Looking at the Crypto market from 2028

Author: 0XSMAC (Compound VC Investor)

Compiled by: Block unicorn

At Compound Crypto, we believe in building various future visions that we firmly believe in across all our core focus areas. We engage in this work over long time frames and multiple cycles because the best way to learn about things is to study them as they begin to break down.

By 2023, cryptocurrency is doing just that in some ways. Faced with an uncertain future, inevitable tailwinds, and strong headwinds, we have been internally trying to think about the subtle progress in categories that we care deeply about. This has led to a vibrant exploration to understand how our world evolves year after year, in detail, and how cryptocurrency as an industry and technology plays its role in this evolution.

1. Seeking Mass Adoption in 2023-2024

DeFi has returned, but not in the way many expected. Our total DeFi users have quietly surpassed 30 million, but the pace of adoption is bittersweet for some; the activity of permissioned KYC products has surged. Public opinion is mixed; some see broader participation and traditional institutions continuing to flood into the space, increasing the value of their investments, and feel delighted. Others claim that high-net-worth individuals can now access white-glove financial service products through forward-looking traditional financial institutions, undermining the essence of cryptocurrency.

The usage rate of native permissionless DeFi has returned to a lesser extent. A significant amount of U.S. Treasury bonds has been tokenized, achieved both through synthetic offshore operators and more regulated, but slower-moving offshore operators. Despite stablecoin trading volumes surpassing $500 billion, the new metric focused on measuring scale in cryptocurrency is stablecoins + Treasury bonds, which peaked at over $1 trillion during this period.

Although the maturity of the on-chain options market has increased due to institutional liquidity, they are not yet fully in place. Now, the development path seems feasible. As expected, this is reflected in exchanges offering perpetual contracts and options, allowing cross-chain margining and dynamic risk engines.

The most exciting new native application is a mobile app wallet, with account abstraction wallets lowering the participation threshold for new users and enabling multi-chain, multi-asset yield generation. Many other companies claim to do this, but the user interface and product details are the key points that make it stand out.

Gaming is not the killer use case to attract newcomers to the space; by the end of 2024, the hundreds of millions of dollars invested in crypto gaming have yielded little return. Game trailers continue to be released, but no crypto-native games have seen any meaningful sustained attention. Crypto gaming is beginning to take on the kind of meme that zk technology had during 2017-2020 ("Don't worry, this is the year; it's coming soon"). However, blockchain still lacks the performance for fully on-chain, continuously state-changing games, and building an engaging off-chain game with on-chain assets takes longer than expected.

The unlocking of "user adoption" comes from smarter, user-friendly, guided searches that make it easier for ordinary people to explore on-chain games, with many revisionist historical perspectives claiming this is obvious.

Wallets have advanced on-chain search assistants that can seamlessly integrate on-chain data and interact with the wallet. For example, searches like: "Show me the most popular NFTs from last month," "Buy me $100 of ETH in the next 2 hours." These are just some queries anyone can make from increasingly smooth interfaces that look more like Runway products than Notion spreadsheets. From the perspective of app integration, we are not yet fully there, but it is clear that this is our direction.

More advanced user operations will soon include things like "Show me a list of stablecoin farms launched last month with annual yields between 10-20%. Over the next 2 weeks, evenly transfer my existing 10% stablecoin risk into these stablecoins." The actual extent of user adoption has been exaggerated, mainly because there are not many new, non-financial things to do on-chain.

"Solana positions itself as a leader focused on mobile development, enabling developers to more easily build applications in the blockchain and mobile space."

Despite the disappointment in gaming, the only bright spot is Solana, which is seen as a gaming chain on both desktop and increasingly mobile devices. Its leading edge in building mobile experiences has paid off, as the network has seen a large number of mobile Solana games launched on Saga. The sales of Saga (Solana's mobile brand) are not impressive (selling 50,000 - 100,000 units), but Solana has established itself as a leader in non-native developers focused on mobile.

Polygon has lagged in this regard due to its lack of gaming throughput compared to Solana, and composability was not very important in the early stages of these limited games. Polygon has leveraged its strengths well, being the best at attracting Web2 brand partnerships and bringing Web enterprises into Polygon, further solidifying its de facto status as a retail "loyalty program" partnership channel.

In the cryptocurrency space, some social applications temporarily have appeal, but the depth of differentiation and new behavior enablement is mostly quite shallow. By the end of 2024, there is a sense that this vertical finally has enough talented crypto product people to build new applications that ordinary users will actually use. Electric Capital's 2024 developer report will reveal that we have crossed the mark of 75,000 active developers per month, with 25,000 full-time developers.

