Blockchain development cycles, much like price action cycles, tend to follow a rhythm. Historically, Bitcoin (BTC) all-time highs have sparked an influx of new developers into the ecosystem. This surge is often followed by a consolidation phase, where some developers exit, while others mature into long-term contributors who form the ecosystem's backbone. As 2024 concludes, the effects of this consolidation are unmistakable. For the first time, the number of established developers has outpaced that of newcomers, signaling a maturing ecosystem poised for its next wave of innovation.
This moment could also bring a significant influx of new developers into the ecosystem in 2025, however, driven by the recent all-time high in BTC price action. Unlike the infrastructure- and DeFi-focused cycles of 2017 and 2021, this cycle is expected to attract developers with "real-world" expertise—individuals transitioning from industries outside of blockchain. Because the infrastructure has been built to allow for more consumer-friendly applications to emerge and that market segment hasn't been fully penetrated by Web3 systems yet, we would expect developers to focus their efforts on creating products that cater to a broader, non-blockchain-native audience, potentially unlocking new use cases and accelerating mainstream adoption.
The foundational work in infrastructure and community building has brought a new level of maturity to the blockchain stack, setting the stage for expanded scope and scale in Web3 applications. This evolution paves the way for reimagining what is possible. The following are some of the most compelling trends to explore in the coming year.
Abstraction
As the blockchain ecosystem grows increasingly complex, abstraction will play a pivotal role in improving user onboarding and scaling. Today, wallet onboarding flows remain notoriously cumbersome for the average user. Simplifying these processes by concealing technical complexities behind intuitive, user-friendly interfaces will empower Web3 applications to rival traditional Web2 experiences. Abstraction layers will lower barriers to entry, streamlining wallet management, transaction handling, and even compliance—ultimately making decentralized platforms accessible to mainstream audiences.
With this in mind, we’re excited to see abstraction frameworks gaining traction in application development. CMT Digital portfolio company Near Protocol’s work with chain signatures has laid a strong technical foundation, while advancements by projects like solver networks and intent fulfillment networks are paving the way for blockchain-native products to meaningfully compete with Web2 counterparts. These innovations promise to deliver the transparency and true ownership benefits inherent to blockchain technology, while offering a seamless, user-centric experience.
Data Composability
We see significant potential in addressing the gap between Web2 and Web3 data composability. Currently, data is siloed across platforms, resulting in inefficiencies and fragmented ecosystems that hinder collaboration and innovation. By enabling seamless data interoperability, blockchain technology can unify these silos, creating a composable ecosystem where data can flow freely across applications, chains, and traditional Web2 systems.
Key to this vision are technologies like Zero-Knowledge Transport Layer Security (zkTLS), which integrates Zero-Knowledge proofs with the standard TLS protocol. zkTLS allows secure, verifiable data sharing from Web2 systems to decentralized applications without exposing sensitive information, effectively linking Web2 data with Web3 ecosystems. Imagine securely verifying your Amazon shopping history or demonstrating ownership of a bank account. Alongside zkTLS, advancements in decentralized identity (DID) systems, data indexing solutions, and cross-chain bridges will drive the next wave of innovation in data composability.
In 2025, we look for these breakthroughs to create a unified digital landscape where composable data unlocks richer user experiences, enables new business models, and enhances collaboration across previously siloed ecosystems. As the boundaries between Web2 and Web3 blur, data composability will become a cornerstone of innovation, combining the transparency and ownership principles of blockchain with the accessibility and scale of traditional web systems.
Incentive Mechanisms
The tragedy of the commons—a phenomenon where shared resources are depleted because individuals prioritize their own short-term interests over collective well-being—remains a significant challenge in decentralized ecosystems. For example, air pollution illustrates this dilemma: while everyone benefits from clean air, assigning a price to its value is complex. Few are willing to bear the cost of polluting the environment, and adopting cleaner practices often reduces profit margins, creating a disincentive for change. Blockchain technology offers a novel solution by acting as an incentive “Schelling point” within complex systems, aligning individual actions with collective goals. For example, in traditionally opaque and illiquid markets like pollution credits, blockchains can enable efficient price discovery by providing transparency and reducing reliance on brokers. Mechanisms such as blockchain-based slashing reward good actors and penalize bad ones, fostering integrity and resilience in decentralized networks while ensuring systems remain both equitable and self-sustaining.
These principles have the potential to extend far beyond DeFi. In climate tech, blockchain can enhance the credibility and efficiency of carbon credit markets, enabling precise tracking, trading, and slashing mechanisms to discourage fraudulent behavior. Similarly, in healthcare, outcome-based incentive models tied to patient care or research milestones could reshape how value is defined and delivered. Moreover, Zero-Knowledge (zk) proofs can play a transformative role by enabling private, verifiable proof of compliance with incentive mechanisms—ensuring transparency without compromising sensitive data.
In 2025, we anticipate the broader adoption of these mechanisms across sectors, with incentive frameworks driving collaboration, accountability, and measurable impact. As decentralized ecosystems continue to mature, incentive mechanisms will be a cornerstone for ensuring alignment and achieving meaningful, large-scale outcomes.
