Transformative Growth: Coinbase 2025 Bitcoin Crypto Market Outlook Research Report Full Text

Original title: 2025 Crypto Market Outlook
Compiled by: Vernacular Blockchain

In the past year alone, the United States 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, and while they appear to be the culmination of years of hard work, there are more signs that this is just the beginning of greater change.

From a market perspective, the upward trend in 2024 is different from previous bull markets. On the surface, "web3" is gradually being replaced by the more appropriate "onchain"; more deeply, fundamental needs are gradually replacing narrative-driven investment, which is closely related to the deepening participation of institutional investors.

Bitcoin’s market dominance has increased significantly, and decentralized finance (DeFi) has broken the boundaries of blockchain technology and promoted the formation of a new financial ecosystem. Global central banks and major financial institutions are also exploring how to improve the efficiency of asset issuance, transactions and recording through Crypto.

Looking forward to 2025, the encryption market is experiencing transformative growth. Coinbase covers all aspects of the encryption ecosystem from altcoins, ETFs, staking to games and other fields, and provides a comprehensive and in-depth analysis of the encryption market outlook in 2025. The following are key excerpts.

Macroeconomic trends in 2025

1) The needs and goals of the Federal Reserve

Donald Trump 's victory in the 2024 U.S. presidential election became the biggest catalyst for the crypto market in the fourth quarter of 2024, driving Bitcoin prices sharply higher to 4-5 standard deviations above the three-month average.

Looking ahead, we believe that the impact of fiscal policy in the short term may not be as significant as the long-term trend of monetary policy, especially as the Fed approaches a critical decision-making moment. It is expected that the Fed may continue to ease monetary policy through 2025, but the pace of easing may be affected by future fiscal expansion, such as tax cuts and tariffs that may push up inflation. Although the overall CPI (consumer index) has dropped to 2.7%, the core CPI is still around 3.3%, which is higher than the Fed's target.

The Fed hopes to slow down price growth while maximizing employment through "de-inflation," that is, controlling the pace of price increases. However, U.S. households would prefer to see prices fall, but deflation could lead to a recession, posing a greater risk.

The most likely scenario right now is a soft landing, driven by lower long-term interest rates and the United States ' unique advantages. The Fed's interest rate cut is almost a foregone conclusion, and the easing of credit conditions will also support Crypto's performance in the next 1-2 quarters. Additionally, if the next administration pursues budget deficit spending, risk appetite (including Crypto purchases) may rise further as more dollars circulate through the economy.

2) The most pro-encryption U.S. Congress in history

After years of political ambiguity, we believe the next legislative session could be a critical moment for the United States to finally establish regulatory clarity for the crypto industry. The election sent a strong signal to Washington that the public is dissatisfied with the existing financial system and desires change. From a market perspective, the bipartisan support for crypto majorities in the House and Senate means that U.S. regulation is expected to transform from a resistance to the crypto market to a driving force, becoming a positive factor for Crypto's performance in 2025.

A new focus of discussion is the creation of a strategic Bitcoin reserve. In July 2024, after the Bitcoin Nashville Conference, Wyoming Senator Cynthia Loomis proposed the "Bitcoin Act", and Pennsylvania also introduced a similar bill, allowing up to 10% of the state's general fund to be invested in Bitcoin or cryptography assets. Michigan and Wisconsin have included crypto in pension investments, and Florida is following suit. However, creating a strategic Bitcoin reserve may face some challenges, such as the Federal Reserve’s legal restrictions on holding crypto assets on its balance sheet.

Meanwhile, the U.S. is not the only region making regulatory progress. Rising global crypto demand is also changing the landscape of international regulatory competition. Looking overseas, the EU’s Cryptoasset Market Regulation (MiCA) is being implemented in phases to provide a clear regulatory framework for the industry. Many G20 countries and major financial centers, such as the United Kingdom, United Arab Emirates, Hong Kong and Singapore, are also actively formulating regulatory rules to adapt to digital assets to create a more favorable environment for innovation and growth.

3) Crypto ETF 2.0

The approval of spot Bitcoin and Ethereum ETFs in the United States is an important milestone for the crypto market. Since their launch, the net inflows of these products have reached US$30.7 billion (about 11 months), far exceeding the US$4.8 billion performance of the SPDR Gold ETF in its first year in 2004. Bloomberg data shows that this puts the crypto ETF in the top 0.1% of about 5,500 ETFs launched in the past 30 years.

