Breaking through difficulties and reshaping the future: Outlook for the crypto world in 2025

Author: Zeke Source: YBB Capital Translation: Shan Ouba, Golden Finance

Crypto World in 2025: Breaking the Deadlock and Rebuilding Outlook

Introduction

From the inscription boom to the election of the first "crypto president", 2024 is coming to an end. This year, the crypto market has experienced an unusual "bull run", with altcoins performing poorly, meme coins dominating, and ultimately everything returning to Bitcoin. Despite the lows and continued disappointments along the way, the crypto industry as a whole is moving in a more positive direction. Looking ahead to 2025, there are many areas to watch. This article will provide a brief outlook for the coming year based on recent views.

1. About the development of AI

Currently, blockchain projects often over-complicate technical implementation in pursuit of conceptual perfection, affecting user interaction and experience. Projects built around the intent architecture are particularly complex. Whether centralized (such as TG Bot), structured (preprocessing combined with on-chain and off-chain) or distributed (such as Solver + Executor architecture), these intent-based projects generally have some common problems. For example, users still need to have a certain degree of DeFi understanding ability, and the expression of intent must be clear, accurate and concise. When users put forward complex or vague intentions, current intent-driven projects are often difficult to respond and have limited execution scope. Since Paradigm proposed this concept in mid-2023, most intent projects have remained at the theoretical level and have not been very helpful in guiding new users or lowering the entry threshold. However, judging from the development path of Ethereum Layer 2, the demand for such solutions is very urgent.

Looking back at the development of Layer 2 in the past few months, leading projects such as OP Superchain are constantly expanding alliances, and ZkSync's Elastic Chain and Arbitrum Orbit are also following suit, trying to form their own alliances. These alliances will achieve internal interoperability through aggregation solutions to alleviate the fragmentation and lack of interoperability of the Ethereum Layer 2 ecosystem. In the future, this multi-chain competition will gradually narrow down to a contest of at least a few parties. However, from a broader perspective, as the crypto market picks up, emerging Layer 2 projects such as Movement and Fuel are launching mainnets in an attempt to compete for scarce liquidity in the altcoin market. For non-first-tier projects, fragmentation and interoperability issues are still worsening. Virtual machines with different architectures may not even have wallet plug-ins that can communicate with each other. For ordinary blockchain users, the Layer 2 ecosystem is becoming increasingly complex, which will become a major obstacle to the development of non-financial applications.

For Ethereum to welcome more new users, ecosystem integration is a key prerequisite. An ecosystem that requires users to have geek levels will never achieve "widespread popularity". On the other hand, the counter-trend growth of Solana and Ton this year, the strategy of lowering user barriers and providing more Web2-style experiences has obviously played an important role in the growth of the ecosystem. In other words, these two ecosystems have only simplified the difficulty of asset issuance, making users' operations on the blockchain almost imperceptible. Therefore, Ethereum must adopt an integration strategy centered on user experience. However, given the open attitude of the core developers, it is unlikely that the entire Layer 2 ecosystem will be forcibly integrated.

I think that AI browser agent is the answer to this problem. In the early days, many people imagined that AI would completely change the way applications interact, transitioning from single-point operation to cross-application operation to create super apps. For example, in a travel scenario, once AI receives a user's travel needs, it can automatically complete flight bookings, customized travel routes, dining arrangements, and schedule planning. If AI has long-term memory, future travel can also be automatically arranged according to user needs.

Currently, Google is about to launch an AI browser agent called Project Mariner, based on the Gemini model. According to a demonstration presented by Jaclyn Konzelmann, director of Google Labs, when a user installs the AI ​​agent plug-in in the Chrome browser, a chat window will pop up on the right side of the browser. Users can instruct the agent to perform tasks, such as: "Create a shopping cart with this list at the grocery store." The AI ​​agent then automatically navigates to the grocery platform, adds the items to the shopping cart, and jumps to the checkout page. The user confirms the purchase (the agent does not have payment permissions). OpenAI will also launch a similar product next month.

It is worth noting that although Google's Project Mariner is currently only available to a small number of test users, I have experienced AI agents developed by some crypto projects for ordinary users. In a few hours of trial, the agent has an accuracy rate of about 60-70% in performing complex or ambiguous tasks. It can autonomously trade tokens on decentralized exchanges (DEX) on multiple blockchains, and even transfer assets across Layer 2 solutions. In this process, I only need to provide the agent with the action intention and enter the wallet password.

