Looking at the Crypto market from 2028

Author: 0XSMAC (Compound VC Investor)

Compiled by: Block unicorn

At Compound Crypto, we believe in building various future visions that we firmly believe in across all our core areas of focus. We engage in this work over long time horizons and multiple cycles because the best way to learn about things is to study them as they begin to break down.

By 2023, cryptocurrency is doing just that in some respects. Faced with an uncertain future, inevitable tailwinds, and strong headwinds, we have been internally trying to think through the subtle progress in the categories we care deeply about. This has led to a vibrant exploration to understand how our world evolves year after year, in detail, and how cryptocurrency as an industry and technology plays its role in this evolution.

1. 2023-2024 Seeking Mass Adoption

DeFi has made a comeback, but not in the way many expected. Our total DeFi users have quietly surpassed 30 million, but the pace of adoption is bittersweet for some; the activity of permissioned KYC products has surged. Public opinion is mixed; some see broader participation and traditional institutions continuing to flood into the space, increasing the value of their investments, while others claim that high-net-worth individuals can now access white-glove financial service products through forward-looking traditional financial institutions, undermining the essence of cryptocurrency.

The usage rate of native permissionless DeFi has returned to a lesser extent. A significant amount of U.S. Treasury bonds has gone on-chain, achieved both through synthetic offshore operators and through more regulated but slower offshore operators. Despite stablecoin trading volumes surpassing $500 billion, the new metric focused on measuring scale in cryptocurrency is stablecoins + Treasury bonds, which peaked over $1 trillion during this period.

Although the maturity of the on-chain options market has increased due to institutional liquidity, it is not yet fully in place. Now, the development path seems feasible. As expected, this is reflected in exchanges offering perpetual contracts and options, allowing for cross-chain margining and dynamic risk engines.

The most exciting new native application is a mobile app wallet, where account abstraction wallets lower the participation threshold for new users and provide multi-chain, multi-asset yield generation. Many other companies claim to do this, but the user interface and product details are what set it apart.

Gaming is not the killer use case to attract newcomers to the space; by the end of 2024, hundreds of millions of dollars invested in crypto gaming have yielded little return. Game trailers continue to be released, but no crypto-native games have seen any meaningful sustained attention. Crypto gaming is beginning to take on the kind of meme that zk technology had during 2017-2020 ("Don't worry, this year is the year; it's coming soon"). However, blockchain performance for fully on-chain, continuously state-changing games is still insufficient, and building an engaging off-chain game with on-chain assets takes longer than expected.

The unlocking of "user adoption" comes from smarter, user-friendly, guided searches that make it easier for ordinary people to explore on-chain games, with many revisionist historical perspectives considering this to be obvious.

Wallets have advanced on-chain search assistants that can seamlessly integrate on-chain data and interact with the wallet. For example, searches like: "Show me the most popular NFTs from last month," "Buy me $100 of ETH in the next 2 hours." These are just some queries anyone can make from increasingly smooth interfaces that look more like Runway products than Notion tables. From the perspective of application integration, we have not fully arrived, but it is clear that this is our direction.

More advanced user operations will soon include requests like "Show me a list of stablecoin farms launched last month with yields between 10-20%. Over the next 2 weeks, evenly transfer my existing 10% stablecoin risk into these stablecoins." The actual extent of user adoption has been exaggerated, mainly because there aren't many new, non-financial things to do on-chain.

"Solana positions itself as a leader focused on mobile development, enabling developers to more easily build applications in the blockchain and mobile space."

Despite gaming remaining disappointing, the only bright spot is Solana, which is seen as a gaming chain on both desktop and increasingly on mobile devices. Its lead in building mobile experiences is paying off, as the network has seen a large number of mobile Solana games launched on Saga. The sales of Saga (Solana's phone brand) are not impressive (selling 50,000 - 100,000 units), but Solana has established itself as a leader in non-native development focused on mobile.

Polygon lags in this regard due to its lack of gaming throughput compared to Solana, and in the early days of these limited games, composability was not very important. Polygon has leveraged its strengths well, being the best at attracting Web2 brand partnerships and bringing Web enterprises into Polygon, further solidifying its de facto status as a retail "loyalty program" partnership channel.

In the cryptocurrency space, some social applications temporarily have appeal, but the depth of differentiation and new behavior enablement is mostly quite shallow. By the end of 2024, there is a sense that this vertical finally has enough talented crypto product people to build new applications that ordinary users will actually use. Electric Capital's 2024 developer report will reveal that we have crossed the mark of 75,000 active developers per month, with 25,000 full-time developers.

