Introduction

From the engraving craze to the birth of the first Crypto President, 2024 is about to draw to a close. This year, the crypto industry has experienced an unusual "bull market": Altcoins performed poorly, while meme coins took the lead, but ultimately all eyes were back on BTC. Although there have been lows and hard-to-overcome disappointments, the crypto industry as a whole is still moving in a more positive direction. Looking ahead to 2025, there are many areas worth watching. This article will briefly discuss the outlook for next year based on recent views.

I. About AI

At the current stage, blockchain projects often over-complexify their technical implementation in pursuit of conceptual perfection, ultimately affecting user interaction and experience. Projects based on the Intent architecture are often more complex. Whether centralized (e.g. TG Bot), structured (combining on-chain and off-chain pre-processing) or distributed (e.g. Solver + Executor architecture), such intent-based projects usually face some common problems. For example, users still need a certain level of DeFi understanding, and the expression of the "intent" itself must be clear, accurate and simple. When users raise complex and vague intents, the current intent projects are often unable to complete them, with a very limited scope of execution. Since Paradigm proposed this concept in mid-2023, intent-focused projects have mostly remained on paper and have not effectively driven new user onboarding or lowered the threshold. However, looking at the development trajectory of Ethereum Layer 2, the demand for such solutions is very urgent.

Reviewing the recent development of Layer 2, leading projects such as OP Superchain have continued to expand their alliances, and ZkSync's Elastic Chain and Arbitrum Orbit are also following this approach, forming their own alliances. These alliances will achieve internal interconnectivity through cluster-based solutions to alleviate the fragmentation and lack of interoperability within the Ethereum Layer 2 ecosystem. In the future, when the competition of dozens of chains begins to shrink, only multi-party contention will remain. But from a more macro perspective, with the crypto market recovery, some new Layer 2 projects (such as Movement, Fuel, etc.) will also join the competition to seize the scarce liquidity in the Altcoin market after launching their mainnets. For those projects that cannot join the top tier, the phenomenon of fragmentation and lack of interoperability will continue to intensify. Based on different virtual machine architectures, they may even lack compatible wallet plugins. For ordinary blockchain users, the entire Layer 2 ecosystem will become increasingly complex, which will inevitably create a huge threshold for the landing of non-financial applications.

To truly enable Ethereum to introduce new users, the unification of the ecosystem is crucial. An ecosystem that requires users to have "semi-geek" qualities is destined to never achieve "mass adoption". Looking at the counter-trend growth of Solana and Ton this year, we can see that their strategies of lowering user thresholds and providing a more Web2-like experience have played an important role in ecosystem expansion. To put it bluntly, these two ecosystems have essentially just reduced the difficulty of asset issuance, allowing users to almost feel no process of using the blockchain. This shows that Ethereum needs to integrate all parties and focus on user experience; however, given the open attitude of the core developers over the years, the possibility of forcibly requiring the Layer 2 ecosystem to unify is not high.

I believe the solution to this problem lies in AI browser agents. People have long envisioned that AI can completely transform the way applications interact, moving from single-point interaction to cross-application operation, forming a "super app". For example, when a user has a travel need, the AI can automatically handle flights, customize travel routes, arrange meals, and set schedules. If the AI also has long-term memory, it can also arrange subsequent trips for the user.

Now, Google is about to launch an AI browser agent called Project Mariner, powered by Gemini. In a demonstration by Jaclyn Konzelmann, the head of Google Labs, after the user installs the AI agent extension in Chrome, a chat window will pop up on the right side of the browser. Users can issue instructions to the agent such as "put the items on this list into the grocery store cart", and the AI agent will automatically jump to the grocery shopping platform, add the items to the cart, and enter the checkout page. After confirming, the user only needs to complete the payment (the agent does not have payment authority). OpenAI will also launch a similar product next month.

Interestingly, although Google's Project Mariner is currently only open to a small number of testers, I have already experienced similar agents aimed at ordinary users in some crypto projects. After a few hours of trial, I found that the agent's accuracy in executing complex or vague tasks is around 60%-70%, and it can independently complete token transactions on decentralized exchanges across multiple blockchains, as well as cross-asset transfers to various Layer 2 networks. Throughout the process, I only need to provide the agent with the intent and enter the wallet password.

