Future of Cryptocurrencies: From Seeking Mass Adoption to the Turning Point in 2026

The Future of Cryptocurrencies: The Turning Point in 2026

Author: 0XSMAC & COMPOUND CRYPTO, compiled by Block unicorn

Introduction

At Compound Crypto, we believe in establishing a variety of future perspectives that we strongly believe in across all of our core focus areas. We do this over long timeframes and multiple cycles, because the best way to learn about things is to study them as they begin to decompose.

By 2023, cryptocurrency is doing just that in some ways. Facing an uncertain future, inevitable tailwinds and powerful headwinds, we’ve been internally trying to think through subtle progressions in categories we care deeply about. This has led to a vivid exploration of how our world develops year after year in granular detail, and how the cryptocurrency industry and technology play a role in that evolution.

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2023-2024: Seeking Mass Adoption

DeFi is back, but not in the way many expected. Our total DeFi users quietly surpass 30 million, but the speed of adoption has been bittersweet for some; activity in KYC products that have acquired permission has exploded. Public opinion is mixed, with some seeing broader participation and continued entry of traditional institutions into the space as adding value to their investments. Others claim that white-glove financial service products, now available through forward-thinking traditional financial institutions, particularly for high net worth individuals, are eroding the essence of cryptocurrency.

Native permissionless DeFi usage has returned to a lesser degree. Large amounts of US Treasury bonds have been put on-chain, both through synthetic offshore operators and those subject to more regulation, but slower to act, onshore operators. Although stablecoin trading volume has surpassed $500 billion, the new metric that cryptocurrency is focused on measuring for scale is stablecoins + treasuries, which peaked over $1 trillion during this period.

Although the maturity of on-chain options markets has increased due to institutional liquidity flows, they are not yet fully in place. Now, the development path seems viable. This is manifested through exchanges offering perpetual contracts and options, allowing for cross-chain margin and dynamic risk engines. The most exciting new primitives are mobile application wallets, where account abstraction wallets lower the barrier to entry for new users and provide multi-chain, multi-asset yield generation. Many other companies claim to do this, but the user interface and product details are the key to standing out.

Games are not the killer use case to attract new people to the space, and there is almost no return on investment for the hundreds of millions of dollars poured into crypto games by the end of 2024. Game trailers continue to be released, but no native crypto games have seen any meaningful sustained attention. Crypto games have started to take on the sort of meme of zk technology from 2017-2020 (“don’t worry, this year is the year, it’s coming”) but the performance of blockchain for fully on-chain, persistent state-changing games is still not there, and building an engaging off-chain game with on-chain assets takes longer than expected.

The “user adoption” unlock comes from smarter, more user-friendly, guided search that makes it easy for regular people to explore on-chain games, and there are many revisionist historical points of view that this was obvious. Wallets with advanced on-chain search assistants that seamlessly integrate and interact with wallets are there. Queries like “show me the most popular NFTs from last month” or “buy me $100 of ETH in the next 2 hours” are just some of the queries that anyone can do from increasingly fluid interfaces that look more like Runway products than Notion tables. From an app integration standpoint, we’re not entirely there yet, but it’s clearly the direction.

The more advanced user operations will soon include things like “show me a list of stablecoin farm yields launched last month with an annual rate between 10-20%. Spread my existing 10% stablecoin risk evenly across these stablecoins in the next 2 weeks.” Actual adoption is exaggerated, but mostly because there aren’t a lot of new non-financial things that can be done on-chain.

“Solana positions itself as the leader in mobile development, enabling developers to more easily build applications in the blockchain and mobile space.”

Despite the continued disappointment of games, the only bright spot is Solana, which is viewed as the gaming chain on desktop and increasingly on mobile. Its lead in building for the mobile experience paid off as there are a ton of mobile Solana games launched on Saga that are seen on the network. Saga’s (Solana’s mobile brand) sales are not amazing (selling 50k-100k units) but Solana has established itself as the leader for non-native developers focused on mobile.

Polygon is behind in this regard, as it lacks Solana’s game throughput performance, and in the early stages of these limited games, composability was not as important. Polygon has made good use of its strengths, as the most adept at attracting Web2 brand partnerships, and bringing web enterprises into Polygon to develop cryptocurrency layers, further solidifying its position as a factual retail “loyalty program” partnership channel.

