Three Technologies Transforming Crypto in 2025

A new growth era is well underway for crypto, as prices soar, applications mature, and institutional adoption reaches a tipping point. These trends are converging as regulators consider new rules that could bring needed stability to the industry, setting the stage for a significant year ahead for crypto innovation. At SVB, we’re watching the space closely as our clients build the next generation of the internet. While exuberance for memecoins, Bitcoin prices and crypto exchange-traded funds (ETFs) dominate the bull market narrative, more fundamental shifts are taking place to entrench blockchain into the mainstream.  

Here are three trends we’re watching this year.  

1. Payments gain traction as the killer app of crypto  

It’s the suit-and-tie cryptocurrency — the kind of crypto you can bring home to mom — and more people are doing just that. Stablecoins have emerged as a transformative force in digital finance infrastructure, achieving remarkable product-market fit in the last year. The number of stablecoins in circulation has grown from $5B in 2020 to over $170B in December 2024. Monthly transfers have surpassed traditional payment networks in transaction volume and become a significant holder of US debt (Tether’s $100B is on par with Mexico and Germany). In November, $2.1T moved across the top four stablecoin networks, more than all VISA card payments worldwide. Peer-to-peer payments accounted for $960B in stablecoin transfers in November, a record high.  

These fiat-backed digital assets have the potential to greatly reduce friction in international money movement, benefiting regions traditionally underserved by conventional banking systems. For example, mobile wallet adoption is growing rapidly in emerging markets such as Nigeria, India and Argentina which have the largest share of mobile wallet users after the US. Globally, cross-border payments are growing 5% per year, creating an enticing market opportunity.  

Financial institutions are taking notice. Stripe's $1.1B acquisition of Bridge in October was the largest acquisition of a crypto company to date. It may signal a growing institutional recognition of stablecoins' potential as a nimble alternative to conventional payment rails, in turn, validating the staying power and legitimacy of blockchain technology as a whole.  

Given the advantages in speed, efficiency and transparency, blockchain technology is gradually blending into conventional financial technology, becoming the unseen back-end to many front-end apps that are already familiar to users. Our 2024 State of Fintech report found that blockchain is the top fintech subsector for deal count in each of the last four years. The overall volume of fintech VC is also shifting toward blockchain. In 2024, nearly 20% of fintech VC investment went to companies building with crypto technology, up more than double the share from four years ago. 

Arnold Lee, founder of crypto payments startup Sphere Finance, said his team has fast-tracked product development plans because of interest from investors and clients. "Now that the environment is more favorable, we're able to do more from our roadmap that we were planning to do later," Lee said.  

The traditional financial system is taking steps to accept crypto into the fold. Crypto ETFs have accelerated this trend by offering a powerful wrapper that rebrands crypto from a niche technological experiment to a legitimate, investable asset class. Crypto ETFs are breaking down regulatory barriers, increasing market access and liquidity while setting the stage for more sophisticated financial tools like options and enhanced hedging mechanisms. The current momentum is giving digital asset teams more influence within large financial institutions (FIs). The dynamic is creating an opportunity for startups such as Sphere who are selling into FIs, Lee said.  

However, significant infrastructure challenges remain. Regulatory ambiguity is constraining critical functions like staking, custody and market making, and creating data silos that prevent asset managers from holistically analyzing traditional and crypto investments. The nascent ETF ecosystem is still grappling with fundamental questions of asset allocation, risk metrics and valuation methodologies, making this a pivotal moment of institutional adaptation and financial innovation.  

2. Decentralized AI enters the chat 

One of the most promising crypto use cases to emerge in 2024 is decentralized AI. No, we’re not talking about the AI agent memecoin variety. What we’re most interested in here are the growing number of emerging blockchain networks and companies that are developing scalable AI infrastructure to rival centralized large language models (LLMs) such as OpenAI, Anthropic and Gemini. Networks tuned specifically for AI tooling – such as NEAR protocol and Bittensor – are experiencing explosive growth as developers and crypto miners leverage the advantages of decentralized computing to build an AI ecosystem on-chain and largely off the books of VC investors. The top six AI-focused blockchain networks have seen an 8x growth in market cap since January 2023, twice the pace of the largest crypto assets. This surge reflects the growing enthusiasm for decentralized AI and the inherent advantages that it may hold compared to the centralized approach to model building. 

Proponents of decentralized AI believe these models can be inherently more trustworthy and more efficient than centralized LLMs. By removing centralized control and the incentives that come with corporate governance, blockchain-based AI could mitigate bias and enhance data security through better transparency, potentially fostering greater trust among users. Token appreciation demonstrates this confidence in future adoption, just as valuations demonstrate investor confidence in the private markets. 

