Disclaimer: This is not financial advice. Anything stated in this article is for informational purposes only and should not be relied upon as a basis for investment decisions. Triton may maintain positions in any of the assets or projects discussed on this website.
TL;DR
Part VI
(Almost) Ready for Primetime
The last few posts have tried to recenter us on what is actually getting built in the first place, why early adopters see value in the technology, and offered a simple introduction to what blockchains are doing in practice. We felt this was warranted because it is far too easy for the first principles to get lost in the noise of ‘crypto’, of which there is undeniably a huge amount. Given we feel the need to do this in the first place, it should come as no surprise when we say that, though exciting, this industry is still very much in the early stages of development. Many skeptics rightfully ask, “so what can you actually do with crypto?” and then are disillusioned when the answer is inevitably, “not much right now, but it is coming”.
But that really summarizes the state of the technology in early 2025 – adoption is still limited and there remains a ton of kinks that need to be worked out. We have very much been working through the infrastructure development phase for the past decade. Focus has been on establishing functioning, high-speed networks and the requisite primitives that need to be in place before any of these are ready for primetime use by internet-scale applications or financial institutions. But we are finally just about there.
How much development has been occurring? The billions of venture investment since 2020 is starting to bear fruit in 2025. On Ethereum alone there is over $100B of capital participating in decentralized finance applications supported by $125B of stablecoin supply. There are at least 160 “layer-2” scaling networks built on top of Ethereum alone, each with slightly different characteristics and target markets, competing to outperform each other. Several already have hundreds of thousands of daily active users on their own. Beyond Bitcoin and Ethereum, there have been hundreds of competing “layer 1” networks all vying to provide the fastest, cheapest, and highest-throughput chains possible. On each of these networks, there are dozens, if not hundreds or thousands of applications being built. Aave, the top lending protocol for example, has roughly $30 billion in deposits on its platform. If it was a US bank, it would be among the 75 largest in the country (top 1.5%).
Though a few networks have started rising to the top (specifically Ethereum, Solana and Base), there are many more still under development that may prove to be the ultimate winning implementations. With all of this development, all of the supporting infrastructure and developer tooling also had to be built in parallel, and with each new chain, a new set of frictions inevitably arises. The past several years have been defined by a huge divergence in approaches and architectures, but increasingly we are seeing convergence around two main implementations (Ethereum’s EVM and Solana’s SVM, specifically). With these execution environments becoming the ‘standard’ choices, developers can increasingly leverage the existing code bases to focus on application development, rather than continuing to build out lower-level infrastructure. While some teams are still pushing the limits on the networks themselves, applications are now starting to take center stage.
We’ll draw a parallel to the development of the internet to get a rough sense of where blockchain technology is today. The internet, in practice, is just a global network of computers and servers that have been connected together by various protocols and hardware so that they can all share data with one another. But it all began with just a few individual computers.
In the 1950s, the US military created a way to transfer digital data over phone lines for its SAGE radar system. This was one of the earliest examples of a computer ‘network’. In 1960, commercial airlines developed a reservation system that was able to connect 2 mainframes together. By 1969, ARPANET became the first network of connected computers, consisting of a whopping 4 University-run nodes (Stanford, UCLA, UCSB, Utah). Eventually, this was expanded to 40 by 1972. In the 1980s, private companies began to use what are called ‘local area networks’ (LANs) that tied together multiple computers within their office buildings or had their own corporate packet networks to facilitate long distance connection between private computers.
At this stage, there were many small, siloed networks that were unable to connect with other networks. Development of ‘internetworking technology’ had begun in 1973 but was not truly adopted by private companies until the mid-1980s. This was the introduction of TCP/IP by ARPANET, two of the most critical internet protocols today. But TCP/IP was not the only game in town, and there were years of contentious debate (known as the “Protocol Wars”) around which communication protocols would be the best path forward. TCP/IP eventually became the dominant implementation by the late-1980s, helped to prominence by the full support of the US Department of Defense.
While this was happening, what we generally consider as the internet today was being built by Tim Berners Lee in 1989, called the “world wide web” (HTTP, URL, browsers, etc.). Only once all of these foundational pieces were in place was the internet ready for any form of consumer use - the first public website was not published until 1991. The late 1990s and early 2000s was when most of the development of actual applications happened, highlighted by the Dotcom bubble at the turn of the millennium.
Development of the internet has been a multi-decade endeavor – under construction for 70 years, but only the last 20 have really allowed for true at-scale adoption. Engineers were having to develop new hardware (e.g. copper, coax, fiber optics, servers, routers, chips) in parallel to the software. We have now arrived at a point where these networks can essentially operate at the speed of light (thanks to fiber optics), but development continues in earnest on the software, semiconductor and wireless side.
