridging has still diminished the overall on-chain experience.
While this is a real issue currently, the community is addressing this user experience issue through various methods, such as: (1) Superchain interoperability within the Optimism ecosystem, (2) real-time proofs and super transactions for zkRollups, (3) based sorting, (4) resource locking, (5) sequencer networks, etc. However, most of these improvements are focused on infrastructure and network layers and may take time to be reflected at the user interface level.
Meanwhile, Bitcoin's L2 ecosystem is more challenging to navigate due to the lack of unified rollup security and roadmap standards. In contrast, Solana's 'network expansion' is generally more application-targeted and may cause less disruption to current user workflows. Overall, L2 is shaping up across most major crypto ecosystems, but its forms vary significantly.
Everyone can have their own chain
The convenience of custom network deployment is prompting more applications and companies to build their own chains that they can better control. Major DeFi protocols like Aave and Sky (formerly MakerDAO) have explicitly incorporated chain building into their long-term plans, while the Uniswap team has also announced plans to launch an L2 chain focused on DeFi. Even some traditional companies are getting involved, such as Sony announcing plans to launch a new chain called Soneium.
As the blockchain infrastructure stack matures and becomes increasingly commoditized, we believe the appeal of owning block space is growing, particularly for entities with regulatory requirements or applications with specific use cases. The technology stack supporting this trend is also changing. In previous cycles, application-centric chains primarily utilized Cosmos or Polkadot's Substrate SDK. Now, the growth of the rollup-as-a-service (RaaS) industry is driving more projects towards launching their own L2 chains, represented by service platforms like Caldera and Conduit, which streamline integration with other services through their marketplace. Similarly, Avalanche's subnets may experience a surge in adoption due to the development of its hosted blockchain service AvaCloud, which significantly simplifies the launch process for custom subnets.
The growth of modular chains may have a corresponding impact on the demand for Ethereum blob space and other data availability solutions (such as Celestia, EigenDA, or Avail). Since early November, Ethereum's blob usage has reached saturation (3 blobs per block), increasing over 50% compared to mid-September. As existing L2s like Base continue to expand throughput, and new L2s launch on the mainnet, demand does not seem to be slowing down. However, the upcoming Pectra upgrade in the first quarter of 2025 may raise the target blob count from 3 to 6, thereby alleviating some pressure.
Theme Four: User Experience
Enhancements in User Experience (UX)
We believe that a simple user experience is one of the most important factors driving mass adoption. While the crypto industry has historically focused on deep technical guidance due to its crypto-punk origins, the focus is now rapidly shifting towards simplifying the user experience. In particular, the entire industry is working to abstract the complexity of crypto technology into the background of applications. Some recent technological breakthroughs are making this shift possible, such as adopting account abstraction to simplify user onboarding and using session keys to reduce signature friction.
The adoption of these technologies will make the security components of crypto wallets (such as seed phrases and recovery keys) invisible to most end users—similar to the seamless security experience of the internet today (like https, OAuth, and passkeys). We expect to see more trends in 2025 towards passkey onboarding and in-app wallet integration. For example, the passkey onboarding of Coinbase Smart Wallet and the integration of Tiplink and Sui Wallet with Google login are early signs of this trend.
Nevertheless, we believe that the abstraction of cross-chain architecture may still pose the greatest challenge for the crypto user experience in the short term. Cross-chain abstraction remains a focus of the research community at the network and infrastructure layer (such as ERC-7683), but in our view, it is still quite distant from the front-end applications. Progress in this area will require improvements at the smart contract application layer as well as enhancements at the wallet layer. Protocol upgrades are necessary for unifying liquidity, while wallet improvements need to provide users with a more streamlined experience. We believe the latter will have a greater impact on expanding the user base, even though current research and industry debates are primarily focused on the former.
User Interface Control
In our view, improving the user interface to 'control' user relationships is one of the most important transformations in crypto user experience. This transformation will be achieved in two ways: first, by enhancing the experience of independent wallets, as described earlier. User onboarding processes are becoming increasingly streamlined to meet user needs. For example, directly integrated application functions (like swapping and lending) within wallets can keep users within a familiar ecosystem.
Meanwhile, applications are also competing to abstract blockchain technology components into the background through wallet integration to control user relationships. This includes trading tools, games, on-chain social applications, and membership applications that automatically configure wallets for registered users through familiar methods (like Google or Apple's OAuth). After users complete onboarding, on-chain transactions are funded by paid service providers (paymasters), with costs ultimately borne by application owners. This model creates a unique dynamic where the income of each user needs to match the costs of their on-chain operations. Although these costs are continually declining as the blockchain expands, they also force crypto applications to reconsider what data needs to be submitted on-chain.
Overall, the crypto industry will face fierce competition to attract and retain users. As evidenced by the average revenue per user (ARPU) of the aforementioned Telegram trading bots, many retail crypto traders are relatively less sensitive to price compared to traditional financial (TradFi) entities. In the coming year, we expect efforts to 'control' user relationships to extend beyond trading, becoming a larger focus of protocols.
Decentralized Identity
With the continued increase in regulatory clarity and more assets being tokenized off-chain, simplifying Know Your Customer (KYC) and Anti-Money Laundering (AML) processes is becoming increasingly important. For instance, certain assets may only be available to qualified investors in specific regions, making identity verification and qualification certification core pillars of the long-term on-chain experience.
In our view, this involves two key components. 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 transformative technology has already emerged in networks like Basenames and Solana Name Service. Adoption of these core on-chain identity services is accelerating, with major traditional payment providers like PayPal and Venmo now supporting ENS address resolution.
The second core component is to build attributes for on-chain identities. This includes confirming KYC verification and jurisdiction data, which other protocols can subsequently reference to ensure compliance. The core of this technology is the Ethereum Attestation Service, which provides a flexible service for entities to offer certified attributes to other wallets. These certified attributes are not limited to KYC and can be freely expanded to meet the needs of certifiers. For instance, Coinbase's on-chain verification utilizes this service to confirm that a wallet is associated with a user from a Coinbase trading account and is located within a specific jurisdiction. Some new real asset lending markets will restrict usage rights through these verifications on Base.
