What is the future of blockchain?

Executive Summary

The vision of Web3 has failed to this date: there isn't a single Web3 company that has been disruptive to Web2 tech giants or traditional financial services. Token incentive models have proved unsustainable and traditional Web2 giants have easily been able to retain users. As a result, we expect Bitcoin dominance to continue to rise as it’s the only crypto asset that is being seen by the market as a digital store of value. All other crypto assets will likely be valued as technology companies which is a major cause for concern as most are dramatically overvalued at current (revenue multiple) levels. Thus we expect valuations of alternative crypto assets (altcoins) to decline despite upside in the near term due to the success of various crypto treasury companies. The crypto treasury companies are not only unsustainable but also troubling as the inevitable unwind could spark a negative reflexive feedback loop, acting as a major catalyst for a bear market.

As crypto rails enable 24/7 markets on all assets, we expect to eventually see a significant shift towards private or centralized blockchains as traditional companies favor their own infrastructure. Private or centralized blockchains will provide better user experience, security controls, and book margins. Over time we expect the majority of crypto trading volumes to shift from crypto tokens to tokenized real-world assets (e.g. stocks, bonds, real estate) as new settlement infrastructure is established. As the regulatory environment continues to improve, we expect crypto to abandon traditional tokens with no legal rights in favor of tokenizing their equity.

We feel that the combination of these factors will result in down own price action for most traditional crypto assets as the majority of value accrues to Web2 technology companies and traditional finance services vs. the decentralized variety championed by crypto natives. Our investment outlook is that Web2 tech companies and traditional finance services with customer loyalty and mass distribution advantages will gain value accrual from blockchain tech going forward and decentralized cryptocurrencies ex-BTC to remain niche and speculative.

Bitcoin Dominance is on the rise
- Bitcoin has significantly outperformed other cryptocurrencies as “Bitcoin Dominance” (market capitalization relative to all other tokens) has increased by over 50% in the past three years, despite over 2 million new cryptocurrencies launching over that time period.
Altcoin demand remains limited

The Ethereum ETFs have only attracted 15% of the demand of the Bitcoin ETF (despite adding $5B of its $9B total in July 20205 alone!). There's a clear lack of sustainable demand for altcoins from traditional retail or institutional investors. We expect this trend to continue for other altcoin ETFs

Despite a favorable environment, only Bitcoin is attracting demand

Even with positive regulatory catalysts, endorsement of stablecoins, and increased institutional involvement, there is very little demand for crypto outside of Bitcoin.

Web3 has little product-market fit

Most of the core ideas behind Web3 have largely failed. Token incentive models have not created sustainable utility, and Web2 giants have easily retained creators by offering competitive compensation. There is currently no disruptive Web3 consumer application of note outside of speculative gambling.

Predictions on where crypto goes from here

Bitcoin is the only crypto cemented as store of value
- Bitcoin's role as a store of value is expected to grow, with its dominance potentially having no ceiling.

Layer 1 tokens are uninvestible

L1 blockchain tokens are valued as technology platforms yet trade at revenue multiples over 1,000x. Price would need to drop over 95% to achieve attractive valuations.

Blockchain business models are unsustainable

The business model of blockchains is a race to zero in fees as blockspace is already fully commoditized.

Tokenized assets and perpetual futures will see massive success

The market for tokenized real-world assets is projected to reach trillions, offering low-fee access to various assets. Additionally, perpetual futures, popularized in crypto, will spread to traditional assets, offering 24/7 trading with a simplified user experience.

Private / centralized blockchains will win out

Due to security, compliance, custody and risk concerns, traditional financial institutions are likely to abandon the public Ethereum Layer 2 model in favor of creating their own private or centralized blockchains.
Centralized chains can reverse damage from hacks as they can be rolled back and funds can be restored. Traditional financial institutions are in the business of maintaining custody of funds.
Private / centralized blockchains can also significantly reduce costs and increase blockchain-based profit margins.

