The cryptocurrency market is poised for a fifth wave of application innovation, driven by the maturation of decentralized applications, increased institutional participation, and greater global regulatory transparency.
Written by: arndxt
Compiled by: Mars Finance, Daisy
1. Introduction
As we stand at the cusp of 2025, the landscape of cryptocurrency is slowly taking shape as a blueprint for the future of finance, governance, and technology. Today, there are 617 million users accessing decentralized systems, with $845 billion flowing through on-chain economies, and we are witnessing the birth of a new global infrastructure. Transformation is inevitable; blockchain processes transactions 50 times faster than before, stablecoins are a pillar of 32% of crypto activity, and DeFi is reshaping cross-border capital flows. This article outlines 14 predictions for 2025 regarding the evolution of the crypto space, co-authored with collaborators from Mckinsey Crypto.
Key highlights
Activate passive crypto users by simplifying access and reducing barriers.
Bridge the gap between on-chain activity and ownership.
Cryptocurrency platforms should prioritize user-friendly mobile solutions and stablecoin products in high-inflation areas.
Political candidates should develop clear cryptocurrency policies to attract an increasing number of voters prioritizing digital asset regulation.
Leverage the growing adoption of stablecoins by ensuring a strong regulatory framework.
Governments should accelerate the implementation of clear cryptocurrency regulations to promote institutional adoption.
Ethereum projects should leverage reduced fees to target cost-sensitive markets, especially in developing regions.
Developers should leverage enhanced scalability to innovate new use cases, especially in high-demand areas.
Utilize ZK technology to build privacy-centric, scalable decentralized applications, focusing on industries such as finance and healthcare.
Focus on integrating stablecoins into traditional systems to accelerate global cryptocurrency adoption, particularly in high-inflation and developing markets.
Leverage blockchain to enhance AI applications, creating new market opportunities in areas such as DeFi, supply chain management, and digital identity.
Capitalize on the shift to DEX by improving user experience, liquidity, and cross-chain trading.
Prioritize developer-friendly tools and infrastructure to attract and retain builders.
Prepare for the fifth wave of cryptocurrency adoption in 2025.
2. Current scale and adoption of cryptocurrency
In 2024, the growth and adoption of cryptocurrencies are highly significant, with key metrics indicating increases in cryptocurrency ownership, active participation, and global trends. Notably, the industry has seen substantial growth in developing countries, while improvements in infrastructure have laid the groundwork for future mass adoption. This section delves into the current scale of the crypto ecosystem, focusing on global ownership, active users, and mobile wallet adoption rates.
2.1 Activate passive crypto users by simplifying access and reducing barriers.
In recent years, cryptocurrency ownership has surged, with millions of users holding crypto assets across various platforms.
Estimated number of global cryptocurrency holders: As of 2024, it is estimated that there are approximately 617 million global cryptocurrency holders. This number accounts for about 12% of the total global internet users (approximately 5 billion people).
Stablecoins and DeFi reshape capital flows: While the crypto industry has reached a considerable portion of internet users, it remains in its early application stages. Most internet users have yet to engage with cryptocurrencies, presenting opportunities for further development.
Data also indicates that many cryptocurrency holders are passive owners, meaning they hold digital assets but do not actively interact with blockchain applications (such as DeFi protocols or decentralized exchanges).
Passive ownership vs. active use: Many individuals holding cryptocurrencies have yet to fully embrace the blockchain ecosystem beyond purchasing and holding assets. This signifies an untapped potential market that developers and startups aim to target by building applications that attract a broader audience and convert cryptocurrency holders into active participants.
Opportunities for startups: Crypto projects have significant opportunities to focus on converting these passive users into active ecosystems by simplifying access to decentralized applications (dApps) and reducing barriers such as high fees, complex user interfaces, and technical knowledge requirements.