As always, when the bull market continues to push forward, animal spirits dominate, and privacy concerns are pushed to the back. For this reason, the development of zkEVMs seems slow, although there have been some new signs of development in very specific use cases for privacy technology (most notably health data and location data). But overall, people are still not concerned about privacy.

Hong Kong has quickly taken action to continue attracting the entire crypto industry. It saw an opportunity as the U.S. is in a presidential election year and will not spend much time on cryptocurrency regulations or oversight. This unfortunately led to cryptocurrency becoming a partisan issue in Washington, with Republicans calling for a looser regulatory framework while scaring people about the possibility of the U.S. losing to China.

On the other hand, Democrats are calling for more regulation, rules, and restrictions, strongly opposing cryptocurrency. Although experts on cryptocurrency policy desperately try to avoid this partisan divide, both parties are merely catering to their voters.

Concerns about dystopian CBDCs have diminished somewhat, as FedNow (the U.S. Federal Reserve's service) has not been impressive. Some banks are using it, but it is just an upgraded version of the SWIFT rails, with some limited superficial decentralization. For all intents and purposes, it has little practical significance.

On the positive side, we have indeed seen bipartisan support for U.S. custodial stablecoin regulations, with a bill very similar to the Toomey bill being passed. At least from the legislative perspective, there is still no clear determination on how cryptocurrency is treated by default (as a commodity or a security). However, there are some judicial precedents that provide the industry with what it considers "strong enough" clarity, making the industry feel it will not be stifled.

When a Republican (as a weak loser) wins the presidential election, many in the cryptocurrency space overemphasize the significance of this for regulatory perspectives, opening a period of undue frenzy. Gary Gensler (SEC Chairman) remains in his position and poses a headache for the cryptocurrency industry, although his influence is waning.

"Seemingly secure major protocols (Uniswap, Aave, Curve) will become the victims of the largest hacks in cryptocurrency history."

As the space continues to expand, one negative effect is the proliferation of increasingly complex hacks. Seemingly secure major protocols (Uniswap, Aave, Curve) will become the victims of the largest hacks in cryptocurrency history. This raises alarms about security. As a narrative, security has become a hot topic of concern for investors, with most discussions revolving around the fact that we now have "real" non-native users. These individuals are uncomfortable with the ideas of routine fraud, vulnerabilities, or malicious contracts, differing from the feelings of crypto-native users. "We need more complex security infrastructure!" ------ has become a hot topic.

Crypto venture capital firms have transformed into AI venture capital firms, that is a fact. Much of the capital from limited partners has been destroyed because they do not truly understand crypto, merely skimming the surface, and know even less about AI. Many investors who turned to crypto in 2022 will quietly return after price improvements, boasting about wanting to "return to the closest community and the crypto space I deeply understand." This is annoying but not surprising.

For crypto users during the COVID-19 pandemic, the inevitability of crypto became clear, with many of them harboring doubts about the space in 2022, although they would not admit it now. By the end of 2024, the external world remains quite skeptical about "what exactly has been built?" but for those inside crypto, this straw man argument no longer carries weight, even as a counterpoint.

2. 2025 Read After Burning (ETH)

Now, the hype cycle of cryptocurrency has fully unfolded. Gensler, as the Chairman of the SEC, has become a lame duck, and it is clear he will not continue in that role after his term ends in 2026. Although the CFTC has not yet been formally recognized as the preferred regulatory agency for cryptocurrency, it is clear this is merely a formal designation, and the U.S. has successfully avoided what was previously seen as a crisis.

All major banks and brokerages now offer some form of cryptocurrency service. Most of this business is conducted within the asset management divisions of these institutions, but each sell-side trading desk now has dedicated crypto asset teams. Major banks have not yet engaged in market-making, but this is only because the regulatory environment is changing slowly; these banks have gradually built and hired corresponding teams to prepare for this inevitability.

The four largest financial institutions in the U.S. now hold over $20 trillion in assets.

Today, the question of whether blockchain should remain public has become a more pressing debate. Very sophisticated hacks continue to stay ahead of rapidly evolving security infrastructure as the scale of this space expands, with the amounts involved in these attacks making negative headlines.

In fact, the on-chain environment is much safer compared to just 2-3 years ago. The four largest financial institutions in the U.S. now hold over $20 trillion in assets, leveraging these opportunities to push the development of private blockchains; JPMorgan attempted to launch the JPM Coin but quietly faltered in an unremarkable manner, similar to Goldman Sachs' Marcus initiative a few years ago.