Decentralization is a meme

Decentralization is only beneficial in environments with financial restrictions, for illicit activities, or for those who demand privacy. Centralized chains offer greater security, compliance, and the ability to reverse transactions, which is crucial for traditional financial institutions.

DeFi will not go mainstream

Decentralized finance (DeFi) will only amount to a relatively niche sector, with the majority of blockchain activity shifting to centralized chains and services offered by established financial institutions.

Value will accrue mainly to the incumbents

Ironically, the financial service companies that crypto insiders aimed to disrupt are positioned to be the primary beneficiaries of blockchain adoption driven by their large existing user bases, speed to market, and other network effects.

What have we learned this cycle?

The first Bitcoin ETFs were launched in January 2024, enabling an easy way for traditional investors to buy Bitcoin. Since then, the Bitcoin ETFs have become some of the most successful ETFs in history with $55B in net inflows as of July 2025. The Ethereum ETF, on the other hand, has seen little demand with $9B in inflows over this same time period equating to 15% of the demand. The majority of this demand emerged in July 2025 alone, with inflows surging by 128% within that single month adding $5B. When the Ethereum ETF launched, there was actually more than $9B in assets locked in the main TradFi Ethereum investment vehicle (Grayscale Ethereum trust), so we’ve actually net outflows date. We expect a similar lack of enthusiasm for other blockchain token ETFs launching later in 2025.

One of the best ways to see the lack of interest in tokens outside of Bitcoin (alternative crypto assets) is to look at the Bitcoin dominance chart, which is the ratio of the BTC market cap to all other tokens. Bitcoin dominance is up over 50% over the past 3 years despite seeing more than 2 million new tokens launched over that period.

Although the treasury vehicle company craze has sparked a resurgence in various altcoin interest, and has also helped make Ethereum and other ETF inflow numbers look significantly better, I do not feel this will lead to sustainable demand for altcoins. As reflexive as the treasury company altcoin purchases have been, the structure of these treasury vehicles will lead to similar reflexivity going the other direction.

One of the most important takeaways one should take from this current crypto cycle is that there isn’t yet sustainable demand for crypto tokens outside of Bitcoin amongst traditional retail or institutional capital. This could change but it’s now looking less and less likely as time goes on.

Is there demand for crypto?

The lack of demand for crypto is especially concerning because there has now been ample time for marketing of crypto and buying crypto has never been easier: new ETFs, treasury vehicles and via platforms like Coinbase and Robinhood. Additionally there has also been plenty of positive news about the pending regulatory changes brought on by the Trump administration.

Positive Regulatory Catalysts Include:

Trump Administration Crypto Task Force

Create regulatory frameworks for crypto assets.

Guidance on how existing securities laws apply to the crypto market, fostering innovation, and protecting investors.
Policy measures and industry engagement to address issues like crypto asset classification, exchange-traded products, and custody solutions.
Tokenizing real world assets like dollars and US equities.

Treasury Secretary Scott Bessent has publicly endorsed stablecoins

US Dollar Stablecoins represent "a new channel of strategic demand" that both expands dollar access globally and supports sustained demand for U.S. Treasury bills.

The GENIUS Act

Establishes a federal regulatory framework for stablecoins, create a model for permitted issuers with federal overnight, and implement consumer protections around reserve backings, public disclosures, audited financials, etc. While this bill does not address other crypto products, it’s clearly a massive step towards further tokenized assets.

There are a plethora of announcements of large institutions building or integrating with crypto.

Blackrock
Visa
Sony
American Express
Disney
Deutsche Bank
Mastercard
BNY Mellon

Additionally, stablecoins are all the rage and supply is up only:

There is already over $260B in stablecoins and this growth is not slowing down.