In the cryptocurrency field, some social applications are temporarily attractive, but most of the depth of differentiation and new behavior enablement is quite shallow. Although by the end of 2024, people feel that this vertical field finally has enough talented cryptocurrency product talents 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 and 25,000 full-time developers.

As always, when the bull market continues to advance, animal spirits dominate and privacy concerns are put on the back burner. For this reason, the development of zkEVMs appears to be relatively slow, although there are some new developments in very specific use cases for privacy technology (most notably health and location data). But overall, people still don’t care about privacy.

Hong Kong is taking action quickly to continue to attract the entire cryptocurrency industry. It saw an opportunity because the United States is in a presidential election year and will not spend too much time on cryptocurrency regulations or supervision. Unfortunately, this has led to cryptocurrency becoming a partisan issue in Washington, with Republicans calling for a looser regulatory framework while also threatening the possibility of the US losing to China. On the other hand, Democrats are calling for more regulations, rules, and constraints on freedom, strongly opposing the cryptocurrency stance. Although experts on cryptocurrency policy are struggling to avoid this partisan split, both parties are just catering to their voters.

Concerns about anti-utopian CBDCs have been reduced because the launch of FedNow (the US Federal Reserve System) is not impressive. Some banks are using it, but it is just an upgraded version of the SWIFT railway with some limited surface decentralization. From all intentions and purposes, it has almost no practical meaning.

Looking at the positive side, we have seen bipartisan support for US custodial stablecoin regulation, with a bill very similar to the Toomey bill passing. There is still no clear ruling on how cryptocurrencies will be treated (as commodities or securities) from a legislative standpoint. However, some legal precedents have provided the industry with what it sees as “strong enough” clarity, making it feel less stifled. Many in the cryptocurrency community overemphasized the significance of this regulatory viewpoint when a Republican (as a narrow loser) won the presidential election, starting an undeserved frenzy. Gary Gensler (SEC Chairman) retains his position and continues to be a thorn in the side of the cryptocurrency industry, although his influence is waning.

“Seemingly safe major protocols (Uniswap, Aave, Curve) will become the victims of the biggest hack in crypto history.”

As the space continues to expand, one negative consequence is the proliferation of increasingly complex hacks. Seemingly safe major protocols (Uniswap, Aave, Curve) will become the victims of the biggest hack in crypto history. This has sparked warnings about security. As a narrative, security has become a hot topic of investor concern, with much of the discussion revolving around the fact that we now have “real” non-local users. These people are uncomfortable with the idea of conventional fraud, vulnerabilities, or malicious contracts, unlike native cryptocurrency users. “We need more complex security infrastructure!” has become a popular topic.

Crypto venture capital firms have turned into AI venture capital firms, that’s a fact. Many limited partners’ capital has been destroyed because they never really understood crypto, only scratching the surface and being ignorant of AI. Many investors who turned to crypto in 2022 will quietly return after price improvements, boasting that they’re “returning to the closest communities and the crypto fields I know best.” It’s annoying but not surprising.

For crypto users during the coronavirus, the inevitability of crypto became clear, and many of them were skeptical about the field in 2022, although they won’t admit it now. By the end of 2024, the outside world will still hold considerable skepticism about “what has actually been built?” but for those inside crypto, this strawman argument no longer carries weight, even as a dissenting view.

2025: Ephemeral Token (ETH)

Now, the hype cycle for cryptocurrencies has fully unfolded. Gensler, as the Chairman of the US Securities and Exchange Commission (SEC), has become a lame duck, and it is clear that he will not continue in that position after his term ends in 2026. While the US Commodity Futures Trading Commission (CFTC) has not yet been officially designated as the preferred regulator for cryptocurrencies, it is clear that this is only a formalism, and the US has successfully avoided the crisis that was previously seen as imminent.

All major banks and brokerages now offer some form of cryptocurrency service. Most of these businesses are conducted in the asset management departments of these institutions, but every sell-side trading desk now has a dedicated crypto asset team. Major banks have yet to make markets in the space, but this is only because regulatory shifts have been slow, and these banks have gradually been building and hiring the necessary teams in preparation for the inevitability.

