Trends in Blockchain and Web3 Development for 2025 and Beyond

Introduction

As of writing this the web3 space has seen increased interest and movement. Surely the coming months and years will hold many surprises and interesting developments. As blockchain technology and Web3 continue to mature, 2025 promises to bring big changes in various sectors. Key trends include the push for central bank digital currencies (CBDCs) by many states, regulatory integration in decentralized finance (DeFi), the growth of Web3 and its cross-chain interoperability, privacy-focused digital identity solutions, and an emphasis on scalability and sustainability. This article explores these trends, focusing on how they impact developers, business owners, investors, and users.

1. Central Bank Digital Currencies (CBDCs) and the Digital Euro

Governments globally are recognizing the potential of blockchain technology in financial systems, with CBDCs like the digital Euro and others being increasingly discussed. The European Central Bank's (ECB) development of a digital Euro exemplifies this shift. [1]

Proponents argue that users of CBDCs benefit from ease of use without the volatility associated with cryptocurrencies. [2] Businesses may gain access to reliable, programmable financial tools that can make more efficient cross-border transactions possible. [3] For investors, CBDCs are presented as a bridge between traditional and digital financial assets, providing a stable option within blockchain ecosystems. [4]

The Issues with CBDCs

However, these benefits must be critically examined. A move toward digital currencies caused alarm with those wary of state-monitored financial systems. [5] The introduction of a digital Euro may also lead to the phasing out of cash, endangering financial autonomy for individuals and posing a risk to actually cause the unbanking of people, something which is claimed this should actually help with. [2] From a user standpoint, the shift to CBDCs raises significant concerns about privacy and government oversight. Unlike cash, CBDCs are fully traceable, allowing governments or central banks to monitor transactions in real time. [6] This level of surveillance has sparked fears about potential misuse, such as the ability to restrict transactions, enforce negative interest rates, or exclude individuals from financial systems based on policy decisions. [3] Users may also face heightened cybersecurity risks, as centralized digital systems are attractive targets for hacking and fraud. [4] Critics argue that such centralization of power could erode financial freedoms and lead to disproportionate control over personal spending habits. [1]

Why does the push towards CBDCs happen

Governments are eager to implement CBDCs for several reasons. First, CBDCs provide an opportunity to enhance monetary policy effectiveness. By having direct access to retail transactions, central banks can implement targeted monetary interventions, such as adjusting consumption incentives or imposing spending caps in times of crisis. [6] Second, the rise of private stablecoins and cryptocurrencies challenges traditional financial systems, prompting governments to establish CBDCs as a sovereign counterbalance. [2] Third, CBDCs could streamline cross-border transactions, reducing reliance on foreign payment systems and increasing monetary sovereignty. [13] Lastly, they offer the potential to combat illicit financial activities by improving traceability and accountability in financial flows. [5]

Technical Considerations

For developers, integrating CBDCs into existing decentralized applications (dApps) and wallets necessitates creating highly secure, compliant infrastructure to ensure seamless, regulated transactions. [4] This includes building APIs that facilitate CBDC interoperability across blockchains, especially as more CBDCs come online. [1] Developers must design solutions that enable efficient cross-chain interactions while safeguarding user privacy and ensuring compliance with strict regulatory standards. [6]

Critics warn that the technical complexity and high cost of developing CBDC-compatible systems may disproportionately favor large financial institutions, potentially stifling innovation in smaller fintech firms. [2] Additionally, the degree of centralization inherent in CBDCs raises questions about the long-term compatibility of such currencies with decentralized blockchain ecosystems. [4]

Opinion

The biggest point of critique here is the fact, that a CBDC are marketed as an innovative solution, when in fact all about it makes it easier for government entities to monitor and control the general population. The way the official statements by governmental organizations within the EU, of which I here quoted the European Central Banks paper about the introduction of the digital Euro, it sounds like it will be a private blockchain, where the general population is subject to total control of their spending habits, which in turn basically creates the “citizen of glass”, while the general population has no control about it. The very fact that the limitation of spending habits in times of crisis is discussed, sparks the following questions. Who decides what a crisis is, for how long can these measures last and what ensures that this is not abused by institutions. The argument of easier control of supply also should lead to concern. While currently central banks can print and erase money as they please, the concept of CBDCs could cause the supply to be altered at the consumer level, meaning that the balance of every day users gets capped or altered as seen fit.

