Original author: Siddhant Kejriwal
Original compilation: Block unicorn
As 2024 dawns, the cryptocurrency space is making a groundbreaking comeback, delivering huge rewards for those who have weathered the latest bear market storm. This recovery is more than just a rebound in value; it is a testament to the resilient and evolving nature of the crypto ecosystem. Determined investors, enthusiasts, and innovators are now at the forefront of the revitalized space, witnessing breakthrough ideas being born and cryptocurrency’s potential blossoming into substantial, innovative applications , far beyond mere speculative assets.
a16z’s Cryptocurrency Report 2023
This dynamic resurgence is supported by a compelling infographic from a16z’s Cryptocurrency Report 2023, showcasing booming global interest in cryptocurrencies. Its not just prices that are rising; an influx of new ideas, an increase in startups, and a growing user base have driven a compound annual growth rate (CAGR) of between 63% and 84% since 2012. This strong growth narrative highlights the dynamic evolution of the cryptocurrency industry and its ability to rebound and push the boundaries of what is possible, while ushering in a new era of innovation and opportunity.
This article takes a deep dive into some of the most compelling new stories shaping the cryptocurrency space in 2024. From the transformative potential of decentralized finance (DeFi) to groundbreaking advances in the tokenization of real-world assets, the breadth of innovation is staggering. However, as we explore these frontiers, it is crucial to look at them with caution. Many of these concepts, while promising, are still in their infancy and their practical applications have yet to be fully realized and tested. In addition, the changing regulatory environment creates additional complexities and potential headwinds.
As we begin to explore the top cryptocurrency narratives, we must remain vigilant, recognizing the endless possibilities while also being aware of the uncertainties and challenges ahead.
Liquidity Staking Tokens: Reshaping the Staking Dynamics
In the traditional staking model, participants lock assets to support network operations and face liquidity constraints as a trade-off for earning rewards. Liquidity staking emerged as a game-changing innovation that solves this fundamental problem by allowing stakers to maintain liquidity while staking their assets. This approach is increasingly in demand as it reconciles the benefits of staking with the flexibility of liquid assets, allowing participants to maximize operational efficiencies and financial opportunities within the blockchain ecosystem.
Chainlink explains liquidity staking mechanism
Benefits and risks of liquidity staking
Liquidity staking brings several benefits that enhance the staking experience:
Enhanced Liquidity: Stakeholders receive liquidity tokens representing their staked assets, enabling them to use them in a variety of DeFi applications without giving up staking rewards.
Increased participation: Liquidity staking encourages broader participation in cybersecurity by lowering barriers to entry and increasing decentralization.
Flexibility and efficiency: Participants can respond quickly to market changes and use their liquidity tokens for trading, lending and borrowing, thereby optimizing the utility of their assets.
However, these advantages also come with associated risks:
Smart Contract Vulnerabilities: Reliance on smart contracts brings a layer of risk, where flaws or vulnerabilities can lead to the loss of funds.
Market Volatility: Liquidity tokens may fluctuate in value, introducing a market risk component that is not typically present in traditional staking.
Complexity and interdependencies: Integrating various DeFi protocols increases complexity and interdependencies, potentially exacerbating systemic risks in the blockchain ecosystem.
Famous liquidity staking projects:
Several notable projects are at the forefront of the liquidity staking movement, having a significant impact on the Web3 landscape:
Lido: As a leader in liquidity staking, Lido offers solutions across multiple blockchains that facilitate staking without locking assets, thereby enhancing liquidity and participation.
Rocket Pool: Rocket Pool provides a decentralized, trustless staking service for Ethereum, promoting accessibility and network health.
These projects and others are leading the shift to a more fluid, dynamic, and inclusive staking environment, cultivating a robust Web3 ecosystem where participants can participate more freely, more securely, and more profitably. As liquidity staking continues to develop, it is expected to redefine the staking paradigm, providing a powerful combination of security, liquidity and opportunity, in line with the basic principles of decentralization and user empowerment in the blockchain field.
The Re-Staking Revolution: A New Paradigm for Cryptocurrency Earnings
A groundbreaking concept called “restaking” redefines the mechanics of blockchain security and token economics. Re-staking is a complex mechanism, and new blockchain networks entrust their economic security to a strong, professional security layer. This is achieved by accumulating liquid staking tokens and distributing them to the staking layer, ensuring enhanced protection and efficiency.
