Happy New Year - hopefully 2025 is peaceful and full of laughter as laughing helps us from not taking ourselves too seriously and, more, importantly is simply fun!
Digital Bytes’ predictions for 2025
According to the Cambridge Dictionary, 2024’s word of the year was ‘brain rot’:
“Brain rot gained new prominence this year as a term used to capture concerns about the impact of consuming excessive amounts of low-quality online content, especially on social media. The term increased in usage frequency by 230% between 2023 and 2024.”
These are our predictions from last this time year: how did we fair?
Writing predictions as we do every year and then reporting on them 12 months later seems like ‘marking your own homework’. So, this year we used an AI platform (as shown in green) to give us its analysis of those predictions we had made this time last year.
· Market makers profile to grow
Market makers are set to become more important as the demand for independence of pricing digital assets grows, especially for funds, given the fall-out from the Neil Woodford fiasco and Link Group agreeing to pay £60 million in compensation: “Yes, market makers' profiles significantly grew in 2024, driven by increased activity in both traditional financial markets and the expanding cryptocurrency sector. The evolution of algorithmic trading, decentralized finance (DeFi), and tokenized assets created more opportunities for market makers to provide liquidity across diverse trading platforms.”
· Digitization of funds set to expand
According to the UK Investment Association - “UK authorised funds have been given the green light to develop tokenisation, following the establishment of the new Technology Working Group of the Government's Asset Management Taskforce earlier this year to harness the potential of innovative technologies for the UK asset management industry”: “Yes, the digitization of funds expanded significantly in 2024, driven by technological advancements, regulatory support, and increasing adoption of digital financial systems across various sectors”.
· Will 2024 be when we see Layer2 blockchains adopted?
Layer2 protocols are blockchains designed to make other blockchains more efficient. Parth Gargava, Product Architect at Fidelity Labs, says: “The improvements in blockchain infrastructure mean that you will likely not have these bottlenecks in congested blockchains and users complaining about high fees,” adding that, “these infrastructure railroads could create opportunities for new projects during the next potential bull market”: “ Yes, 2024 marked a significant year for the adoption of Layer 2 blockchains as their integration into various blockchain ecosystems gained substantial momentum. The adoption was driven by the demand for scalable, cost-efficient, and faster solutions to address the limitations of Layer 1 blockchains like Ethereum.”
· Money market funds, an alternative bank account
According to PwC, the total value of funds is expected to reach $145trillion by 2025 (almost 100 times the size of the crypto market). Pace will accelerate for the tokenization of funds initially guided by the tokenization of cash mutual funds following the lead for global asset managers such as Abrdn, Blackrock, Franklin Templeton and Amundi Asset Management. Tokenized products will be introduced by the top 10 asset managers: “In 2024, money market funds (MMFs) gained increasing attention as viable alternatives to traditional bank accounts, particularly in the context of rising interest rates and evolving consumer preferences for financial flexibility and returns.”
· NFTs are likely to receive more attraction
In 2023 we saw Harry Styles’ success in using NFTs, and now it is being predicted that Taylor Swift (whose recent global tour, Era, expected to be the first to gross over the $1billion) is also looking to use NFTs as a tool for fan engagement. But for all business, remember to be a farmer not a hunter - i.e. look after your existing clients as well as looking for new customers as it is easier to sell more goods and services to existing clients than onboard new ones. So, could we see more companies engaging with NFTs as a tool to customer loyalty programs?: “In 2024, NFTs (non-fungible tokens) gained renewed attention and attraction across various industries, signalling their ongoing evolution beyond mere collectibles. 2024 solidified NFTs as a multifaceted tool with growing applications, marking their evolution from niche digital assets to mainstream instruments with tangible benefits. This year showcased their potential for enhancing both digital and real-world experiences.”
· How long before we start to see traditional stock exchanges begin to trade digitized funds, equities, real estate, bonds, etc?
There are just under 2,000 companies listed in the UK on the London Stock Exchange in Q2 of 2023, a fall of 23% since the Q1 2023. Yet, according to the Investment Association, there are 4,500 funds in the UK. As we see more funds being digitized and listed on digital exchanges such as Archax (UK), SIX (Switzerland), Swarm (Germany) and ADX (Singapore), surely traditional exchanges will either buy one of these digital exchanges or simply start trading the digitized funds themselves? Highly probable is that traditional stock exchanges will start to use more blockchain-powered platforms for smaller low regulation listings. We asked: “In 2024, did we see more traditional stock exchanges looking to use blockchain technology?”: ”The growing adoption of DLT and blockchain by traditional stock exchanges in 2024 highlighted a broader trend of financial digitization. These technologies not only streamlined existing processes but also opened new opportunities in tokenized assets and cross-border trade. The year underscored the transformative potential of blockchain in reshaping traditional financial markets.”