As always, when the bull market continues to push forward, animal spirits dominate, and privacy issues are pushed to the back. For this reason, the development of zkEVMs seems slow, although there have been some new signs of development in very specific use cases for privacy technology (most notably health data and location data). But overall, people are still not concerned about privacy.

Hong Kong has swiftly taken action to continue attracting the entire cryptocurrency industry. It sees an opportunity as the U.S. is in a presidential election year and will not spend much time on cryptocurrency regulations or oversight. This has unfortunately led to cryptocurrency becoming a partisan issue in Washington, with Republicans calling for a looser regulatory framework while scaring people about the possibility of the U.S. losing to China.

On the other hand, Democrats are calling for more regulation, rules, and restrictions, strongly opposing cryptocurrency. Although experts on cryptocurrency policy are desperately trying to avoid this partisan divide, both parties are merely catering to their voters.

Concerns about dystopian CBDCs have diminished, as the launch of FedNow (the U.S. Federal Reserve's system) has not been impressive. Some banks are using it, but it is merely an upgraded version of the SWIFT rails, with some limited superficial decentralization. For all intents and purposes, it has little practical significance.

On the positive side, we have indeed seen bipartisan support for U.S. custodial stablecoin regulations, with a bill very similar to the Toomey bill being passed. At least from the legislative perspective, there is still no clear definition of the default treatment of cryptocurrency (commodity or security). However, there are some judicial precedents providing the industry with what it considers "strong enough" clarity, making the industry feel it will not be stifled.

When a Republican (as a weak loser) wins the presidential election, many in the cryptocurrency space overemphasize the significance of this for regulatory perspectives, entering a period of undue frenzy. Gary Gensler (SEC Chairman) remains in his position and continues to pose challenges to the cryptocurrency industry, although his influence is waning.

"Seemingly safe major protocols (Uniswap, Aave, Curve) will become the victims of the largest hacks in cryptocurrency history."

As the space continues to expand, one negative consequence is the spread of increasingly complex hacks. Seemingly safe major protocols (Uniswap, Aave, Curve) will become the victims of the largest hacks in cryptocurrency history. This raises alarms about security. As a narrative, security has become a hot topic of concern for investors, with much of the discussion revolving around the fact that we now have "real" non-native users. These individuals are uncomfortable with the notions of regular fraud, vulnerabilities, or malicious contracts, differing from the feelings of crypto-native users. "We need more sophisticated security infrastructure!" ------ has become a hot topic.

Crypto venture capital firms have transformed into AI venture capital firms, that is a fact. Many limited partners' capital has been destroyed because they do not truly understand crypto, merely skimming the surface, and know even less about AI. Many investors who turned to crypto in 2022 will quietly return after price improvements, boasting about wanting to "return to the closest community and the crypto space I understand deeply." This is annoying but not surprising.

For crypto users during the COVID-19 pandemic, the inevitability of crypto became clear, with many of them harboring doubts about the space in 2022, even though they would not admit it now. By the end of 2024, the external world remains quite skeptical about "what has actually been built?" but for those inside crypto, this straw man argument no longer carries weight, even as a counterpoint.

2. 2025 Burn After Reading (ETH)

Now, the hype cycle of cryptocurrency has fully unfolded. Gensler, as the Chairman of the SEC, has become a lame duck, and it is clear he will not continue in that position after his term ends in 2026. Although the CFTC has not yet been formally recognized as the preferred regulatory body for cryptocurrency, it is clear this is merely a formality, and the U.S. has successfully avoided what was previously seen as a crisis.

All major banks and brokerages now offer some form of cryptocurrency service. Most of this business is conducted within the asset management departments of these institutions, but every sell-side trading desk now has dedicated crypto asset teams. Major banks have not yet engaged in market-making, but this is only because the regulatory environment is changing slowly; these banks have gradually built and recruited the corresponding teams to prepare for this inevitability.

The four largest financial institutions in the U.S. now hold over $20 trillion in assets.

Today, the question of whether blockchains should remain public has become a more pressing debate. Very sophisticated hacks continue to stay ahead of rapidly evolving security infrastructure as the scale of this space expands, and the amounts involved in these attacks draw negative headlines.

In fact, the on-chain environment is much safer compared to just 2-3 years ago. The four largest financial institutions in the U.S. now hold over $20 trillion in assets, leveraging these opportunities to drive the development of private blockchains; JPMorgan attempted to launch the JPM chain but quietly faltered in an unremarkable manner, similar to Goldman Sachs' Marcus initiative a few years ago.

The on-chain options market has finally begun to develop, as the current architecture is now efficient enough to handle the complexity of pricing inputs. The share of crypto options in spot trading is increasing but still only accounts for 50% (though up from 2% a few years ago). Unsurprisingly, the on-chain structured products market is thriving.