Conclusion

All of these concerns right now might seem farfetched. But history is full of governments abusing their powers. While this should not come as a critique of the Digital Euro, it is definitely a warning about the possible dangers of CBDCs in general. This dystopia might not happen soon, or even to you, but the likelihood of it happening at all is far too big of a risk to take, when the main selling points are taken care of by stable coins already. But one thing is 100% assured with CBDCs. You are under total control. Whoever knows your spending habits has a nearly complete picture of who you are. But we will have to see.

Within the EU, the preparation phase for implementation has started as of November 2023. In the US the Biden administration released a framework for regulating digital assets in September 2022. This included the idea of developing a CBDC for the United States. Other countries are following this trend as well. It remains to see what comes of that. One thing is sure. This is the biggest topic coming up for the next years and this is why I put it right at the start.

2. Decentralized Finance (DeFi) and Regulatory Compliance

DeFi continues to expand, especially in regions like Asia, where countries such as Singapore and Japan have implemented comprehensive regulatory frameworks. This regulatory clarity increases investor confidence and encourages greater adoption among institutions, which are more likely to participate in regulated DeFi ecosystems. For business owners, regulated DeFi frameworks present opportunities to create new financial products that balance innovation with compliance, such as decentralized lending and payments, while reducing risks associated with illicit finance. [7][12]

Developers are responding to regulatory demands by building smart contracts that incorporate compliance protocols like anti-money laundering (AML) and know-your-customer (KYC) checks. This modular approach allows developers to update specific components of the code as regulations evolve without needing a complete overhaul. By embedding compliance features within DeFi applications, developers support the broader integration of DeFi into mainstream finance while reducing risks associated with financial crime. Regulatory technology (reg-tech) solutions, such as Elliptic’s monitoring tools, are also gaining traction, enabling automated compliance checks across DeFi ecosystems. [7][12]

3. Web3 and Cross-Chain Interoperability

Web3's rapid growth, particularly in sectors like gaming, digital commerce, and social media, underscores the demand for interoperable blockchain solutions. Interoperability enables users to seamlessly transfer digital assets across different platforms, enhancing user experience. For business owners, interoperability allows them to tap into multiple blockchain ecosystems, creating opportunities for broader engagement and customer reach. Investors, in turn, benefit from diversified revenue streams across interconnected platforms, which reduce reliance on a single blockchain ecosystem. [8]

To address these demands, developers are focusing on cross-chain solutions and Layer 2 technologies, which reduce network congestion and transaction costs. By implementing interoperability frameworks such as Polkadot and Cosmos, both of which have been around for a couple of years, developers can build dApps capable of seamless interactions across multiple blockchains. Layer 2 scaling solutions, like rollups, are also essential to support high transaction volumes, which are critical for the continued growth of Web3 applications. These frameworks enhance the efficiency and scalability of blockchain networks, improving accessibility and lowering barriers to entry for users and businesses alike. [8]

4. Privacy and Digital Identity in Web3

As data privacy becomes an increasing concern, digital identity solutions in Web3 are evolving to empower users with control over their personal information. Self-sovereign identity (SSI) platforms allow users to manage their identity data securely without relying on centralized entities. This approach reduces business liability for data storage and helps organizations comply with stringent data privacy regulations such as the General Data Protection Regulation (GDPR). Investors see privacy-focused digital identity solutions as a growing market, reflecting heightened public interest in privacy and secure data management. [9]

For developers, implementing digital identity solutions requires familiarity with privacy-preserving cryptographic protocols, such as zero-knowledge proofs (ZKPs) and decentralized identifiers (DIDs). These technologies allow users to verify their identity without exposing sensitive data, ensuring compliance with regulations while enhancing user privacy. Integrating SSI systems into Web3 platforms helps create a safer and more user-centric digital environment, fostering trust among users while adhering to regulatory requirements. [9]

5. Scalability and Sustainability Challenges

Scalability and sustainability remain key challenges of blockchain adoption. Users often encounter high fees and slow transaction speeds, which can limit blockchain’s practical use in everyday transactions, while especially Proof of Work chains are critiqued for their high energy consumption. For businesses, resource-intensive consensus mechanisms, like Proof of Work, can lead to elevated operational costs. Investors are also placing greater emphasis on sustainability, favoring projects that implement eco-conscious practices to ensure long-term viability. [10]