Of course, the platform still needs to call the centralized model API. So, what is the intersection of cryptocurrency and this development? I believe that AI browser agents will not only improve the user experience of intent resolution, but also promote the development of AI wallets, decentralized computing and data projects.

Think about a simple question:Why has the beautiful vision of AI agents only gradually come true now?

Looking back at the development of OpenAI, the reason why language models (LLMs) have developed faster than image generation models is that the Internet itself is a huge text corpus that provides rich materials for training. The development of language models is more limited by computing power and energy bottlenecks. AI agents require a lot of manual annotation and feedback, and their reasoning process is costly.

Cryptocurrency is naturally suitable for incentivizing labor acquisition. In this economic system, advanced users can provide a large amount of annotated data and feedback in a decentralized manner to earn tokens, while the bottom layer can integrate decentralized computing and data projects. Once trained, it can be integrated into wallets and DeFi projects through SDKs to create a real AI wallet and eventually form a closed loop. The ideas of other AI agents can also be derived from this model, because any AI agent for Web3 needs computing power, annotation, and feedback to grow.

Second, Stablecoin

Stablecoin has always been an important battlefield in the crypto market and a field with extremely high entry barriers. Its application value is not only widely recognized in the industry, but also attracts much attention in the traditional financial field. For example, this year PayPal launched PYUSD, BlackRock and Ethena cooperated to issue USDb, and VanEck launched AUSD for Argentina and Southeast Asia, all of which indicate that traditional financial giants are accelerating their layout of the stablecoin market.

As Tether and Circle continue to consolidate their dominance in the industry, new players entering the stablecoin market are gradually divided into two categories:

1. Issuers of fiat-backed stablecoins are beginning to focus on emerging markets such as South America and specific application scenarios;

2. Algorithmic stablecoins are increasingly using low-risk financial products as underlying assets, such as Ethena and Usual (which we mentioned in previous articles).

From the trend, more "zero exposure" (delta-neutral) stablecoins will flood into the market next year to compete for short liquidity on CEX. The scope of hedging assets will gradually expand from BTC and ETH to public chain tokens with higher risks and lower liquidity, trying to occupy the last niche areas in the market.

As for stablecoins like Usual, which are backed by short- and medium-term US debt, I think the focus will still be on protocol tokens and yield innovation, because in terms of underlying assets, short- and medium-term government bonds are still the best choice. In addition, compared with the limited liquidity in CEX, this type of stablecoin has greater potential and development space in areas with less competitive pressure.

Overall, the development of stablecoins is gradually moving towards more stable underlying assets and decentralized governance. But what I am most looking forward to is that next year, we will see the emergence of fully decentralized and over-collateralized stablecoin protocols.

3. Payment field

As the supervision of stablecoins in various countries gradually lands and accelerates its popularization, the payment field will become a new focus of competition in the downstream of stablecoins. Heterogeneous public chains like Solana and Move will become the main infrastructure for payment applications with their advantages of high TPS and low gas fees. The traditional payment market is already quite mature and competitive, and is a typical "red ocean market". So, what innovations can blockchain bring in the payment field? There are usually two directions: 1. Optimizing cross-border payments Blockchain can eliminate the need for pre-funding, making cross-border remittances faster, cheaper and more convenient, and solving the problem of trillions of dollars being locked in pre-funding in the traditional system. 2. Serving emerging markets As I mentioned in my previous article, the application value of stablecoins has been verified in regions such as Asia, Africa and Latin America. The strong financial inclusion of stablecoins enables residents of third world countries to effectively cope with the high inflation caused by unstable governments, participate in global financial activities, and enjoy the most cutting-edge virtual services.

At the 7th EthCC Conference, Solana Foundation Manager Lily Liu proposed the concept of **"PayFi"**, which brings more possibilities to blockchain payments. PayFi consists of two core concepts:

1. Real-time settlement (T+0 settlement)

PayFi can achieve same-day or multiple settlements, eliminating the delays and complexities inherent in traditional financial systems and greatly improving the speed of capital circulation.

2. Buy Now, Pay Never

For example, a user deposits $50 into a lending product and buys a $5 cup of coffee. Once the accumulated interest reaches $5, the interest will automatically pay for the coffee, and the remaining funds will be unlocked and returned to the user's account.