The “re” in restaking represents layered commitment: resources are initially staked to secure a major protocol like Ethereum, and then allocated to another protocol, benefiting both layers. This innovative approach simplifies security and fosters a more connected and collaborative blockchain ecosystem.
The impact of restaking on the crypto economy
Re-staking is a game changer for the crypto economy, especially for emerging layer 1 networks. By eliminating the need for these networks to independently recruit validators and accumulate staking resources, restaking significantly lowers barriers to entry and operational overhead. This model promotes more efficient utilization of resources as staked assets can be leveraged across multiple protocols, thereby enhancing the overall security and vitality of the Web3 space.
Additionally, the additional revenue stream generated through re-staking will incentivize new participants to join the ecosystem. The influx of stakeholders helps create a more secure, robust and decentralized Web3 environment, highlighting the transformative potential of restaking.
Ethereum staked on the network - chart from CryptoQuant
How to participate in re-staking
Participating in restaking requires a strategic approach and a deep understanding of the underlying platform and mechanics. Potential participants should first familiarize themselves with platforms such as EigenLayer and EtherFi, which are at the forefront of the restaking movement.
General steps include obtaining liquid pledged tokens (LSTs) from platforms such as Lido Finance and staking these assets to the chosen re-staking layer. By following this process, individuals and entities can contribute to the security and efficiency of multiple blockchain networks while also leveraging new channels to earn revenue and participate in the digital asset space.
BRC-20 Token: Making Bitcoin Smarter
The BRC-20 token represents a major innovation that brings a new layer of utility to the Bitcoin blockchain. Unlike satoshis, which are the traditional basic unit of Bitcoin, the BRC-20 token introduces a novel concept by burning a JSON file onto a single satoshi. This process is similar to attaching a unique digital annotation to each satoshi, giving them unique properties and identity. These inscriptions can detail a variety of properties, including the token’s name, token symbol, and total supply, turning ordinary satoshis into versatile digital assets.
The serial number inscription is also a BRC-20 token
Overview of comparison of BRC-20 tokens and ERC-20 tokens
The creation of BRC-20 (like Ordinals) tokens differs significantly from the established ERC-20 standard on the Ethereum blockchain. ERC-20 tokens utilize smart contracts to introduce new assets with properties independent of Ethereum, while BRC-20 tokens use an inscription approach. To create a BRC-20 token, a specific amount of Bitcoin must be deposited into the ordinal registry. These deposited Bitcoins will then serve as the backbone of BRC-20 tokens, with the token supply corresponding to the amount deposited.
An interesting aspect of BRC-20 tokens is their operating framework, which allows them to run in parallel with the main Bitcoin blockchain. Therefore, transactions can be verified on the Bitcoin network if they fail to meet predefined inscription conditions, while transactions can be rejected on the BRC-20 protocol.
The advantages of the BRC-20 token include its simplicity and strong security inherited from the Bitcoin blockchain. However, they also have some limitations. Their versatility is limited by the lack of smart contract functionality, and their interoperability with other blockchain systems is relatively limited.
The future prospects of the BRC 20 token
Going forward, the BRC-20 token is expected to usher in a new era for the Bitcoin network. From enabling direct peer-to-peer transfers to facilitating the creation of Bitcoin-based DeFi applications and tokenizing real-world assets such as gold and real estate, BRC-20 could significantly broaden Bitcoin’s use cases, opening new doors for its legendary evolution. chapter.
ERC 7621: Basket of Tokens Standard
ERC-7621 is a new token standard developed by Alvara Protocol. It is designed to create and manage on-chain multi-token asset portfolios and investment portfolios. It provides a framework for deploying token basket standards on the Ethereum blockchain. A single BTS token can encapsulate any combination of ERC-20 tokens, similar to mutual funds in traditional finance, thus facilitating on-chain fund management.
Alvara Protocol pioneers a basket of token standards - Image from Alvara Litepaper
Key features and innovations
Basket Token Standard (BTS): A revolutionary approach that allows the creation of tokens containing a variety of underlying ERC 20 tokens.
