2025 Crypto Market Outlook

Compiled by: Baihua Blockchain

In just the past year, the U.S. has approved Bitcoin and Ethereum spot ETFs, and significant progress has been made in the tokenization of financial products, the growth of stablecoins, and the integration of global payment frameworks. These achievements did not happen overnight; while they may seem like the result of years of effort, more signs indicate that this is just the beginning of a larger transformation.

From a market perspective, the upward trend in 2024 differs from previous bull markets. On the surface, "web3" is gradually being replaced by the more fitting term "onchain"; more fundamentally, demand driven by fundamentals is gradually replacing narrative-driven investment, closely related to the deepening participation of institutional investors.

Bitcoin's market dominance has significantly strengthened, decentralized finance (DeFi) has broken the boundaries of blockchain technology, and a new financial ecosystem is emerging. Central banks and major financial institutions worldwide are also exploring how to enhance the efficiency of asset issuance, trading, and record-keeping through crypto.

Looking ahead to 2025, the crypto market is poised for transformative growth. Coinbase covers various aspects of the crypto ecosystem, from altcoins, ETFs, staking to gaming, providing a comprehensive and in-depth analysis for the 2025 crypto market outlook, with the following key excerpts.

2025 Macroeconomic Trends

1) The Federal Reserve's Demand and Goals

Donald Trump's victory in the 2024 U.S. presidential election is expected to be the biggest catalyst for the crypto market in the fourth quarter of 2024, driving Bitcoin prices significantly higher, exceeding the three-month average by 4-5 standard deviations.

Looking ahead, we believe that the impact of fiscal policy in the short term may not be as significant as the long-term trends of monetary policy, especially as the Federal Reserve approaches a critical decision-making moment. It is expected that by 2025, the Federal Reserve may continue to ease monetary policy, but the pace of easing could be influenced by future fiscal expansions, such as tax cuts and tariffs that may drive up inflation. Although the overall CPI (Consumer Price Index) has fallen to 2.7%, the core CPI remains around 3.3%, above the Fed's target.

The Federal Reserve aims to achieve a slowdown in price growth through "de-inflation," while maximizing employment, i.e., controlling the pace of price increases. However, American households prefer to see prices fall, but deflation could lead to economic recession, posing greater risks.

The most likely scenario at present is a soft landing, thanks to the decline in long-term interest rates and the unique advantages of the U.S. A Fed rate cut seems almost certain, and the loosening of credit conditions will also support crypto performance in the next 1-2 quarters. Additionally, if the next government implements budget deficit spending, with more dollars circulating in the economy, risk appetite (including the purchase of crypto) may further rise.

2) The Most Crypto-Friendly U.S. Congress in History

After years of political ambiguity, we believe the next legislative session may be a key moment for the U.S. to finally establish regulatory clarity for the crypto industry. This election sends a strong signal to Washington: the public is dissatisfied with the existing financial system and desires change. From a market perspective, bipartisan support for crypto in both the House and Senate means that U.S. regulation is likely to shift from being a hindrance to a driving force for the crypto market, becoming a positive factor for crypto performance in 2025.

The new focus of discussion is the establishment of strategic Bitcoin reserves. After the Bitcoin Nashville Conference in July 2024, Wyoming Senator Cynthia Lummis introduced the "Bitcoin Bill," and Pennsylvania also launched a similar bill allowing up to 10% of state general funds to be invested in Bitcoin or crypto assets. Michigan and Wisconsin have included crypto in pension investments, and Florida is following suit. However, creating strategic Bitcoin reserves may face challenges, such as legal restrictions on the Federal Reserve holding crypto assets on its balance sheet.

Meanwhile, the U.S. is not the only region making regulatory progress. The rising global demand for crypto is also changing the landscape of international regulatory competition. Looking overseas, the EU's Markets in Crypto-Assets Regulation (MiCA) is being implemented in phases, providing a clear regulatory framework for the industry. Many G20 countries and major financial centers, such as the UK, UAE, Hong Kong, and Singapore, are also actively developing regulatory rules adapted to digital assets, creating a more favorable environment for innovation and growth.