Permissionless and Semi-Permissioned Systems
While permissionlessness remains foundational to DeFi's success, certain verticals are increasingly benefiting from the flexibility of semi-permissioned systems. These systems incorporate elements of permissioning, such as Know Your Customer (KYC) protocols or whitelisting, to meet regulatory requirements while preserving many of the open, decentralized principles that define DeFi. For instance, platforms like Aave Arc require users to undergo KYC checks to access permissioned pools, ensuring compliance while still enabling decentralized lending and borrowing. Similarly, stablecoins often employ limited permissioning to ensure adherence to regulatory standards, such as verifying reserve backing or preventing illicit transactions, while maintaining accessibility and usability for everyday users. This hybrid approach provides a critical stepping-stone for broader adoption, bridging the gap between decentralized innovation and institutional acceptance.
We’re particularly excited about the potential to unlock collateral across verticals, especially through the tokenization of Real-World Assets (RWAs). Semi-permissioned frameworks can facilitate the compliant integration of RWAs into DeFi protocols, allowing assets like real estate, invoices, or carbon credits to seamlessly interact with decentralized ecosystems. This convergence of traditional finance with permissionless innovation will catalyze a new wave of liquidity, scalability, and product development. Over time, we expect these semi-permissioned approaches to evolve into fully permissionless systems as regulatory clarity improves, enabling faster innovation and more robust, decentralized solutions.
DeFi Restaking and Elective Rehypothecation
The emergence of liquid restaking tokens (LRTs) has significantly transformed the decentralized finance (DeFi) landscape. Initiated by platforms like EigenLayer, which allows Ethereum validators to "restake" their assets to secure additional services, this innovation has driven a remarkable increase in total value locked (TVL). Starting from $282 million at the beginning of the year, the TVL in restaking protocols has surged to over $12 billion, underscoring the growing appeal of these mechanisms.
While security-based yields from restaking are notable, the potential for yield generation through DeFi activities is even more substantial, largely driven by the inflow of new value in the form of Real-World Assets (RWAs) into the ecosystem. RWAs, such as tokenized real estate, invoices, or carbon credits, will increasingly seek yield within DeFi protocols, as these assets often cannot participate in security-focused platforms like EigenLayer due to constraints like unstaking periods. DeFi protocols, with their flexible liquidity provisioning and lending mechanisms, are uniquely positioned to accommodate these assets, offering higher velocity and more dynamic yield opportunities.
We anticipate that this inflow of exogenous value in the form of RWAs will significantly increase the velocity of assets within DeFi, as assets are rehypothecated and restaked across multiple platforms to optimize returns. This proliferation of asset activity will not only unlock new yield-generation strategies but also deepen liquidity and accelerate innovation within the DeFi ecosystem, further establishing it as a critical infrastructure for global financial markets.
Lending Modularization within DeFi
The onchain lending and borrowing environment has proven product-market-fit in recent years, as three of the top ten protocols in terms of Total Value Locked (TVL) provide services that enable users to post collateral and borrow assets in a permissionless manner. Currently, the lending market has $52bn of TVL and YTD growth of 136%. It stands to reason that this infrastructure is one of the most direct beneficiaries of bull markets as TVL increased from $83mn at the beginning of 2020 to $44bn by the time 2022 started.
With this significant demand for borrow highlighted, a theme that has emerged this year is the increase in demand for whitelisting additional long-tail cryptoassets as collateral. However, lending protocols that are inherently monolithic in design structure, such as Aave, are innately unable to service the demand side. This is due to monolithic constraints involving adding new assets, as doing so increases risks in their non-siloed multi-asset pools to significant levels. Thus, monolithic borrowing protocols by design require conservative loan-to-value (LTV) ratios and heavy liquidation penalties to address these risks. Isolating lending pools within the monolithic stack offer more asset flexibility in selection criteria but suffer from fragmented liquidity and are inefficient at the capital utilization level as rehypothecation is significantly constrained. As a result of these limitations, since the start of the year we have observed a surge in DeFi lending innovations that enable users to customize their risk tolerance, a component of onchain lending unlocked by modular lending platforms. These recent entrants represent a shift in the market to becoming base layer primitives with their modular infrastructure enabling previously untapped levels of flexibility and adaptability. The market has ingested this emergence in DeFi lending with strong demand, as TVL within Morpho has increased from $1.4bn at the start of the year to $4.5bn. Euler, a portfolio company that launched v2 for their lending platform that fully embraces modular infrastructure with their Euler Vault Kit (EVK), has increased TVL 7x from the start of November until now with $104mn of current TVL.
Use cases that we are thematically excited about becoming unlocked within DeFi protocols at the emergence of modular lending solutions include leverage farming liquid restaking tokens (LRTs), protecting market participants from incurring impermanent loss, capitalizing on stablecoin carry trades, and unlocking the ability to take on leverage positions with real-world assets (RWAs). As demand for borrowing within DeFi increases alongside market sentiment, modularization of the DeFi lending stack is expected to usher in the next phase of onchain money markets.