Many ideas can be derived from this. For example, in terms of use cases, the financing needs of emerging projects can be met by PayFi on the blockchain, providing a safer and more transparent way to enter and exit. Currency exchange when traveling will no longer require various physical financial institutions. Payment and collection time will be more flexible (delayed collection earns interest, early payment gets discount). In addition, the income generation methods will also be diversified. In addition to depositing stablecoins into lending products to earn interest, I personally think that the types of stablecoins should also be easy to exchange.

In the future, as more and more emerging stablecoins enter the market, users can choose the most suitable type of stablecoin according to their risk preferences, while earning protocol tokens and higher stablecoin interest. If this payment system becomes mainstream, its growth potential in DeFi will be huge.

4. Decentralized Exchange (DEX)

As mentioned above, the fragmentation and lack of interoperability of Layer 2 are becoming an important obstacle to the development of the crypto market. However, there is another problem with this development path: excess block space. The development speed of infrastructure (Infra) has far exceeded the growth rate of DApp (decentralized application).

This imbalance may naturally eliminate many long-tail chains in the next few years, which is also a headache for Ethereum. Due to the imperfect pricing mechanism of Ethereum's data availability (DA), Layer 2 has brought very limited positive feedback to the Ethereum mainnet.

Looking back, those public chains that have grown against the trend in the bear market basically rely on strong communities, complete ecosystems, and marketing advantages. These advantages are mainly reflected in the asset issuance platform, which has promoted the rapid growth of the total locked volume (TVL). Therefore, not all Layer 2s can replicate this "attention economy" model. The problem of lack of explosive applications will continue in the next year.

In terms of future trends, one possible development direction is the AI agent demand we mentioned earlier. In the short term, other clear trends include:

• On-chain order book DEX

• Privacy solutions

• Payment-related technology stack

• On-chain decision-making tools

I am personally optimistic about the development of on-chain order book DEX and believe that it will become the mainstream of the next generation of decentralized exchanges.

After all, from the development of AMM, the complexity of its technical path continues to increase, but the marginal efficiency improvement is getting smaller and smaller. We have discussed this issue in our previous article on Uniswap.

However, for Layer 2, the limitations of performance and Gas fees are still very obvious. Therefore, innovations in matching algorithms and Gas fee optimization will become key challenges.

5. Asset issuance is still the mainstream

From 2023 to now, from inscriptions to AI Meme platforms, asset issuance methods have run through the past year. If the timeline is extended, asset issuance has been the core theme of the crypto market since the ICO era. The only thing that has changed is the external packaging and entry threshold.

The positive side is that the market's demand for user participation has driven the development of early infrastructure and DeFi. As the technology is gradually recognized and accepted, blockchain has entered the mainstream and deeply integrated with the real world.

The negative side is that market competition is becoming more pure and absurd. The lowering of the threshold for asset issuance means that the "dark forest" of the crypto market has become more dangerous. Nowadays, with just a few clicks, some pictures and a few lines of text, you can start a large-scale zero-sum game.

But why not direct this force in a positive direction and promote the development of the industry?

For example, some current AI Meme projects are gradually evolving into actual AI agents, rather than the AI ​​assistants that only speak nonsense in the past. The recently popular DeSci (decentralized science) can also be regarded as a "scientific version of ICO". Although it is still driven by memes at present, in the long run, combined with the advantages of blockchain, DeSci can make traditional scientific research more transparent, easier to spread, easier to raise funds, and promote scientific research cooperation on a global scale.

However, whether this model can succeed in practice or how it will develop remains to be seen.

In fact, the idea behind DeSci is similar to what I mentioned in the article related to GameFi: How blockchain can promote the development of independent games when small studios are short of funds and manpower.

The core problems facing on-chain financing are:

• The threshold for asset issuance is too low

• Lack of restrictions

• Too strong financing capabilities

This may be attributed to the extremely low entry threshold of blockchain. How to constrain the use of funds through rules and force project teams to continue to create truly valuable products is the focus we need to pay attention to.

Let players compete freely and let builders continue to move forward. This is the premise for the continued development of blockchain. In the coming year, we may see more iterative versions of the "ICO" model, but what I really look forward to is that in this grand game, the next "DeFi Summer" can be ushered in.