While the 2010s saw a plethora of fintech lending platforms emerge and fail, many alternative lending activities have shifted on-chain. Data is richer, payment processing is continuous, and the diversity of global participants is limited; now there is a robust on-chain entity market that regularly issues bonds collateralized by this.

One unexpected consequence of this hype cycle is the concern over Ethereum's burn rate (now as high as 15,000 ETH per day). A contentious discussion has emerged regarding the adjustment of rewards shares for node stakers, with one side attempting to adjust the reward shares for stakers, while the other believes such changes are unnecessary. The current state (80% burn / 20% to depositors) is good for those holding ETH, who point out that demand for ETH is very high, but without any action, there are real concerns about long-term sustainability.

Complicating matters further is traditional finance's infatuation with Ethereum; stable ETH yields have become an easy-to-understand meme for traditional finance. There is intense debate over the idea of introducing "minimum/maximum deposit yields." An important social coordination development has emerged with better frameworks to evaluate protocols and value crypto assets. There are now enough protocols (over 30) generating meaningful fee revenue (annualized $100 million), so no one is loudly calling for total value locked (TVL) anymore. Incentivizing initial liquidity is important, but the key metrics most people are focused on relate to:

• The number of paying addresses
• Repeat paying addresses
• "Power user" penetration; this is a metric developed by improved data visualization techniques that can easily show which wallet addresses will pay in the future, specific to each stage
• Allowing integrations; another new metric that measures the extent to which users authorize each protocol to execute autonomous wallet operations, gauging the "trustworthiness" of the protocol.

Some more mature protocols are now being valued based on fee revenue or multiples of fee generation, but there is still discussion about whether liquidity is more relevant. These multiples remain significantly higher than the multiples of current growth tech companies, but as the largest protocols now generate nine-figure fees, this gap is narrowing.

Crypto protocols and foundations leverage tokens to acquire traditional tech startups.

The approval of exchange-traded funds (ETFs) for Bitcoin (BTC) and Ethereum (ETH) has finally brought further liquidity to the space and opened the door for broader retail participation. Crypto protocols and foundations leverage tokens to acquire traditional tech startups, leading to cross-acquisitions that, while initially met with skepticism, ultimately become quite successful: the crypto industry attracts a wave of high-quality talent, while struggling startups achieve better outcomes.

In developing countries, cryptocurrency has gained significant and sustained momentum. Some developing regions in Latin America and Asia continue to experience incredible adoption rates. In some of these countries, stablecoins now account for a large portion of trading volume. Digital assets have become one of the five most widely held assets in Asia, second only to stocks, cash, fixed income, and real estate.

On the consumer side, early adopters of consumer augmented reality (AR) products were mocked for wearing bulky AR products in public, similar to early Google Glass or first-generation AirPods wearers. However, more and more people are beginning to wear the next generation of these devices, which are smaller, more comfortable, and can be worn for extended periods, and are now socially accepted.

Crypto projects adopt AR advertising as a means to launch new networks and consolidate influence among the younger generation, who have a disproportionate adoption rate for these products. Now, users interact with AR crypto ads, completing small tasks/games/surveys and earning token rewards by providing direct feedback to the projects, inadvertently addressing many ongoing collusion attack issues.

On-chain search assistants continue to improve, with previously limited search assistants for relatively simple operations (e.g., "Evenly distribute 10% of my existing stablecoin exposure across these two lending protocols over the next two weeks") gradually maturing. Through new session keys and smart contract account innovations, users can choose to grant these search assistants varying degrees of proxy permissions.

Even if users are offline or not using their wallets, if they allow maximum proxy, search assistants can decide to execute specific actions, such as arbitraging the assets held in smart contract accounts or choosing to stake assets based on attractive yields. All of this does not require explicit user instructions. Some may feel comfortable providing this level of autonomy, but there will also be costly mistakes that deter most people.

Solana Labs continues to push in the hardware space and doubles down on gaming.

The V2 version of Saga (Solana's phone brand) has been released, significantly better than V1 (selling 500,000 units), although its success has led some other ecosystems to mistakenly believe they can replicate this success. Solana Labs continues to work in the hardware space and doubles down on gaming, announcing partnerships in virtual reality (VR) to build Solana-supported VR games on their own devices. The timing of this release is still unclear, but its ambitious vision is undoubtedly evident.