Demand for altcoins remains low

Despite a highly favorable environment for the crypto industry, demand for Ethereum and other altcoins remains low. While crypto enthusiasts often say "we're early"—a long-standing catchphrase that has become a meme implying guaranteed future price increases—we believe that early doesn't necessarily mean a rising tide will lift all boats now or into the future. The lack of demand for altcoins could stem from several factors: the limited legal rights of decentralized autonomous organizations (DAOs), lingering skepticism due to past fraud and negative press, or the scarcity of tokens that are genuinely investable from a fundamental valuation perspective. Regardless of the underlying causes, there's clearly very little investor appetite for these assets. One of the largest underlying concerns has been the token vs. equity models most crypto companies seek to take advantage of for regulatory or business model reasons. When these companies raise capital, investors are given both equity and a token but this creates a concern around where value accrues. Unfortunately for retail market participants, the value accrues mainly to the equity as most tokens trade well below where they were initially sold into the market.

Were we wrong about Web3 disruption?

I recently took a look at the deck we created to raise capital for Kerve Capital back in 2022. One of the main drivers of my interest in crypto is that I thought Web3 could be extremely disruptive to Web2. My thesis was as follows:

Web3 is more than a financial movement, it’s an evolution of the internet.
Blockchains are more than ledgers, they are computers.
Crypto isn’t just a new financial system, it’s a new computing platform.

We wrote that Web3 enabled value accrual to network participants, i.e. token holders vs. the big technology companies. Blockchains are special because they transfer control from centralized entities to DAOs. The big unlock is that these decentralized communities can sprout entirely new business models due to the ability for tokens to unlock ownership and other incentive alignment. The general idea is that ownership could motivate outside contributors to help build an organization faster than a centralized core team.

Perhaps even more importantly, is that in theory, the new Web3 paradigm brings more power to the users who can earn a greater share of revenue by cutting out the big technology company middlemen. We can see this phenomenon in comparing take rates (% of revenues network owners take from users) between Web2 companies like Facebook and Youtube to Web3 companies like OpenSea and Uniswap.

The idea is that Web3 platforms could enable significantly lower margins, and therefore could pay their users more (with using tokens or other incentives), and have more capital to invest back into the business.

**Web3 take rates can be as low as 0.3% vs. 30-100% in Web2.**

Why were we so wrong about Web3?

There were a variety of issues with the Web3 model.

1. Token incentives models have completely failed with diminishing returns.

It’s been very difficult to create enough token utility to outweigh the price of emissions. This has resulted in down only price action that can never recover, creating diminishing returns and other problems.

2. It’s been too easy for Web2 giants that have all the users to do the minimum to keep their creators happy.

It’s just far too easy for a Youtube or an Instagram to just pay their creators more. For example, Youtube has offered a number of pay increases and other benefits to their creators over the years. These Web2 giants already have all the creators and all the users and there just isn’t a strong enough incentive to start new somewhere else. I don’t see that changing.

There isn’t a single disruptive Web3 company of note

As many investors like to say, being early is the same as being wrong. If you had asked me in 2022, when I joined Kerve Capital, that 3 years later we wouldn't have a single viable Web3 consumer application, I would have said you were crazy. But we still don’t!

What is the future of blockchain? Predictions and other viewpoints.

Bitcoin dominance has no ceiling

Whereas the market has proven to not be interested in alternative crypto assets, there is clearly significant interest in Bitcoin. Bitcoin is treated by the market as a store of value, thus enabling the asset to not be tethered to revenue-based valuation models. Instead, Bitcoin can be aligned with gold and can continue to gain market share alongside gold through a store of value narrative.

Tokens that represent public blockchains are ‘uninvestible’

The market has firmly rejected Ethereum or any other Layer 1 blockchain (L1) token as a store of value. Instead, the market values these assets as technology platforms. The problem with valuing these assets as technology platforms is that they’re all grossly overvalued at current levels.

L1 blockchain tokens currently trade at revenues multiples in the thousands.

The price of L1 tokens will continue to fall

All L1 tokens trade at well over 1,000x revenue multiples. In order for Ethereum or Solana to look even remotely attractive from a revenue multiple perspective, i.e. a ~50x revenue multiple, the price of all of these assets would need to drop by over 95%. One could very well imagine a situation where the total value of tokens secured on a blockchain is significantly higher than the market cap of the blockchain. This could pose major security risks to the blockchain ecosystem as a whole and is one of the reasons why we believe private or centralized blockchains will win out to the public variety.