· Greater use of digital payment products and services
As globalization continues, businesses will look to overseas markets drive revenue. Juniper Research estimates that cross-border eCommerce transactions will grow 107% over the next 5 years, to exceed $3.3 trillion in value: “The momentum seen in 2024 for digital payments is expected to accelerate further, with advancements in blockchain-based payment solutions, AI-driven fraud detection, and the potential rollout of central bank digital currencies (CBDCs). This shift underscores a global move towards a more cashless and efficient economy.”
· ETFs start trading cryptos
Led by Bitcoin, ETFs have been approved in US and UK and so lead to greater engagement of crypto by institutions: “Following the successful launch of several ETFs investing in cryptocurrencies it has laid the groundwork for the continued growth of cryptocurrency as an institutional-grade investment. With innovations in fund structures and further regulatory clarity, the coming years are likely to see even greater adoption of crypto ETFs, expanding beyond Bitcoin and Ethereum to include more diversified and innovative offerings.”
· Sustainability will drive investment
Blockchain, with big data, automation, artificial intelligence and platformization will drive sustainability measurement, investment and transparency. Web3 will be the infrastructure that connects social and environmental values between companies and people (such as green bonds, social impact bonds, company loyalty schemes and carbon accounting): “Yes, in 2024, sustainability continued to be a significant driver of investment decisions globally. The increasing emphasis on environmental, social, and governance (ESG) criteria and sustainable finance reflected a shift in investor priorities toward long-term resilience, ethical practices, and environmental stewardship. Below is an overview of the trends and developments.”
· Expect to see more CBDCs
100% fiat-backed stablecoins will become more widespread in 2024. They will be required as equities, bonds, funds and real estate become increasingly digitized. Indeed, Citi Group believes: “Tokenization of financial and real-world assets could be the killer use case driving blockchain breakthrough with tokenization expected to grow by a factor of 80x in private markets and reach up to almost $4 trillion in value by 2030”: “The year 2024 marked a pivotal period in the evolution of CBDCs, with several nations transitioning from exploratory phases to active development and implementation. These advancements reflect a global commitment to modernizing financial systems and enhancing the efficiency of cross-border transactions through digital currencies.”.
Furthermore, stablecoins are now valued at over $200billion, according to a recent article in Forbes.
· TradFi embraces DeFi rise
Algorithmic trading across financial sector, back-office operations and cross border transactions to benefit from the use of self-executing smart contracts: “In 2024, the convergence of traditional finance (TradFi) and decentralized finance (DeFi) gained significant momentum, with both sectors exploring collaborative opportunities to enhance financial services. This trend suggested a future where the strengths of TradFi and DeFi could be combined to create a more efficient and inclusive financial ecosystem.”
· UK continues to embrace digital assets
The UK's Digital FMI Sandbox will change the way liquidity and markets operate in digital assets on the UK and will increase/allow wholesale market participation in digital assets. It is a great thing for the UK: “The UK's active steps in 2024 to embrace digital assets signal its intent to position itself as a global hub for digital finance innovation. By fostering an environment that balances innovation with regulation, the UK is paving the way for a future where digital assets play a central role in its financial ecosystem.”
· AI role in social media and broadcasting, influencing content creation, user engagement and personalized experiences set to expand
Further advancements in AI-driven content creation, virtual influencers and enhanced deepfake detection technologies to maintain the integrity of digital spaces. Additionally, AI could play a more significant role in combating misinformation, fostering a safer online environment: “ Yes, in 2024, the role of AI in social media and broadcasting expanded significantly, shaping content creation, enhancing user engagement, and personalizing experiences. In 2024, AI's integration into social media and broadcasting revolutionized how content was created, consumed, and monetized. By enhancing personalization and interactivity, AI reshaped user experiences, creating a more engaging and tailored digital environment. However, its growth also underscored the need for careful management of ethical and societal implications.”
· Blockchain will be embraced more
2024 will be the start of real-world use-cases for blockchain beyond the circular economies driven by speculation. For example, EV charging tokens, allowing EV users access to public and private charging units that are interoperable across multiple brands: “In 2024, blockchain technology transitioned further into mainstream applications. From EV charging networks to supply chain management and digital identity systems, blockchain's real-world adoption in 2024 demonstrated its potential to create interconnected ecosystems, revolutionize industries, and enhance efficiency in ways that go beyond financial speculation.”
· Regulatory clarity driving up participation
There is a fast-evolving landscape of jurisdictions through governments and supervisory bodies driving legal and regulatory clarity and frameworks. This will accelerate participation and initiatives around digital assets from many more traditional financial services participants. If Q4 2023 was anything to go by, then this momentum is likely to continue and gather pace in 2024: In 2024, regulatory clarity around digital assets globally spurred increased participation and mainstream adoption. Key advancements included the U.S. introducing bipartisan legislation for asset classification, the EU implementing the MiCA framework, and Asia enhancing licensing structures for crypto exchanges. The Middle East focused on tokenized assets, while international bodies like the IMF and FSB set stablecoin guidelines. These measures encouraged institutional investment, boosted market confidence, and fostered innovation across the digital asset ecosystem.”
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This article first appeared in Digital Bytes (1st of January, 2025), a weekly newsletter by Jonny Fry of Team Blockchain.