2024 was a pivotal year for cryptocurrency, driven by substantial institutional adoption. The approval and launch of spot Bitcoin and Ethereum ETFs marked a turning point, solidifying digital assets as institutional-grade. Bitcoin has evolved into a macro asset, and the ecosystem’s outlook remains robust, with signs of regulatory clarity in the US and increasing broad adoption. High-quality research from firms like VanEck, Messari, Pantera, Galaxy, and a16Z, has further strengthened my conviction.
As a “normie in web3,” my perspective comes from connecting the dots through research, not from early airdrops or token swaps. While the speculative frenzy, rug pulls, and scams at the “casino” end are off-putting, the real potential on the “computer” side of blockchains is thrilling. Events like TOKEN2049 in Dubai and Singapore highlight the ecosystem’s energy, with hundreds of side events now central to the experience.
As the web3 ecosystem evolves, new blockchains, roll-ups, and protocols vie for attention. With 60 million unique wallets in the on-chain economy, adoption is set to expand beyond this base. DeFi transaction volumes have surpassed USD 200B/month, yet the ecosystem remains in its early stages, with only 10 million users.
Despite current fragmentation, the future looks promising. Themes like tokenising real-world assets, decentralised public infrastructure, stablecoins for instant payments, and the convergence of AI and blockchain could reshape finance, identity, infrastructure, and computing. Web3 holds transformative potential, even if not in marketing terms like “unstable” coins or “unreal world assets.”
The Decentralisation Paradox of Web3
Decentralisation may have been a core tenet of web3 at the onset but is also seen as a constraint to scaling or improving user experience in certain instances. I always saw decentralisation as a progressive spectrum and not a binary. It is, however, a difficult north star to maintain, as scaling becomes an actual human coordination challenge.
In Blockchains. We have seen this phenomenon manifest with the Ethereum ecosystem in particular. Of the fifty-plus roll-ups listed on L2 Beat, only Arbitrum and OP Mainnet have progressed beyond Stage 0, with many still not posting fraud proofs to L1. Some high-performance L1s and L2s have deprioritised decentralisation in favour of scaling and UX. Whether this trade-off leads to greater vulnerability or stronger product-market fit remains to be seen – most users care more about performance than underlying technology. In 2025, we’ll likely witness the quiet demise of as many blockchains as new ones emerge.
In Finance. On the institutional side, some aspects of high-value transactions in traditional finance or TradFi, such as custody, need trusted intermediaries to minimise counterparty risk. For web3 to scale beyond the 60-million-odd wallets that participate in the on-chain economy today, we need protocols that marry blockchains’ efficiency, composability, and programmability with the trusted identity and verifiability of the regulated financial systems. While “CeDeFi” or Centralised Decentralised Finance might sound ironical to most in the crypto native world, I expect much more convergence with institutions launching tokenisation projects on public blockchains, including Ethereum and Solana. I like underway pilots, such as one by Chainlink with SWIFT, facilitating off-chain cash settlements for tokenised funds. Some of these projects will find strong traction and scale coupled with regulatory blessings in certain progressive jurisdictions in 2025.
In Infrastructure. While decentralised compute clusters for post-training and inference from the likes of io.net can lower the cost of computing for start-ups, scaling decentralised AI LLMs to make them competitive against LLMs from centralised entities like OpenAI is a nearly impossible order. New metas such as decentralised science or DeSci are exciting because they open the possibility of fast-tracking fundamental research and drug discovery.
Looking Back at 2024: What I Found Exciting
ETFs. BlackRock’s IBIT ETF became the fastest to reach USD 3 billion in AUM within 30 days and scaled to USD 40 billion in 200 days. The institutional landscape now goes beyond traditional ETFs, with major financial institutions expanding digital asset capabilities across custody, market access, and retail integration. These include institutional-grade custody from Standard Chartered and Nomura, market access from Goldman Sachs, and retail integration from fintechs such as Revolut.