Information Finance
We are excited about the proliferation of information finance in 2025, a movement enabled by decentralized markets that harness the power of collective intelligence. Platforms like Polymarket exemplify this evolution, where prediction markets not only aggregate bets on future events, but also incentivize participants to gather and share valuable information to refine outcomes. The second-order effects of such markets are profound: the data generated through these decentralized information ecosystems can lead to greater efficiencies across industries. For instance, policymakers could utilize real-time market insights to anticipate economic trends, while insurers might leverage prediction markets to better underwrite risks.
Additionally, these markets create a feedback loop where participants are motivated to uncover and verify information, driving transparency and accountability. Over time, the functionality of these systems could extend to dynamic pricing models, real-time hedging, or even guiding resource allocation in sectors like healthcare and climate response, demonstrating how decentralized prediction markets can become a cornerstone of a more informed and efficient economy.
Stablecoins and Payments
Stablecoins
Stablecoins have solidified their position as a cornerstone of the digital finance ecosystem, with their product-market fit now undeniable. Their global adoption has surged, offering a stable and reliable medium of exchange within the often volatile cryptocurrency market. This was exemplified by PayPal's recent use of its stablecoin, PYUSD, to facilitate a commercial payment to Ernst & Young, highlighting how stablecoins are increasingly bridging the gap between traditional finance and blockchain technology.
From 2021 through the end of 2024, the primary drivers of stablecoin growth have been centralized exchanges (CEXs) and other organic stablecoin activities, such as lending, on-chain investment funds, minting and burning, fiat ramps, and individual transactions. However, a notable gap persists in the growth of stablecoin usage within decentralized exchanges (DEXs), which has only modestly increased from around $40 billion per month in May 2021 to approximately $65 billion by December 2024. This trend is poised for transformation in 2025, with significant growth anticipated in stablecoin activity within decentralized finance (DeFi). The influx of real-world assets (RWAs) and the expanding role of on-chain autonomous agents in trading activities are expected to catalyze this shift. Analysts at VanEck echo these projections, reinforcing the expectation of a dynamic evolution in stablecoin utility across DeFi platforms.
Payments
If 2025 follows the trends of 2023 and 2024, blockchain-based payments could experience growing merchant acceptance and further integration into payment platforms. Stablecoins, in particular, could emerge as strong competitors to traditional methods, especially in cross-border commerce. In regions with limited traditional banking infrastructure, such as emerging markets, stablecoins might drive this shift by enabling users to bypass intermediaries and reduce transaction costs.
Blockchain-based payments will also unlock entirely new use cases previously impractical due to inefficiencies in traditional payment rails. Smart contracts will enable programmable payments, automating complex financial processes like subscriptions, payroll, and escrow. These innovations will streamline workflows, reduce friction, and open up opportunities for businesses and consumers alike.
In addition, the tokenization of real-world assets (RWAs) is expected to further extend blockchain’s influence into payment systems tied to physical assets. Payments triggered by supply chain events, real estate transactions, or other tokenized asset exchanges are projected to see growing adoption.
This is a trend that MasterCard itself is highlighting, in its 10 predictions for payments in 2025 it said “Cryptocurrencies, stablecoins and tokenized assets have moved from concept to commercialization, particularly as relates to their applicability to real-world assets. In 2025, bet on blockchain technology to enhance speed, security and efficiency, especially when it comes to B2B and commercial payments.”
DePIN
Decentralized Physical Infrastructure Networks (DePIN) experienced remarkable growth in 2024, exemplified by portfolio company Helium, the decentralized mobile service provider, which scaled its subscriptions from approximately 25,000 at the start of the year to over 120,000 by year-end. This surge in adoption highlights the potential of DePIN to disrupt traditional infrastructure models.
Looking ahead, the progress of category-leading DePIN projects is set to redefine how infrastructure integrates with decentralized systems. These networks exemplify how decentralization reshapes ownership, empowering individuals with earning opportunities that were once the domain of centralized entities. From noise pollution reduction to energy grid optimization and natural disaster alerts, DePIN projects are already addressing critical challenges while unlocking innovative use cases.
Though still in its early stages, the potential applications of DePIN are almost limitless. In 2025, early adopters could see passive income opportunities from these networks contribute up to 5% of the average individual’s earnings—a prediction that we will be keenly tracking.
We believe the blockchain ecosystem is on the cusp of transformative growth in 2025, driven by innovations that extend far beyond traditional infrastructure and DeFi cycles. From abstraction and data composability to modular lending and incentive mechanisms, these emerging themes promise to unlock unprecedented opportunities across industries. As the boundaries between Web2 and Web3 blur, the blockchain space will increasingly cater to mainstream audiences, fostering collaboration, transparency, and efficiency. By harnessing these advancements, the ecosystem is well-positioned to redefine the digital landscape and drive meaningful, large-scale impact in the years to come.
