Coinbase 2025 Outlook: New Technologies, New Landscape, New Opportunities – The Crypto Market Is Set for Transformative Growth
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Coinbase 2025 Outlook: New Technologies, New Landscape, New Opportunities – The Crypto Market Is Set for Transformative Growth
In-depth research covering the crypto space, from altcoins to ETFs, staking to gaming.
Navigating Web3 tides with focused insightsAuthors: David Duong & David Han
Translation: TechFlow
Key Takeaways
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In 2025, the cryptocurrency market will undergo transformative growth, advancing further toward maturity and widespread adoption.
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Our four key focus areas for 2025 include: macroeconomic trends, blockchain meta games, disruptive innovations, and enhanced user experience.
Executive Summary
Looking ahead to 2025, the crypto market is entering a phase of transformative growth. As this asset class matures, institutional adoption continues to rise and use cases expand. Over the past year, the U.S. approved its first spot ETFs, tokenization of financial products accelerated rapidly, and stablecoins grew significantly while increasingly integrating into global payment systems.
These achievements did not come easily. While they may seem like the culmination of years of effort, they are likely just the beginning of a much larger transformation.
A year ago, crypto assets were struggling under rising interest rates, regulatory pressure, and uncertain outlooks. Today’s progress demonstrates the resilience of cryptocurrencies and confirms their emergence as a robust alternative asset class.
From a market perspective, the 2024 bull run differs significantly from previous cycles. For example, the term “Web3” has gradually been replaced by the more accurate “onchain.” Additionally, investment strategies have shifted from narrative-driven to fundamentals-focused, partly due to broader participation from institutional investors.
Bitcoin’s market dominance has also increased notably, while innovation in decentralized finance (DeFi) continues to expand the boundaries of blockchain applications, laying the foundation for new financial ecosystems. Central banks and financial institutions worldwide are also exploring how cryptographic technologies can improve efficiency in asset issuance, trading, and record-keeping.
Going forward, the outlook for crypto remains promising. Cutting-edge innovations include decentralized peer-to-peer exchanges, prediction markets, and AI agents with built-in crypto wallets. In the institutional space, significant potential exists in stablecoins and payment solutions (bridging crypto and traditional banking), uncollateralized lending powered by onchain credit scoring, and compliant onchain capital formation.
Despite growing awareness of crypto technology, its complex technical structure still feels unfamiliar to many. However, technological innovation is actively working to change this. An increasing number of projects are focusing on simplifying blockchain usage and enhancing smart contract functionality. These advancements will make crypto more accessible to new users.
Meanwhile, the U.S. laid the groundwork in 2024 for clearer crypto regulation—a development that could solidify digital assets’ position within mainstream finance in 2025.
With concurrent progress in regulation and technology, we expect the crypto ecosystem to see substantial growth in 2025. Broader adoption will bring the industry closer to realizing its full potential. This year will be a pivotal moment, with breakthrough developments potentially setting the foundation for decades of future growth.
Theme One: The 2025 Macro Roadmap
The Fed's Goals and Market Demand
Donald Trump’s victory in the 2024 U.S. presidential election became the biggest catalyst for the crypto market in Q4. It drove Bitcoin prices up by 4–5 standard deviations above their three-month average. Looking ahead, however, we believe short-term fiscal policy reactions may matter less than the long-term trajectory of monetary policy—especially given the Federal Reserve’s critical decision-making juncture.
We anticipate the Fed will continue easing monetary policy in 2025, though the pace may depend on the extent of upcoming fiscal expansion. Tax cuts and tariffs could push inflation higher. Although headline CPI has dropped to 2.7% year-over-year, core CPI remains elevated at 3.3%, exceeding the Fed’s target.
The Fed’s current goal is “disinflation”—prices continuing to rise but at a slower rate—to fulfill its mandate of “maximum employment.” In contrast, average households hope for outright deflation—falling prices—to relieve the high-cost pressures of the past two years. Yet falling prices carry recession risks, making it an undesirable outcome.