Of course, the platform currently still needs to use centralized model APIs. So what role can Crypto play in this trend? I believe that AI browser agents will not only improve the user experience of intent parsing, but will also drive the development of AI wallets, decentralized computing power, and decentralized data projects in the coming year.

Consider a simple question: why is the vision of AI agents only now beginning to become a reality, after years of rapid AI development? Reviewing OpenAI's development, it is not difficult to find that language models have been able to develop faster than image generation models because the Internet itself, as a massive corpus, can provide a continuous stream of text training materials. The more limiting factors for language models are computing power and energy consumption. On the other hand, AI agents require a large amount of manual labeling and feedback, and their reasoning process is costly. Crypto is naturally suitable for obtaining labor through token incentives: in such an economic system, upper-level users can provide a large amount of labeled data and feedback in a decentralized way to earn tokens, while the lower-level can integrate decentralized computing power and data projects. Once the training is completed, it can be integrated with wallets and DeFi projects through SDKs to form a true AI wallet, ultimately achieving a closed loop. Based on this idea, other AI agent concepts will also emerge, as any Web3 AI agent requires computing power, labeling, and feedback to "grow".

II. Stablecoins

Stablecoins have always been a battleground within the crypto industry, and it is also a field with extremely high thresholds. In terms of application value, it has also gained widespread recognition outside the industry. For example, this year, several major players in traditional finance have started to get involved in stablecoin issuance, including PayPal's PYUSD, BlackRock and Ethena's USDb, and VanEck's AUSD for Argentina and Southeast Asia.

With Tether and Circle's continued strength in this field, new entrants are gradually differentiating into two main types: one is the issuers of fiat-backed stablecoins, who are starting to turn to emerging markets such as South America or specific application scenarios; the other is the increasingly more algorithmic stablecoins with low-risk financial products as the underlying assets, such as Ethena and Usual mentioned earlier. Looking at the trend, next year may see more "delta-neutral" stablecoins competing for the liquidity of short-selling trades on centralized exchanges (CEXs), and the scope of hedging assets will also expand from BTC and ETH to riskier and less liquid public chain tokens, in an effort to capture the remaining niche market. As for stablecoins like Usual that use short-term US Treasuries as the supporting assets, I think their focus will still be on innovation in protocol tokens and yield methods, as short-term Treasuries are still the safest underlying assets. And for the liquidity-constrained CEX market, the competitive pressure on these stablecoins will be lower, and their theoretical growth ceiling should be higher.

Overall, stablecoins are gradually evolving towards more stable underlying assets and decentralized governance. But what I'm most looking forward to is whether a truly decentralized and over-collateralized stablecoin protocol will emerge next year.

III. Payments

As regulatory oversight of Altcoins eases and adoption accelerates, the downstream payment sector of Altcoins will also become a new focus of competition. Heterogeneous public chains like Solana and Move, with high TPS and low gas fees, will become the main underlying infrastructure for payment applications. Traditional payments have long been a mature and fiercely competitive red ocean market, so what kind of innovations can blockchain bring to payments? The two most commonly mentioned are: first, optimizing cross-border payments, avoiding the need for pre-funding, making cross-border remittances faster, cheaper, and simpler, thereby solving the problem of trillions of dollars being tied up in pre-funding in the traditional system; second, serving emerging markets. As I mentioned in my previous article, the application value of Altcoins has been preliminarily verified in regions such as Asia, Africa, and Latin America. With the strong financial inclusiveness provided by Altcoins, residents of third-world countries can more effectively cope with the high inflation caused by government turmoil, and participate in global financial activities and subscribe to the world's most cutting-edge virtual services.

The "PayFi" concept proposed by Lily Liu, a manager at the Solana Foundation, at the 7th EthCC conference, has brought more possibilities for the integration of blockchain and payments. Its core includes two points: one is real-time settlement, i.e. T+0 settlement. PayFi can realize multiple settlements on the same day, getting rid of the delays and complexities of the traditional financial system, and greatly improving the speed of capital turnover; the other is the "Buy Now, Pay Never" (BNPL) model. For example, the user deposits $50 in a lending product and buys a $5 coffee. When the interest accumulated reaches $5, this part of the interest is used to pay for the coffee, and then the funds are unlocked and returned to the user's account.