Transferability and Liquidity: By integrating with the ERC 721 standard for ownership representation, BTS becomes transferable, thereby enhancing liquidity and management rights.
Fungible BTS LP Tokens: These are ERC-7621 LP tokens that represent holdings in baskets and can be used in a variety of DeFi applications, increasing their utility beyond traditional fund holdings.
Dynamic Donations and Withdrawals: The protocol allows LP tokens to be minted and destroyed with each donation or withdrawal, consistent with fund dynamics.
Management fees and rebalancing: ERC-7621 simplifies fund management by enabling automatic allocation of management fees and facilitating portfolio rebalancing.
Alvara Protocol: Leveraging ERC-7621
The Alvara protocol utilizes the ERC-7621 standard to provide a decentralized framework for the creation and management of investment funds on the blockchain. Leveraging the Fund Factory and Marketplace, Alvara drives ecosystem participation and governance by enhancing BTS visibility and performance tracking, powered by its native ALVA and veALVA tokens. The protocol democratizes money management, ensuring an accessible and efficient elite environment.
Note: ERC-7621 is an experimental token standard and has not yet been officially proposed as an Ethereum improvement proposal. As such, it has not yet been reviewed by the Ethereum community, so readers planning to explore this new standard must take it seriously.
ERC-404: Semi-fungible tokens
ERC-404 is another experimental token standard independently developed by Pandora Labs. Ethereum supports the ERC-20 standard for creating fungible tokens and the ERC-721 standard for NFTs. Pandora Labs merged these concepts to create semi-fungible tokens, a solution very similar to fragmented NFTs.
The idea of semi-fungible tokens has been floating around in Web3 almost since the advent of NFTs. The idea provides for a situation where NFTs need to be jointly owned on-chain. Standard NFT tokens can only have one official owner at a time, and ERC-404 defines a standard that retains both the non-fungibility of NFTs and the liquidity of ERC-20 tokens.
How ERC-404 works:
ERC-404 tokens are both divisible and unique. When a newly minted ERC-404 token represents ownership of a virtual asset, the entire unit from a single address will mint the NFT in your wallet. That address can then sell a portion of that token. Once the ERC-404 is split, the protocol will destroy the NFT. When an address collects enough of a specific ERC-404 token to form a whole again, the protocol re-mints the NFT in the associated address.
ERC-404 compared with other token standards - Picture from Pandora website
The potential of ERC-404 tokens
Pandoras innovation has many potential applications that could expand the utility of NFTs. First, one can use fragmented NFTs as a source of liquidity to power liquidity pools, or have a diversified portfolio of NFT baskets rather than purchasing entire NFT units individually.
However, users must understand that ERC-404 is experimental and not a standard Ethereum improvement proposal. Pandora is being developed independently and has not yet been reviewed by the Ethereum developer community. As a result, this innovation may be riddled with bugs and vulnerabilities, and may be prone to development bottlenecks.
Universal Data Availability Layer: The Frontier of Modularity
Data availability is crucial as it ensures that sufficient transaction data is accessible during the consensus process. This accessibility is crucial for validators or nodes to verify the validity of transactions in proposed blocks. Data availability is fundamental to maintaining chain liveness, i.e. the network continues to agree on transaction sequences and ensures that invalid transactions are consistently identified and rejected.
However, creating a dedicated data availability (DA) layer is resource-intensive. It requires strong hardware capabilities and staking requirements to ensure robustness and security. To alleviate these challenges, the blockchain industry is witnessing the rise of universal DA layers. These layers provide a shared infrastructure that new or emerging blockchain networks can simply subscribe to, thereby alleviating the need for each chain to build its own expensive data availability solution.
Outstanding data availability solution
Celestia: Celestia is a pioneering solution in this space, providing a modular blockchain network that decouples data availability from consensus, enabling scalable and flexible blockchain designs.
EigenDA: EigenDA improves the efficiency of blockchain networks by providing a unique approach to data availability through the use of liquid staking tokens.
Polygon Avail: As part of the Polygon suite, Avail is designed to serve as a powerful and decentralized data availability layer, supporting various blockchain architectures and enhancing their performance and security.
