As we bid farewell to 2024, it’s clear that the past year has laid the groundwork for pivotal shifts in the Web3 landscape. These are the top 5 impactful trends that stood out to us at Sodot:
1. Regulation Gains Momentum Leading to Business Growth
This year saw regulatory frameworks solidify across major markets:
- Europe: The Markets in Crypto-Assets (MiCA) regulation came into effect, providing a comprehensive framework for digital assets in the EU. The regulatory clarity has set the stage for business activity, including investments and acquisitions.
- United States: The House passed the Financial Innovation and Technology for the 21st Century Act (FIT21) to establish clear regulatory guidelines for digital assets. The election of Donald Trump leads the way for it to be a positive framework for Web3.
- Global: Other than China, countries like the the UAE and Singapore are racing to create Web3 regulatory frameworks to attract business activity.
- Our take:
- Regulatory clarity leads to business growth and the other way around. It’s as simple as that.
- The EU saw investments and acquisitions aimed at obtaining licenses to operate in the EU, such as Paxos acquiring Membrane and Tether investing in StablR.
- In the U.S., banks and financial institutions, encouraged by the elections, are moving aggressively to catch up with their European peers. We are also seeing the first (and definitely not the last) crypto-native IPOs this cycle, led by Exodus.
2. The Stablecoin Frenzy
Stablecoins cemented their role as the first major Web3 use case to impact global payments, offering instant, low-cost cross-chain settlements. This trend presents both an opportunity and a threat to industry giants.
- The stablecoin market, valued at ~$200B, remains dominated by Tether ($140B) and Circle ($40B), with a ground-breaking profitable activity.
- The desire to get a piece of the pie led to a frenzy. From acquisitions (such as Stripe acquiring Bridge for $1.1B) to industry leaders issuing their own stablecoin, inc. Revolut, BitGo, Ripple, and a joint stablecoin for Robinhood, Anchorage, Kraken and others led by Paxos).
- Our take:
- This trend is likely to continue with full force, with larger and slower-acting Trad-Fi industry giants expected to follow.
- There is a growing question of whether every ecosystem will have a stablecoin or whether we will see a consolidation. In 2025, we expect to see the first.
- Secure custody is a must-have for this growing sector, as well as wallets that serve as a distribution channel. MPC tech is foundational for both.
3. AI x Crypto: A Convergence Begins
The AI takeover found its way to mainstream Web3.
- AI-powered Web3 applications are gaining traction. Moreover, and perhaps more impactful, is that stablecoins are likely to be the native currency in the AI-agentic economy, used for micropayments between AI agents.
- Our take:
- The potential is immense. The infrastructure doesn’t exist. The race to build it draws the best minds, backed by top investors.
- Security is likely to be a significant area of focus required for actual adoption - instead of millions of private keys that can be potentially lost/stolen - it will be billions.
- We believe MPC tech will dominate, not only in solving the problem of lost/stolen private keys, but also because it enables providing agents with partial permissions and ensures they transact according to the user’s intent.
4. The Challenge of Securing Sensitive Keys Persists
Compromised keys remain one of the main pain points in Web3. In addition to private keys, stolen API keys are a growing attack vector.
- $340M was stolen in Q3/2024 alone due to private key exploits (Certik report).
- Emerging threat: Exchange API key hacks prove to be an attack vector that is gaining traction as a favorable go-to, with new sophisticated methods of stealing funds via trading (i.e., not requiring permissions for withdrawing funds from the exchange).
- Internal threats: We saw the rogue employees' threat affect Web3 with full force, as Coindesk found evidence that more than a dozen Web3 companies unknowingly hired IT workers from North Korea and subsequently got hacked.
- Our take:
- Web3 security companies are expected to continue flourishing, with large industry players entering the space either by acquisitions (Chainalysis acquiring Hexagate) or by building a new activity (such as Checkpoint).
- We see great synergy between secure key management and transaction security. Both are required to keep funds safe.
- For secure key management, MPC continues to prove its value in hardening security against internal and external attack vectors, by distributing the risk of compromising a key across different admins, tech stacks, cloud providers and even geographies.
5. This is a Multichain Bull Run
Unlike the Ethereum-led bull run of 2021, this cycle is multichain.
- Significant activity on blockchains such as Solana, Aptos, Sui, Ton, and others has been able to draw heavyweights like BlackRock, Société Générale, and JP Morgan to a adopt a multi-chain strategy.
- Our take:
- Major players launching L2s (From Coinbase’s Base to Metamask’s Linea and soon Kraken’s Ink) are contributing to this trend. It's hard to imagine they will all succeed.
- The ability to receive yield on Bitcoin is another major trend expected to grow in 2025.
- Blockchain-agnostic infrastructure, such as MPC, thrives in cross-chain applications, making it essential for the future.
That’s a wrap. What an exciting year it has been, and we can’t wait to see what 2025 will hold for the Web3 space.