Stablecoins. Stablecoin usage beyond trading has continued to grow at a healthy clip, emerging as a real killer use case in payments. Transaction volumes rose from USD 10T to USD 20T in a year, and yes, that is a trillion with a “t”! The current market capitalisation of stablecoins is approximately USD 201.5 billion, slated to triple in 2025, with Tether’s USDT at over 67% market share. We might see new fiat-backed stablecoins being launched this year, such as Ethena’s yield-bearing stablecoin, but I don’t expect USDT’s dominance to change.
RWAs. Even though stablecoins represent 97% of real-world assets on-chain and the dollar value of all other types of assets is still insignificant, the potential market for asset tokenisation is still a staggering USD 1.4T, and with regulatory clarity, even if RWAs on-chain were to quadruple, the resulting USD 50B will be a sliver of the overall opportunity. We can expect more projects in asset classes such as private credit – rwa.xyz is a great dashboard to watch this space.
DePIN. Decentralised public infrastructure across wireless, energy, compute, sensors, identity, and logistics reached a USD 50B market cap and USD 500M in ARR. Key developments include the emergence of AI as a major driver of DePIN adoption, the maturation of supply-side growth playbooks, and the shift in focus toward demand-side monetisation. More than 13 million devices globally contribute to DePINs daily, demonstrating successful supply-side scaling. Notable projects include:
- Helium Mobile: Adding 100k+ subscribers and diversifying revenue streams.
- AI Integration: Bittensor leading decentralised AI with successful subnets.
- Energy DePINs: Glow and Daylight addressing challenges in distributed energy systems.
- Identity Verification: World (formerly Worldcoin) achieving 20 million verified identities.
These trends indicate significant advancements in the web3 ecosystem, and the continued evolution of blockchain technologies and their applications in finance, infrastructure, and beyond holds immense promise for 2025 and beyond.
In my next Ecosystm Insights, I’ll present the trends in 2025 that I am excited about. Watch this space!
Environmental, social, and governance (ESG) ratings towards investment criteria have become popular for potential investors to evaluate companies in which they might want to invest. As younger investors and others have shown an interest in investing based on their personal values, brokerage firms and mutual fund companies have begun to offer exchange-traded funds (ETFs) and other financial products that follow specifically stated ESG criteria. Passive investing with robo-advisors such as Betterment and Wealthfront have also used ESG criteria to appeal to this group.
The disruption caused by the pandemic has highlighted for many of us the importance of building sustainable and resilient business models based on multi-stakeholder considerations. It has also created growing investor interest in ESG.
ESG signalling for institutional investors
The increased interest in climate change, sustainable business investments and ESG metrics is partly a reaction of the society to assist in the global transition to a greener and more humane economy in the post-COVID era. Efforts for ESG standards for risk measurement will benefit and support that effort.
A recent study of asset managers by the investment arm of Institutional Shareholder Services (ISS) showed that more than 12% of respondents reported heightened importance of ESG considerations in their investment decisions or stewardship activities compared to before the pandemic.
In the area of hedge funds, there has been an increased demand for ESG-integrated investments since the start of COVID-19, according to 50% of all respondents of a hedge fund survey conducted by BNP Paribas Corporate and Institutional Banking of 53 firms with combined assets under management (AUM) of at least USD 500B.
ESG criteria may have a practical purpose beyond any ethical concerns, as these criteria may be able to help avoidance of companies whose practices could signal risk. As ESG gets more traction, investment firms such as JPMorgan Chase, Wells Fargo, and Goldman Sachs have published annual reports that highlight and review their ESG approaches and the bottom-line results.
But even with more options, the need for clarity and standards on ESG has never been so important. In my opinion, there must be an enhanced effort to standardise and harmonise ESG rating metrics.
How are ESG ratings made?
ESG ratings need both quantitative and qualitative/narrative disclosures by companies in order to be calculated. And if no data is disclosed or available, companies then move to estimations.