The on-chain options market has finally begun to develop, as the current architecture is efficient enough to handle the complexity of pricing inputs. The proportion of crypto options in spot trading is increasing, but still only accounts for 50% (though up from 2% a few years ago). Unsurprisingly, the on-chain structured products market is thriving.

While the 2010s saw a surge and failure of many fintech lending platforms, much alternative lending activity has shifted on-chain. Data is richer, payment processing is continuous, and the diversity of global participating enterprises is limited in correlation; now there is a robust on-chain entity market that regularly issues bonds collateralized by this.

An unexpected consequence of this hype cycle is the concern over the rate of Ethereum burning (now up to 15,000 ETH per day). A debate over adjusting the reward shares for node stakers has become very controversial, with one side attempting to adjust the reward shares to stakers while the other believes such changes are unnecessary. The current state (80% burned / 20% to depositors) is good for those holding ETH, who point out that demand for ETH is very high, but without any measures taken, there are real concerns about long-term sustainability.

Complicating matters further is traditional finance's obsession with Ethereum; stable ETH yields have become an easily understood meme in traditional finance. There is intense debate over the idea of introducing "minimum/maximum deposit yields." An important social coordination development is the emergence of better frameworks to assess protocols and value crypto assets. There are now enough protocols (over 30) generating meaningful fee revenue (annualized $100 million), so no one is loudly calling for total value locked (TVL) anymore. Incentivizing initial liquidity is important, but the key metrics that most people focus on are related to:

• The number of paying addresses
• Repeat paying addresses
• "Advanced user" penetration; this is a metric developed by improved data visualization techniques that can easily show which wallet addresses will pay in the future, specific to each stage
• Allowing integrations; another new metric that measures the extent to which users authorize each protocol to execute autonomous wallet operations, gauging the protocol's "trustworthiness."

Some more mature protocols are now being valued based on fee revenue or multiples of fee generation, but there is still discussion about whether liquidity is more relevant. These multiples remain significantly higher than the multiples of current growth tech companies, but as the largest protocols now generate nine-figure fees, this gap is narrowing.

Crypto protocols and foundations leverage tokens to acquire traditional tech startups.

The approval of exchange-traded funds (ETFs) for Bitcoin (BTC) and Ethereum (ETH) has finally brought further liquidity to the space and opened the door for broader retail participation. Crypto protocols and foundations leverage tokens to acquire traditional tech startups, leading to cross-acquisitions that, while initially met with skepticism, ultimately become quite successful: the crypto industry attracts a wave of high-quality talent, while struggling startups achieve better outcomes.

In developing countries, cryptocurrency has gained significant and sustained momentum. Some developing regions in Latin America and Asia continue to experience incredible adoption rates. In some of these countries, stablecoins now account for a large portion of trading volume. Digital assets have become one of the five most widely held assets in Asia, second only to stocks, cash, fixed income, and real estate.

On the consumer side, early adopters of consumer augmented reality (AR) products were mocked for wearing bulky AR devices in public, similar to early Google Glass or first-generation AirPods wearers. However, more people are starting to wear the next generation of these devices, which are smaller, more comfortable for long-term wear, and are now socially accepted.

Crypto projects adopt AR advertising as a means to launch new networks and solidify influence among the younger generation, who have a disproportionately high adoption rate for these products. Now, users interact with AR crypto ads, completing small tasks/games/surveys and earning token rewards by providing direct feedback to the projects, inadvertently addressing many ongoing collusion attack issues.

On-chain search assistants continue to improve, with previously limited search assistants for relatively simple operations (e.g., "In the next two weeks, evenly distribute 10% of my existing stablecoin exposure across these two lending protocols") gradually maturing. Through new session keys and smart contract account innovations, users can choose to grant these search assistants varying degrees of proxy permissions.

Even if users are offline or not using their wallets, if they allow maximum proxy, search assistants can decide to execute specific actions, such as arbitraging the assets they hold in smart contract accounts or choosing to stake assets based on attractive yields. All of this can be done without explicit user instructions. Some may feel comfortable providing this level of autonomy, but there will also be costly mistakes that deter most people.

Solana Labs continues to push in the hardware space and doubles down on gaming.

The V2 version of Saga (Solana's mobile brand) has been released, significantly better than V1 (selling 500,000 units), although its success has led some other ecosystems to mistakenly believe they can replicate this success. Solana Labs continues to push in the hardware space and doubles down on gaming, announcing partnerships with virtual reality (VR) partners to build Solana-supported VR games on their own devices. The timing of this release is unclear, but its ambitious vision is undoubtedly evident.