Business model of layer 1 blockchains is unsustainable

Layer 1 blockchains are in the business of selling blockspace. Whenever a transaction happens on a blockchain there is a transaction fee that the user processing the transaction pays to the infrastructure providers (known as validators or miners). Additionally, blockchains can make money through ordering of transactions (known as MEV) as one can pay a higher fee to prioritize their transactions over others. The problem with this business model is that as the blockchain technology improves, via scaling, UX changes, speed, or other updates, the fees generated by the blockchain are reduced. Therefore, the L1 business is a race to zero as blockchains compete with each other on which can offer the cheapest transaction fees and thus cannibalizing potential revenue. Furthermore, Blockspace is now incredibly easy to create as one can now launch a new blockchain without much technical knowledge via “Blockchain as a Service” providers. It's safe to say that blockspace is now fully commoditized.

Tokenized markets on everything

The tokenized asset craze is just getting started. We’re going to see tokenized assets markets in everything because it can offer a low fee way for the world to access assets that they traditionally never were able to access: private equity, venture capital, equities, private stock, and more. Many estimates have the value of tokenized assets reaching trillions of dollars in value over the coming years. We’re already seeing this happening with a slew of announcements from companies like Kraken, Robinhood, Blackrock, Coinbase and BNY Mellon, Fidelity, and many more. There is already over $260B in stablecoins, growing at a 62% YoY run rate with no signs of slowing down. Stablecoins have a clear product-market fit as a way for the world to access the USD and “risk-free rate” via various tokenized money market funds and other on-chain yield products.

Perpetual futures will spread like wildfire

It’s becoming apparent that the future of blockchain will be 24/7 markets on anything and everything. However, one innovation stands to spread: the perpetual future. This financial product has been popularized by crypto and enables anyone to simply leverage long or short without an expiration. This means traders can hold their positions open indefinitely, as long as they maintain the required margin and pay the required funding fees. This product has become one of the largest areas of product market fit in crypto and the platforms that offer it are some of the most profitable in the industry. It’s very easy to see how this will soon be offered for stocks, bonds, and other assets using blockchain rails and traded 24/7 as the UX is easy, intuitive and far easier than trading options or other derivatives. Trading is as easy as selecting long or short and using a slider to determine the position size. According to data from The Block, perpetual futures currently do 12.6x the volume of options in crypto and we expect to eventually see similar usage rates on traditional assets.

Unlike trading options, perpetual futures have a very friends user experience.

The majority of blockchain activity will move to private or centralized blockchain

There are a slew of firms that are building on or have announced plans to build on Ethereum which include: BlackRock, Fidelity, Franklin Templeton, UBS, Kraken, Visa, Coinbase, Sony, Disney, American Express, Deutsche Bank, Mastercard, BNY Mellon, and Robinhood. We’re seeing the choice to build on Ethereum because that’s where most of the assets are located. Ethereum and its ecosystem of L2s have over ~$90B in assets on chain vs. $50B across all other ecosystems combined. It should be no surprise that these traditional institutions have picked Ethereum as assets can flow easily across these chains, especially as Ethereum implements better UX and solutions for cross-chain functionality. Building on Ethereum enables easy access to capital vs starting from scratch with your own chain. However, due to requirements around security, compliance, and other factors as the crypto industry becomes more regulated, we’d expect to see traditional financial firms create their own private or centralized blockchains and abandon the Ethereum L2 model.

While these firms currently lack strong incentives to launch their own chains, as they begin to capture more assets, they'll be strongly motivated by financial and security concerns to leave Ethereum to gain more control. The business model of traditional financial institutions relies on full asset custody. Because they cannot fully custody assets on a public blockchain, this presents a foundational conflict that makes the model unfeasible for them. Additionally, these traditional companies have the distribution already so there is no reason for them to pay others for this access. An L1 blockchain offers significant advantages over a public chain for companies focused on managing their margins and maximizing profitability. This is particularly true when their business model has no inherent need for decentralization or neutrality.