For now, a soft landing remains the base case, supported by low long-term interest rates and the so-called “American Exceptionalism 2.0.” Rate cuts are almost certain, and looser credit conditions provide a favorable backdrop for crypto performance over the next 1–2 quarters. Moreover, if the incoming administration pursues deficit spending, it could further boost risk appetite and benefit the crypto market.
The Most Crypto-Friendly Congress in U.S. History
After years of policy uncertainty, we believe the next U.S. Congress could finally deliver real regulatory clarity for the crypto industry. This election sent a clear signal to Washington: public dissatisfaction with the existing financial system is growing, and demand for change is intensifying. From a market standpoint, bipartisan pro-crypto majorities in both the House and Senate suggest the U.S. regulatory environment may shift from being a barrier to becoming a driver of crypto innovation.
A new focal point is the possibility of a “strategic Bitcoin reserve.” In July 2024, following the Bitcoin Nashville conference, Senator Cynthia Lummis of Wyoming introduced the “Bitcoin Act,” while Pennsylvania’s legislature proposed the Pennsylvania Bitcoin Strategic Reserve Act, which would allow the state treasurer to invest up to 10% of Pennsylvania’s general fund in Bitcoin or other crypto assets. Currently, pension funds in Michigan and Wisconsin already hold crypto or related ETFs, and Florida is considering similar moves. However, establishing a “strategic Bitcoin reserve” may face legal hurdles—for instance, whether such assets can legally appear on the Federal Reserve’s balance sheet.
Meanwhile, the U.S. is not alone in advancing crypto regulation. Global demand for crypto is fueling regulatory competition. The EU, for example, is rolling out its Markets in Crypto-Assets Regulation (MiCA) in phases, offering the industry a clear operational framework. Major financial hubs like the UK, UAE, Hong Kong, and Singapore are also actively crafting rules to foster innovation and growth in digital assets.
Crypto ETFs 2.0
The U.S. approval of spot Bitcoin and Ethereum exchange-traded funds (ETFs) marks a milestone for the crypto economy. Since launch (about 11 months ago), these products have attracted $30.7 billion in inflows—far surpassing the $4.8 billion drawn by SPDR Gold Shares ETF (GLD) in its first year (adjusted for inflation). According to Bloomberg, these ETFs rank among the top 0.1% of roughly 5,500 new ETFs launched over the past 30 years.
The ETFs have reshaped the market dynamics for Bitcoin (BTC) and Ethereum (ETH), creating new sources of demand support. Bitcoin’s market dominance rose from 52% at the start of the year to 62% in November 2024. According to recent 13-F filings, nearly every type of institutional investor—including endowments, pension funds, hedge funds, investment advisors, and family offices—has invested in these products. Additionally, regulated options launched in November 2024 offer investors more flexible risk management tools and lower-cost exposure.
Looking ahead, market attention turns to whether ETFs covering additional tokens (such as XRP, SOL, LTC, and HBAR) will be approved. We believe near-term approvals may be limited to only a few assets. Instead, we’re watching whether the SEC will allow staking within ETFs or lift restrictions on cash-based creation/redemption in favor of in-kind (physical) settlement. This shift could align ETF share prices more closely with net asset value (NAV), reduce transaction costs, and enhance market efficiency.
The current cash-based model introduces price volatility and tax complications, whereas physical settlement avoids these issues, offering greater stability and transparency for investors.
Stablecoins: Crypto’s “Killer App”
In 2024, the stablecoin market experienced explosive growth, with total market capitalization increasing by 48% to $193 billion (as of December 1). Market analysts project that, based on current trends, the stablecoin market could reach nearly $3 trillion within five years. While this figure seems large, it still represents only about 14% of the U.S. M2 money supply ($21 trillion).