These ETFs have created a new demand pivot for Bitcoin and Ethereum, increasing Bitcoin's market share from 52% at the beginning of the year to 62% in November 2024. The latest 13-F report shows that nearly all types of institutional investors — such as endowments, pension funds, hedge funds and family offices — are involved in these products. At the same time, U.S. options products launched in 2024 will provide investors with lower-cost risk management tools.

Looking ahead, industry focus is on issuers potentially expanding the asset range of ETFs to include more tokens like XRP, SOL, LTC and HBAR, but we believe these potential approvals may only be beneficial to a limited group of assets. What is more noteworthy is what impact will it have if the U.S. Securities and Exchange Commission (SEC) allows ETFs to use staking functions, or relaxes restrictions so that ETF shares can be created and redeemed in kind instead of just cash? The current cash model results in settlement delays, share price deviations from net asset value (NAV), and higher transaction costs. The physical model is expected to improve price alignment, narrow bid-ask spreads, reduce transaction costs, and reduce price fluctuations and tax implications, thereby improving market efficiency.

4) Stablecoins: Crypto ’s “killer application”

In 2024, the stablecoin market has experienced substantial growth. As of December 1, its total market value has increased by 48%, reaching $193 billion. Some market analysts believe that based on current development trends, the stablecoin market is expected to grow to nearly $3 trillion in the next five years. Although this prediction seems too aggressive and is almost the same size as the entire current crypto market, it only accounts for about 14% of the US $21 trillion money supply and liquidity, which means it is not impossible.

We increasingly believe that the next wave of real Crypto adoption may come from the stablecoin and payments space, which helps explain why stablecoins have received such enthusiastic attention over the past 18 months . Compared with traditional payment methods, stablecoins can provide faster and lower-cost transactions, which makes them more and more widely used in digital payments and remittances, and many payment companies are also stepping up to build stablecoin infrastructure. In fact, we may be approaching a point where the primary uses of stablecoins will no longer be limited to transactions, but will expand to global capital flows and business transactions. Additionally, the broad financial applications of stablecoins have raised political concerns, particularly their potential to help solve the U.S. debt problem.

As of November 30, 2024, the total transaction volume of the stablecoin market has reached $27.1 trillion, which is almost three times the $9.3 trillion during the same period (11 months) in 2023. This includes a large number of peer-to-peer (P2P) transfers and cross-border business-to-business (B2B) payments. More and more companies and individuals are beginning to use stablecoins like USDC to meet compliance requirements and deeply integrate with payment platforms such as Visa and Stripe. In fact, Stripe acquired stablecoin infrastructure company Bridge for $1.1 billion in October 2024, which is also the largest transaction in the crypto industry to date.

5) Tokenization revolution

Tokenization has made significant progress in 2024. According to data from rwa.xyz, tokenized real-world assets (RWA) grew from $8.4 billion at the end of 2023 to $13.5 billion on December 1, 2024, an increase of more than 60% (excluding stablecoins). Predictions from various analysts indicate that this market may grow from a minimum of US$2 trillion to a maximum of US$30 trillion in the next five years, an increase of nearly 50 times . Asset management companies and traditional financial institutions, such as BlackRock and Franklin Templeton, are increasingly adopting the tokenization of traditional assets such as government bonds on public and permissioned chains, enabling cross-border Settlement is almost instantaneous and trading is possible around the clock.

Some companies are trying to use tokenized assets as collateral for other financial transactions (such as derivatives transactions), which can not only simplify operations (such as margin calls), but also reduce risks . In addition, the trend of RWA Tokenization has expanded from US Treasury bonds and money market funds to private credit, commodities, corporate bonds, real estate, insurance and other fields. Ultimately, tokenization is expected to move the portfolio construction and investment process to the blockchain, further streamlining the entire investment process, although this goal may still be several years away.

Of course, these efforts also face some unique challenges, including liquidity fragmentation across multiple blockchains and an ever-changing regulatory environment, both of which have seen significant progress.

Overall, we expect tokenization to be a gradual and ongoing process, but the benefits it brings are widely recognized. There’s never been a better time for companies to experiment and ensure they stay ahead of the technological wave.

6) The resurgence of DeFi

“DeFi is dead, long live DeFi.” Decentralized finance (DeFi) suffered a major blow in the last market cycle because some applications relied on token incentives to attract liquidity, with high but unsustainable returns. However, over time, a more sustainable financial system is emerging that not only includes real-world use cases but also has transparent governance structures.

