Original title: 6 Predictions for Crypto in 2024: Panteras Paul Veradittakit
Original author: Paul Veradittakit
Original source: coindesk
Original compilation: Kate, Mars Finance
The past year has proven the blockchain space’s ability to recover from the worst external conditions. Since the “crypto winter” at the beginning of this year, the overall market value of the crypto space has increased by 90%, reaching $1.69 trillion. Bitcoin has grown from an annual low of $16,000 in January 2023 to more than $40,000 in December. More than doubled.
This article is part of CoinDesk’s “Crypto 2024” prediction package.
In 2023, we continue to feel some aftershocks of 2022’s major crash wave, most notably the FTX trial and verdict and Binance plea deal in November, and the brief decoupling of the USDC stablecoin in March amid the banking crisis . Meanwhile, we continue to see breakthroughs in the space, including Ethereum’s Shapella upgrade to a full proof-of-stake network in March, the ruling in July that XRP (primarily) is not a security, the launch of PayPal’s PYUSD stablecoin and Grayscale’s announcement in August A victory over the U.S. Securities and Exchange Commission on Bitcoin spot ETFs, and the rise of pioneers in novel tokenized social experiences such as Friend.tech.
So were optimistic about the path ahead as we head into 2024. Here are my top predictions for the crypto industry in 2024:
1. Bitcoin’s recovery and “DeFi Summer 2.0”
Bitcoin is making a comeback in 2023, with Bitcoin’s dominance (Bitcoin’s share of cryptocurrency market capitalization) rising from 38% in January to around 50% in December, making it one of the most noteworthy ecosystems to watch in 2024 . There are at least three major catalysts driving its resurgence over the next year: (1) the fourth Bitcoin halving in April 2024, (2) the expected approval of several Bitcoin spot ETFs by institutional investors, and (3) programmable capabilities Additions include base protocols such as Ordinals, as well as Layer 2 and other extensible layers such as Stacks and Rootstock.
At the infrastructure level, we believe we will see a proliferation of Bitcoin L2s and other scalability layers to support smart contracts. The Bitcoin ecosystem should be integrated around one or two Turing-complete smart contract languages, with top contenders including Rust, Solidity, or extensions of the Bitcoin native language Clarity. This language will become the standard for Bitcoin development, similar to how Solidity is considered the standard for Ethereum development.
We also see the fundamentals of a possible “DeFi Summer 2.0” for Bitcoin. Wrapped BTC (WBTC) currently has a market cap and total value locked (TVL) of approximately $6 billion, so DeFi demand for Bitcoin is clearly huge. Today, Ethereums market cap is $273 billion, of which about 10% is TVL ($28 billion). As Bitcoin DeFi infrastructure matures, we may see Bitcoin DeFi total value locked (TVL) rise from the current $300 million (0.05% of market cap) to 1-2% of Bitcoin market cap (at current prices Calculated to be approximately US$10-15 billion). In the process, many of Ethereums DeFi practices may be transferred and naturalized to Bitcoin, such as the recently emerged BRC-20 inscription and ideas such as staking in Babylon L2.
Bitcoin NFTs, such as those engraved with ordinal numbers, may also become increasingly popular in 2024. Due to Bitcoins higher cultural recognition and Meme value, web2 brands (such as luxury retailers) may choose to release NFTs on Bitcoin, similar to Tiffanys collaboration with Cryptopunks to release the NFTFi pendant series in 2022.
2. Tokenize social experiences for new consumer use cases
Web2 has moved from social to finance, and Web3 is moving from finance to social. In August 2023, friend.tech created a new form of tokenized social experience on Base L2, where users can buy and sell divided shares of other peoples X (Twitter). It reached a peak of 30,000 ETH TVL (approximately $50 million at the time) in October, and inspired several copycat projects such as post.tech. It seems that friend.tech has successfully pioneered a new token economics model for the SocialFi space by financializing Twitter profiles.
In the upcoming year, we expect more experimentation in the social space, with tokenization (whether fungible or non-fungible tokens) playing a key role in reshaping the social experience. Fungible tokens are more likely to be new forms of points and loyalty systems, while non-fungible tokens (NFTs) are more likely to serve as personal data and social resources (such as trading cards). Both can be traded on-chain and participate in the DeFi ecosystem.
Lens and Farcaster are two leading web3 native applications integrating DeFi with social networks. Projects like Blackbird will also promote token points systems for loyalty programs in specific vertical industries (such as restaurants), use a combination of stablecoin payments and token rebates to reshape the consumer experience, and functionally provide an on-chain alternative to credit cards. plan.