We believe the next wave of true crypto mass adoption may come from stablecoins and payments. This explains the rapid development in the sector over the past 18 months. Compared to traditional payment methods, stablecoins offer faster speeds and lower costs, leading to increasing adoption in digital payments and cross-border remittances. Many payment companies are expanding their stablecoin infrastructure. In the future, stablecoins may extend beyond transactions to become integral to global capital flows and commercial payments. Beyond broader financial applications, stablecoins’ potential to help manage U.S. debt burdens has also drawn political interest.
As of November 30, 2024, stablecoin transaction volume reached nearly $27.1 trillion—almost triple the same period in 2023. This includes substantial peer-to-peer (P2P) transfers and cross-border corporate payments. Stablecoins like USDC, thanks to broad integration across payment platforms and strong compliance, are gaining wider adoption among businesses and individuals.
The Tokenization Revolution
In 2024, tokenization made significant strides. According to data from rwa.xyz, the market size for tokenized real-world assets (RWA)—excluding stablecoins—grew from $8.4 billion at the end of 2023 to $13.5 billion by December 1, 2024, an increase of over 60%. Analysts predict this sector could grow to between $2 trillion and $30 trillion over the next five years, representing a potential 50-fold expansion.
An increasing number of asset managers and traditional financial institutions (such as BlackRock and Franklin Templeton) are beginning to tokenize government securities and other traditional assets on permissioned or public blockchains. This technology enables near-instant cross-border settlement and supports 24/7 trading.
Additionally, enterprises are exploring the use of tokenized assets as collateral in financial transactions (e.g., derivatives), streamlining operations (such as margin management) and reducing risk. RWA applications are expanding—from U.S. Treasuries and money market funds to private credit, commodities, corporate bonds, real estate, and insurance. We believe tokenization will eventually optimize portfolio construction and management, moving the entire investment process onchain—though achieving this vision may take several more years.
Naturally, tokenization faces challenges such as fragmented liquidity across multiple chains and regulatory barriers. However, notable progress has been made in both areas recently. We expect tokenization to be a gradual process, but its advantages are now widely recognized. This stage offers firms valuable experimentation opportunities to stay ahead in the wave of technological innovation.
The DeFi Revival
In the last market cycle, decentralized finance (DeFi) suffered heavy setbacks. Some projects attracted liquidity through token incentives, offering unsustainable high yields. As the market corrected, a more resilient DeFi ecosystem is now forming—one characterized by use cases closer to real needs and transparent governance structures.
We believe evolving U.S. regulatory conditions may become a key catalyst for DeFi’s revival. Examples include the establishment of stablecoin regulatory frameworks and clear pathways for traditional institutional investors to participate in DeFi. The synergy between onchain and offchain capital markets continues to strengthen. Decentralized exchange volumes now account for 14% of centralized exchange volumes—up from 8% in January 2023. Additionally, the potential for decentralized applications (dApps) to share protocol revenue with token holders is growing.
Moreover, DeFi’s potential is gaining official recognition. In October 2024, Federal Reserve Governor Christopher Waller noted that DeFi can complement centralized finance (CeFi), distributed ledger technology (DLT) can improve CeFi’s record-keeping efficiency, and smart contracts can enhance its functionality. He also acknowledged stablecoins’ potential in payments and as “safe assets,” while cautioning about risks like bank runs and illicit financing. All these signs indicate that DeFi is moving beyond its traditional crypto-native user base and building stronger ties with traditional finance (TradFi).
Theme Two: Disruptive Paradigms
Telegram Trading Bots: The Hidden Profit Center
Beyond stablecoins and native Layer-1 transaction fees, Telegram trading bots have emerged as one of the most profitable sectors in crypto during 2024. In terms of protocol net revenue, they have even surpassed top-tier DeFi protocols like Aave and MakerDAO (now known as Sky). This phenomenon is largely driven by increased trading activity and the explosive popularity of meme tokens. Indeed, meme coins were the best-performing crypto sector in 2024 (measured by market cap growth), and meme coin trading activity surged significantly in Q4 2024—particularly on Solana DEXs.
