• The Exponential team

What’s next for crypto in 2025?

• Uniswap lost some ground in 2024 to newer players like Aerodrome and Fluid. With the launch of V4 expected soon, will its new features see Uniswap return to dominance or will newer innovations continue to take share? The key update to look out for is the introduction of hooks, which allows for custom code to be executed before and after swaps.

• The Aave renaissance in 2024 saw net deposits hit a record high of $35B as users flocked to the largest decentralized lending protocol to earn yield and leverage their positions. The anticipated V4 upgrade planned for mid-2025 will introduce a unified liquidity layer that will aggregate liquidity across multiple networks within a single protocol.

• Trump’s World Liberty Financial ended the year on a buying spree of key DeFi tokens including AAVE, ETH, cbBTC and LINK. There is little detail available on the protocol but it is expected to be a lending and borrowing platform built on top of Aave. All eyes are on the incoming President’s next DeFi moves in 2025.

• Babylon was the hottest BTCFi protocol in 2024, taking in over 57,000 BTC deposits (>$6B), and placing it firmly in the top 10 DeFi protocols by TVL. Staking rewards are set to go live this year, unlocking native yield on BTC for the first time. Where will Babylon’s TVL be by the end of 2025?

• A multitude of Bitcoin Layer 2 rollups are live now on mainnet, enabling more productive use cases for BTC holders like staking, lending/borrowing and market making. Among the many options (Bitlayer, BSquared, BOB, Rootstock, AltLayer, Merlin, Stacks, and CORE), which ones will ultimately rise to the top?

• Tokenized real-world assets (RWAs) reached a new all-time high of $14B market cap in 2024, and institutional interest is only growing. RWAs are closing the gap between traditional finance and DeFi, by onboarding traditional assets like Treasuries, bonds and real estate to decentralized blockchains.

• Challenges remain, including regulatory uncertainty and standardization issues that could hinder adoption. Moreover, there is a growing concern of counterparty risk. As more traditional assets come on-chain, what are the potential consequences for DeFi users?

• AI agents are the latest craze in crypto. Think of them as digital workers that execute tasks or make decisions autonomously like managing a portfolio or posting social content. The proliferation of these agents could reshape how institutions and retail users interact with crypto markets.

• As the dominant AI agent platform, Virtuals Protocol enables anyone to create and deploy agents to perform on-chain tasks. Its native token, VIRTUAL, soared to a $5B market cap on the AI wave, benefitting from several successful launches, such as AIXBT, which has already become a highly followed X influencer.

• Restaking will face its first big test in 2025 as slashing mechanisms are set to go live on mainnet, introducing real risks for participants and the broader restaking ecosystem. This will likely have an impact on the expected restaking yield as users reassess their portfolio risks.

• Over $25B of deposits are already staked in restaking platforms like EigenLayer and Symbotic, but adoption thus far has been driven by the allure of airdrop rewards. Will we see certain services like oracles and bridges start offering more sustainable yield sources from transaction fees?

• Protocols and exchanges are increasingly launching their own rollups/blockchains, after seeing the success of Coinbase with Base. The most notable recent examples include Uniswap’s Unichain and Kraken’s Ink chain.

• Sovereign chains promise better scalability and cost savings for DeFi protocols, but fragmentation of liquidity is a growing concern. This trend raises important questions about interoperability and whether DeFi can thrive across so many isolated chains.

In the news 🗞️

• Franklin Templeton plans more crypto ETFs in 2025. Franklin Templeton aims to expand its crypto offerings in 2025, focusing on new ETFs for assets like Solana and XRP under clearer regulations. The firm is also growing its OnChain US Government Money Fund (FOBXX) as a yield-bearing alternative to stablecoins and plans to take its tokenized fund global.

• Tether boosts Bitcoin reserves. Tether added 8,404 BTC ($777.4M) to its corporate reserve, its largest move since March, bringing total holdings to 83,759 BTC ($7.75B). This solidifies Tether as the third-largest Bitcoin holder globally, promoting corporate adoption of Bitcoin as a treasury asset.

• Avalon Labs secures $10M to expand Bitcoin DeFi. Avalon Labs, issuer of the BTC-backed stablecoin USDa, raised $10M in a Series A round led by Framework Ventures to grow its Bitcoin DeFi ecosystem. USDa allows users to collateralize BTC for stablecoins at a fixed 8% borrowing rate, reaching $700M in TVL.

• Solana liquid staking platform Jito surpasses $400M in revenue in Q4. Jito achieved a record $400M in revenue for Q4, a 504% increase from Q3, surpassing Ethereum’s Lido. The platform’s success, driven by both staking and MEV rewards, has fueled Solana's DeFi growth, with its TVL rising 125% this year.