In our view, changes in the U.S. regulatory environment may be key to reigniting the prospects of DeFi. Specifically, this may include establishing a regulatory framework for stablecoins and providing a path for traditional institutional investors to enter the DeFi market, especially as synergies between off-chain and on-chain capital markets continue to deepen. In fact, DEX currently accounts for approximately 14% of CEX trading volume, an increase from 8% in January 2023. Even the possibility of decentralized applications (dApps) sharing protocol revenue with token holders is becoming more and more likely, becoming a reality in a more friendly regulatory environment.

In addition, Crypto ’s disruptive role in the financial services sector is being recognized by more and more key figures. In October 2024, Federal Reserve Governor Christoper Waller gave a speech on how to make DeFi and centralized finance (CeFi) complementary. He believed that distributed ledger technology (DLT) can make CeFi’s Record keeping becomes more efficient and faster, while smart contracts enhance CeFi’s capabilities. He also said that stablecoins could be beneficial in terms of payments and as "safe assets" on trading platforms, although they would require measures to deal with risks such as runs and illicit finance.

All of this shows that DeFi is likely to no longer be limited to the encryption user group, but will extend to the traditional finance (TradFi) field.

disruptive paradigm

1) Telegram Trading Bot: A Hidden Profit Center in Crypto

After stablecoins and native L1 transaction 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 Sky). This trend mainly benefits from increased trading and Memecoin activity. In fact, Memecoin has become the strongest performing crypto space in 2024 (measured by market capitalization growth), and Memecoin ’s trading activity (on the Solana DEX platform) has also risen sharply in the fourth quarter of 2024.

Telegram trading bot is a chat-based trading tool. Users can create a custodial wallet directly within the chat window and recharge and manage it through buttons and text commands. As of December 1, 2024, the users of Telegram trading bots are mainly concentrated in Solana (accounting for 87%), followed by Ethereum (accounting for 8%), and then Base (accounting for 4%). (Note: Most Telegram trading bots are not associated with The Open Network (TON) integrated with Telegram’s native wallet.) In other words, the users served by these bots tend to use the Solana blockchain for transactions or other operations.

Like most trading platforms, Telegram trading bots typically charge around 1% per trade. However, users are not unhappy with these higher fees due to the higher volatility of the traded assets. By December 1, 2024, the cumulative fees of the highest-earning Photon robot had reached US$210 million, close to the US$227 million charged by Pump, Solana’s largest Memecoin launch platform. In addition, other major bots like Trojan and BONKbot also earned $105 million and $99 million respectively. By comparison, Aave will have protocol revenue of $74 million (net of fees) for full-year 2024.

We believe that the appeal of these bots mainly comes from their convenience in DEX trading, especially for tokens that are not yet listed on CEX. Many bots also offer additional features, such as a “sniping” function when a token goes online and integrated price alerts. The Telegram transaction experience is very user-friendly. Nearly 50% of users of the Trojan bot use it for more than four days (while only 29% of users stop using it after one day), which also brings the average revenue per user to 188 Dollar.

While increasing competition among Telegram trading bots may eventually lead to lower transaction fees, we believe Telegram bots (along with the other core interfaces discussed below) will continue to remain a leading profit center in 2025.

2) Prediction Markets: Open Betting

Prediction markets could 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 that this is a victory for Crypto , because the blockchain-based prediction market shows significant advantages over traditional polling data and reflects the unique application potential of blockchain technology. Prediction markets not only demonstrate the advantages of transparency, speed and global access brought by cryptography, but their blockchain foundation enables decentralized dispute resolution and outcome-based automated payment settlement, thus distinguishing themselves from traditional non-blockchain Chain prediction platform.

While many believe these decentralized applications (dApps) may lose popularity after the election, we are already seeing their use expand in other areas such as sports and entertainment. In the financial sector, they have proven to be a more accurate reflection of economic data, such as inflation and non-farm payrolls, than traditional surveys, which also means they are likely to keep going after the election.

3) Games: Controversies attract 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 that traditional games have, has always been a challenge for crypto games. Players of many crypto games are more focused on making money than just having fun, which makes attracting more non-crypto users difficult. Additionally, many crypto games rely on web browser distribution and require the use of self-hosted wallets, which limits their audience to primarily crypto enthusiasts rather than mass gamers.

However, crypto-integrated games have improved significantly compared to the previous cycle. The key change is the shift from the original concept of "fully owning the game on the chain" to selectively placing assets on the chain, which unlocks new features without affecting the overall gaming experience. In fact, we found that many high-profile game developers now view blockchain technology as an auxiliary tool rather than a core marketing selling point.