Manifold Labs, an Austin-based developer, is one of the companies building decentralized AI on Bittensor. Co-founder James Woodman said developers are attracted to the space by both the incentives and the mission. “We haven’t raised external capital, and we don’t need to raise,” Woodman said. “There is a better way to fundraise now and it’s the protocol. We are being subsidized not by institutional investment but by Bittensor itself.”  

It's precisely that incentive structure that may give blockchains an edge over time. The economics of tokenized networks create a marketplace for building and running AI models, which could encourage the distribution of computing resources better than a centralized company could. In theory, a global blockchain network with many thousands of nodes could act as a single supercomputer using latent power capable of training powerful AI models much more efficiently than a centralized company like Microsoft, which must build and maintain costly data centers. For now, that vision is still in the distance. Centralized data centers far outpace the model training capabilities of blockchain networks. But progress is being made. 

AI and crypto are increasingly merging. VC investment into companies combining AI and crypto technologies increased 2x in 2024. One recent breakthrough demonstrates the potential of decentralized computing in AI. VC-backed startup Prime Intellect announced in November that they trained a 10-billion parameter LLM using a global network, the world’s first. The achievement demonstrates that large-scale model training “is no longer confined to large corporations but can be achieved through distributed, community-driven approaches,” the company said.  

While momentum grows, significant challenges remain. The immense capital requirements for training LLMs pose a major hurdle for many crypto projects, which are not at the scale required. Data access is an even bigger barrier. High-quality, personalized data remains crucial for LLM development. While decentralized models can leverage open-source repositories, they face an uphill battle against centralized giants like Facebook and Google, who possess vast troves of user data.  

Finally, while decentralized networks are attracting capital and talent, user adoption is key to watch. Will there be certain queries that users ask decentralized AI protocols over centralized models? In which circumstances will they be more accurate and reliable? Here, crypto may pose an advantage as proof-of-staking mechanisms are incentivized to find the best and most comprehensive answers compared to supercomputer models that are curated.  

3. Web3 gaming: If you build it, they will come 

It may not get the most fanfare in the crypto ecosystem, but gaming continues to boast one of the most active user groups. On-chain games attracted 5.5M daily active wallets in Q3 2024, (about 26% of the decentralized app market), the most of any sector. Web3 gaming has long held promise as a dynamo for the crypto ecosystem, with the potential to power on-chain economies by driving demand for tokenized products and services. So far, despite its continued growth, it’s largely failed to achieve that vision, with fragmented blockchain games gaining only a fraction of the audience of their Web2 competitors. The 7M monthly blockchain gamers pales in comparison to the ~120M monthly Xbox users. What Web3 gaming lacks is a smash hit. A single high-quality game could drive mass adoption in the same way the release of Halo drove a generation of gamers onto Xbox in the early 2000s. Crypto is still waiting for its Halo moment. We think it’s only a matter of time. 

Gaming is one of those blockchain use cases that intuitively makes sense. Gamers understand the value of digital assets and already participate in the virtual economies of their games. Whether they appreciate “crypto” is less relevant. Tokenization theoretically enhances gamers’ experience by enabling true ownership of digital assets, play-to-earn gaming and the transfer of objects across platforms.  

Analysis by Helika, a crypto analytics firm, shows that Web3 games are building engaged communities of gamers on par with conventional games “with some Web3 games achieving over 70% D1 retention rates, well above the industry standard of 30-40%.” Over 250 new on-chain games were released in through Q3 of 2024. One promising platform is Telegram, a messaging app with 900M users that is attracting a vibrant blockchain gaming ecosystem. It is often the messaging app of choice for crypto natives. Its TON blockchain network has captured over 20% of new on-chain games this year. However, user retention has been an ongoing challenge for early entrants in Telegram. Helika estimates benchmark Day 1 retention rates of 10-20%. This can be explained, in part, by the proliferation of bots, the early stage of much of the content, and the early focus on play to airdrop mechanics — issues that should be resolved in time. 

Game development takes time, and many of the most promising titles are still in the works. As of Q3 2024, only about 45% of announced Web3 games were in a playable state with only 34% fully integrated with blockchain technology. Despite these challenges, the overall commitment to expanding the application of the technology remains strong, with community-driven projects showcasing innovative trends in engagement and gameplay. In 2024, about 23,000 developers were actively building crypto games every month. Look for that number to rise this year, as lower fees on L2 solutions help to further incentive builders and users alike.  

Looking ahead 

While these themes are captivating our long-term interest, they’re not the only areas worth watching. Crypto regulations are set to undergo considerable changes under a new administration that has signaled favorability toward digital assets. The price of Bitcoin has surged past all-time highs and continues to climb, driving more institutional and retail investors into the space.  

To dig further into the data, please reach out to your SVB contact, or send us a message at crypto@svb.com. Also, visit our Crypto page to learn more about how SVB supports blockchain and crypto innovators.