Telegram trading bots provide users with a simple chat-based interface for trading these tokens. Users can create custodial wallets directly within chat windows and manage funds and execute trades using buttons and text commands. As of December 1, 2024, most bot users focused their trading on Solana tokens, accounting for 87%, followed by Ethereum (8%) and Base (4%). Importantly, these bots are mostly unrelated to TON (The Open Network), which is integrated into Telegram’s native wallet. High-revenue bots like Photon, Trojan, and BONKbot are deeply integrated with the Solana network, reflecting user preferences.
Like other trading interfaces, Telegram bots charge a fee per trade—up to 1% of the transaction amount. However, because the underlying assets are highly volatile, these relatively high fees appear to have little impact on user behavior. As of December 1, 2024, the highest-earning bot, Photon, had accumulated annual revenue of $210 million—close to Pump, Solana’s largest meme coin launch platform, which earned $227 million. Other notable bots, Trojan and BONKbot, generated $105 million and $99 million respectively. By comparison, Aave’s net protocol revenue in 2024 was only $74 million.
The appeal of Telegram trading bots lies in their convenience, especially for trading tokens not yet listed on exchanges. They also offer additional features like “sniping” new token launches and price alerts. Data shows nearly 50% of Trojan users reused the service after four days or longer, with each user generating an average of $188 in revenue. Although competition among bots may eventually drive down fees, we expect Telegram bots to remain a major profit center in crypto throughout 2025.
Prediction Markets: Showcasing Blockchain’s Potential
During the 2024 U.S. election cycle, prediction markets were among the biggest winners. Platforms like Polymarket outperformed traditional polling data, which had predicted a much tighter race than actually occurred. This wasn’t just a win for prediction markets—it was a win for blockchain technology. Blockchain-based prediction markets demonstrated clear advantages over traditional polls, emerging as a unique application of the technology. These markets offer greater transparency, faster trading, global accessibility, decentralized dispute resolution, and automated, outcome-based settlements—all enabled by their blockchain foundation, giving them a distinct edge over non-blockchain alternatives.
While some believe interest in prediction markets may wane post-election, we’ve already seen their scope expand into sports and entertainment. In finance, prediction markets have proven more accurate than traditional surveys in gauging market sentiment around economic data (such as inflation and nonfarm payrolls), demonstrating sustained value and relevance beyond elections.
Gaming: From Niche Appeal to Mainstream Adoption
Gaming has long been a key application area for crypto technology, given the vast potential of onchain assets and trading markets. However, most crypto games have struggled to build loyal player bases. This is primarily because many players are motivated more by profit than pure entertainment. Additionally, many crypto games rely on web browsers for distribution and require users to set up self-custody wallets—limiting their audience to crypto enthusiasts rather than the broader mainstream gaming population.
That said, crypto-integrated games have made significant progress compared to the previous cycle. Developers are no longer chasing the extreme ideal of “fully onchain” games but instead selectively placing certain assets onchain to unlock new features without compromising core gameplay. Many developers now view blockchain as a supporting tool rather than a central marketing point.
For example, Off the Grid, a first-person shooter and battle royale game, launched with its blockchain component (an Avalanche subnet) still in testing. Yet the game itself became the top free game on Epic Games. Its main draw is unique gameplay—not blockchain tokens or trading markets. Moreover, the game has expanded distribution channels for crypto-integrated titles, now available on Xbox, PlayStation, and PC via the Epic Games Store.
Mobile platforms are also becoming important distribution channels for crypto games, including native apps and embedded mini-apps (like Telegram mini-games). Many mobile games selectively adopt blockchain components while running most operations on centralized servers. These games often eliminate the need for external wallets, drastically lowering entry barriers and enabling even crypto-novices to play easily.