3) Crypto ETF 2.0

The approval of spot Bitcoin and Ethereum ETFs in the U.S. is a significant milestone for the crypto market. Since their launch, these products have seen net inflows of $30.7 billion (approximately 11 months), far exceeding the $4.8 billion raised by the SPDR Gold ETF in its first year in 2004. According to Bloomberg, this places crypto ETFs in the top 0.1% of approximately 5,500 ETFs launched in the past 30 years.

These ETFs have created new demand for Bitcoin and Ethereum, increasing Bitcoin's market share from 52% at the beginning of the year to 62% by November 2024. The latest 13-F reports show that almost all types of institutional investors—such as endowments, pensions, hedge funds, and family offices—are participating in these products. Meanwhile, U.S. options products launched in 2024 provide investors with lower-cost risk management tools.

Looking ahead, the industry's focus is on whether issuers will expand the asset range of ETFs to include more tokens like XRP, SOL, LTC, and HBAR, but we believe that these potential approvals may only benefit a limited group of assets. More importantly, what impact would it have if the U.S. Securities and Exchange Commission (SEC) allows ETFs to use staking features or relax restrictions to allow ETF shares to be created and redeemed through physical assets rather than just cash? The current cash model leads to settlement delays, deviations between share prices and net asset value (NAV), and higher trading costs. In contrast, a physical model is expected to improve price alignment, narrow bid-ask spreads, reduce trading costs, and minimize price volatility and tax implications, thereby enhancing market efficiency.

4) Stablecoins: The "Killer Application" of Crypto

In 2024, the stablecoin market experienced significant growth, with a total market capitalization increase of 48% to $193 billion as of December 1. Some market analysts believe that, following the current growth trend, the stablecoin market could grow to nearly $3 trillion within the next five years. While this prediction may seem overly ambitious, almost equivalent to the current size of the entire crypto market, it only accounts for about 14% of the $21 trillion U.S. money supply, indicating that it is not impossible.

We increasingly believe that the next wave of true crypto adoption may come from stablecoins and the payments sector, which also helps explain why stablecoins have received such enthusiastic attention over the past 18 months. Compared to traditional payment methods, stablecoins can provide faster and lower-cost transactions, making them increasingly popular in digital payments and remittances, with many payment companies ramping up the construction of stablecoin infrastructure. In fact, we may be approaching a moment where the primary use of stablecoins will no longer be limited to transactions but will extend to global capital flows and business dealings. Additionally, the widespread financial applications of stablecoins have also drawn political attention, especially regarding their potential to help address the U.S. debt issue.

As of November 30, 2024, the total trading volume in the stablecoin market reached $27.1 trillion, nearly three times the $9.3 trillion recorded during the same period in 2023 (11 months). This includes a significant amount of peer-to-peer (P2P) transfers and cross-border business-to-business (B2B) payments. An increasing number of businesses and individuals are starting to use stablecoins like USDC to meet compliance requirements and deeply integrate with payment platforms like Visa and Stripe. In fact, Stripe acquired the stablecoin infrastructure company Bridge for $1.1 billion in October 2024, marking the largest deal in the crypto industry to date.

5) The Tokenization Revolution

Tokenization made significant progress in 2024. According to rwa.xyz, the tokenized real-world assets (RWA) grew from $8.4 billion at the end of 2023 to $13.5 billion by December 1, 2024, an increase of over 60% (excluding stablecoins). Analysts predict that this market could grow from a minimum of $2 trillion to a maximum of $30 trillion over the next five years, representing an increase of nearly 50 times. Asset management firms and traditional financial institutions, such as BlackRock and Franklin Templeton, are increasingly adopting tokenization of traditional assets like government bonds on public and permissioned blockchains, enabling near-instant cross-border settlements and 24/7 trading.