2.2 The gap between on-chain activity and ownership: Monthly active cryptocurrency addresses.
The number of monthly active addresses across various blockchain networks has reached a historical peak of approximately 220 million. However, it is important to note that a single user may control multiple addresses, so this number does not directly correlate with the number of unique users.
After adjusting for users with multiple addresses, it is estimated that 30 to 60 million independent active users interact with blockchain networks each month. While the number of active addresses is impressive, the discrepancy between the number of addresses and unique users highlights that the crypto ecosystem is still relatively small compared to the total number of internet users. This gap indicates that the industry has not yet achieved mainstream adoption. On-chain activity and ownership: Despite a large number of individuals holding cryptocurrencies, on-chain active participation remains much lower. This may be attributed to high transaction fees on certain networks, a lack of user-friendly interfaces, and limited practical applications of cryptocurrencies beyond speculation.
2.3 Cryptocurrency platforms should prioritize user-friendly mobile solutions and stablecoin products in high-inflation areas.
Mobile wallets have become a significant entry point for cryptocurrency users, especially in developing countries where traditional financial infrastructure is less accessible.
Regions leading in mobile wallet adoption:
Nigeria, India, and Argentina have become major regions for mobile wallet usage, leading in adoption rates and activity.
U.S. mobile wallet share: The share of mobile wallet usage in the U.S. has dropped below 15%, reflecting a shift in adoption patterns towards developing markets.
There is a growing reliance on mobile wallets in regions such as Africa, Asia, and Latin America, reflecting the practical use of cryptocurrencies in these economies. In many of these areas, cryptocurrencies are used to hedge against inflation, transfer funds across borders, and access financial services that would otherwise be unavailable.
Stablecoins in high-inflation economies: The surge in mobile wallet usage in countries like Argentina highlights the role of stablecoins as a hedge against local currency devaluation. With annual inflation rates reaching 80%, stablecoins pegged to the dollar provide these users with a more stable store of value.
3. Political landscape and regulatory environment
As cryptocurrencies continue to evolve, their impact on the political landscape is becoming increasingly evident, especially in the U.S. This section explores how cryptocurrencies have become an important political issue, the role of stablecoins in maintaining the dollar's dominance, and the latest regulatory developments shaping the industry.
3.1 Political candidates should develop clear cryptocurrency policies to attract an increasing number of voters prioritizing digital asset regulation.
As the 2024 U.S. presidential election approaches, cryptocurrency has become a hot topic, especially in key swing states.
Pennsylvania, Wisconsin, and Michigan experienced the most significant growth in crypto-related search interest from 2020 to 2024, making them key battlegrounds where crypto policy may impact voter turnout and decisions.
Google Trends data: A deep dive into search trends shows a sharp increase in interest in cryptocurrencies in these states, indicating that some voters view cryptocurrency as a significant issue.
Politically pivotal states are showing increasing interest in cryptocurrencies, indicating that they may influence the outcome of the 2024 elections. With the rise of pro-crypto candidates and discussions surrounding the role of digital currencies in the U.S. economy, cryptocurrencies could become a decisive issue in the elections.
Politicians' positions: Both Democrats and Republicans have begun to integrate cryptocurrencies into their platforms, discussing innovation, regulatory transparency, and the economic benefits of embracing digital assets. The bipartisan interest in cryptocurrencies highlights their significance as a mainstream issue that transcends traditional political divides.
3.2 Leverage the growing adoption of stablecoins by ensuring a strong regulatory framework. The status of the dollar as the global reserve currency is of strategic significance to the U.S., but its dominance is challenged by other currencies and emerging digital assets.
Stablecoins as a tool for the dollar's dominance:
Stablecoins pegged to the dollar: Over 99% of stablecoins are pegged to the dollar, making them an essential tool for maintaining the dollar's dominant position in the global economy.
Strengthening the dollar: With the rise of foreign central bank digital currencies (CBDCs), stablecoins have become the digital standard for cross-border transactions, providing the U.S. with a means to maintain its influence.
