Skyland Ventures Partner: One article to understand the emerging crypto fields worth paying attention to in 2025

Author: Yonkuro

I am happy to announce that I became a partner of Skyland Ventures' Web3/Crypto fund in November 2024. I have just published an article summarizing the Web3 and encryption landscape in 2024 from a venture capital perspective.

This year, Skyland invested in 15 projects, 9 projects in our portfolio were successfully listed, and 2 projects became unicorns. The industry is growing at an incredible pace, and 2024 will be no different. In this article, I share insights into the transformation and key players in the Web3/encryption space from a VC perspective, and highlight emerging areas to watch in 2025.

Decentralized Finance (DeFi)

Key to the New Financial System What is Web3/Encryption? It is crucial to understand its nature. In my opinion, it represents the democratization of finance brought about by the Internet and blockchain technology. Particularly through decentralized finance (DeFi), the field is reimagining financial systems that previously relied on centralized institutions. Permissionless and stateless financial services and the infrastructure that supports them are at the heart of this revolution. Just as the Internet has revolutionized various fields such as information, retail, media and hardware, blockchain is driving similar changes in the financial field. Transactions and money transfers that once required a bank or financial intermediary can now be completed instantly and cost-effectively through cryptocurrencies. Bankless ’ title aptly sums up this paradigm shift. By the way, when it comes to cryptocurrency videos, Unchained is also another channel you should definitely watch. Still, challenges remain. Volatility in the sector leads to over-leverage and speculation in bull markets, while bear markets often see liquidations of over-leveraged assets leaving significant scars. Security breaches and massive financial losses from hackers are also ongoing concerns, leading governments and major companies to take a cautious stance. Despite these obstacles, the cryptocurrency market is still worth over $3.3 trillion, surpassing the size of some national stock markets. While acknowledging these challenges, as a venture capitalist, my goal is to support the paradigm shift toward "next generation internet finance."

virtual protocol

Proof of Entrepreneurial Resilience In 2024, an iconic entrepreneurial story emerged in the industry. Virtuals Protocol was originally launched in 2021 as a token-based gaming and community DAO project. However, during the bear market in 2022, its valuation plummeted, with its FDV falling to just $6 million. This situation would have forced many projects to retreat, but the founders of Virtuals chose to persevere and explore new directions. Starting in 2023, in the context of the rise of artificial intelligence technology, they began to study artificial intelligence and shifted their focus to artificial intelligence agents. They developed a platform that supports tokenized artificial intelligence agents, and their FDV has soared to $3 billion as of 2024, making them the leading project in the field of artificial intelligence agents. This success highlights the importance of long-term vision and the ability to adapt in changing market conditions. Evolution of the Ethereum Ecosystem In 2024, the Ethereum ecosystem made significant progress in terms of infrastructure maturity. The long-discussed issue of scalability has made significant progress with the emergence of Layer 2 (L2) solutions. Technologies based on zk-rollup such as Taiko , Scroll , and zkSync launched mainnet and listed tokens. Coinbase’s Base L2 also gained traction, becoming the second largest L2 in terms of users and TVL. A prominent contributor to this success Including social application Warpcast in the first half and DEX Aerodrome in the second half . At the same time, Uniswap announced its own L2, Unichain , which belongs to the Optimism Super Chain framework .

In addition, under the leadership of EigenLayer , significant progress has been made in the re-staking field. Re-staking enables assets such as Lido's LST to be pledged again, thereby enhancing the security of Ethereum on EigenLayer's AVS while achieving shared security. Projects such as EtherFi Renzo and Puffer contribute to this thriving ecosystem. Ethereum has evolved into a modular, scalable ecosystem with massive network effects.

BTCFi

Unlocking Bitcoin’s Potential Bitcoin (BTC) accounts for about half of the cryptocurrency market, but lacks smart contract capabilities. The launch of BTC staking protocols such as Babylon is addressing this limitation, allowing staked BTC to protect the infrastructure. In addition, EVM-compatible BTC L2 solutions such as MerlinChain , B²Network , Bitlayer , and BOB have been launched, taking advantage of the scalability and network effects of EVM. These moves mark the beginning of an era in which the previously dormant BTC asset becomes active. Liquidity Fragmentation: Challenges and Solutions As the Ethereum modular ecosystem grows, competition among layer-2 (L2) solutions intensifies, and liquidity fragmentation becomes a major challenge. Many L2s have established independent networks, creating a situation of competition for liquidity. To solve this problem, concepts such as intent and chain abstraction are widely adopted. Currently, the use of high-speed L2 bridges such as Orbiter Finance and Owlto Finance has become mainstream among users. In addition, liquidity provision protocols have also emerged to provide solutions for enhancing liquidity liquidity. Notable projects include Solv and StakeStone which deal with both BTC and ETH, act as liquidity centers and hold large amounts of TVL. Additionally, Cycle Network and 0xastra have developed unique solutions to address these challenges.

Solana 's resurgence

Following the FTX crash in 2022, Solana experienced a dramatic recovery, with its token price soaring from less than $9 to $260 in 2024. The Solana Foundation and its developer community have shown unparalleled unity in successfully rebuilding the ecosystem. Their efforts have even sparked debate about the competition between Ethereum (ETH) and Solana (SOL). The key to Solana’s resurgence lies in large-scale campaigns such as Jito and Jupiter , which launched large airdrop campaigns to attract users.