Some companies are attempting to use tokenized assets as collateral for other financial transactions (such as derivatives trading), which can not only simplify operations (e.g., margin calls) but also reduce risk. Furthermore, the trend of RWA tokenization has expanded from U.S. Treasury bonds and money market funds to private credit, commodities, corporate bonds, real estate, and insurance. Ultimately, tokenization is expected to shift portfolio construction and investment processes onto the blockchain, further simplifying the entire investment process, although this goal may take several years to achieve.

Of course, these efforts also face unique challenges, including liquidity fragmentation across multiple blockchains and a constantly evolving regulatory environment, but significant progress has already been made in both areas.

Overall, we expect tokenization to be a gradual and ongoing process, but its benefits are widely recognized. Now is the best time for companies to experiment to ensure they stay ahead in the wave of technological development.

6) The Revival of DeFi

"DeFi is dead, long live DeFi." Decentralized finance (DeFi) suffered significant blows in the last market cycle, as some applications relied on token incentives to attract liquidity, offering high yields that were unsustainable. However, over time, a more sustainable financial system is gradually emerging, one that includes real-world use cases and transparent governance structures.

In our view, changes in the U.S. regulatory environment could be key to reigniting the prospects for DeFi. Specifically, this may include establishing a regulatory framework for stablecoins and providing pathways for traditional institutional investors to enter the DeFi market, especially as the synergy between off-chain and on-chain capital markets deepens. In fact, DEXs currently account for about 14% of CEX trading volume, up from 8% in January 2023. Moreover, the possibility of decentralized applications (dApps) sharing protocol revenues with token holders is becoming increasingly feasible in a more favorable regulatory environment.

Additionally, the disruptive role of crypto in financial services is gaining recognition from more key figures. In October 2024, Federal Reserve Board Governor Christopher Waller spoke about how to make DeFi complementary to centralized finance (CeFi), arguing that distributed ledger technology (DLT) could make record-keeping in CeFi more efficient and faster, while smart contracts could enhance CeFi's capabilities. He also noted that stablecoins could bring benefits in payments and as "safe assets" on trading platforms, although they need to take appropriate measures to address risks such as runs and illicit finance.

All of this suggests that DeFi is likely to extend beyond the crypto user base and into the traditional finance (TradFi) realm.

Disruptive Paradigms

1) Telegram Trading Bots: The Invisible Profit Center in Crypto

After stablecoins and native L1 trading fees, Telegram trading bots have become the most profitable part of the 2024 crypto space, even surpassing the net protocol revenue of major DeFi protocols like Aave and MakerDAO (now known as Sky). This trend is primarily benefiting from increased trading and Memecoin activity. In fact, Memecoins have become the strongest-performing sector in crypto in 2024 (measured by market cap growth), and trading activity for Memecoins (on Solana DEX platforms) surged sharply in the fourth quarter of 2024.

Telegram trading bots are chat-based trading tools. Users can create custodial wallets directly in the chat window and manage deposits and transactions through buttons and text commands. As of December 1, 2024, users of Telegram trading bots are primarily concentrated on Solana (87%), followed by Ethereum (8%), and then Base (4%). (Note: Most Telegram trading bots are not associated with The Open Network (TON), which integrates with Telegram's native wallet.) This means that the users served by these bots tend to prefer trading or performing other operations on the Solana blockchain.

Like most trading platforms, Telegram trading bots typically charge around 1% per transaction. However, due to the high volatility of trading assets, users do not seem dissatisfied with these higher fees. As of December 1, 2024, the top-earning Photon bot has accumulated fees of $210 million, close to the $227 million charged by Solana's largest Memecoin launch platform, Pump. Additionally, other major bots like Trojan and BONKbot have generated $105 million and $99 million in revenue, respectively. In contrast, Aave's total protocol revenue for 2024 was $74 million (net income after fees).

We believe the appeal of these bots primarily stems from their convenience in DEX trading, especially for tokens that have not yet been listed on CEXs. Many bots also offer additional features, such as "sniping" functions when tokens launch and integrated price alerts. The Telegram trading experience is very user-friendly, with nearly 50% of Trojan bot users using it for more than four days (compared to only 29% of users who stop using it after one day), resulting in an average revenue per user of $188.