Key metrics: Stablecoins holding U.S. debt
Stablecoins are currently the 20th largest holder of U.S. government debt, surpassing major economies such as Germany. As adoption rates increase, stablecoins may continue to play a key role in supporting U.S. government debt and could potentially become one of the largest holders in the future. This shift underscores the growing influence of stablecoins within both the crypto and traditional financial ecosystems. As a digital extension of the dollar, stablecoins are widely used, providing the U.S. with a unique opportunity to strengthen its economic influence globally, even as other countries explore the use of central bank digital currencies (CBDCs). By adopting stablecoins, the U.S. can enhance the dollar's position in global trade and finance while providing a more flexible digital alternative to the traditional banking system.
Future challenges: While stablecoins have significant advantages, regulatory uncertainty and concerns about their systemic impact on traditional finance remain obstacles that need to be addressed. Ensuring that stablecoins are well-regulated and backed by appropriate reserves is crucial for maintaining confidence in their use as digital dollars.
3.3 Governments should accelerate the implementation of clear cryptocurrency regulations to promote institutional adoption.
In 2024, the regulatory environment for cryptocurrencies is marked by both progress and challenges, as governments worldwide struggle to determine how to regulate this rapidly evolving industry. The U.S. has made significant strides in establishing a clearer regulatory framework for cryptocurrencies, but challenges remain.
Bipartisan support for crypto legislation:
FIT-21 Bill: A significant development is the passage of the FIT-21 bill by the U.S. House of Representatives, which has received broad bipartisan support. The bill outlines a regulatory framework for cryptocurrencies, aimed at clarifying issues such as taxation, consumer protection, and the regulation of decentralized finance (DeFi) platforms.
Stablecoin Legislation: Bipartisan interest in establishing stablecoin legislation is growing, with some lawmakers recognizing the importance of ensuring that stablecoins are regulated and operate within a secure and robust financial system.
The passage of the FIT-21 bill and the growing focus on stablecoin regulation mark a positive step forward for the U.S. cryptocurrency industry. Regulatory clarity is essential for fostering innovation and ensuring consumer protection. However, the pace of implementation of the new legislation and the ultimate regulatory landscape remains uncertain.
Global regulatory trends:
Europe and Asia: Several countries in Europe and Asia are also moving toward more comprehensive regulatory frameworks for cryptocurrencies. The EU's Markets in Crypto-Assets (MiCA) regulation is a prime example, indicating that regions are seeking to regulate the industry and create a stable environment that encourages growth.
CBDC and cryptocurrency regulation: As more countries experiment with or launch central bank digital currencies (CBDCs), the interplay between national currencies and decentralized stablecoins will become a significant regulatory focus. Governments need to find a balance between fostering innovation and maintaining control over their monetary systems.
Clearer regulations may increase institutional adoption of cryptocurrencies, as businesses and financial institutions seek the security of operating in a well-defined regulatory environment. At the same time, regulatory clarity will help attract more users by providing safeguards against fraud and abuse.
4. Infrastructure development
4.1 Ethereum projects should leverage reduced fees to target cost-sensitive markets, especially in developing regions.
The Ethereum network underwent significant upgrades in 2024, with one of the most impactful changes being EIP-4844 (Proto-Danksharding). This upgrade drastically reduced transaction fees for second-layer (L2) solutions and improved the overall scalability of the Ethereum ecosystem.
EIP-4844 implementation:
Proto-Danksharding: This upgrade introduces a new data availability layer for Ethereum, specifically designed to meet the demands of rollups (second-layer scaling solutions). By allowing rollups to store data more efficiently, EIP-4844 significantly reduces the cost of using Ethereum for developers and end-users.
Impact on second-layer solutions:
Reduce ETH transaction costs.