We would say that blockchain development is somewhere around the late 1980s/early 1990s, but advancing through that timeline rapidly. We have many high-performance chains, with more coming, that continue to push transaction speeds to the limit (e.g. speed of light). Optimizations are still happening around consensus and sequencing speeds, and novel layered architectures provide for lighter-weight execution, and thus faster, more efficient processing than solely relying on base chain functionality. But these networks still largely exist in silos, and it is very difficult to move assets safely between networks. Virtual machines and execution environments are still largely developed separately. As a result, users and the pools of onchain capital remain largely segmented as well. User experience is very clunky. In short, we still suffer from a lack of ‘internetworking’ functionality. This all means that internet-scale consumer-facing applications have been incredibly difficult to develop to date. Users should not have to interact directly with underlying protocol contracts, this should all be abstracted away, much like what web browsers do when we use the internet.
Slowly and surely, protocols that allow movement between networks and better abstraction are happening, cheaper and faster zk-proofs, aggregation and intents are around the corner, and we expect to see step-change improvements in these systems over the next 12-24 months. It was only when the core internet protocols were developed and the interconnection between siloed networks became seamless and fully abstracted - when the internet became the Internet - that the application phase of the internet really took off. Blockchain technology is just now getting to that point. But once we reach that stage, the application development will be nearly on par with what we see today on the internet – leveraging all of the existing programming languages, libraries and design knowledge that we have developed over the past two decades. We will not have a similar 10-to-20-year period of mildly useful applications; blockchain applications will likely be ready for primetime far quicker once the underlying infrastructure is ready. We are at that inflection point now.
Quantifying Things
A major criticism of blockchains is that they are slow, expensive and inefficient. While that may have been true a few years ago, this generally misses the mark today.
One of the major ways to gauge how ‘fast’ a blockchain can operate is by looking at the number of transactions it can process per second (transactions-per-second, or TPS). Bitcoin is notoriously slow (but secure), processing roughly 7 transactions per second, with blocks of transactions processed roughly every 10 minutes. Ethereum, the next largest network, can theoretically support up to almost 120 TPS on its main network, producing new blocks every 12 seconds. Faster than Bitcoin, but still very slow. This is why there has been so much development in new networks, both building as additional layers on top of Bitcoin and Ethereum or as alternative base networks themselves.
These new generations of chains are far, far faster.
Base, the network built by US exchange Coinbase, capable of roughly 1,400 TPS, is on track to scale its throughput by 10x this year alone and introduced new technology to enable 200ms pre-confirmations to effectively quicken its 2s blocktime. Arbitrum, a layer 2 network on top of Ethereum, can support up to 40,000 TPS and produce blocks every 250ms. MegaETH can theoretically support up to 100,000 TPS, with promising developments that point to ~10ms pre-confirmations and 1s blocktimes. Solana is generally seen as the highest-throughput chain of any of the ‘majors’, supporting up to 65,000 TPS at 400ms block times, with ‘shreds’ allowing for even faster confirmations. The network has a new upgrade in the works that can theoretically push that performance to 1 million TPS, constrained only by advancements in hardware. For a sense of what that throughput means: Solana could enable the equivalent of 20x the throughput of Visa, Mastercard and Paypal, combined. This upgrade, known as Firedancer, is expected this year.
What the internet enables today was barely even imaginable in 1995. Now imagine what an open and globally connected value network can enable. To some, it may seem marginally beneficial now like how the internet was viewed when it first came out and ‘what it could do’ still seemed fairly narrow. Nobel Prize winner Paul Krugman (your author’s former professor (economics, not computer science, thankfully)) made the infamous prediction in 1998 that the internet will be no more impactful than the fax machine. But like the internet, what blockchains unlock may actually be very difficult to imagine today.
A perfect example already is the use of stablecoins by SpaceX’s Starlink to enable global satellite-based payments, allowing users in underdeveloped markets to seamlessly pay for satellite internet access when their local banking infrastructure is wholly incapable of doing so and local internet infrastructure does not exist. In terms of magnitude, despite how early this technology still is, there is already hundreds of billions in capital on these networks driving 10s of trillions in transaction volume. These are impressive numbers already, but given the global financial system is ~$500 trillion, there is a very long way to go.
As a quick aside, there is a line that many observers still resort to today when trying to handwave away the technology that goes something like this:
First, the trillions in transaction volume we just highlighted is not on the dark web, so that already rings hollow. But more importantly, this criticism is lazy and myopic at best and intentionally dishonest at worst. It is also an easy way to spot whether somebody is actually familiar with the state of the industry.