Based on this, many use cases can be derived. For example, in the financing needs of emerging projects, PayFi can provide a more secure and transparent channel for inflows and outflows; when traveling abroad, there is no need to go through various physical financial institutions for currency exchange; the time for payment and collection can be more flexible (delaying collection to earn interest, prepaying to enjoy discounts); in addition, the way of earning will also become more diverse. In addition to depositing Altcoins into lending products to earn interest, I personally think that different types of Altcoins should also be allowed to be easily exchanged. In the future, as more and more new Altcoins enter the market, users can choose the most suitable Altcoin type based on their own risk preferences, and at the same time obtain Altcoin protocol tokens and higher Altcoin interest. If this payment system can go mainstream, its potential in the DeFi field will be very considerable.

IV. Decentralized Exchanges (DEXs)

As mentioned earlier, the fragmentation and lack of interoperability of Layer 2 are still headaches. However, there is another problem with this development path: excess block space. The speed of infrastructure construction far exceeds the growth of decentralized applications (DApps) themselves. This problem is likely to naturally eliminate many long-tail public chains in the next few years, and also become a major challenge for Ethereum in failing to obtain positive feedback on the data availability (DA) pricing mechanism.

Looking back at the public chains that have seized development opportunities in the counter-cycle, they have relied on strong communities, strong ecosystems, and marketing advantages to bring opportunities to asset issuance platforms, thereby rapidly increasing the overall TVL. Not every Layer 2 can replicate this "attention economy" model. The lack of killer applications will continue next year. Continuing this line of thinking, in addition to the potential demand for AI agents mentioned earlier, other relatively clear directions in the short term include on-chain order book DEXs, privacy solutions, payment-related technology stacks, and decision-making tools.

Personally, I am quite optimistic that on-chain order book DEXs will become the mainstream of the next generation of decentralized exchanges. After all, from the development trajectory of AMMs, their technical path is becoming increasingly complex, but the marginal efficiency improvement is becoming more and more limited. This point has also been mentioned in our previous article on Uniswap. However, for most Layer 2s, the limitations in performance and gas costs are still obvious. Therefore, innovations in matching algorithms and gas solutions will be key challenges.

V. Asset Issuance Remains Mainstream

From 2023 to the present, from engraving to the current AI Meme platforms, the past year has seen many hot spots revolving around asset issuance. If we extend the timeline a little further, "asset issuance" has been the core proposition of the entire crypto circle since the ICO era, only the packaging and thresholds are constantly changing.

From a positive perspective, user demand for market participation has driven the early development of underlying infrastructure and DeFi. When this technology gains recognition and is widely applied, blockchain begins to go mainstream and integrate with the real world. From a negative perspective, market competition is becoming increasingly pure and absurd. The lower the threshold for asset issuance, the more dangerous this "dark forest" becomes. With just a few clicks, a few images, and a few lines of copy, a large-scale zero-sum game can be launched. But why not turn this model towards the positive side and drive the progress of the industry?

For example, some AI Meme projects have already begun to evolve towards practical AI agents, rather than the previous "paper AI" that just outputs nonsense. In addition, the recent hot DeSci can also be seen as a "scientific version of ICO". Although its core is still based on memes at the moment, in the long run, injecting the advantages of blockchain into traditional scientific research can make research more transparent, easier to disseminate, easier to obtain funding, and easier to collaborate. As for whether it can be implemented in practice or how it will evolve, there are still unknowns.

In fact, the thinking behind DeSci is similar to my views on GameFi, that is, how blockchain can effectively promote the R&D of independent games in the case of lack of funds and manpower in small and medium-sized game studios. However, the main problem faced by the financing model under the blockchain is still that the issuance threshold is too low, the restrictive clauses are too few, and the financing capacity is too strong (which can also be attributed to the extremely low access threshold of blockchain itself). How to constrain the use of funds through rules, forcing project parties to continue to build products with real value, is the focus we should pay attention to.

Let speculators compete, and let builders move forward. This is the prerequisite for the continuous development of blockchain. Next year, there may be more iterative versions of "ICO" emerging, but what I look forward to is that in this grand game, we can witness the rise of the next "DeFi Summer".

About YBB

YBB is a Web3 fund dedicated to discovering the potential projects that define Web3, with the goal of creating a better online home for all network residents. YBB was founded by a group of believers who have been deeply involved in the blockchain industry since 2013, and is always willing to help early projects evolve from 0 to 1. We value innovation, self-motivation, and user-centric products, and recognize the potential of crypto and blockchain applications.