Unsurprisingly, the influx of liquidity and higher prices has led to a resurgence of speculative enthusiasm. This time, it manifests as the proliferation of crypto gambling, with crypto-native gambling platforms flooding the market, especially in Asia, where the vast majority of activity is concentrated, resulting in massive overall amounts. The annual revenue of the entire crypto gambling industry now exceeds that of traditional gambling companies like MGM (growing 5 times). Many of these projects did not consider licensing and regulatory consequences much at launch ------ we have seen platforms shut down overnight when regulators crack down, particularly in the U.S. Users have suffered losses, and comparisons to the 2011 Black Friday of poker are apt.

Tools with crypto capabilities and their privacy guarantees show real potential - first for rare disease data collection aggregation, which has led to some unexpected scientific breakthroughs.

The first truly scalable use case for zero-knowledge technology has become clear, and it has not appeared in the financial realm of lending/loans/institutional privacy as many expected, but rather in the growing DeSci (data science) community. After continuous leaks of sensitive health information, the protection and collection of health data have become very important. Tools with crypto capabilities and their privacy guarantees show real potential - first for rare disease data collection aggregation, which has led to some unexpected scientific breakthroughs. These surprising successes, along with discussions about when the cost of human genome sequencing will reach $1, have sparked interest in this technology among many in the scientific community.

The scale of multimodal transformers (referring to a type of neural network model) has become very large (many now exceed 500 billion parameters), and they are trained on images, videos, audio, and actions. The computational workload is enormous. Now, multiple companies spend over $1 billion annually on training, and there is a massive demand for chips, even leading to congressional proposals to restrict their use. Therefore, we see a significant increase in demand for potential GPUs.

The crypto networks providing access to these resources are experiencing exponential growth in adoption, with leading providers rendering over 100 million frames in 2025. It is now clear that beyond financial speculation, there are many meaningful application areas, many of which address significant problems that might not be solvable otherwise.

Although the goals have not been fully achieved, some small groups in the energy and crypto sectors are building independent infrastructure models, particularly decentralized energy resources. Microgrids are becoming increasingly popular in Texas, California, Florida, and the Southwest.

3. 2026 A Significant Turning Point

2026 will be remembered as a key turning point in the crypto space. This year, we finally saw the U.S. enact constructive crypto legislation.

Here are the guiding principles:

1. Clarification of Regulation: The CFTC is recognized as the default regulatory body for crypto assets, while the SEC is responsible for overseeing a portion of crypto assets considered security tokens.

2. Clear Tax Treatment: Clear tax guidance is provided for different types of crypto assets; most crypto assets are taxed as property, while stablecoins and security tokens have separate tax laws.

3. Flexible Guidelines: High-level principled guidance is provided rather than specific regulations to accommodate the rapid evolution of the crypto space; this approach strikes a balance between the need for regulatory oversight and the flexibility for ongoing innovation.

4. Minimal Compliance Burden: The educational efforts on Capitol Hill over the past few years have made people more aware of the importance of avoiding unnecessary compliance burdens on crypto startups.

5. International cooperation is discussed, and most believe it is necessary, although there are currently issues of fragmentation and regulatory arbitrage that will take time to resolve.

The economic success of Montenegro paves the way for some existing EU member states to seriously consider leaving the EU.

Outside the U.S., we see some interesting experiments taking shape. Montenegro has become a center for digital experimentation in recent years, adopting Ethereum (ETH) as its legal tender. This is more symbolic, although the formal adoption is the strongest signal yet that it may no longer be interested in joining the European Union. The economic success of Montenegro paves the way for some existing EU member states to seriously consider leaving the EU.

We see Asia's first attempt to introduce a large-scale controlled universal basic income (UBI) program.

In Asia, we further see the first large-scale attempt to introduce a controlled universal basic income (UBI) program. As Japan continues to face a population crisis and stagnant economic growth, the government has ramped up its stimulus efforts. It has begun implementing digital identity verification to distribute specific tokens to residents based on predetermined income, location, and employment status. These tokens are time-limited and must be spent at registered participating merchants within a specified period, or they will be destroyed from the user's wallet. Although Western countries express concerns, viewing it as dystopian; in reality, it is a desperate attempt by a government eager to stimulate economic growth and prevent young talent from leaving.

A number of new crypto payment processors have emerged from a wave of startups, and the entire crypto industry now adopts "super fluid continuous" payment methods (i.e., all crypto-native companies' payments are continuous rather than settled weekly/biweekly/monthly). This real-time payment infrastructure has spread in Asia beyond just crypto companies, with some forward-looking traditional tech companies in the U.S. also beginning to adopt these payment channels.

In the decentralized finance (DeFi) space, several competing mature options markets have now emerged. The total trading volume of options has surpassed spot trading volume for the first time, and DeFi has entered a new phase of development and adoption. U.S. Treasuries continue to increase, with the combined value of on-chain stablecoins and Treasuries peaking close to $2 trillion.