Global fintechs and e-commerce giants like Stripe, Paypal and Shopify all allow native cryptocurrency payments to be made. JP Morgan, the largest bank in the US - and despite its CEO being a vocal critic of Bitcoin - has their own payments- and tokenization-focused blockchain that has already facilitated nearly $2 trillion in transaction volume with efforts to enable, among other novel uses cases, a satellite-based value transfer network (separate from the one SpaceX is using):
Visa enables crypto to be used to pay any merchant around the world and is one of the largest supporters of stablecoin adoption among ‘traditional’ financial companies. Crypto wallets, apps and exchanges around the world offer their own cards that allow users to pay from any cryptocurrency in the exact same fashion that a user would pay using USD, GBP or ARS from their bank accounts, and merchants have the option to accept payment in crypto or have the payments automatically converted into their local currency. Relying on cards like this is an interim step while the merchant familiarity and infrastructure for self-hosted wallets is being built, but once point-of-sale solutions integrate crypto functionality as a common feature, it will be trivial to scan a QR code or use NFC to pay from a crypto wallet, cutting out the middlemen entirely.
We are starting to see signs of the disintermediation happening as applications like Oobit and Infini allow direct wallet-to-merchant tap-to-pay functionality without the need for any cards at all. Many that offer these services also integrate onchain protocols on their backend to allow users to earn 5%+ yields on their balances at the same time, far outpacing the de minimis 0.01% interest that customers would otherwise earn on checking deposits. In short, not only can one ‘buy stuff with crypto’, one can often do so in a superior way than through traditional solutions. Unfortunately, that is not the narrative most are exposed to through typical everyday media channels.
Any other holdups?
Technological development is just one piece of the equation. Regulatory and policy support is another. Many in the industry are quick to argue that the progress on regulation has been slow. We do not disagree but are also sympathetic to the fact that governments are generally slow and when dealing with financial technologies, the benefits of speed are often far outweighed by the importance of getting it right. Special interest groups, lobbyists and political agendas are a different story.
By and large, the regulatory landscape for blockchain and crypto has been at best neutral-to-negative over the past 15 years but more recently there has been a marked divergence in regulatory approaches. Some jurisdictions, like the UAE, Singapore, Switzerland, and Hong Kong have positioned themselves as much more welcoming to crypto and have created frameworks and policies to attract, support and promote the industry. Others, most acutely in the US, have historically taken antagonistic stances against the industry.
Regardless of which approach one agrees with, this has undeniably had a marked impact on where developers are actually building and who is ultimately using these products. Silicon Valley remains the global leader in technology and the US has the most advanced financial market in the world, and yet, US based developers make up an increasingly small fraction of the industry – a remarkable downtrend over the past 10 years (blue lines below).
Beyond developers, this has also had a hugely dampening impact on users and adoption of these protocols to date. The US consumer base is the strongest of any country. Unfortunately, it has largely been sidelined from engaging with the technology beyond just buying and selling assets on centralized exchanges. Why? There has been a significant lack of direction around which activities are permissible, which are not, how certain tokens should be classified, and what is ultimately legal or not. There are securities laws that are in place and must be followed – of that there is no doubt. But the novel mechanisms of these open-source protocols create new issues that early 1900s security laws simply were unable to account for when created, and their applicability to a decentralized permissionless blockchain protocol in many cases is unclear.
Undoubtedly, there are many cases where teams are simply going for ‘regulatory arbitrage’ and attempting to get out from under the laws that are in place in certain countries around the world. But most teams simply just want to understand the sand box they are playing in, and by and large, the industry in the US wants regulation, but regulation crafted specifically for this novel technology rather than trying to shoehorn existing rules to fit. This is why there has been such a push by the industry in the US to have crypto-specific bills passed by Congress (we will touch more on these shortly).
Foundational concepts have largely been left undefined. Is code considered constitutionally protected free speech and if so, can a group of developers be sued by the SEC if the open-source, immutable smart contracts are used by others in a way deemed illegal? Or, can the US’s Office of Foreign Asset Control (OFAC) sanction a set of open-source, immutable smart contracts that exist online, and is the developer criminally liable? Is staking an asset a security? Can banks custody crypto? There has yet to be reliable and consistently clear guidance provided by regulators or law on questions like these, and instead, a patchwork of court decisions has been made after years of lawsuits and litigation. SEC commissioners themselves have been aware of this:
It all comes down to clarity. For example, in the US, it is still unclear whether the SEC or CFTC has jurisdiction over these assets. Bitcoin squarely falls under the CFTC as a commodity. Ethereum’s native asset Ether is now largely seen as a commodity and thus under CFTC purview, but this is still not entirely clear and has only been the operating assumption for a few months (despite being a 10 year-old $300B asset), and many groups have been sued by the SEC over assets that are nearly identical in form to Ethereum. It is still unclear if it is legal to put Ether to productive use in order to secure the network through staking and because of this lack of clarity, the ETFs in the US were forced to launch without staking even though it has been included in similar products around the world for years. There was legislation introduced that would make members of the public who use self-custody wallets to store their crypto be subject to the same stringent KYC/AML requirements as banks and payment companies. Note that this is akin to requiring every person do this when buying something with physical cash – wholly impractical and a potentially huge invasion of privacy.