While the increasing competition among Telegram trading bots may eventually lead to lower trading fees, we believe that Telegram bots (and other core interfaces discussed below) will continue to maintain their leading profit center status in 2025.

2) Prediction Markets: The Clear Bets

Prediction markets may be one of the biggest winners of the 2024 U.S. election cycle, with platforms like Polymarket outperforming traditional polling data that predicts election outcomes. We believe this is a victory for crypto, as blockchain-based prediction markets demonstrate significant advantages over traditional polling data, showcasing the unique application potential of blockchain technology. Prediction markets not only highlight the transparency, speed, and global access advantages brought by crypto technology, but their blockchain foundation also enables decentralized dispute resolution and outcome-based automatic payment settlements, distinguishing them from traditional non-blockchain prediction platforms.

Although many believe these decentralized applications (dApps) may lose popularity after the election, we have already seen their applications expanding into other areas such as sports and entertainment. In the financial sector, they have proven to be more accurate than traditional surveys in reflecting economic data, such as inflation and non-farm payroll data, suggesting they may continue to develop post-election.

3) Gaming: Controversy Drives Attention

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, attracting a loyal user base, especially those loyal players of traditional games, has been a challenge for crypto games. Many players of crypto games are more focused on profit rather than pure entertainment, making it difficult to attract more non-crypto users. Additionally, many crypto games rely on web browser distribution and require the use of self-custody wallets, limiting their audience primarily to crypto enthusiasts rather than mainstream gamers.

However, compared to the previous cycle, crypto-integrated games have seen significant improvements. The key change is the shift from the initial concept of "fully on-chain ownership of games" to selectively placing assets on-chain, unlocking new features without compromising the overall gaming experience. In fact, we find that many well-known game developers now view blockchain technology as a supplementary tool rather than a core marketing selling point.

"Off the Grid" is a representative of this trend. Although its core blockchain component—the Avalanche subnet—was still in testing at the time of release, it became the top-ranked free game on the Epic Games platform. The game's core appeal lies in its unique gameplay rather than blockchain tokens or item trading markets. More importantly, we believe this game paves the way for crypto-integrated games to enter a broader market, as it is now playable on Xbox, PlayStation, and PC (via the Epic Games Store).

Mobile platforms have also become an important distribution channel for crypto-integrated games, including native apps and embedded applications (such as Telegram mini-games). Many mobile games also selectively integrate blockchain features, but most activities are actually run on centralized servers. Typically, these games can be played without requiring external wallets, reducing the entry barrier and allowing users unfamiliar with crypto to participate.

In our view, the lines between crypto games and traditional games may continue to blur. Upcoming "crypto games" are likely to be crypto-integrated games rather than games solely focused on crypto, and we believe they will place greater emphasis on gameplay refinement and distribution channels rather than a "play-to-earn" mechanism at their core, which may drive broader adoption of crypto technology, though we are uncertain how it will directly drive demand for liquidity tokens. In-game tokens are likely to be isolated across different games, and we believe that non-crypto enthusiast gamers may not want external investors to influence the in-game economy.

4) DePIN

Decentralized Physical Infrastructure Networks (DePIN) have the potential to address distribution issues in the "real world" by guiding the construction of resource networks. In simple terms, DePIN can theoretically overcome the common early economies of scale issues faced by such projects. The scope of DePIN projects covers various fields, from computing power and communication towers to energy, aiming to provide a more efficient and cost-effective way to aggregate these 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 has successfully built a network covering most cities in the U.S., Europe, and Asia without incurring the high costs of building and deploying communication towers or investing large amounts of upfront capital. Instead, early users gained early access and stakes in the network through tokens, incentivizing their participation.