The four largest financial institutions in the US now hold over $20tn in assets

Now, the question of whether blockchains should remain open has become a more urgent point of contention. Very sophisticated hackers continue to stay ahead of rapidly developing security infrastructure, and as the scale of this space expands, the amounts involved in these attacks have become headline-grabbing negative news. In fact, the on-chain environment is much more secure than just 2-3 years ago. The four largest financial institutions in the US now hold over $20tn in assets, and are using this opportunity to push the development of private blockchains; JP Morgan attempted to launch JPM Coin, but it died a quiet death, similar to Goldman Sachs’ Marcus plan several years ago.

The on-chain options market is finally developing, as now the architecture is efficient enough to handle the complexity of pricing inputs. The proportion of crypto options in spot trading is growing, but still only accounts for 50% (though it has grown from 2% just a few years ago). As expected, the on-chain structured product market is booming. While the 2010s saw the emergence and failure of numerous fintech lending platforms, many alternative lending activities have migrated to the chain. Data is richer, payment processing is continuous, the diversity of globally participating entities is limited, and now there is a robust on-chain market for real-world assets that regularly issue bonds backed by them.

One unexpected consequence of this hype cycle is concern over the speed at which Ethereum is being burned (up to 15,000 ETH per day now). There has been a contentious discussion around adjusting the reward share for stakers, with one side pushing to adjust the reward share to stakers and the other arguing that such a change is unnecessary. The current state (80% burned/20% given to depositors) is good for ETH holders, who point out that demand for ETH is very high, but there are real concerns about long-term sustainability if no action is taken.

Further complicating the issue is the traditional finance industry’s fascination with Ethereum; stable ETH yields have become a familiar meme for traditional finance to latch onto. There is fierce debate around the idea of introducing “minimum/maximum deposit yields.” A significant social coordination development has been the emergence of better frameworks for evaluating protocols and valuing crypto assets. There are now enough protocols (30+) generating meaningful fee revenue (annualizing at $100M+) that no one is shouting total value locked (TVL) anymore. Incentivizing initial liquidity is important, but most people are focused on key metrics related to:

• Number of paying addresses

• Repeat paying addresses

• “Advanced user” penetration; an indicator developed with improved data visualization techniques that makes it easy to see which wallet addresses will be paying in the future, broken down by each phase

• Allowances integration; another new metric that measures a protocol’s “credibility” by measuring the degree to which users authorize each protocol to execute autonomous wallet operations.

Some of the more mature protocols are now being valued based on multiples of fee revenue or fee generation, but there is still debate over whether liquidity is a more relevant metric. These multiples are still significantly higher than those of currently growing tech companies, but the gap is narrowing as the largest protocols now generate nine-figure fees.

Crypto protocols and foundations using tokens to acquire traditional tech startups

Bitcoin (BTC) and Ethereum (ETH) exchange-traded funds (ETFs) are finally approved, bringing further liquidity to the space and opening the door to wider retail participation. Crypto protocols and foundations using tokens to acquire traditional tech startups are beginning to see cross-acquisition, which was initially met with skepticism but has ultimately proven quite successful: the crypto industry attracted a wave of high-quality talent, while struggling startups received better outcomes.

In developing countries, cryptocurrencies have 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 the majority of transaction volume. Digital assets have become one of the top five assets held 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 ridiculed for wearing bulky AR products in public, much like early Google Glass or first-generation AirPods wearers. However, more and more people are starting to wear the next generation of these devices, which are smaller, more comfortable to wear for extended periods, and now socially accepted.

Crypto projects are adopting AR ads as a means to launch new networks and solidify influence among the younger generation, who have disproportionate adoption rates in using these products. Now, users interact with AR crypto ads, complete small tasks/games/surveys, and earn token rewards by providing direct feedback to the project, inadvertently solving many ongoing collusion attack problems with this new behavior.

On-chain search assistants continue to improve, with search assistants, previously limited to relatively simple operations (e.g., “uniformly allocate 10% of my existing stablecoin exposure into these two lending protocols over the next two weeks”), gradually maturing. Through new session key and smart contract account innovations, users can choose to provide varying degrees of proxy authority to these search assistants. 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 assets owned in smart contract accounts or selecting staking assets based on attractive yields. All of this without explicit user instruction. Some will be comfortable with this level of autonomy, but expensive mistakes will also 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, is released and is significantly better than V1 (sold 500,000 units), although its success led some ecosystems to mistakenly believe they could replicate this success. Solana Labs continues to push in the hardware space and doubles down on gaming, announcing a partnership with a virtual reality (VR) partner to build Solana-supported VR games on their own devices. The timing of the release is unclear, but its ambitious vision is without question.