Stablecoins and DeFi reshape capital flows; fees for using second-layer networks like Arbitrum or Optimism have significantly decreased. For instance, transferring stablecoins using second-layer solutions now costs less than a cent, compared to $12 on the Ethereum mainnet in 2021. This is a game-changer for users in developing countries, where high fees previously made many Ethereum-based services inaccessible. The success of EIP-4844 is a key milestone for Ethereum as it continues to address high fees and network congestion challenges. By making transactions on second-layer networks more affordable, Ethereum can better compete with newer first-layer blockchains that offer faster and cheaper transactions. This infrastructure upgrade also opens doors for new types of decentralized applications (dApps) that require low transaction costs to operate effectively.
4.2 Developers should leverage enhanced scalability to innovate new use cases, especially in high-demand areas.
Blockchain scalability has been a focal point in the industry, as networks need to handle an increasing number of transactions without sacrificing speed or security. In 2024, significant progress has been made towards comprehensive scalability for blockchain networks.
Transaction throughput growth:
50x growth: Blockchain networks can now handle 50 times more transactions per second (TPS) than four years ago. This improvement is due to advancements in Ethereum's second-layer scaling solutions and optimizations from alternative first-layer blockchains like Solana, Tron, and Avalanche.
Contributors to scalability:
Second-layer scaling: Ethereum's second-layer solutions (such as rollups) have played a key role in increasing network transaction throughput without overloading the main chain. As more users transition to second-layer networks, Ethereum's capacity to handle dApp activity has grown exponentially.
Solana and other first layers: Platforms like Solana focus on enhancing the speed and efficiency of base-layer transactions. Solana's Proof of History (PoH) mechanism enables the network to process thousands of transactions per second, making it a popular choice for high-frequency trading and gaming applications.
Advancements in these scalability aspects enable blockchains to support a wider range of applications, from DeFi to gaming, without encountering the bottlenecks that plagued the industry during previous bull markets. As blockchains become more efficient and affordable, we are likely to see more experimentation with decentralized applications that were previously unattainable due to high costs and slow transaction speeds.
4.3 Utilize ZK technology to build privacy-focused, scalable decentralized applications, with a focus on industries such as finance and healthcare.
Zero-knowledge proofs (ZKP) represent a breakthrough in cryptographic technology, providing solutions to some of blockchain's most pressing challenges: scalability, privacy, and interoperability. What are zero-knowledge proofs?
Zero-knowledge proofs allow one party to prove the validity of a statement to another party without revealing any other information. In the context of blockchain, ZKPs can be used to verify transactions without exposing sensitive data.
Applications of ZKP:
Privacy: ZKP supports private transactions on public blockchains, protecting user confidentiality without compromising network transparency.
Scalability: By allowing certain computations to be processed off-chain and verified on-chain, ZKPs can significantly reduce the amount of data that needs to be stored on the blockchain, thereby enhancing efficiency.
Interoperability: ZKPs can facilitate cross-chain interactions by validating data between different blockchains without exposing underlying information.
Technological advancements:
ZK Virtual Machine (ZKVM): The development of ZKVM is an important milestone in making zero-knowledge technology more accessible. ZKVM allows developers to build decentralized applications that leverage ZKP to enhance privacy and scalability.
Performance metrics: ZKVM is still in the early stages of development, with performance comparable to that of early traditional computing. However, improvements are occurring rapidly, and ZK technology is expected to play a significant role in the next wave of blockchain innovation.
ZKP is a key focus area for the future of blockchain technology. They have the ability to address privacy concerns while enhancing scalability, making them a crucial innovation for next-generation decentralized applications. As ZK technology matures, we can expect broader applications across various industries, from finance to healthcare.
5. Emerging applications and trends
5.1 Focus on expanding the integration of stablecoins with traditional systems to accelerate global cryptocurrency adoption, particularly in high-inflation and developing markets.
Decentralized finance (DeFi) and stablecoins will continue to dominate the cryptocurrency space in 2024. These two sectors represent the majority of on-chain activity and have become key drivers of the entire cryptocurrency ecosystem.