While this is happening, the IRS strictly views crypto as property (specifically, virtual currency) and thus applies different tax law than it would versus foreign currency or other securities, despite the SEC historically claiming most are securities. Bloomberg’s top ETF analysts have an entire category devoted to guessing about how the SEC views the biggest, multi-billion dollar assets in the industry - “Maybe” and “Likely Yes” are not exactly confidence-inspiring. As of February 2025, they were only certain about two (XRP and SOL) not being viewed as a commodity (e.g. that the SEC definitely viewed them as securities) and yet, the agency has already done a complete reversal on XRP and dropped its lawsuit, first filed in 2020 and seeking a $2 billion penalty, arguing that XRP is a security just this week. New reports suggest the SEC may classify XRP as a commodity, after all. And yet, in January, wireless internet provider Helium was sued by the SEC that it has been engaged in unregistered securities offerings, thus implying its token HNT definitely is a security. It would not be surprising to see this case dropped in the coming weeks. Uniswap received a Wells Notice from the SEC last spring for offering unregistered securities - typically a precursor to imminent legal action - and yet that entire case was dropped in February. The same thing happened with Kraken, a US based exchange, who was already sued by and settled with the SEC two years ago for allowing its customers to stake their assets to participate in the underlying network security. Coinbase, another US exchange, has been sued for offering securities as well, but the SEC has filed to drop this now too.
Clear on all of that?
As a result of all of this mixed messaging, onchain applications have been terrified to allow US based users to access their platforms. Airdrops are a major aspect of growth marketing and user retention for crypto protocols. Instead of being able to use this valuable tool and market to US consumers, teams instead outright bar any US users and specifically do not allow them to access airdrops. This means that US consumers have missed out on nearly $3 billion in incentives distributed by just a handful of these protocols, all because the teams are afraid of being sued by the SEC. Note this also means likely close to $1B in foregone tax revenue This has been the standard, not an exception:
The explosive price performance over the past 18 months has simply been a sign of the growing optimism that the future may be different, namely, that the US and its $30 trillion economy will be able to finally participate at scale. The official approval and then launch of the Bitcoin spot ETFs in the US in early 2024 allowed many to believe that there may be a path to real clarity and adoption in the country. The next leg up followed the change in administration in the US in late 2024. The government’s new stance as a pro-crypto administration has opened the door to far more optimism, and though executive orders like the official creation of a ‘Strategic Bitcoin Reserve’ and ‘Digital Asset Stockpile’ are fairly narrow, the mere show of support, rather than demonization, marks a massive shift in paradigm from just a few years ago:
Most importantly, there are two bills that have been circulating through the House and Senate since 2023. The first is a bill specifically providing a framework for stablecoins. We have highlighted these in the past as the largest use case of blockchains at the moment, with over $200B in supply. Tether, the largest of these, earned $13B in profit in 2024 (as much as Goldman Sachs) and has US treasury holdings on par with that of the largest countries, just trailing India and Brazil but ahead of Mexico, Germany and South Korea. Despite that size, the US has yet to provide any clear regulatory framework for their product. This bill will likely be passed in the coming months – and major banks such as Bank of America have already indicated their intents to launch stablecoins once they know the playing field, as CEO Brian Moynihan recently said “if they make [stablecoins] legal, we will go into that business”. Left unsaid here is that US companies Circle, issuer of $60B stablecoin USDC, Paxos, Gemini, and even Paypal have all had their own stablecoins for years. That is, it is already legal, but just so unclear from a regulatory perspective that banks are afraid of being involved.
The second is the ‘market structure’ bill. Basically, this bill would delineate how to actually determine if a cryptocurrency is a commodity or security, and as a result, which agency (SEC or CFTC) would have jurisdiction. Pretty basic stuff. The first version of this passed with bipartisan support in 2024 but was ultimately tabled. Another version is currently in the works, with a first iteration expected to be circulated in the coming months but will likely not be put to final vote until late 2025 or 2026.
All of this is to say, we are still early, but the reality of what blockchain based financial systems can already do – despite everything else - is why we are so excited about where this technology might ultimately take us. This is also why so many in the industry are so optimistic following the US election. For most of the industry’s history, governments around the world have largely tried to block and marginalize development of blockchain technology. There are reasons to be cautious for sure, as new technology needs to be understood before integrating it into financial systems. But with the US now officially embracing cryptocurrencies, there is a lot of excitement around what the next few years of supported progress can potentially unlock. Keep in mind that this is just 1988, and 1989 may not look all that much different. But given the speed at which blockchain tech is progressing and the growing embrace by regulators around the world, the next 10 years have the potential to produce some incredibly exciting advancements that are difficult to imagine today.
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