As expected, the high liquidity and increased prices led to renewed speculation. This manifested in the proliferation of crypto gambling, with native crypto gambling platforms flooding the market, particularly in Asia, where the vast majority of activity is concentrated and the amounts involved are enormous. Annual revenues for the entire crypto gambling industry now exceed those of traditional gambling companies like MGM, growing fivefold. Many of these projects did not consider the licensing and regulatory consequences too much at launch – we saw platforms shut down overnight when regulators cracked down, especially in the US. Users were left with losses, and the comparison to Black Friday in poker in 2011 is apt.

Tools for encrypted functionality and their privacy guarantees show the true potential – first for rare disease data collection and aggregation, which has already led to some unexpected scientific breakthroughs

The first truly large-scale use case of zero-knowledge technology became clear, and it did not appear in the lending/loan/privacy of financial institutions that many expected, but in the rapidly growing DeSci (data science) community. Health data protection and collection became very important after continued leaks of sensitive health information. Tools for encrypted functionality and their privacy guarantees show the true potential – first for rare disease data collection and aggregation, which has already led to some unexpected scientific breakthroughs. These surprising successes, as well as discussions about when the cost of human genome sequencing will reach $1, have piqued the interest of many in the scientific community.

Multi-modal transformers (referring to a type of neural network model) have become very large in scale (many now exceed 500 billion parameters) and are trained on images, videos, audio, and motion. The computational workload is enormous. Multiple companies now spend over $1 billion per year on training, with chip demand being massive and even Congressional bills being introduced to restrict their use. As a result, we see exponential growth in the adoption rate of encrypted networks that provide access to these resources, with leading providers rendering over 100 million frames by 2025. It is now clear that there are many meaningful applications beyond financial speculation, with many addressing significant problems that may not have been solvable in other contexts.

Although not fully realized, 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.

2026: A Pivotal Turning Point

2026 will be reviewed as a critical turning point in the crypto space. That year, we finally see the US pass constructive crypto legislation.

Here are the guiding principles:

1. Clarify Regulation: The CFTC is designated as the default regulator of crypto assets, while the SEC is responsible for regulating a subset of crypto assets deemed to be securities tokens.

2. Clear Tax Treatment: Give clear tax guidance for different types of crypto assets; most crypto assets are taxed as property, while stablecoins and security tokens have separate tax laws.

3. Flexible Guidance: Provide high-level principle-based guidance rather than specific rules to accommodate the rapid development of the crypto space; this approach balances the need for regulatory oversight with the flexibility of continued innovation.

4. Minimal Compliance Burden: The education work on Capitol Hill over the past few years has 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 with fragmentation and regulatory arbitrage that will take time to resolve.

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

Outside the US, we see some interesting experiments taking shape. Montenegro has become a hub for digital experiments over the past few years and has adopted Ethereum (ETH) as its official currency. This is more symbolic than anything, but the formal adoption is the strongest signal to date that it may no longer be interested in joining the European Union. The economic success achieved by Montenegro paves the way for some existing EU member states to seriously consider leaving the EU.

We see Asia’s first attempt at introducing a large-scale controlled Basic Income (UBI) program

In Asia, we further see the first attempt to introduce a large-scale controlled Basic Income (UBI) program. As Japan continues to face a population crisis and economic growth stagnation, the government has stepped up efforts to stimulate activity. It began implementing digital identity authentication and issuing 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. Despite concerns from Western countries that it has a dystopian hue, in fact, this is a government’s desperate attempt to promote economic growth and prevent the outflow of young talents.

Several new crypto payment processors have emerged from a large number of startups, and the entire crypto industry is now using “superfluid continuous” payment methods (i.e., payments between and within all local crypto companies are continuous, rather than weekly/biweekly/monthly settlements). This real-time payment infrastructure has been promoted beyond just crypto companies in Asia, and some forward-thinking traditional tech companies in the US are adopting these payment channels as well.

In the decentralized finance (DeFi) field, several competing mature options markets have emerged. The total trading volume of options first exceeded that of spot trading, and DeFi entered a new phase of development and adoption. US Treasury bonds continue to increase, and the combined value of on-chain stablecoins and Treasury bonds approaches $2 trillion at its peak.