Unsurprisingly, the influx of liquidity and higher prices has led to a resurgence of speculative enthusiasm. This time, it manifests as the proliferation of crypto gambling, with crypto-native gambling platforms flooding the market, especially in Asia, which is where the vast majority of activity is concentrated, resulting in enormous amounts overall. The annual revenue of the entire crypto gambling industry now exceeds that of traditional gambling companies like MGM (growing fivefold). Many of these projects did not consider licensing and regulatory consequences much at launch—platforms have been seen to shut down overnight when regulators crack down, particularly in the U.S. Users have suffered losses, and comparisons to Black Friday poker in 2011 are apt.

Tools with crypto functionality and their privacy guarantees show real potential - first for rare disease data collection, which has already led to some unexpected scientific breakthroughs.

The first truly scalable use case for zero-knowledge technology has become clear, and it has not appeared in the financial realm of lending/loans/institutional privacy as many expected, but rather in the growing DeSci (data science) community. After ongoing leaks of sensitive health information, health data protection and collection have become critically important. Tools with crypto functionality and their privacy guarantees show real potential - first for rare disease data collection, which has already led to some unexpected scientific breakthroughs. These surprising successes and discussions about when the cost of human genome sequencing will reach $1 have sparked interest in this technology among many in the scientific community.

The scale of multimodal transformers (referring to a type of neural network model) has become enormous (many now exceed 500 billion parameters) and are trained on images, videos, audio, and actions. The computational workload is immense. Now, multiple companies spend over $1 billion annually on training, and there is massive demand for chips, even leading to congressional proposals to limit their use. Therefore, we see a significant increase in demand for potential GPUs.

Cryptonetworks providing access to these resources are experiencing exponential growth in adoption, with leading providers rendering over 100 million frames in 2025. It is now clear that beyond financial speculation, there are many meaningful application areas, many of which address significant problems that might not be solvable otherwise.

Although the goals have not yet been fully achieved, some small groups in the energy and crypto fields are building independent infrastructure models, particularly decentralized energy resources. Microgrids are becoming increasingly popular in Texas, California, Florida, and the Southwest.

3. 2026 Important Turning Point

2026 will be remembered as a key turning point in the crypto space. This year, we finally saw the U.S. pass constructive crypto legislation.

Here are the guiding principles:

1. Clarified regulation: The CFTC is recognized as the default regulatory agency for crypto assets, while the SEC is responsible for regulating a portion of crypto assets considered security tokens.

2. Clear tax treatment: Clear tax guidance is provided for different types of crypto assets; most crypto assets are taxed as property, while stablecoins and security tokens have separate tax laws.

3. Flexible guidelines: High-level principled guidance is provided rather than specific regulations to accommodate the rapid development of the crypto space; this approach balances the need for regulatory oversight with the flexibility for ongoing innovation.

4. Minimal compliance burden: Education efforts on Capitol Hill over the past few years have made people more aware of the importance of avoiding unnecessary compliance burdens on crypto startups.

5. International cooperation is discussed, and most believe it is necessary, although there are currently issues of fragmentation and regulatory arbitrage that will take time to resolve.

The economic success of Montenegro paves the way for some existing EU member states to seriously consider leaving the EU.

Outside the U.S., we see some interesting experiments taking shape. Montenegro has become a center for digital experimentation over the past few years, adopting Ethereum (ETH) as its legal tender. This is more symbolic, although the formal adoption is the strongest signal yet that it may no longer be interested in joining the European Union. The economic success of Montenegro paves the way for some existing EU member states to seriously consider leaving the EU.

We see Asia's first attempt to introduce a large-scale controlled basic income (UBI) program.

In Asia, we further see the first large-scale attempt to introduce a controlled basic income (UBI) program. As Japan continues to face a population crisis and economic stagnation, the government has intensified its stimulus efforts. It has begun implementing digital identity verification to distribute specific tokens to residents based on predetermined income, location, and employment status. These tokens are time-limited and must be spent at registered participating merchants within a specified period, or they will be destroyed from the user's wallet. Although Western countries express concern, viewing it as dystopian; in reality, it is a desperate attempt by a government eager to stimulate economic growth and prevent young talent from leaving.

A number of new crypto payment processors have emerged from a batch of startups, and the entire crypto industry now adopts "super liquid continuous" payment methods (i.e., payments between and within all crypto-native companies are continuous rather than settled weekly/bi-weekly/monthly). This real-time payment infrastructure has spread in Asia beyond just crypto companies, with some forward-thinking traditional tech companies in the U.S. also beginning to adopt these payment channels.

In the decentralized finance (DeFi) space, several competing mature options markets have now emerged. The total trading volume of options has surpassed spot trading volume for the first time, marking DeFi's entry into a new stage of development and adoption. U.S. Treasury bonds continue to increase, with the combined value of on-chain stablecoins and Treasury bonds peaking close to $2 trillion.

