(Bloomberg Opinion) -- Before I undertake the hard task of predicting where the crypto industry will go in 2025, let’s take a minute to recall where it has been. The bout of exuberance we are currently experiencing was preceded by three episodes of crypto summers followed by crypto winters — roughly three years of generally rising Bitcoin prices, and increasing capital flows and popular interest, followed by 14 months or so of sliding Bitcoin prices and serious questions about the future of crypto.
It’s tempting to assume this is the eternal pattern — in which case Bitcoin’s price might increase to around $500,000 in 2025, followed by a crash around the end of the year to a low around $100,000 in 2026 — but that misses the main point. The industry has made substantial progress. In 2014, many people thought Bitcoin and other cryptocurrencies would not survive, and that the underlying blockchains would never be more than a minor technology for niche applications. In 2018, most assumed crypto would not disappear, but that it would never deliver a social revolution comparable to the internet. In 2022, the question was whether the sector could integrate with existing regulation and financial markets or survive as an outlaw alternative similar to the dark web.
2025 will go a long way toward answering that last question. There are reasons to think the Cold War between crypto innovators and governments will end, allowing capital to move more freely between traditional and crypto sectors. Bitcoin and the “respectable” crytpo projects, backed by major venture capital firms and traditional financial institutions, could emerge into full sunlight, with projects developed by “two gals in a garage” and shadowy groups of hackers, anarchists and libertarians still in the shadows but perhaps out of the crosshairs of law enforcement. This would lead to further Bitcoin appreciation. Or crypto could remain in legal limbo with the associated volatility, with only Bitcoin and projects controlled by traditional companies having clear rules. This would not crash Bitcoin prices, but it might limit the upside.
Even in the bull scenario, crypto will continue to experience the booms and busts of technology stocks, but perhaps not the long and deep winters of the past, nor the dizzying returns of the summers. If peace negotiations fail, which also seems a plausible outcome, crypto is now mature enough to survive and even to gain strength from regulatory repression. (Disclosure: I am an active crypto investor and have venture capital investments and advisory relations with companies in the space.)
Here are five technologies that have been around for some time and are actively employed today that could see widespread adoption in 2025. If they fail, the historical pattern will probably repeat, and we can expect another crypto winter.
Decentralized Digital Identities
The dream is for individuals to store all their personal information in encrypted form on a blockchain that ensures both privacy — so that only the individual can authorize someone to see the information; and trustworthiness — authorized viewers can be confident any shared information is accurate. A decentralized system requires some type of valuable crypto tokens to pay for processing power, and to underwrite security and accuracy. Not only would this be a major crypto achievement in itself, it would make many other crypto projects feasible.
In a world where personal information is tracked in centralized conventional databases and is often inaccurate, relying on things such as photo IDs and signatures, traditional institutions have an advantage. But in a DDI world, crypto is the natural way to handle transactions, give permissions, enforce contracts and organize collective activity.
I don’t expect everyone to get a decentralized digital identity in 2025, but it will be a major plus for crypto if one or more DDI systems such as Polygon ID or World ID can sign up a few million users. If not, if such an obviously good idea can’t attract a critical mass of technophiles, perhaps crypto isn’t all it’s cracked up to be.
Oracles
A related idea is crypto solutions to getting trustworthy information online. This is a different kind of trust than that given to traditional sources such as government information, news media or textbooks — it’s information that will pay you if it’s wrong. Instead of evaluating the source of the information — its credentials, track record and incentives — your trust is based on the amount you collect if it turns out to be false.
Oracles such as Chainlink and Band already exist and are used in many crypto systems. In 2025, we may see some emerge for general information that gets widespread attention. Like DDIs, this would be a major application on its own, and one that opens the door for progress in other applications.
Zero-Knowledge Proofs
This is another approach to getting trustworthy information online and accelerating crypto acceptance. Zero-knowledge proofs have been used to prove the solvency of crypto exchanges since 2023, and 2025 could be the year they emerge for non-crypto applications. (Disclosure: I am a paid adviser to a crypto ZKP provider.)
ZKPs do not merely promise money if information is wrong, they prove mathematically that it is true. Their scope is more limited than oracles. An oracle can answer any question while existing ZKPs can only answer questions about blockchain-encoded information. They can tell you a crypto exchange is solvent or, with the help of DDIs, that a social media platform has no users under the age of 13, but not whether the Los Angeles Dodgers won the 2024 World Series.
Synergy with Artificial Intelligence
AI can benefit from the accurate information supplied by oracles and ZKPs, and also exploit DDIs to make better decisions without endangering individual privacy. There is a benefit in the other direction; AIs could become major users of crypto services in 2025. Moreover, human consumers of AI information, such as a farmer relying on an AI tool to integrate weather reports, agriculture price forecasts and other data to select an optimal planting scheme, will likely want the trust services available in crypto. They’ll want to know that the proposed crop allocation really came from the AI and that it is either provably true or backed by a significant financial bond. The two technologies together could be far more powerful and socially transformative than either on its own.
Major breakthroughs in this area are unlikely in 2025, but we could see crossover projects announced. If increasing numbers of decisions are turned over to computers, these computers will need the kind of communication and coordination tools offered by emerging crypto applications. Moreover, as more activity is coordinated by crypto, human users will likely rely more on AI to manage things.
Chips and data centers
Hardware issues may seem out of place among the sophisticated abstract software ideas above, but crypto requires massive computing power, as do AI and other emerging fields that link naturally with crypto such as computational biology. We have shortages of chips, and data centers to support the chips, and there are real questions about how to get enough electricity to run it all. Moreover, the processing sector raises sensitive national security issues.
How these questions play out in 2025 will have a major impact on the future direction of crypto and other processing-intensive sectors. Increasing supply of increasingly powerful chips, with plenty of capital and regulatory support for building and connecting data centers, and abundant electricity should accelerate progress. Without those things, we could see progress slowed or halted.
A related question is who will own the data centers. Will large providers and users such as Amazon.com Inc. supply their own processing needs and rent out processing to smaller users? Will independent data centers sell to the highest bidders? Will governments impose controls on the market? The answers to these questions in 2025 will help us understand the future direction of crypto.
More From Bloomberg Opinion:
- Is Bitcoin at $100,000 a Last Laugh for HODLers?: Lionel Laurent
- Bitcoin Reserve Could Be the Biggest Crypto Scam Yet: Editorial
- Bitcoin Jump Reminds Me of Netscape’s Rise and Fall: Aaron Brown
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