Disruption and Reinvention: 2025 Crypto World Landscape Outlook

YBB Capital

24-12-29 17:00

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Original Title: "Disruption and Reinvention: 2025 Crypto World Landscape Outlook"

Original Author: Zeke, YBB Capital Research

Preface

Starting from the Metaverse boom and ending with the election of the first crypto-friendly president, 2024 is coming to a close. In this year, Crypto experienced an unusually turbulent "bull market," with altcoins underperforming, meme coins dominating the conversation, and ultimately everything flowing back to BTC. Despite some lows and disappointments, Crypto has indeed been moving in a more positive direction. As we approach 2025, there are many areas worth paying attention to. In this article, we will provide a brief outlook for next year based on recent perspectives.

1. About AI

In the current stage, Chain Abstraction Layer projects often pursue conceptual perfection to the point where the technical implementation becomes overly complex, ultimately affecting user interaction. On the other hand, projects implementing an Intent architecture tend to be more complex in their implementation, whether they are based on centralization (such as TG Bot), structured (a combination of on-chain and off-chain preprocessing), or distributed (such as Solver + Executor architecture). These intent-driven projects often suffer from some common pitfalls. For example, users still need a significant understanding of DeFi, the expression of intent must be clear, accurate, and simple, and for complex and vague intents expressed by users, current intent projects often appear powerless, with a limited scope of implementation. Therefore, from the time Paradigm proposed this concept in mid-23 to the present day, so-called intent-centric projects have always been more talk than action, offering little help in guiding new users and lowering the user operation threshold. However, it is clear that, looking at the development path of Ethereum Layer 2, the market demand for both approaches is still urgent.

Let's review the development of Layer 2 over the past few months. Among the leading projects, Layer 2 alliances represented by OP Superchain have been growing rapidly. Zksync's Elastic Chain and Arbitrum Orbit will eventually form their own alliance along this path. These alliances will be able to achieve internal direct communication through solutions such as interoperable clusters, easing the current over-fragmentation of liquidity in the Ethereum Layer 2 ecosystem and the lack of interoperability. Competition among dozens of chains will also narrow down to competition among multiple power centers. However, from a broader perspective, as the crypto market continues to improve, Layer 2 projects with new architectures such as Movement and Fuel are also launching their mainnets in competition to attract scarce meme market liquidity. For projects outside the top tier, fragmentation and lack of interoperability continue to worsen, with different architecture-designed virtual machines even facing situations where wallet plugins are not interoperable. Let alone bringing in new users, for the average blockchain user, the entire Layer 2 ecosystem is extremely complex, and the development of non-financial application chains will face significant obstacles in this situation.

In order for Ethereum to attract new users, ecosystem alignment is the biggest prerequisite. If the ecosystem requires users to be half a geek to get started, it will never achieve Mass Adoption. Looking at the counter-trend development of Solana and Ton in the current year, it is evident that strategies focusing on lowering the user threshold and providing a more unified, Web2-like user experience have played a significant role in ecosystem growth. To be more direct, what these two ecosystems have done besides promotion is to reduce the difficulty of asset issuance and make on-chain usage more seamless. Therefore, for Ethereum, a holistic solution with a focus on user experience is necessary. However, given the Ethereum core developers' consistent open attitude, it is naturally impossible to align the entire Layer 2 ecosystem through force.

I believe the solution that can address this issue first is an AI browser agent. Early on, when ChatGPT emerged, many envisioned that AI would revolutionize app interaction by allowing seamless interaction across multiple apps, forming a comprehensive super app. Taking the common scenario of travel as an example, after receiving a user's travel requirements, AI can automatically complete tasks such as ticket booking, customizing travel routes, arranging meals and schedules based on the user's input. If this AI also has long-term memory capabilities, it can suggest more suitable solutions based on this memory.

Today, Google is about to launch an AI browser agent powered by Gemini, Project Mariner. In the example demonstrated by Google Lab Director Jaclyn Konzelmann, after installing the AI agent extension on the Chrome browser, a chat window will pop up on the right side of the browser. Users can instruct the agent to perform tasks like "create a shopping cart from the grocery store based on this list." Subsequently, the AI agent will automatically navigate to a grocery platform, add items to the cart, proceed to the checkout interface, and upon confirmation, the user will proceed to checkout manually (the agent does not have payment authorization). Similar products will also be launched by OpenAI next month.