The permissionless part of decentralized finance (DeFi) still generates over $100 billion in fees from more than 500 million active users.

The trillion-dollar scale of traditional assets has been transferred on-chain, with two-thirds being permissioned and one-third being permissionless. Although the permissioned pool dominates, permissionless DeFi still generates over $100 billion in fees from more than 500 million active users. Flash loans, structured products, and new infrastructure are increasingly popular but remain complex, often favoring the most sophisticated participants.

This year is also when unsecured loans begin to develop significantly, thanks to a confluence of factors: more effective reputation and identity infrastructure, the popularity of permissioned DeFi, and now clear regulatory direction. The early forms of this lending primarily emerged first in Latin America, parts of Africa, and Southeast Asia; in these regions, cryptocurrency continues to fulfill many promises. The decline in funding costs in emerging markets has sparked heated discussions about how much influence cryptocurrency has played in this transition.

Although most cryptocurrency social media users are unaware, DeSci is making continuous progress, seeking true product-market fit. Several large pharmaceutical companies are leveraging health data networks for clinical trials, obtaining richer sample sets. Due to advancements in data collection and coordination, there is optimism about better health outcomes in the future.

Somewhat controversially, a Chinese drug development company announced the development of a new cancer drug that utilizes large-scale analysis of genomic and treatment data from over a million patients in mainland China. Although the drug showed promising results in early studies, many Americans express skepticism about the validity of this claim.

Now there are very sophisticated AI agents capable of reviewing protocol documents, smart contracts, and network architectures; these agents compete with each other.

As discussions around artificial intelligence become highly politicized, some in the crypto space attempt to promote the benefits it can offer. Specifically, this information primarily revolves around data privacy, fairness in proprietary model execution, and the authenticity of content generation. In auditing and on-chain security, efficiency has significantly improved due to the emergence of AI agents. Now there are very sophisticated AI agents capable of reviewing protocol documents, smart contracts, and network architectures; these agents compete with each other, looking for the most profitable vulnerabilities in testing environments as the final simulation before protocols go live on the mainnet.

Incremental progress has been made in improving user interfaces, allowing users to publicly sign any content they publish for verification. However, social consensus has yet to form, and much work remains to be done. The music industry still faces challenges with new technologies; many artists attempt to restrict the use of any generated music that uses their likeness, while those who actively embrace and share sales revenue with new generative studios benefit the most.

We witnessed the first fictional CGI (virtual musician) artist recognized by the Recording Industry Association of America (RIAA) for five million sales. Given the slow pace of copyright law evolution, there remains some ambiguity regarding ownership of the creative works of these artists.

In a medium-sized city in northern Texas (population 100,000 to 500,000), a fully self-sufficient energy infrastructure plan powered by an emerging crypto network has been proposed. The city operates a municipal utility system that generates renewable energy from solar, wind, and battery storage systems throughout the city. Residential consumers can sell excess energy to neighbors or sell it back to the city to meet energy demands during peak times. Commercial buildings are required to purchase a minimum percentage of energy from renewable sources, further incentivizing activity on the network.

Battery storage systems throughout the city are optimized through autonomous systems, storing excess energy during the day and releasing it as needed. The municipal utility operates some batteries, while private owners can also operate and sell storage services. The city has established a decentralized autonomous organization (DAO) that allows residents to propose and vote on new incentives, cryptocurrency distribution methods, and smart city upgrades. The city also provides an open data platform to give residents transparency about energy supply and demand.

In the event of power outages, microgrids provide electricity to critical infrastructure such as hospitals. These microgrids automatically connect to on-site renewable energy generation and storage systems; residents can choose to connect their homes to these microgrids for backup power or receive compensation for contributing power and storage. This is an ambitious plan that has garnered significant interest and attention nationwide.

Emerging public layer blockchains continue to launch, and while long-time crypto natives often view them as "unnecessary" or "lacking differentiation," new consensus mechanisms are indeed developing. Developer growth remains steady, with over 500,000 active developers per month and over 100,000 full-time developers.

As 2026 draws to a close, the pace of progress accelerates, and crypto has permeated mainstream finance, expanding into other large verticals. For those directly involved in crypto work, it seems ubiquitous, although it still appears niche for some households, people have a better understanding of its widespread impact. Some in traditional tech industries attempt to shift their targets rather than acknowledge their mistakes, but at this stage, this is merely talk without any impact on progress for 2027.

4. 2027 and 2028 Approaching

Once you see what the world could look like, you can no longer be satisfied with the status quo of the real world.