Projects are addressing these concerns through the adoption of Proof of Stake (PoS) consensus mechanisms, Layer 2 solutions, and optimized infrastructure. For example, Ethereum’s transition to PoS has significantly reduced its energy consumption, while Layer 2 rollups help offload transactions from the main blockchain, enhancing throughput and reducing fees. These advancements make blockchain networks more scalable and environmentally friendly, supporting widespread adoption while reducing the carbon footprint. [10]

6. Regulatory Developments and Global Market Adaptation

The global regulatory landscape for crypto is evolving, with frameworks like the European Union’s Markets in Crypto-Assets (MiCA) regulation setting new standards for digital asset management. MiCA’s comprehensive approach addresses issues like consumer protection, financial crime, and market stability, providing businesses with a clearer regulatory environment. For institutional investors, regulatory clarity reduces market uncertainty, making it easier to assess and manage risks associated with crypto investments. The report by Elliptic highlights how MiCA is influencing other regions to adopt similar frameworks, as well as the increasing prevalence of the Travel Rule in global regulatory standards. [11][12]

Developers face the challenge of creating adaptable systems that comply with diverse global regulations. Reg-tech solutions are becoming essential to streamline compliance, allowing developers to build automated systems that monitor transactions for regulatory compliance. Integrating tools that automate checks for AML/CFT and sanctions compliance allows blockchain applications to meet international standards, promoting wider acceptance in global markets and reducing regulatory risk for users and businesses alike. By focusing on adaptive regulatory compliance, developers can support the safe and legal expansion of blockchain technologies across regions. [11][12]

Conclusion

As we look ahead to 2025 and beyond, blockchain and Web3 technologies are set for transformative growth driven by advancements in finance, identity, interoperability, scalability, and regulation. Developers, business owners, investors, and users all play crucial roles in shaping the future of these technologies. By developing secure, scalable, and compliant systems, stakeholders can contribute to a resilient, globally interconnected blockchain ecosystem that balances innovation with regulatory accountability. The trends explored here set the foundation for a new form of transacting. Let us work on it so it becomes a more decentralized, efficient, and sustainable economy.

Sources

[1] BCG, The Digital Euro Could Herald a New Era of Innovation, 2024, https://www.bcg.com/publications/2024/digital-euro-could-herald-new-era-of-innovation

[2] Der Standard, Was geschieht, wenn digitales Zentralbankgeld das Bargeld verdrängt?, 2023, https://www.derstandard.at/story/2000145162022/was-geschieht-wenn-digitales-zentralbankgeld-das-bargeld-verdraengt.

[3] Wirtschaftsdienst, Digitales Zentralbankgeld: Dabei sein ist nicht alles, 2023, https://www.wirtschaftsdienst.eu/inhalt/jahr/2023/heft/12/beitrag/digitales-zentralbankgeld-dabei-sein-ist-nicht-alles.html.

[4] Henkel et al., Central Bank Digital Currencies: Perspectives and Challenges, Journal of Banking & Finance, 2023, https://www.sciencedirect.com/science/article/pii/S1057521923005471.

[5] Bitpanda Academy, Central Bank Digital Currency (CBDC) Definition and Erklärung, https://www.bitpanda.com/academy/de/lektionen/central-bank-digital-currency-cbdc-definition-and-erklarung/.

[6] ECB, The Digital Euro: Our Money Wherever, Whenever We Need It, Occasional Paper Series No. 360, 2023, https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op360~35915b25bd.en.pdf.

[7] Charles W., 3 Web3 Trends to Watch in Asia, Forbes, February 2024, https://www.forbes.com/sites/charleswayn/2024/02/19/3-web3-trends-to-watch-in-asia/.

[8] Markets and Markets, Web 3.0 Market Report, 2024, https://www.marketsandmarkets.com/Market-Reports/web-3.0-market-195663542.html.

[9] IBM, The Future of Digital Money, IBM, 2024, https://www.ibm.com/think/insights/the-future-of-digital-money.

[10] CoinMarketCap Academy, What Will Be the Next Bull Market Catalyst?, 2024, https://coinmarketcap.com/academy/article/what-will-be-the-next-bull-market-catalyst-a-look-at-crypto-in-2025.

[11] Kavout, IBM’s Role in Blockchain Transformation of Industries, 2024, https://www.kavout.com/market-lens/ibms-role-in-blockchain-transformation-of-industries.

[12] Elliptic, Global Crypto Regulation Landscape 2024, 2024; https://www.elliptic.co/resources/global-crypto-regulation-landscape-2024.