"Off the Grid" is representative of this trend. Although its core blockchain component, the Avalanche subnet, was still in beta when the game was released, it still became the number one free-to-play game on the Epic Games platform. The core attraction of the game lies in its unique gameplay, not the blockchain token or item trading market. More importantly, we think this game paves the way for crypto-integrated games to enter the wider market, and it's now available to play on Xbox, PlayStation, and PC (via the Epic Games Store).

The mobile terminal has also become an important distribution channel for crypto-integrated games, including native applications and embedded applications (such as Telegram mini-games). Many mobile games similarly selectively integrate blockchain functionality, but most campaigns actually run on centralized servers. Often, these games can be played without the need for an external wallet, reducing the barrier to entry and allowing users unfamiliar with crypto to participate.

In our view, the lines between crypto and traditional gaming may continue to blur. Upcoming “crypto games” are likely to be crypto-integrated games rather than games entirely focused on crypto, and we believe they will focus more on the sophistication of gameplay and distribution channels rather than having “play and earn” mechanics at their core , which may drive wider adoption of crypto, but we’re not sure how it will directly drive demand for liquidity tokens. In-game tokens will likely be segregated between games, and we believe that gamers who are not crypto enthusiasts may not want outside investors to influence the in-game economy.

4) DePIN

Decentralized Physical Infrastructure Networks (DePIN) have the potential to solve “real world” distribution problems by guiding the construction of resource networks. Simply put, DePIN can theoretically overcome the initial economies of scale problems common to such projects. DePIN's projects range from computing power to communications towers to energy, with the aim of providing a more efficient and cost-effective way to aggregate these resources.

The most prominent example of this is Helium, which operates by distributing tokens to individuals who provide local cellular hotspots. By issuing Tokens to hotspot providers, Helium has successfully built a network covering most cities in the United States, Europe and Asia without having to bear the high cost of building and deploying communication towers or investing large amounts of upfront capital. On the contrary, early users gain early access to and equity in the network through tokens , thus incentivizing them to participate.

However, the long-term revenue and sustainability of these networks need to be assessed on a case-by-case basis. That said, we do not believe that DePIN is a one-size-fits-all solution for resource allocation, as the pain points of different industries can vary greatly. For example, a decentralization strategy may not be suitable for certain industries, or it may only solve a small subset of problems in an industry. The difference in network adoption, token usage and revenue sources in this field depends more on the industry it targets rather than the technical network it relies on.

5) Artificial intelligence and real value

Artificial intelligence (AI) has become an investment focus in both traditional and crypto markets, while its impact in the crypto space is diverse and its narrative continues to evolve. Initially, blockchain technology was thought to be able to solve the problem of tracking AI-generated content and user data, ensuring data authenticity. At the same time, an AI-driven intent architecture was proposed to improve the user experience in the encryption market. Subsequently, the focus shifted to decentralized AI model training and computing networks, as well as encryption-driven data generation and collection. Recently, attention has turned to autonomous AI agents capable of controlling crypto wallets and interacting via social media.

The full impact of AI on the crypto market remains unclear, as evidenced by the changing narrative. However, this is not to say that this uncertainty will weaken the potential changes that AI will bring to the encryption market. After all, AI technology will continue to break through, bring new developments, and AI applications will become 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 changes into lasting value accumulation between liquidity tokens and company equity. For example, many AI agents run on traditional technology frameworks, and recent “value accumulation” (i.e., market attention) has flowed more to Memecoin than to any underlying infrastructure. While liquidity tokens associated with the infrastructure layer have also seen price increases, their usage growth generally lags behind price increases. We believe that this trend of prices outperforming network indicators, coupled with the rotating focus on AI memecoins, reflects the lack of investor consensus on how to capture AI growth in the crypto market.

Blockchain ecological game

1) Is the future of multi-chain still a zero-sum game?

During the last bull run, an important returning theme was the popularity of alternative Layer 1 networks. Emerging networks increasingly compete by lowering transaction costs, redesigning execution environments, and reducing latency. We believe that the Layer 1 field has developed to a new high. Now, although high-value block space is still scarce, the overall general block space has been surplus.