However, the long-term revenue and sustainability of these networks need to be evaluated on a case-by-case basis. In other words, we do not believe DePIN is a one-size-fits-all solution for resource distribution, as the pain points in different industries may vary significantly. For example, decentralized strategies may not be suitable for certain industries, or they may only address a small portion of issues within a specific industry. The adoption of networks, token usage, and revenue sources in this field depend more on the targeted industry than on the underlying technological network.

5) AI and Real Value

Artificial Intelligence (AI) has become a focal point for investment in both traditional and crypto markets, and its impact in the crypto space is diverse, with its narrative continuously evolving. Initially, blockchain technology was seen as a solution to tracking AI-generated content and user data, ensuring data authenticity. Subsequently, AI-driven intent architectures were proposed to enhance user experience in the crypto market. The focus then shifted to decentralized AI model training and computing networks, as well as crypto-driven data generation and collection. Recently, attention has turned to autonomous AI agents capable of controlling crypto wallets and interacting through social media.

The overall impact of AI on the crypto market remains unclear, as evidenced by the constantly changing narrative. However, this uncertainty does not diminish the potential transformative impact of AI on the crypto market; after all, AI technology will continue to break new ground, leading to new developments, and AI applications are becoming increasingly accessible to non-technical users, which we believe will further accelerate the emergence of creative applications.

The biggest question is how to translate these transformations into lasting value accumulation between liquidity tokens and company equity. For example, many AI agents operate on traditional technology frameworks, and recent "value accumulation" (i.e., market attention) has flowed more toward Memecoins than any underlying infrastructure. Although liquidity tokens related to the infrastructure layer have also seen price increases, their usage growth typically lags behind price increases. We believe that this trend of prices surpassing network metrics, combined with the rotational focus on AI memecoins, reflects a consensus gap among investors on how to capture AI growth in the crypto market.

Blockchain Ecosystem Games

1) A Multi-Chain Future or a Zero-Sum Game?

In the last bull market, a significant recurring theme was the popularity of alternative Layer 1 networks. Emerging networks are increasingly competing by lowering transaction costs, redesigning execution environments, and reducing latency. We believe the Layer 1 space has reached a new high, and while high-value block space remains scarce, the overall generic block space has become oversaturated.

That said, additional block space itself does not necessarily hold greater value. However, a vibrant protocol ecosystem, combined with an active community and dynamic crypto assets, can still allow certain blockchains to charge a premium. For example, despite no improvement in Ethereum's mainnet execution capacity since 2021, it remains the center of high-value DeFi activity. Moreover, investors are still attracted to the potential differentiated ecosystems on these new networks, even as the barriers to differentiation gradually rise. High-performance chains like Sui, Aptos, and Sei are competing with Solana for market share, while the upcoming launch of Monad is seen as a strong competitor for developers.

Historically, DEXs have been the main source of on-chain fees. Achieving this requires strong user onboarding, wallets, interfaces, and capital support to establish a continuously enhancing cycle of activity and liquidity. This concentration of activity often leads to certain chains winning out in competition.

However, we believe the future will still be multi-chain, as different blockchain architectures have unique advantages to meet diverse needs. While application chains and layer two solutions can provide customized optimizations and cost reductions for specific use cases, a multi-chain ecosystem can enjoy the network effects and innovations of the entire blockchain space while specializing.

2) Enhancing Layer 2 Networks

Despite Layer 2's significant scalability capabilities, controversies surrounding Ethereum's "Rollup centralization" roadmap persist. Criticism mainly focuses on the "extractive" nature of L2 on L1 activities and the fragmentation of its liquidity and user experience. In particular, L2 is seen as a reason for the decline in Ethereum network fees. As discussions deepen, new points of contention have emerged, including the trade-offs of decentralization, different virtual machine environments (which may lead to EVM fragmentation), and the distinction between "based" and "native" Rollups.

From the perspective of increasing block space and reducing costs, Layer 2 has achieved tremendous success. In March 2024, Ethereum's Dencun (Deneb+Cancun) upgrade introduced binary large object (blob) transactions, reducing Layer 2's average costs by over 90% while also facilitating a tenfold increase in Ethereum L2 activity. More importantly, the ability to experiment with multiple execution environments and architectures on top of Ethereum is a long-term advantage of the L2 roadmap.