Looking ahead, we expect the line between crypto games and traditional games to blur further. Upcoming mainstream “crypto games” may lean more toward crypto integration rather than being fully crypto-centric. Their focus will be on high-quality gameplay and wide distribution rather than simplistic “play-to-earn” mechanics. While this trend could promote broader adoption of crypto technology, it remains unclear whether it will directly increase demand for liquid tokens. In-game currencies may remain siloed, and regular players may resist interference from external investors in game economies.
Decentralizing the Real World: The Promise and Limits of DePIN
Decentralized Physical Infrastructure Networks (DePIN) aim to solve real-world resource allocation problems by incentivizing the creation of resource networks. In theory, DePIN can overcome the common initial-scale economics challenges in such projects. Currently, DePIN spans diverse fields—from computing power to cellular networks to energy—creating more resilient and cost-effective ways to aggregate resources.
Helium is a prime example of DePIN. By distributing tokens to individuals who deploy local cellular hotspots, Helium successfully built a network covering major cities in the U.S., Europe, and Asia—without investing in cell towers or large upfront capital. Early participants were incentivized through token ownership.
However, we believe the long-term revenue and sustainability of such networks must be evaluated on a case-by-case basis. Not all industries are suitable for decentralization, and pain points may be confined to specific niches. In our view, there may be significant variation among DePIN projects in terms of network adoption, token utility, and revenue generation.
Artificial Intelligence: Seeking Real Value
Artificial intelligence (AI) continues to capture investor attention in both traditional and crypto markets. However, AI’s impact in crypto is multifaceted and constantly evolving. Initially, it was believed that blockchain could address authenticity issues in AI-generated content and user data (e.g., verifying data provenance). Later, AI-driven intent recognition architectures were proposed as a way to improve crypto UX. Then, focus shifted to decentralized AI model training and compute networks, along with crypto-powered data generation and collection. Recently, attention has turned to autonomous AI agents capable of controlling crypto wallets and engaging via social media.
Currently, AI’s overall impact on the crypto industry remains unclear, evident in the shifting narratives. Yet this uncertainty does not diminish AI’s potential to transform the sector. As AI technology advances and becomes more user-friendly for non-technical users, we expect more innovative applications to emerge.
The biggest challenge lies in translating these technological shifts into lasting value between liquid tokens and company equity. For instance, many AI agents operate on traditional tech stacks, and recent “market hype” has flowed more toward Meme Tokens than underlying infrastructure. While prices of infrastructure-related liquid tokens have risen, usage growth typically lags behind price increases. This disconnect between price and network metrics, combined with investor rotation into AI Meme Tokens, reflects a lack of consensus on how to use crypto to capture AI-driven growth.
Theme Three: Blockchain Meta Games
Multi-Chain Ecosystem or Zero-Sum Competition?
Since the last bull cycle, the popularity of alternative Layer-1 (L1) networks has reemerged as a key theme. Newer networks increasingly compete through lower transaction costs, redesigned execution environments, and minimized latency. Nevertheless, we believe the L1 landscape has expanded to the point of surplus generic block space—even if high-value block space remains scarce.
In other words, additional block space isn’t inherently more valuable. However, a vibrant protocol ecosystem, active community, and dynamic crypto assets can still enable certain blockchains to command fee premiums. For example, despite no upgrades to mainnet execution capacity since 2021, Ethereum remains the hub of high-value DeFi activity.
Nonetheless, investors remain attracted to the differentiated ecosystems new networks might build—even as the bar for differentiation rises. High-performance chains like Sui, Aptos, and Sei are competing for attention with Solana, while Monad’s upcoming launch is seen as a strong contender among developers.