The permissionless part of decentralized finance (DeFi) continues to generate over $100 billion in fees from over 500 million active users.

The trillion-dollar scale of traditional assets has been transferred on-chain, with two-thirds being permissioned and one-third being permissionless. Although the permissioned pool dominates, permissionless DeFi continues to generate over $100 billion in fees from over 500 million active users. Flash loans, structured products, and new infrastructure are becoming increasingly popular, but they remain complex and often more favorable to the most sophisticated participants.

This year has also seen the significant development of unsecured loans, thanks to a confluence of factors: more effective reputation and identity infrastructure, the proliferation of permissioned DeFi, and now clear regulatory direction. The early forms of this lending have primarily emerged in Latin America, parts of Africa, and Southeast Asia; in these regions, cryptocurrency continues to deliver on many promises. The cost of capital in emerging markets has decreased, sparking heated discussions about how much influence cryptocurrency has had in this transition.

Although most cryptocurrency social media users are unaware, DeSci is making steady progress, seeking true product-market fit. Several large pharmaceutical companies are utilizing health data networks for clinical trials, obtaining richer sample sets. Due to advancements in data collection and coordination, there is optimism about better health outcomes in the future.

Controversially, a Chinese drug development company announced the development of a new cancer drug that leverages large-scale analysis of genomic and treatment data from over a million patients in mainland China. Although the drug has shown promising results in early studies, many Americans express skepticism about the validity of this claim.

Now there are very sophisticated AI agents capable of reviewing protocol documents, smart contracts, and network architectures; these agents compete with each other.

As discussions around artificial intelligence become highly politicized, some in the crypto space are trying to promote the benefits it can offer. Specifically, this information mainly revolves around data privacy, fairness in proprietary model execution, and the authenticity of content generation. In auditing and on-chain security, the emergence of AI agents has significantly improved efficiency. Now there are very sophisticated AI agents capable of reviewing protocol documents, smart contracts, and network architectures; these agents compete with each other, looking for the most profitable vulnerabilities in testing environments as the final simulation before the mainnet of the protocol.

Incremental progress has been made in improving user interfaces, allowing users to publicly sign any content they publish for verification. However, social consensus has not yet formed, and there is still much work to be done. The music industry continues to struggle with new technologies; many artists attempt to restrict the use of any generated music using their likeness, while those who actively embrace and share sales revenue with new generation studios benefit the most.

We witnessed the first fictional CGI (virtual musician) artist recognized by the RIAA for five million sales. Given the slow pace of copyright law evolution, there remains some ambiguity regarding the ownership of these artists' creative works.

In a medium-sized city in North Texas (population 100,000 to 500,000), a fully self-sufficient energy infrastructure plan powered by an emerging crypto network has been proposed. The city operates a municipal utility system that generates renewable energy using solar, wind, and battery storage systems throughout the city. Residential consumers can sell excess energy to neighbors on a peer-to-peer basis or sell it back to the city to meet energy demands during peak times. Commercial buildings are required to purchase a minimum percentage of energy from renewable sources, further incentivizing activity on the network.

Battery storage systems throughout the city are optimized through autonomous systems, storing excess energy during the day and releasing it as needed. The municipal utility operates some batteries, while private owners can also operate and sell storage services. The city has established a decentralized autonomous organization (DAO) that allows residents to propose and vote on new incentives, methods of cryptocurrency distribution, and smart city upgrades. The city also provides an open data platform to ensure transparency in energy supply and demand.

In the event of power outages, microgrids provide electricity to critical infrastructure such as hospitals. These microgrids automatically connect to on-site renewable energy generation and storage systems; residents can choose to connect their homes to these microgrids for backup power or receive compensation for contributing power and storage. This is an ambitious plan that has garnered significant interest and attention nationwide.

Emerging foundational public blockchains continue to launch, and while long-time crypto natives often view them as "unnecessary" or "lacking differentiation," new consensus mechanisms are indeed developing. Developer growth remains steady, with over 500,000 active developers per month and over 100,000 full-time developers.

As 2026 draws to a close, the pace of progress accelerates, with crypto permeating mainstream finance and expanding into other large verticals. For those directly involved in crypto, it seems ubiquitous, although it still appears niche for some households, people have a better understanding of its widespread impact. Some in traditional tech industries attempt to shift their targets rather than acknowledge their mistakes, but at this stage, this is merely talk, with no impact on progress for 2027.

4. 2027 and 2028 Approaching

Once you see what the world could look like, you can no longer be satisfied with the status quo of the real world.