However, this development has also brought short-term drawbacks. Cross-Rollup interoperability and the overall user experience have become more complex, especially for users who do not fully understand the differences between various Layer 2s or do not know how to bridge. Although bridging speed and costs have improved, we believe users still need to interact with bridges, which itself affects the overall on-chain experience.

While this is an urgent issue to address, the community is actively exploring various solutions, such as
(1) superchain interoperability in the Optimism ecosystem,
(2) real-time proofs and super transactions in zkRollups,
(3) sorting-based models,
(4) resource locking,
(5) sorter networks, etc.

Although these issues are primarily being addressed at the infrastructure and network levels, it may take some time for improvements to be reflected at the user interface level.

Meanwhile, the complexity of the Bitcoin Layer 2 ecosystem is increasing due to the lack of unified Rollup security standards and roadmaps. In contrast, Solana's "network expansion" focuses more on application scenarios, potentially causing less disruption to existing user workflows.

Overall, despite their varying forms, Layer 2 is gradually being implemented across multiple mainstream crypto ecosystems.

3) Everyone Owns Their Own Blockchain

As the difficulty of deploying customized networks continues to decrease, more applications and companies are beginning to build their own blockchains that they can control. Major DeFi protocols like Aave and Sky (formerly MakerDAO) have explicitly stated their plans to launch their own chains as part of their long-term development strategy, while the Uniswap team has also announced plans to launch a Layer 2 chain focused on DeFi. Even some traditional enterprises are getting involved. For instance, Sony has announced plans to launch a new chain called Soneium.

As blockchain infrastructure matures and becomes increasingly commoditized, owning block space is becoming more attractive, especially for regulatory bodies or applications with specific use cases. The technology stack to achieve this is also changing. In previous cycles, application-centric chains primarily relied on Cosmos or Polkadot's Substrate SDK. Additionally, companies like Caldera and Conduit represent the rapidly developing "Rollup as a Service" (RaaS) industry, enabling more projects to launch their own Layer 2s. These platforms facilitate convenient integration with other services through the market. Similarly, Avalanche's subnets may gain more adoption due to its managed blockchain service AvaCloud, which simplifies the launch of custom subnets.

The growth of modular chains may have corresponding impacts on the demand for Ethereum's blob space, and data availability solutions like Celestia, EigenDA, or Avail may also gain traction. Since early November, Ethereum's blob usage has reached saturation (three blobs per block), increasing by over 50% compared to mid-September. Moreover, demand does not seem to be slowing down, as existing Layer 2s like Base continue to expand throughput, and new Layer 2s are also launching on the mainnet. The upcoming Pectra upgrade in the first quarter of 2025 is expected to increase the target number of blobs from three to six.

User Experience

1) Improvements in User Experience (UX)

We believe that simplifying user experience is one of the most important factors driving mass adoption. Although the crypto industry has traditionally emphasized technical access, stemming from its cypherpunk roots, the focus is rapidly shifting toward simplifying user experience. In particular, the entire industry is pushing to hide the complexity of crypto technology in the background of applications. Recent technological breakthroughs have made this transition possible, such as adopting account abstraction to simplify user access and using session keys to reduce signature friction.

The adoption of these technologies will make security components (such as mnemonic phrases and recovery keys) in crypto wallets invisible to most end users, similar to today's seamless security experience on the internet (such as https, OAuth, and password keys). We expect to see more password key access and in-app wallet integration in 2025. Early signs include password key access in Coinbase Smart Wallet and Google-integrated login with Tiplink and Sui Wallet.

Nevertheless, the abstraction of cross-chain architectures may still be the biggest challenge facing the crypto experience in the near term. While cross-chain abstraction remains a research focus at the network and infrastructure levels (such as ERC-7683), in our view, they are still far from the front-end applications. Improvements in this area need to be made at both the smart contract application layer and the wallet layer. Protocol upgrades are crucial for unifying liquidity, while improvements in wallets help provide users with a more streamlined experience. The latter is ultimately critical for scaling adoption, although the current focus of research and industry debate is primarily on the former.