Historically, decentralized exchange (DEX) trading has been the primary driver of onchain fees, requiring robust onboarding, wallets, interfaces, and capital to create a virtuous cycle of activity and liquidity. This concentration often leads to winner-take-all dynamics across chains. However, we believe the future will likely remain multi-chain, as different blockchain architectures offer unique advantages catering to diverse needs. While app-specific chains and Layer-2 solutions can provide tailored optimization and lower costs for specific use cases, a multi-chain ecosystem allows specialization while still benefiting from broader network effects and innovation across the blockchain space.
The Evolution of Layer-2
Despite their exponential scalability, debates continue around Ethereum’s rollup-centric roadmap. Criticisms include L2s “siphoning” activity from L1, fragmenting liquidity, and creating a disjointed user experience. In particular, L2s have been blamed for declining Ethereum network fees and the fading of the “ultrasound money” narrative. New debate centers include trade-offs in decentralization, fragmentation across virtual machine environments (potentially fragmenting EVM), and differences between “based-on” and “native” rollups.
Nevertheless, from the perspective of increasing block space and lowering costs, L2s have achieved tremendous success. In March 2024, Ethereum’s Dencun (Deneb+Cancun) upgrade introduced binary large object (blob) transactions, reducing L2 average costs by over 90% and driving a tenfold increase in Ethereum L2 activity. Furthermore, we see the ability to experiment with diverse execution environments and architectures within the ETH ecosystem as a long-term advantage of the rollup-centric approach.
This roadmap also entails short-term trade-offs. For example, cross-rollup interoperability and overall user experience have become more complex—especially for newcomers who may not fully understand the differences between ETH on various L2s or how to bridge between them. While bridging speed and cost have improved, we believe the mere need for users to interact with bridges degrades the overall onchain experience.
While this remains a current issue, the community is actively exploring multiple solutions to improve UX, including (1) Superchain interoperability in the Optimism ecosystem, (2) real-time proofs and super-transactions for zkRollups, (3) rollup sequencers, (4) resource locking, and (5) sequencer networks. Of course, these challenges center on infrastructure and network-layer improvements, which may take time to manifest in user-facing interfaces.
Meanwhile, the growing Bitcoin L2 ecosystem appears even harder to navigate due to the lack of unified rollup security standards and roadmaps. In contrast, Solana’s “network scaling” leans more toward application-specific solutions, potentially disrupting current user workflows less. Overall, L2s are gradually being implemented across most major crypto ecosystems, albeit in vastly different forms.
Everyone Can Have Their Own Blockchain
As the technical barrier to deploying customized blockchain networks continues to fall, more applications and enterprises are launching blockchains they can control independently. Major DeFi protocols like Aave and Sky (formerly MakerDAO) have explicitly outlined plans to launch independent chains in their long-term roadmaps, while Uniswap has announced plans to launch a Layer-2 chain focused on DeFi. Even traditional companies are joining the trend—Sony announced the launch of a new chain called Soneium.
As blockchain infrastructure matures and becomes increasingly commoditized, owning block space is becoming more attractive—especially for regulated institutions or those with specific application needs. At the same time, the tech stack enabling this trend is evolving. In prior cycles, app-centric blockchains relied on Cosmos or Polkadot Substrate SDKs. Now, the rise of the “Rollup-as-a-Service” (RaaS) industry—led by firms like Caldera and Conduit—is helping more projects quickly launch their own Layer-2 chains. These platforms offer seamless service integration through marketplaces. Similarly, Avalanche’s managed blockchain service AvaCloud simplifies the creation of custom subnets, potentially accelerating adoption.
The rapid growth of modular chains may also significantly increase demand for Ethereum blob space, spurring development of other data availability solutions (such as Celestia, EigenDA, and Avail). Since early November, Ethereum’s blob usage has hit capacity (three blobs per block), up over 50% from mid-September. Still, demand continues to grow as existing L2s (like Base) scale throughput and new L2s come online. The upcoming Pectra upgrade in Q1 2025 may increase the target blob count from three to six, further alleviating demand pressure.