That is, additional block space does not necessarily have greater value in itself. However, a vibrant protocol ecosystem, combined with active communities and dynamic crypto assets, can still enable certain blockchains to charge a premium . For example, although Ethereum’s mainnet execution capabilities have not improved since 2021, it remains the center of high-value DeFi activity. And investors remain attracted to the potentially differentiated ecosystems on these new networks, even as the threshold for differentiation is gradually rising. High-performance chains like Sui, Aptos, and Sei are competing with Solana for market share, and the upcoming launch of Monad is seen as a strong contender for developers.

Judging from historical experience, DEX has always been the main source of on-chain fees. Achieving this requires strong user onboarding, wallets, interfaces, and capital support to establish an ever-increasing cycle of activity and liquidity. This concentration of activity often results in certain chains winning out over the competition.

However, we believe that the future will still be multi-chain, because different blockchain architectures have unique advantages and can meet different needs. While application chains and second-layer solutions can provide customized optimization and cost reduction for specific use cases, multi-chain ecosystems can specialize while enjoying the network effects and innovation of the entire blockchain field.

2) Improve the second-layer network (Layer2)

Despite Layer 2’s significant scalability, controversy remains over Ethereum’s “rollup centralization” roadmap. Criticisms mainly focus on L2’s “extraction” of L1 activities, as well as its mobility and fragmentation of user experience. In particular, L2 is believed to be responsible for the decline in Ethereum network fees. As the discussion deepens, new controversial points also emerge, including the trade-offs of decentralization, different virtual machine environments (which may lead to EVM fragmentation), and the difference between "based" and "native" Rollup.

Layer 2 has been a huge success from the perspective of increasing block space and reducing costs. In March 2024, Ethereum's Dencun (Deneb+Cancun) upgrade introduced binary large object (blob) transactions. The average cost of Layer 2 dropped by more than 90%, and it also promoted 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 also brings short-term drawbacks . Interoperability and the overall user experience across Rollups becomes more complex, especially for users who don't fully understand the differences between different Layers 2, or don't know how to bridge. Although bridge speeds and costs have improved, we believe that users still need to interact with the bridge, a process that itself impacts the overall on-chain experience.

Although this is an urgent problem that needs to be solved, the community is actively exploring multiple solutions, such as (1) superchain interoperability in the Optimism ecosystem,
(2) zkRollup’s real-time proof and super transactions,
(3) Ranking-based model,
(4) Resource locking,
(5) Sorter network, etc.

Although these issues are mostly addressed at the infrastructure and network level, it may take some time to be reflected at the user interface level.

At the same time, the complexity of the Bitcoin Layer 2 ecosystem increases due to the lack of unified rollup security standards and roadmaps. In contrast, Solana's "network extension" focuses more on application scenarios and may have less interference with existing user workflows.

**Overall, despite their varying forms, L2 is gaining ground in multiple mainstream crypto ecosystems.
**

3) Everyone has their own blockchain

As the difficulty of customized network deployment continues to decrease, more and more applications and companies are beginning to build blockchains that they can control. Major DeFi protocols like Aave and Sky (formerly MakerDAO) have made it clear that they will launch their own chains in their long-term development plans, and the Uniswap team has also announced plans to launch a DeFi-focused Layer 2 chain. Even some traditional companies are starting to get involved. For example, Sony announced plans to launch a new chain called Soneium.

As blockchain infrastructure matures and becomes more commoditized, owning the blockchain space becomes increasingly attractive, especially for regulators or those with specific use cases for their applications. The technology stack that enables this is also changing. In past cycles, application-centralized chains have primarily relied on Cosmos or Polkadot’s Substrate SDK. In addition, companies like Caldera and Conduit represent the rapidly growing Rollup as a Service (RaaS) industry, enabling more projects to launch their own Layer 2. These platforms are easily integrated with other services through marketplaces. Likewise, Avalanche's subnets are also likely to gain greater adoption for its managed blockchain service, AvaCloud, which simplifies the launch of custom subnets.

The growth of modular chains may have a corresponding impact on Ethereum’s blob space requirements, and data availability solutions like Celestia, EigenDA, or Avail may also gain momentum. Since early November, Ethereum’s blob usage has reached saturation (3 blobs per block), an increase of more than 50% compared to mid-September. Moreover, demand does not seem to be slowing down, with existing Layer 2 such as Base continuing to expand throughput, and new Layer 2 also being launched on the mainnet. The Pectra upgrade expected in the first quarter of 2025 may increase the number of target blobs from three to six.

user experience

1) Improvement of user experience (UX)

We believe that simplifying the user experience is one of the most important factors driving mass adoption. While the crypto industry has historically focused on access to technology, largely due to its cypherpunk roots, the focus is now rapidly shifting toward streamlining the user experience. In particular, there is an industry-wide push to hide the complexity of encryption technology into the backend of applications. Several recent technological breakthroughs have made this transition possible, such as the use of account abstraction to simplify user onboarding and the use of session keys to reduce signing friction.