Additionally, the increasing use of meme coins for marketing has gained traction and attracted a large number of users. Solana has proven its ability to handle large volumes of transactions with minimal issues, solidifying its position as a single L1 capable of further growth.

Meme coins have gained significant momentum, with platforms such as Pump.fun generating $3.5 million in cumulative revenue within 10 months of launch. Meme Coins and VC Coins The rise of meme coins ended up sparking major debates. Historically, memecoins have been viewed as speculative assets. However, tokens from venture-backed projects have continued to underperform post-IPO, changing public perception. Memecoins are starting to be viewed as “fairer and more community-focused.” Conversely, venture capital-backed tokens have been criticized for benefiting only venture capital firms. From a venture capital perspective, it is important to note that the lock-up period after a token is listed is usually 6 months to 1 year, which means that venture capital cannot generate immediate selling pressure. The basic role of venture capital remains to fund emerging projects and promote financial innovation.

There are many reasons why altcoin prices fall. The approval of the BTC spot ETF attracted widespread attention, making the surge in Bitcoin prices the benchmark for comparison. Increasing competition among projects and frequent airdrops have led to an increasingly clear trend of users immediately selling the tokens they receive . Additionally, the rapid popularity of memecoins has further diverted attention away from altcoins. As altcoin season has arrived and altcoin prices have begun to rise, these debates have died down. Hyperliquid is a permanent DEX that builds its own high-speed EVM Layer 1 chain. It is developing a roadmap to build a DeFi-centric ecosystem on this infrastructure. Since the launch of the product, its superior user experience has attracted traders. It is worth noting that even after TGE, Hyperliquid did not list on CEX, but chose to list exclusively on its own platform. The project has not raised funding from venture capital firms. Instead, it distributed 30% of the tokens to early adopters in one of the largest airdrops in history, quickly attracting the attention of the community. As a result, its FDV reached $35 billion.

This shows that a well-loved app can gain significant recognition by prioritizing its user community. Not only does Hyperliquid provide compelling answers to many of the debates looming in the industry in 2024, but it also has the potential to become a legendary project in crypto history. Although it is a risk-free investment project, it was selected as the 2024 MVP because it embodies the fundamental elements required in today's industry. What will 2025 look like? What will the Web3/encryption industry look like in 2025? Here are five predictions for the year ahead:

1.AI Agents The story of AI Agents begins with $GOAT and is expected to expand to autonomous artificial intelligence agents and develop further in 2025. Self-sufficient AI Agents are rapidly emerging in the crypto industry. Examples include the AI ​​investing agent , which grew a $500 wallet more than 8x, and aixbt_agent , a cryptographic messaging agent on X. Efforts to integrate artificial intelligence into the entertainment and creator economy are accelerating, such as Virtuals Protocol and Luna . This trend is driven by improved inference models and is an area that both Web2 and Web3 VC should pay close attention to.

2. New Ecosystems and Killer Apps In 2024, Sui has achieved significant growth, with its valuation reaching $45 billion FDV. This shows that, similar to Solana, monolithic Layer 1 has the potential to make significant progress. Looking ahead to 2025, high-speed Layer 1 features featuring parallel processing are expected to be released, such as Monad and Berachain , the latter of which introduces a new consensus algorithm called Proof of Liquidity. What these projects have in common is that they focus on spearheading application development from the infrastructure side, creating a strong ecosystem from the start. In the ETH Layer 2 field, MegaETH and Reddio, which build high-speed chains through parallel processing, are also expected to be launched . In addition, ecosystems such as MovementLabs, which integrates Move with EVM , and DuckChain, which integrates TON with EVM , may gain attention. As Hyper Liquid demonstrates, while 2025 will see many ecosystems emerge, the launch of a killer app will also be a key factor. Identifying and supporting such applications will remain a key task for venture capital firms.

3. The evolution of stablecoins In 2025, the adoption and innovation of stablecoins will increase. Projects such as Ethena and Usual introduced novel stablecoin concepts in 2024, marking high FDV. Compared to BTC, stablecoins are able to generate stable returns (10-15%) without the volatility of the crypto market, which could make it an attractive entry point for businesses. The project that seems to be leading this trend is Level .

4. Payment progress As stablecoins become more widely used, the payment system is expected to mature, provide liquidity exports, and promote the integration of new finance and the real economy. PayFi, which combines DeFi with payments, will become the focus, emphasizing smart, intermediary-free, and transparent payment systems.

5. On-chain dashboards and data The key to progress in artificial intelligence lies in data sets, and better data management is crucial to improving algorithm performance. As the volume of data and number of token issuances continues to grow, real-time asset management and analysis tools such as KaitoAI, which visualizes market trends, and SoSoValue, known for its superior user experience, will continue to gain popularity. Halving Cycle Anomalies and Market Outlook 2025 Cryptocurrency markets are affected by a phenomenon called halving cycles, where market trends shift between bullish and bearish phases when Bitcoin halving events occur. Historically, these cycles have driven seemingly predictable events. Market trends. If this pattern continues, the current bull trend may end and usher in a bear market by the end of 2025, which will have profound consequences for projects and require careful planning and strategy. However, it is worth noting that these patterns may not always be the case. is ongoing. Factors such as the approval of BTC spot ETFs and governments and businesses entering the market at scale to purchase Bitcoin may have a positive impact on traditional market cycles. The key is to view the 4-year halving cycle as a short-term indicator and focus on building for the long term. toughness.

When challenges arise, remember the story of Virtuals Protocol. Even in a tough bear market, continued growth and preparation for the next bull market are critical to success in this space.