Theme Four: User Experience
Optimizing User Experience
In our view, simplicity and ease of use are among the most critical factors for driving mass adoption of crypto technology. Although the industry once emphasized technical details rooted in its “cypherpunk” origins, the focus is now rapidly shifting toward simplifying the user experience. Specifically, the industry is working to hide the complexity of crypto behind application interfaces. Recent technological breakthroughs are enabling this shift—such as the adoption of account abstraction, which streamlines user onboarding, and session keys, which reduce the friction of repeated signature requests.
Widespread adoption of these technologies will render security components in crypto wallets—like seed phrases and recovery keys—“invisible” to most users, akin to today’s seamless internet security experiences (e.g., HTTPS, OAuth, and Passkey). Indeed, we expect Passkey onboarding and in-app wallet integration to become major trends by 2025. Current examples include Coinbase Smart Wallet’s Passkey onboarding and Google’s integration with login solutions like Tiplink and Sui Wallet.
However, we believe the complexity of cross-chain architecture will remain a key UX challenge in the short term. While abstraction of cross-chain architecture remains an active research topic at the network and infrastructure level (e.g., ERC-7683), these technologies are still far from front-end applications. Improvements here require dual optimization at the smart contract application layer and wallet layer. Protocol upgrades are crucial for unifying liquidity, while wallet improvements must deliver more intuitive user experiences. While current industry research focuses heavily on the protocol layer, we believe wallet optimization will ultimately be more important for driving user adoption.
Ownership of the User Interface
In our view, a key shift in crypto UX will come from optimizing interface design to strengthen user relationships. This transformation manifests in two ways. First, standalone wallets are improving user experience. Onboarding is becoming simpler and better aligned with user needs. Features like in-wallet token swaps and lending allow users to perform actions within familiar ecosystems, boosting retention.
Second, blockchain complexity is being hidden behind integrated wallets. This approach is common in trading tools, gaming, onchain social apps, and membership platforms. For example, users can register using familiar methods like Google or Apple OAuth, with wallets automatically configured for them. After onboarding, “sponsors” cover gas fees on their behalf, which are ultimately borne by the app operator. This model presents a new challenge: apps must ensure that revenue per user exceeds onchain operational costs. While blockchain scalability is steadily reducing these costs, it also pushes developers to reconsider which data truly needs to be recorded onchain.
Overall, competition in crypto will increasingly revolve around acquiring and retaining users. As demonstrated by the average revenue per user (ARPU) of Telegram trading bots, crypto traders tend to be less price-sensitive than traditional finance users. We expect that, over the next year, “owning the user relationship” will become a key strategic focus for protocols beyond the trading sector.
Decentralized Identity (DID)
As regulatory clarity improves and more offchain assets become tokenized, streamlining Know-Your-Customer (KYC) and Anti-Money Laundering (AML) processes is becoming increasingly important. For example, certain assets are restricted to accredited investors in specific jurisdictions, making identity verification and qualification checks essential components of future onchain experiences.
In our view, building decentralized identity involves two key components.
First is the creation of onchain identities themselves. The Ethereum Name Service (ENS) provides a standard for mapping human-readable “.eth” names to one or more cross-chain wallet addresses. Similar services have emerged on other networks, such as Basenames and the Solana Name Service. As traditional payment giants like PayPal and Venmo begin supporting ENS address resolution, the adoption of these onchain identity services is accelerating.
Second is attaching attributes to onchain identities. These attributes include KYC verification and jurisdictional information, visible to other protocols for compliance purposes. The Ethereum Attestation Service (EAS) is central to this technology, providing entities with a flexible way to assign specific attributes to other wallets. These attributes go beyond KYC and can be extended based on need. For example, Coinbase uses the service to verify whether a wallet is linked to a Coinbase trading account and confirm the user’s jurisdiction. Some new permissioned lending markets on Base are also using EAS to verify onchain identities tied to real-world assets.
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