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

Still, the abstraction of cross-chain architecture may remain the biggest challenge facing the near-term crypto experience. Although cross-chain abstractions are still a focus of research at the network and infrastructure levels (such as ERC-7683), in our view, they are still far away from front-end applications. Improvements in this area require improvements at both the smart contract application level and the wallet level. Protocol upgrades are critical to unifying liquidity, while wallet improvements help provide a simpler experience for users. The latter will ultimately be critical to scaling adoption, although the focus of current research and industry debate is largely on the former.

2) Control the interface

The most critical shift in crypto user experience will come from “taking control” of the user relationship through better interfaces. We believe this will be achieved in two ways:

The first is the aforementioned improvement of the independent wallet experience. The user access process is becoming more and more streamlined to adapt to user needs. The integration of applications directly into the wallet (such as exchange and borrowing) may also make it easier for users to stay in one. in a familiar ecosystem.

Second, applications are also competing to “take control” of the user relationship, enabling integrated wallets by abstracting blockchain technology components into the backend. This includes trading tools, games, on-chain social and membership applications, etc., where users automatically receive a wallet after signing up through familiar methods such as Google or Apple OAuth. Once onboarding is complete, on-chain transactions are funded through payment providers, with fees ultimately borne by the application owner. This creates a unique dynamic: each user’s revenue needs to match the costs of covering their on-chain actions. This cost continues to decrease as blockchains scale, but it also forces crypto applications to consider which data components to commit on-chain.

Overall, the crypto space will face fierce competition in the future, and attracting and retaining users will be key. As the aforementioned average revenue per user (ARPU) of Telegram trading bots shows, many retail crypto traders tend to be less sensitive to price changes than institutions in the traditional financial sector. It is expected that in the coming year, controlling user relationships will become a greater focus for protocols outside of the transactional realm.

3) Decentralized identity

As regulatory transparency increases and more assets are tokenized off-chain, it becomes increasingly important to streamline customer identification (KYC) and anti-money laundering (AML) processes. For example, some assets are only open to accredited investors in specific regions, making identity verification and qualification verification critical elements in future on-chain operations.

In our opinion, the construction of decentralized identity can be divided into two key parts. The first is to create an on-chain identity. The Ethereum Naming Service (ENS) provides a standard for mapping human-readable “.eth” names to multiple cross-chain wallets. Similar services are appearing on other networks, such as Basenames and Solana Name Service. As mainstream payment platforms such as PayPal and Venmo also begin to support ENS address resolution, the popularity of on-chain identity services is accelerating.

The second core part is building properties for on-chain identity. This includes confirming KYC verification and region information, which can be viewed by other protocols to ensure compliance with relevant regulatory requirements. At the heart of the 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 and can be expanded based on the needs of the authenticating party. For example, Coinbase utilizes the 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 license lending markets based on Base will also restrict users' usage rights through these certifications.

summary

Looking back on the past year, although the crypto market has been volatile due to interest rate hikes, regulatory pressure, and uncertain prospects, today’s progress marks a turnaround and is a testament to Crypto ’s resilience: it has remained steady in the face of various challenges. Grow and gradually become a mature and durable alternative asset .

Looking to the future, the encryption market presents multiple development directions full of potential. From peer-to-peer DEX, decentralized prediction markets, to artificial intelligence (AI) agents equipped with crypto wallets, these cutting-edge technologies are gradually coming to the fore. At the same time, areas such as the integration of stablecoins and payments, unsecured on-chain lending, and the formation of compliant on-chain capital also show huge room for development.

Although the popularity of the crypto industry has increased significantly, it is still poorly understood by many due to its novel technical structure. But as more and more projects make progress in optimizing user experience, simplifying the complexity of blockchain technology, and enhancing smart contract functions, the situation is expected to change, which will help attract more new users to join and accelerate the development of Crypto . universal.

Moreover, the United States has laid the foundation for a clear regulatory framework in 2024, and 2025 is expected to bring more progress and further consolidate the position of crypto assets in mainstream finance. We foresee that 2025 will be a critical year for the Crypto industry, and breakthrough developments may lay the foundation for development in the coming decades.