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

Trillions of dollars in traditional assets have been transferred to the chain, two-thirds of which are permissioned and one-third permissionless. Despite the dominance of the permissioned pool, permissionless DeFi still generates over $100 billion in fees from more than 500 million active users. Flash loans, structured products, and new infrastructure are becoming increasingly popular, but are still complex and often more favorable to the most sophisticated participants.

This year is also a significant year for unsecured loans, thanks to the convergence of various factors: more effective reputation and identity infrastructure, the popularity of permissioned DeFi, and now clear regulatory directions. The early forms of this type of loan first appeared mainly in Latin America, parts of Africa, and Southeast Asia; in these regions, cryptocurrencies continue to fulfill many promises. The cost of funds in emerging markets is falling, sparking heated discussions about how much influence cryptocurrencies play in this shift.

Despite most cryptocurrency social media users being unaware, DeSci is making strides towards true product-market fit. Several major pharmaceutical companies are leveraging health data networks for clinical trials and obtaining richer sample sets. Optimism for better health outcomes in the future is high due to advances in data collection and coordination.

Controversially, a Chinese drug development company announced the creation of a new cancer drug that utilized large-scale analysis of the genomes and treatment data of over one million mainland Chinese patients. While the drug showed promising results in early studies, many Americans are skeptical of the claim’s validity.

There are now highly complex AI agent programs capable of reviewing protocol documents, smart contracts, and network architecture; these agents compete against each other

As discussions of artificial intelligence become increasingly politicized, some in the crypto field are attempting to tout the benefits they can provide. Specifically, this information revolves around data privacy, the fairness of proprietary model execution, and the veracity of content generation. Efficiencies have significantly increased in auditing and on-chain security due to the emergence of AI agent programs. There are now highly complex AI agent programs capable of reviewing protocol documents, smart contracts, and network architecture; these agents compete against each other to find the most lucrative vulnerabilities in testing environments as a final simulation before going live on the mainnet.

Progress has been made in improving user interfaces to allow users to publicly sign any content they publish for verification. However, social consensus has yet to form, and there is still much work to be done. The music industry still struggles with new technology; many artists try to restrict any music generated using their likeness, though those who embrace and share revenue from new generative studios benefit most. We witnessed the first fictional CGI (virtual musician) to be recognized by the Recording Industry Association of America (RIAA) as having sold five million units. Given the slow pace of copyright law evolution, there is still some ambiguity as to ownership of these artists’ creative works.

A fully self-sufficient energy infrastructure plan powered by emerging crypto networks has been proposed in a medium-sized city (10,000-50,000 population) in north Texas. The city operates a municipal utility system that generates renewable energy using solar, wind, and battery storage systems throughout the city. Residential consumers can sell excess energy to neighbors peer-to-peer, or back to the city to meet energy demand during peak hours. Commercial buildings are required to purchase a minimum percentage of energy from renewable sources, further incentivizing activity on the network.

The battery storage systems throughout the city are optimized by autonomous systems, storing excess energy during the day and releasing it as needed. The city’s public utilities operate some of the batteries, and private homeowners can also operate and sell energy storage services themselves. The city has set up a decentralized autonomous organization (DAO) that allows residents to propose and vote on new incentive measures, cryptocurrency distribution methods, and smart city upgrades. The city also provides an open data platform to give residents transparency into energy supply and demand. In the event of a power outage, microgrids provide power 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 residences to these microgrids to receive backup power or earn rewards for contributing power and storage. It is an ambitious plan that has generated significant interest and attention nationwide.

Emerging base layer public blockchains are constantly being launched, and while long-time crypto natives often view them as “unnecessary” or “lacking differentiation,” there are new consensus mechanisms in development. Developer growth remains steady with over 500,000 monthly active developers and over 100,000 full-time developers. As 2026 draws to a close, progress is accelerating, and crypto has penetrated into mainstream finance and is expanding to other large verticals. For those who are directly involved in crypto, it seems ubiquitous, although it still appears niche to some households, people have a better understanding of its far-reaching impact. Some people in traditional tech industries are trying to change their targets rather than acknowledging their mistakes, but at this point, it is just talk and has no bearing on the progress in 2027.

2027 and 2028 are Coming

Once you see what is possible in the world, you can never be satisfied with the status quo of the real world.

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