**How it started:** One of the first recorded real-world cryptocurrency transactions took place in 2010\. A man paid 10,000 Bitcoin (about $1million at today’s value) for two pizzas.

How it’s going:
Cryptocurrency is part of the mainstream. You can trade Bitcoin at kiosks in shopping centers. Large financial institutions like J.P. Morgan are exploring crypto.

We’ve come a long way. But crypto hasn’t reached full maturity yet. Mainstream acceptance also leads to fiascos like the Hawk Tuah coin, the $Libra scandal, and the ByBit hack. These ups and downs show how volatile digital currency can be, especially in the hands of novices and/or scammers.

So, what does the future hold for crypto? Here’s how many believe cryptocurrency will—and should—evolve in the next decade.

Key Concepts for Blockchain and Cryptocurrency

Before we get into the predictions, it’s important to define a few terms. These concepts are at the heart of our discussion about the future of crypto:

What Is Cryptocurrency?

Cryptocurrency, or “crypto,” is a term for assets that uses cryptography for security and operates on a decentralized network, like a blockchain. Decentralization is key for crypto—since it’s not controlled or issued by a government or any other institution, no single entity has control over it.

Cryptocurrency started with Bitcoin in 2009, with the goal of establishing peer-to-peer, censorship-resistant, deflationary money. Now there are dozens of crypto tokens, including stablecoins, which are tokens linked to fiat currencies.

What Is Tokenomics?

The economic structure that governs cryptocurrency is called “tokenomics.” Individual units of a cryptocurrency can be thought of as digital tokens that represent some value, and sometimes can be traded in lieu of physical currency. Tokenomics determines how blockchain projects incentivize users, maintain value, secure networks and ensure long-term stability. Essential concepts for tokenomics include:

Supply

Inflation is a real concern when you’re dealing with a theoretically limitless resource. Supply controls are necessary in crypto just as with fiat currency

Governance and Control

Cryptocurrencies must establish who can create a token, how the network is secured, how gas fees are assessed, and much more.

Incentives and Distribution

This aspect includes the way tokens are initially distributed, how participants are rewarded, and how tokens are limited to avoid inflation.

Ultimately, the goal of a successful blockchain project is to create sustainable demand without risking hyperinflation and rapid devaluation.

What is Tokenization?

Tokenization is the process of creating digital tokens that are tied to real-world assets (such as real estate, commodities, and intellectual property). Then, these assets can be recorded and transferred on a blockchain.

A real-world asset is digitized by creating a blockchain-based token that represents ownership. These tokens can be fractionalized—for example, a token representing a house could be co-owned by four people with each owning a different percentage of the whole.

Once the asset is tokenized, smart contracts can govern transactions to ensure transparent, trustless transfers. These assets can also be traded on marketplaces.

Tokenization offers a few key benefits:

Increased liquidity: It’s hard to own a fraction of, say, an oil painting. But multiple people can share ownership of the token that represents it.

Lower transaction costs: Tokens can be traded without middlemen like banks, brokers, or realtors.

Transparency and security: Blockchain provides an unalterable record of ownership and of each transaction.

Three Forces Shaping the Future of Crypto

What’s next for cryptocurrency will depend on how powerful forces interact, come into conflict and build on each other. These three are the most significant.

The Tokenization of Assets: A Trillion-Dollar Market

Tokenization is a central focus for Avalanche. We want to make it easier for everyone from artists to musicians to hedge fund managers to trade assets in a trustless, decentralized environment. Tokenization will continue to expand to include assets like:

• Real Estate
• Commodities and precious metals
• Equities and securities
• Intellectual property, including art and music
• Carbon credits and sustainability assets

Tokenization will facilitate trade and make fractional ownership a norm. However, we will need new types of regulation and new controls to avoid market manipulation and ensure security.

The Rise of Central Bank Digital Currencies (CBDCs)

CDBCs are exactly what they sound like: digital currencies that are issued and backed by central banks. Governments are pushing for CBDCs for many reasons:

• More efficient and faster payment systems
• Greater financial inclusion/serving the historically underserved
• Government control over policy in the digital economy

While there are clear benefits to CBDCs, they do lack the decentralization that is essential to privacy, security and equality in cryptocurrency. If CBDCs replaced stablecoins and private cryptocurrencies, it would mean recreating the financial system we already have rather than replacing it with something better.

The Inevitable Regulation

Cryptocurrency’s “wild West” phase is over, for the most part. Governments have taken notice and are beginning to create policy that will reign in the excesses and create a framework for punishing scammers.

Currently, regulation in the United States is a question mark, with the new president signaling a hands-off approach. But cryptocurrency is borderless; regulations in one country will affect crypto everywhere.

The crypto industry is beginning to adopt its own self-regulation, creating governance models for decentralized autonomous organizations (DAOs). Whether self-regulation can help stem the oncoming tide of government regulation remains to be seen.

What the Next 10 Years Look Like for Cryptocurrency

It’s fair to expect some growing pains in the next decade of crypto. But despite inevitable setbacks and challenges, there are plenty of reasons to be optimistic. Expect to see:

The Maturation of Crypto Markets

Thankfully, the days of meme coins and short-lived hype cycles are numbered. Institutional adoption will accelerate, with banks, hedge funds, and corporations integrating crypto into their operations. Regulations will bring standardization and clarity—hopefully without affecting the decentralized, self-governed nature of crypto.

Expect also to see a decline in speculative tokens—the Ponzi-scheme-esque projects with weak fundamentals that rely on hype cycles and underinformed buyers. Instead, investors will prioritize usefulness over hype.

Convergence of Traditional Finance and Blockchain

Crypto and traditional finance don’t have to be mortal enemies. Merging the two will provide more utility, flexibility and security.

Expect to see tokenized versions of traditional assets like stocks, bonds and real estate. This will allow 24/7 trading not tied to the traditional working hours of established stock exchanges. Financial institutions will also adopt decentralized finance—banks and asset managers will interact with decentralized protocols under regulatory oversight.

Ultimately, we’ll see hybrid systems emerge that blend the efficiency and equality of decentralized finance with the safeguards of traditional finance. These hybrid systems are called permissioned blockchain solutions.

Introduction of New Economic Models

Token economies will become more sustainable, sophisticated, and omnipresent over the next decade. We’ll see more sophisticated tokenomics in action, meaning the decline of high-inflation Ponzi-esque models. Future projects will focus on accruing value, offering real yield, and will function with strong deflationary mechanisms in place.

We might also see DAOs become digital corporations, a next-generation organizational structure that could replace traditional companies in some industries. Governance models that blend decentralization with decision-making frameworks could change the way businesses govern themselves.

There’s even the potential for blockchain-powered Universal Basic Income, which may become a necessity as AI reduces the need for human workers. Decentralized models for UBI, funded by network fees or smart contract taxes, could emerge as a way to share the wealth in blockchain systems.

The Future Is Decentralized

The next 10 years will see a constant balancing act between decentralization and government control. While CBDCs and regulatory oversight will attempt to impose limits, crypto’s core innovation—permissionless, decentralized finance—will remain unstoppable.

The projects that survive and thrive will be those that offer real-world utility, strong economic models, and seamless user experiences. Speculation will fade, but blockchain’s true revolution is just beginning.

We predict that by 2035, crypto will be the infrastructure behind global finance and digital ownership, giving rise to new economic systems.

Ready to help shape the future of finance on the blockchain? Explore DeFi on Avalanche.