3. Add TradFi-DeFi “bridge”, such as stablecoins and mirror assets
2023 has seen a lot of legal action in the crypto space, including several high-profile victories for the industry, such as the XRP ruling and victory in the Grayscale ETF lawsuit, as well as financial fraud by Binance and FTX being brought to justice. At the same time, institutional interest and potential ETF approvals for Bitcoin and Ethereum have also increased significantly.
By 2024, we expect a significant increase in institutional adoption, as they seek not only ETFs but also tokenized real-world assets (RWA) and TradFi financial products. In other words, TradFi assets will be mirrored in DeFi, and crypto assets will increase exposure in the TradFi market, thereby creating a TradFi-DeFi bridge that will bring the two worlds closer together and provide investors with Increase liquidity and diversification.
Stablecoins will become one of the most important links between the TradFi and DeFi worlds, with stablecoins such as USDC and PYUSD becoming more widely accepted as portfolio options and payment instruments. As Circle considers an IPO in 2024, we are also likely to see an increase in the issuance and use of non-USD stablecoins, particularly euro-backed stablecoins such as Circle’s EURC, as well as British Pound, Singapore Dollar, and Japanese Yen stablecoins. Some of these stablecoins may be launched by state-backed actors. This could also lead to the growth of on-chain fiat currency FX markets. Tokenized Treasury bonds have already received $800 million in tokenization through platforms such as Ondo.
4. Integration of modular blockchain and zero-knowledge proof
In the past year, the concepts of modular blockchain and zkp have become very mature, such as the recently launched Celestia mainnet, Espressos Arbitrum integration, RiscZeros open source Zeth prover, and Succincts launch of the ZK market. An interesting trend is how these two narratives are merging together, with companies in the ZK space “modularizing” by focusing on specific verticals such as coprocessors, privacy layers, proof markets, and zkDevOps.
In the coming year, I expect this trend to continue, with zero-knowledge proofs becoming the interface between different components of the modular blockchain stack. For example, Axioms ZK coprocessor leverages zkp to provide proof of historical state, which developers can then use to perform computations in dapps. As zkp becomes the common interface between these different providers, we will see a new era of smart contract composability. This gives developers greater flexibility in building dapps and lowers the barrier to entry into the blockchain stack. On the consumer side, ZKP may see increased use cases as a way to protect identity and privacy, for example in the form of ZK-based decentralized IDs.
5. More computing-intensive applications are brought to the chain, such as AI and DePIN
A lot of time, effort, and money have been invested in the scalability problem of decentralized applications. Today, most of the scalability issues have been solved - gas fees for Ethereum L2s are less than $0.02 (compared to $11.5 for Ethereum mainnet), and on Solana, fees are even lower by 3-4 Magnitude.
As this trend continues over the next year, we believe that computationally expensive applications (where applications can use gigabytes of RAM) will become more economically viable on-chain in the near future. This includes vertical applications such as on-chain artificial intelligence systems, decentralized physical infrastructure networks (DePIN), on-chain knowledge graphs, and fully on-chain games and social networks. All of this has the potential to fundamentally reshape the on-chain data economy, greatly improving the experience for users and developers as they are freed from onerous gas fees and tight constraints on computing power.
Examples of computationally expensive projects that can take advantage of this cheaper on-chain “compute” include Hivemapper creating a decentralized Google Map on Solana, Bittensor creating a decentralized machine learning platform, Modulus Labs working on ZKML and artificial intelligence Generated NFT art efforts, The Graph’s on-chain knowledge graph initiative, and Realmsverse creating on-chain game worlds and lore on Starknet.
6. Integrate the hub and spoke model of public blockchain ecosystem and application chain
There has been a surge in infrastructure projects over the past few years. Despite the common technical classification of Layer 1 (L1) and Layer 2 (L2), there is not much difference from a user experience perspective. This is especially true for general public blockchains. Today, L1s like Solana or Avalanche are direct competitors to L2s like Arbitrum or zkSync in terms of users, projects, and capacity.
With this homogeneity, liquidity becomes a centralizing force in general public blockchains, benefiting larger existing players such as Arbitrum, Optimism, and Solana, with the four largest ecosystems currently accounting for 90% of total value locked (TVL) % about. Smaller ecosystems must focus their efforts on specific vertical areas (such as social, gaming, DeFi) to maintain their advantages and effectively become application chains or professional chains. Among the top 10 L2s in TVL, 3 (dydx, Loopring, Ronin) are actually application chains focusing on a single vertical field. The TVL break-in of smaller, newer L2 chains (such as Base and Blast) also relies heavily on a single killer app (such as friend.tech and Blur) to establish a large number of beachheads.