No global standard has been defined for what is included in a given company’s ESG rating. Attempts at standardising the list of ESG topics to consider include the materiality map developed by the Sustainable Accounting Standard Board (SASB) or the reporting standards created by the Global Reporting Initiative (GRI). But most ESG rating providers have been defining their own materiality matrices to calculate their scores.
Can ESG scoring be automatically integrated?
Just this month, Morningstar equity research analysts announced they will employ a globally consistent framework to capture ESG risk across over 1,500 stocks. Analysts will identify valuation-relevant risks for each company using Sustainalytics’ ESG Risk Ratings, which measure a company’s exposure to material ESG risks, then evaluate the probability those risks materialise and the associated valuation impact. ESG rating firms such as MSCI, Sustainalytics, RepRisk, and ISS use a rules-based methodology to identify industry leaders and laggards according to their exposure to ESG risks, as well as how well they manage those risks relative to peers.
Their ESG Risk Ratings measure a company’s exposure to industry-specific material ESG risks and how well a company is managing those risks. This approach to measuring ESG risk combines the concepts of management and exposure to arrive at an assessment of ESG risk – the ESG Risk Rating – which should be comparable across all industries. But some critics of this form of approach feel it is still too subjective and too industry-specific to be relevant. This criticism is relevant when you understand that the use of the ESG ratings and underlying scores may in future inform asset allocation. How might this better automated and controlled? Perhaps adding some AI might be useful to address this?
In one example, Deutsche Börse has recently led a USD 15 million funding round in Clarity AI, a Spanish FinTech firm that uses machine learning and big data to help investors understand the societal impact of their investment portfolios. Clarity AI’s proprietary tech platform performs sustainability assessments covering more than 30,000 companies,198 countries,187 local governments and over 200,000 funds. Where companies like Cooler Future are working on an impact investment app for everyday individual users, Clarity AI has attracted a client network representing over $3 trillion of assets and funding from investors such as Kibo Ventures, Founders Fund, Seaya Ventures and Matthew Freud.
What about ESG Indices? What do they tell us about risk?
Core ESG indexing is the use of indices designed to apply ESG screening and ESG scores to recognised indices such as the S&P 500®, S&P/ASX 200, or S&P/TSX Composite. SAM, part of S&P Global, annually conducts a Corporate Sustainability Assessment, an ESG analysis of over 7,300 companies. Core ESG indices can then become actionable components of asset allocation when a fund or separately managed accounts (SMAs) provider tracks the index.
Back in 2017, the Swiss Federal Office for the Environment (FOEN) and the State Secretariat for International Finance (SIF) made it possible for all Swiss pension funds and insurance firms to measure the environmental impact of their stocks and portfolios for free. Currently, these federal bodies are testing use case with banks and asset managers. Its initial activities will be recorded in an action plan, which is due to be published in Spring 2021.
How can having a body of sustainable firms help create ESG metrics?
Creating ESG standard metrics and methodologies will be aided when there is a network of sustainable companies to analyse, which leads us to green fintech networks (GFN) of companies interested in exploring how their own technology investments can be supportive of ESG objectives. Switzerland is setting up a Green Fintech Network to help the country take advantage of the “great opportunity” presented by sustainable finance. The network has been launched by SIF alongside industry players, including green FinTech companies, universities, and consulting and law firms. Stockholm also has a Green Fintech Network that allows collaboration towards sustainability goals.
Concluding Thought
We should be curious about how ESG can provide decision-oriented information about intangible assets and non-financial risks and opportunities. More information and data from ESG data providers like SAM, combined with automation or AI tools can potentially provide a more complete picture of how to measure the long-term sustainable performance of equity and fixed income asset classes.
Singapore FinTech Festival 2020: Investor Summit
For more insights, attend the Singapore FinTech Festival 2020: Investor Summit which will cover topics tied to 2021 Investor Priorities, and Fundraising and exit strategies