Usage breakdown:
DeFi: Accounts for 34% of on-chain activity, making it the most prominent use case for blockchain technology.
Stablecoins: Stablecoins account for 32% of activity, primarily due to their role as a medium of value transfer, especially in high-inflation economies and cross-border remittances.
Infrastructure services (bridges, oracles, smart contract wallets): These account for 14% of blockchain activity, highlighting the increasing importance of infrastructure solutions for connecting different blockchain ecosystems and ensuring seamless functionality of dApps.
Token transfers: General token transfers account for 13% of usage, indicating the ongoing flow of value within blockchain networks.
Other categories:
Centralized exchanges (CEX): Only 3% of blockchain activity is related to centralized exchanges, indicating a shift toward decentralized alternatives.
Gaming and NFTs: These emerging industries collectively account for less than 3% of total activity but hold enormous growth potential in the coming years.
Social applications: Social dApps are still in their infancy, accounting for less than 1% of blockchain activity.
It has been proven that DeFi and stablecoins are the most powerful and widely used applications of blockchain technology. The success of DeFi lies in its ability to offer financial services without intermediaries, allowing users to lend and trade effortlessly. On the other hand, stablecoins provide a reliable medium for transactions and hedge against volatile local currencies in high-inflation markets. As infrastructure improves and more users join decentralized platforms, both sectors are expected to continue driving cryptocurrency adoption in 2025.
Growth potential:
DeFi: As the DeFi ecosystem matures, more complex financial products (such as derivatives, insurance, and cross-chain lending) are expected to emerge, attracting institutional investors.
Stablecoins: The demand for stablecoins continues to grow, especially among participants in developing countries and institutions, which may drive further adoption. The integration of stablecoins with the traditional financial system, coupled with clearer regulations, could stimulate further adoption.
5.2 Leverage blockchain to enhance AI applications, creating new market opportunities in areas such as DeFi, supply chain management, and digital identity.
The intersection of artificial intelligence (AI) and blockchain has become one of the most exciting frontiers in 2024, with significant overlap between user bases and emerging applications.
User overlap:
High relevance: Data shows a high overlap between users of AI technologies like ChatGPT and active participants in the cryptocurrency space. This overlap indicates that cryptocurrency users are among the early adopters of AI and are likely to drive innovation at the intersection of the two technologies.
Applications and synergies:
Authenticity and verification: One of the most promising use cases for blockchain in AI is verifying the authenticity of AI-generated content. As deepfakes and AI-generated media become more prevalent, the need for trusted systems to verify content origins and accuracy will grow. Blockchain, with its cryptographic properties, can serve as a verification layer to ensure the legitimacy of AI outputs.
Data ownership and control: Blockchain can also address concerns about data ownership within AI applications. Decentralized systems allow individuals to control their personal data, which can then be used to train AI models without compromising privacy or sovereignty.
Decentralized AI agents: Blockchain can facilitate the creation of decentralized AI agents that operate independently of any central authority. These agents can be utilized for various applications, from automated trading to decentralized customer service, without the risk of censorship or tampering.
Many startups and established companies are beginning to explore how blockchain can enhance the functionality and security of AI applications. The convergence of these two cutting-edge technologies could unlock new markets and use cases that were previously unattainable, particularly in decentralized finance, supply chain management, and digital identity verification.
5.3 Leverage the shift to DEX by improving user experience and liquidity, as well as cross-chain trading.
One of the most significant changes in 2024 is the increasing market share of decentralized exchanges (DEXs) compared to centralized exchanges (CEXs). This trend reflects a broad movement within the crypto ecosystem toward decentralization.
Market share trends
DEX: In 2020, decentralized exchanges accounted for 0% of cryptocurrency trading volume. By 2024, DEXs are expected to capture over 10% of total cryptocurrency trading volume, with some estimates suggesting this figure could rise to 30-40% in the coming years.