2) Controlling Interfaces

The most critical shift in the crypto user experience will come from "controlling" user relationships through better interfaces. We believe this will be achieved in two ways:

First is the improvement of independent wallet experiences, where user access processes are becoming increasingly simplified to meet user needs, and applications directly integrated into wallets (such as exchanges and borrowing) may make it easier for users to stay within a familiar ecosystem.

Secondly, applications are also competing to "control" user relationships by abstracting blockchain technology components to the background for integrated wallets. This includes trading tools, games, on-chain social applications, and membership applications, where users automatically receive wallets after registering through familiar methods (such as Google or Apple OAuth). Once access is completed, on-chain transactions are funded by payment providers, with costs ultimately borne by the application owners. This creates a unique dynamic: the income of each user needs to match the costs of their on-chain behavior. As blockchain scales, this cost continues to decrease, but it also forces crypto applications to consider which data components to submit on-chain.

Overall, the future crypto space will face intense competition, and attracting and retaining users will be key. As indicated by the average revenue per user (ARPU) of Telegram trading bot users, many retail crypto traders tend to be less sensitive to price changes compared to traditional financial institutions. It is expected that in the coming year, controlling user relationships will become a greater focus for protocols beyond just the trading space.

3) Decentralized Identity

As regulatory transparency increases and more assets achieve off-chain tokenization, simplifying customer identity verification (KYC) and anti-money laundering (AML) processes becomes increasingly important. For example, some assets are only open to certified investors in specific regions, making identity verification and qualification certification key elements in future on-chain operations.

In our view, the construction of decentralized identity can be divided into two key parts. The first is creating on-chain identities. Ethereum Name Service (ENS) provides a standard that maps readable ".eth" names to multiple cross-chain wallets. Similar services have emerged on other networks, such as Basenames and Solana Name Service. With mainstream payment platforms like PayPal and Venmo also beginning to support ENS address resolution, the speed of adoption for on-chain identity services is accelerating.

The second core part is building attributes for on-chain identities. This includes confirming KYC verification and regional information, which other protocols can view to ensure compliance with relevant regulatory requirements. The core technology is the Ethereum Attestation Service, a flexible service that allows different entities to provide verification for other wallets. These verifications are not limited to KYC but can be extended based on the needs of the certifying parties. For example, Coinbase uses this service for on-chain verification, confirming that a wallet is associated with a user who has a Coinbase account and is located in a specific jurisdiction. Some new permissioned borrowing markets based on Base will also restrict user access through these certifications.

Conclusion

Looking back over the past year, despite the volatility of the crypto market influenced by interest rate hikes, regulatory pressures, and uncertain prospects, the current progress marks a turning point, demonstrating the resilience of crypto: it continues to grow steadily in the face of various challenges, gradually becoming a mature and durable alternative asset.

Looking ahead, the crypto market presents multiple promising development directions. From peer-to-peer DEXs, decentralized prediction markets, to AI agents equipped with crypto wallets, these cutting-edge technologies are gradually emerging. At the same time, the integration of stablecoins and payments, unsecured on-chain borrowing, and the formation of compliant on-chain capital also show significant growth potential.

While the crypto industry's visibility has significantly increased, many people still do not have a deep understanding of its novel technological structure. However, as more projects make progress in optimizing user experience, simplifying the complexity of blockchain technology, and enhancing smart contract functionalities, the situation is expected to change, helping to attract more new users and accelerate the adoption of crypto.

Moreover, the U.S. has laid the groundwork for a clear regulatory framework in 2024, and further progress is expected in 2025, solidifying the position of crypto assets in mainstream finance. We foresee that 2025 will be a pivotal year for the crypto industry, with breakthrough developments potentially laying the foundation for growth in the coming decades.