It is worth mentioning that although Google's Project Mariner is currently only available to selected testers, I have already experienced similar agents developed by some projects in Crypto for ordinary users. From several hours of trial use, the agent's accuracy in implementing complex, ambiguous intents can reach about sixty to seventy percent (the cursor operation speed is relatively slow), and it can autonomously perform various tasks such as token transactions within various public chains' Dexes and even cross-asset transfers from Ethereum to Layer 2. Throughout this process, all I needed to do was inform it of my intent and enter my wallet password.

Of course, this base still needs to call the API of a centralized model, so what collision can Crypto have with it? I believe that besides becoming a better-intentioned solution, the AI browser agent will also drive the emergence of AI wallets, decentralized computing power, and decentralized data projects next year.

Think about a simple question: Why did it take until today to achieve such a beautiful concept as the Agent during the rapid development of AI in recent years? In fact, looking back at OpenAI's development process, it is not difficult to see that the development of pure language models has always been faster than other models such as image generation. This is because the internet itself is a vast corpus of text material that can provide endless text data for training. What limits the development of language models more is computing power and energy. Agents, on the other hand, require a large amount of human annotation and feedback, and the reasoning process is expensive. Crypto inherently has the ability to incentivize and obtain labor. In this economic system, upper-layer users can provide a large amount of annotation data and feedback to obtain tokens in a decentralized manner, while the lower layer can integrate decentralized computing power and data projects. After training, it can also be integrated with wallets and DeFi projects through SDKs to achieve a truly meaningful AI wallet and ultimately form a closed loop. Ideas about other AI agents can also be derived from this, as any AI agent applicable to Web3 will require computing power, annotation, and feedback to "grow."

2. Stablecoin

Stablecoin has always been a battleground and a high-threshold track in the Crypto world. Regarding its application value, it has gained relatively widespread recognition even outside the industry. For example, this year, several giants in the traditional financial sector have also entered the stablecoin market, including PayPal's PYUSD, BlackRock's collaboration with Ethena on USDb, and VanEck's AUSD (serving Argentina, Southeast Asia, and other regions).

As Tether and Circle continue to deepen their dominance in this track, new entrants in stablecoin issuance have gradually diversified into two categories. First, the issuers of fiat-backed stablecoins have begun to focus on emerging markets in South America and specific use cases, while algorithmic stablecoins are currently generally turning to stablecoins with low-risk financial products as underlying assets, such as Ethena and Usual mentioned in our previous article. Looking at the trends, next year will see more Delta-neutral stablecoins competing with the short position liquidity in CEX, and hedge assets will also gradually expand from BTC and ETH to higher-risk, lower-liquidity public chain tokens to compete in the remaining underserved markets. As for stablecoins like Usual, which are backed by medium-term to short-term US Treasury bonds, I believe that there will be more innovation in protocol tokens and yield mechanisms. There is no better choice than medium-term to short-term government bonds in terms of RWA asset types. However, compared to the limited liquidity in CEX, the competition for such stablecoins will be smaller, and there will be more room for growth.

Overall, the development of stablecoins is gradually moving towards pursuing a more stable underlying asset and decentralized governance. However, what I hope for more is to see some completely decentralized and non-overcollateralized stablecoin protocols emerge next year.

Three, Payments

With the compliance and accelerated adoption of stablecoins in various countries, the payment track downstream of stablecoins will also become a new focus of competition. Heterogeneous blockchains such as Solana and Move, with high TPS and low Gas fees, will become the main infrastructure for payment applications. Traditional payments are already an extremely mature and saturated market. What transformation can blockchain provide? Firstly, two relatively simple and commonly mentioned points are optimization of cross-border payments, eliminating the need for pre-funding, making cross-border remittances faster, cheaper, and easier, addressing the tens of billions of dollars in pre-funding required in traditional systems. Secondly, serving emerging markets. As I have mentioned in previous articles, in regions such as Asia, Africa, and Latin America, the application value of stablecoins has already been demonstrated. The strong financial inclusion allows residents of third-world countries to effectively cope with currency hyperinflation caused by government instability. Through stablecoins, they can also participate in some global financial activities and subscribe to cutting-edge global virtual services.

