In CoinDesk’s special report “Crypto 2024,” Paul Veradttakit, the Managing Partner of Pantera, made six predictions for the cryptocurrency industry in 2024.
Table of Contents:
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The Revival of Bitcoin and DeFi Summer 2.0
Tokenization of New Consumer Use Cases in Social Experiences
The Bridge Between TradFi and DeFi: Stablecoins and Asset Mapping
Cross Integration of Modular Blockchains and Zero-Knowledge Proofs
More Computation-Intensive Applications Moving Onto the Chain, such as AI and “Decentralized Physical Infrastructure Network (DePIN)”
Integration of the Public Blockchain Ecosystem and the “Hub-Spoke” Model of Application Chains
Bitcoin experienced a revival in 2023, with its market share rising from around 38% in January to approximately 50% in December. Paul Veradttakit stated that there are at least three main catalysts driving the continued revival of Bitcoin next year:
The fourth Bitcoin halving expected in April 2024
The potential launch of a Bitcoin spot ETF
Programmable enhancements, including both on-chain (such as Ordinals) and off-chain solutions like Layer 2 networks and other scalable layers, such as Stacks and Rootstock.
Veradttakit is optimistic about the development of Layer 2 networks and other scalability layers within the Bitcoin ecosystem and believes that the DeFi Summer trend is set to reoccur within this ecosystem. Additionally, NFT-related tracks are also expected to experience rapid growth within the Bitcoin ecosystem.
Following the success of friend tech, Veradttakit expects to see more experimental projects in the social space next year. Tokenization, whether it be fungible or non-fungible tokens, will play a crucial role in reinvented social applications. Fungible tokens are likely to be used as new forms of points and loyalty systems, while non-fungible tokens (NFTs) may be used for personal profiles and social resources. Both will be tradable on the chain and participate in the DeFi ecosystem.
In 2024, institutional adoption is expected to increase significantly, as they seek not only ETFs but also the tokenization of real-world assets (RWA) and TradFi financial products. In other words, TradFi assets will be “mapped” onto DeFi, while crypto assets will gain more exposure channels in the TradFi market, creating a bridge between TradFi and DeFi and providing investors with more liquidity and diversification options. Stablecoins will play a significant role in this process.
Veradttakit points out that with the maturity of modular blockchains and zero-knowledge proofs (ZKPs), ZK-focused development companies will launch “modular” ZK solutions by focusing on specific vertical markets, such as co-processors, privacy layers, proof markets, and zkDevOps. For example, Axiom’s ZK co-processor utilizes ZKPs to provide historical state proofs that developers can use for computations within DApps. Veradttakit concludes:
“As ZKPs become a universal interface among these various providers, we will enter a new era of smart contract composability. This will give DApp developers greater flexibility in choosing suppliers and lower the barriers to entry into the blockchain stack. On the consumer side, ZKPs may have broader applications as a means of protecting identity and privacy, such as using ZK-based decentralized identity proofs.”
Veradttakit believes that with the emergence of L2 and new public chains, computationally expensive applications that can use billions of bytes of RAM will become more economically viable on-chain in the near future. This includes vertical applications such as on-chain AI systems, decentralized physical infrastructure networks (DePIN), on-chain knowledge graphs, and fully on-chain games and social networks. All of these have the potential to fundamentally change the on-chain data economy, greatly improving user and developer experiences, as they will no longer be constrained by heavy gas fees and computational power.
Some examples of these applications include Hivemapper, Bittensor, Modulus Labs, The Graph, and Realmsverse.
Over the past few years, the public blockchain ecosystem has undergone significant development and integration, particularly in Layer 1 (L1) and Layer 2 (L2) technologies. While there are technical differences between L1 and L2, users do not perceive the distinction (such as Solana and Arbitrum).
With this trend of homogenization, liquidity has become a significant concentration of power in the public blockchain ecosystem, benefiting large existing participants like Arbitrum, Optimism, and Solana. Currently, the top four ecosystems occupy the majority of the Total Value Locked (TVL).
In this context, smaller ecosystems must focus on specific vertical markets, such as social, gaming, or decentralized finance (DeFi), effectively transforming into “application chains” or “industry chains” focused on specific domains. For example, some major L2 projects like dydx, Loopring, and Ronin have already become application chains focused on a single domain. Meanwhile, smaller or newer L2 chains like Base and Blast rely heavily on specific killer applications, such as friend.tech and Blur, for their TVL growth.
Furthermore, most major general-purpose public blockchains have introduced application chain toolkits, such as OP Stack, Arbitrum Nitro, and StarkEx, allowing these application chains to leverage the liquidity of these public networks and be included in their ecosystem. As a result, we are starting to see the formation of a “hub-spoke” model, with a few general-purpose public blockchains as the “hub” and many specialized application chains as the “spokes.” In 2024, it is worth noting some Rollup-as-a-Service providers like Caldera, Conduit, and Eclipse, who may leverage this “hub-spoke” model to expand their business.