Centralized exchanges: While centralized exchanges still dominate the market, their share is gradually declining as more users seek decentralized alternatives for greater security, transparency, and control over their funds.
Advantages of DEX:
Security: DEXs eliminate the need for users to entrust their funds to a central authority, reducing the risk of hacks or fraud that have plagued many centralized exchanges in recent years.
Transparency: All transactions on DEXs are executed on-chain, meaning they are publicly visible and verifiable, thereby reducing the risk of market manipulation or opaque behavior.
User control: DEXs allow users to retain custody of their assets throughout the trading process, reducing the risk of losses due to exchange insolvency or mismanagement.
Forecast: As DEXs continue to improve user experience and liquidity, they are expected to capture a larger market share. The introduction of features such as automated market makers (AMMs) and cross-chain trading has already made DEXs more competitive, and further development of decentralized finance infrastructure may accelerate this trend.
6. Prioritize developer-friendly tools and infrastructure to attract and retain builders.
Developer interest in the crypto space is a key indicator of the industry's long-term growth potential. In 2024, the number of builders focused on crypto projects is expected to increase significantly as infrastructure improves and innovation potential expands.
Builder Energy Dashboard: The proprietary Builder Energy Dashboard from A16Z tracks developer activity across blockchains, categories, and regions. The tool indicates that the number of active builders in the crypto space is growing year by year, reflecting the ecosystem's increasing maturity and expansion.
Platform preferences:
Ethereum and second-layer: Ethereum and its second-layer solutions continue to attract the interest of most developers, focusing on scalability and improving user experience. The success of EIP-4844 and rollup solutions like Optimism and Arbitrum has drawn developers looking to build on these efficient and scalable platforms.
Base: Base is a breakthrough ecosystem in 2024, with rapidly growing developer interest due to its performance and innovation in second-layer scaling.
Other ecosystems: While Ethereum and its second-layer solutions dominate, platforms like Bitcoin, Solana, and new entrants continue to gain attention, particularly for applications requiring high throughput and low transaction costs.
Growth of Builder Energy: Increasing interest from developers indicates a healthy and evolving ecosystem. As more projects are launched and tools created for developers proliferate, the crypto space becomes increasingly accessible for innovation.
7. Trends for 2025
As the crypto industry continues to evolve, several key trends and predictions are emerging for 2025. These are expected to impact the next phase of growth and innovation in the field.
Infrastructure utilization: With improvements in scalability in 2024, the broad application of blockchain technology is ready. As transaction fees decrease and network efficiency increases, more users and applications will enter the space.
New use cases: The reduction of transaction fees will enable the development of more decentralized applications in areas such as social media, gaming, and supply chain management. These areas currently represent underwhelming on-chain activity, but significant growth may occur as infrastructure strengthens.
Regulatory clarity: Regulatory developments in the U.S. and around the world will play a crucial role in determining the pace of adoption. Clearer regulations will attract more institutional investors and lend greater legitimacy to the industry, while safeguarding consumers and ensuring market stability.
The convergence of AI and blockchain is expected to accelerate in 2025, leading to more use cases at the intersection of these two technologies. From AI-driven decentralized finance applications to blockchain-based AI model validation systems, the synergy between these technologies could open new avenues for innovation.
Fifth wave of adoption: The cryptocurrency market is expected to experience a fifth wave of application innovation, driven by the maturation of decentralized applications, increased institutional participation, and greater global regulatory transparency. If the industry maintains its current momentum, 2025 may usher in the next significant cycle of growth and innovation.
8. Conclusion
2024 is a transformative year for the cryptocurrency industry, characterized by significant improvements in infrastructure, regulatory advancements, and the maturation of key applications. As blockchain technology continues to expand and become more affordable, the industry is expected to see broader applications across multiple sectors, including finance and gaming. Despite ongoing challenges—especially in regulatory transparency and user experience—the overall outlook for the industry remains positive.