Lily Liu, the Solana Foundation Manager, proposed the concept of "PayFi" at the 7th EthCC Conference, providing more imagination for the integration of blockchain and payments. This concept involves two core aspects. First is real-time settlement, which is T+0 settlement. PayFi can achieve same-day settlement, and even settle multiple times a day. The delays and complexities involved in the traditional financial system in this whole process will be eliminated, significantly improving the speed of fund circulation. Secondly is Buy Now, Pay Never (BNPL), for example, a user deposits $50 into a lending product and buys a $5 coffee. Once the accrued interest reaches $5, it will be used to pay for the coffee, and the funds will be unlocked and returned to the user's account.

Many other ideas can be extended from this, such as the financing needs of emerging projects can be more securely and transparently entered and exited in the blockchain through PayFi, currency exchange during travel will no longer require various physical financial institutions, and the freedom to control payment and receipt times (delayed receipt to earn interest, early payment to receive a discount). The revenue models will also become more diverse. In addition to earning interest by depositing stablecoins into lending products, I personally believe that different types of stablecoins should also be allowed for free conversion. In the future, with the emergence of various stablecoins, users can choose the most suitable stablecoin type based on their individual risk tolerance at any time, thereby simultaneously obtaining stablecoin protocol tokens and higher stablecoin interest. For DeFi, if this payment system becomes mainstream, its growth potential will be unimaginably huge.

Four. Dex

In the first section, we have already mentioned the issue of fragmentation and lack of interoperability of Layer2. This development path actually faces another problem, which is the oversupply of block space, where Infra's development far surpasses Dapp's development. This issue will lead to the natural elimination of a large number of long-tail chains within a few years, which is also a headache for Ethereum, whose DA pricing mistakes fail to receive Layer2 positive feedback.

Looking back at this round of countercyclical growth of public chains, it mainly relies on its strong community, ecosystem, marketing, and promotion advantages, and provides these advantages to asset issuance platforms to achieve rapid overall TVL growth. Therefore, not every Layer2 can replicate this attention economy, and the lack of killer applications remains a realistic issue to be faced next year. Following the trend, in addition to what we mentioned earlier, the future demand for AI Agent may be a way out. In the short term, other noticeable trends include on-chain order book Dex, privacy, payment-related stacks, decision-making tools, etc.

Personally, I am more optimistic about on-chain order book Dex becoming the mainstream of the next generation Dex. After all, looking at the development of AMM, the complexity of its technical path is increasing exponentially, but the efficiency gains are becoming more and more limited, as we have also mentioned in articles related to Uni. However, for Layer2, the limitations of performance and Gas are still evident, and the improvement of matching algorithms and the innovation of Gas solutions will be key challenges.

Five. Asset Issuance Remains the Main Theme

From 23 years ago to today, from inscriptions to today's AI Meme platforms, the way of providing asset issuance has been a hot topic in the past year. If we extend this timeframe a bit, in fact, from the ICO era to the present, asset issuance can be considered the sole theme of the crypto world. It's just that the outer packaging and the threshold for issuance are changing. From a positive perspective, users' gaming demands have driven the advanced development of Infra and DeFi. As this technology becomes well-known and accepted, blockchain has stepped into the mainstream and integrated into reality. From a negative perspective, this game has become more pure and absurd, and the decreasing difficulty of asset issuance means that this dark forest is even more dangerous. Now, with just a click, accompanied by an image and a few words, a grand zero-sum game begins. Why not steer it back to a more positive side? Drive progress in the industry through this game.

For example, some of the current AI Memes are now transitioning to practical Agent development, rather than the early versions of nonsensical AI Agents. The recent trend of DeSci can also be called the "research version of ICO," although the core is currently driven by memes, in the long run, by combining various advantages of blockchain, DeSci can make traditional research more transparent, easily disseminated, financed, and exchanged. However, whether it can ultimately land and how it evolves still need to be questioned.

In fact, similar to the DeSci concept, I also mentioned in an article about GameFi how to effectively promote the development of indie games through blockchain, addressing issues such as indie game funding and personnel shortages. The issue with blockchain funding lies in the low asset issuance threshold, lack of restrictions, and excessive fundraising capacity (due to the extremely low barrier to entry on the chain). It is crucial for us to consider how to use rules to restrict the use of funds, forcing project teams to continuously create truly valuable assets.

Let gamers game and let builders build is the premise for the continuous development of blockchain. Next year, we may see more versions of "ICO," but what I hope for is to advance towards the next "DeFi Summer" in this gaming feast.