Decentralization is a meme

Decentralization is great under these circumstances:

Your government restricts access to financial services
You’re trying to hide or value privacy
You can’t access the dollar or other stable currencies

Outside of this there is very little product market fit for decentralization. Decentralization enables billions of dollars to be stolen each year.

Billions of dollars are stolen from consumers each year through use of decentralized financial applications.

Using centralized chains could prevent all damage from hacks to be stopped as centralized chains can roll back and funds can be restored. There is precedence for this as in April 2025 Hyperliquid experienced an attack on one of its products which was quickly restored with the attacker losing money as the team worked with infrastructure providers to roll back the chain. It seems that people love the idea of decentralization until they lose money. Any probability of a loss occurring due to use of financial infrastructure is a complete no go for traditional financial institutions. They will demand the centralization necessary to prevent any bad things from happening to their users.

Another problem is that decentralization makes blockchain scaling and improved transaction speeds much more difficult to achieve. When constructing a new blockchain there is always a tradeoff between decentralization and user experience.

DeFi and public blockchains more broadly will be a niche sector

As more major financial institutions launch their own blockchains, we’ll see the majority of blockchain use occurs via these centralized chains, apps and other blockchain-based services. These traditional financial institutions already have all of the users and we’re already seeing them create structured financial products similar to what’s seen in DeFi. We believe that DeFi will go from a primary crypto use case more of a niche use case. There is very little evidence of product-market fit for decentralized blockchains outside of the aforementioned categories. DeFi continues to run into user experience issues like poor onboarding, illiquid markets, and poorly designed interfaces.

I believe the value of public blockchain tokens will continue to decline due to concerns about their underlying business models and valuations. This trend is likely to persist until revenue multiples become more appealing when evaluated using traditional technology platform valuation models.

The challenge is that this decline could lead to a situation where the total value of assets intended to be secured by a blockchain aligns with its market capitalization. This parity creates a significant risk for various exploit scenarios, such as a 51% attack. Such a vulnerability significantly increases the likelihood of financial institutions opting to operate their own private blockchains, where they can proactively prevent exploits and address unforeseen issues.

The winners will be some of the very companies that crypto insiders were hoping to disrupt

The majority of the value generated through the use of blockchains will ironically accrue to financial service companies, like Robinhood and Kraken, that are quick to offer 24/7 markets with an easy user experience. The driver for the winners is that they already have all of the users! It turns out that it’s just too easy for these platforms to just expand their offerings and reduce any competitive advantage for crypto native or decentralized offerings. The important component to success will be the speed to offer these products, the ease at which they are accessed, and user network effects.

Most companies will be forced to abandon the token vs equity models

As demand for altcoins remains low, we expect crypto companies to begin to tokenize equity in order to get more investors onboard with investing in the crypto market. The traditional equity vs. token models seen in crypto have never been sustainable with most crypto tokens accruing zero value while the teams and early investors retain most of the value in the form of equity and routinely dump their token allocations into the market. One regulation opens up, we think abandoning this failed model will be a boon to the crypto markets more broadly.

Conclusion

Despite the broader market now coming around to crypto as a new and exciting asset class, we at Kerve Capital are quite bearish most crypto assets outside of Bitcoin. Although we expect on chain trading volumes to dramatically rise from here as more and more traditional financial assets are tokenized, we do not believe this value will accrue to traditional crypto tokens but rather to the Web2 technology companies and traditional finance services. The crypto market is broadly overvalued with most layer 1 blockchains trading at revenue multiples in the thousands. We feel that the traditional Web2 technology and traditional finance service companies entering the space will favor their own infrastructure vs. the decentralized variety championed by crypto natives. We feel that this will result in down own price action for traditional crypto assets.