Advantages of a dedicated data availability (DA) layer
The emergence of a dedicated DA layer brings multiple advantages to the blockchain ecosystem:
Reduce the overhead of new chains: By leveraging the existing DA layer, new blockchain projects can significantly reduce their startup and operating costs.
Efficient utilization of resources: The dedicated DA layer optimizes resource usage across the entire ecosystem, preventing redundancy and promoting eco-friendly blockchain operations.
Enhanced decentralization: With accessible DA services, smaller chains can achieve levels of security and decentralization that are otherwise unattainable.
Application Chain Foundation: These layers facilitate the development of application-specific chains, or “application chains,” enabling customized blockchain solutions that meet unique needs without compromising data integrity or availability.
Essentially, a dedicated data availability layer is changing the blockchain landscape, providing the infrastructure to support the growth and diversification of the Web3 ecosystem. They demonstrate the continued development and maturation of blockchain technology, paving the way for more resilient, scalable and application-centric networks.
DePIN: Decentralized Physical Infrastructure Network
The Decentralized Physical Infrastructure Network (DePIN) represents a groundbreaking movement in the crypto space, combining blockchain technology with real-world physical infrastructure. The DePIN project leverages the decentralization and tokenization of blockchain to innovate in areas such as data storage, energy and connectivity, changing the way physical services are provided and managed. Notable examples such as The Graph Protocol, Theta Network, and Arweave illustrate the potential of DePIN, showing how blockchain can extend its utility beyond the digital realm to impact tangible, real-world infrastructure.
The Graph Protocol uses blockchain to index and query web data, effectively creating a decentralized service for information retrieval.
Theta Network decentralizes video streaming by allocating bandwidth to users, thereby increasing the quality and reach of streaming services.
Arweave provides a novel data storage solution that allows information to be stored permanently on a decentralized network.
These initiatives fully demonstrate how DePIN is redefining infrastructure and leveraging crowdsourced contributions to improve service efficiency and accessibility.
Advantages of DePIN over traditional systems
DePIN has many advantages over traditional infrastructure models:
Decentralization: By distributing control and ownership, DePIN ensures that no single entity can monopolize services, fostering a more democratic infrastructure ecosystem.
Transparency: The inherent transparency of blockchain allows all network participants to view and verify transactions and operational processes.
Incentives: DePIN uses cryptocurrency rewards to incentivize participation, ensuring the infrastructure is maintained and enhanced by a voluntary community.
Accessibility: DePIN lowers the barrier to entry, enabling a wider range of actors to contribute to and benefit from physical infrastructure services.
DePIN’s zoning map – Image via X
Challenges facing DePIN
Despite its potential, DePIN still faces some challenges:
Integration with physical infrastructure: Connecting digital blockchain systems with physical infrastructure requires innovative solutions and powerful middleware to ensure seamless operation.
Scalability: As these networks grow, it is critical to ensure they can scale efficiently while maintaining quality of service and network security.
Regulatory Compliance: Understanding the regulatory environment, especially in areas such as energy and transportation, is critical to DePIN adoption and success.
In summary, DePIN is poised to transform physical infrastructure and make it more decentralized, transparent and user-centric. By taking an innovative and collaborative approach to solving relevant challenges, DePIN can have a significant impact on various industries and usher in a new era of blockchain-integrated physical services.
Decentralized Science: Revolutionizing Research and Innovation
Decentralized Science (DeSci) is an innovative movement using blockchain technology to change the landscape of scientific research, collaboration, and publishing. Decentralized science (DeSci) solves several long-standing problems in traditional science, such as inaccessibility of data, lack of transparency in research funding and publishing processes, and the monopoly of knowledge by a few gatekeepers. Leveraging the inherent transparency, immutability, and decentralization properties of blockchain, Decentralized Science (DeSci) promotes open collaboration, democratizes access to scientific data, and simplifies financing mechanisms.
The role of decentralized science (DeSci) in data sharing, research publishing and funding
Decentralized Science (DeSci) revolutionizes data sharing by enabling transparent, immutable records of scientific data, facilitating peer verification, and encouraging collaborative research efforts across borders. Decentralized Science (DeSci) challenges the traditional research publishing model, providing a decentralized platform where research results can be published without excessive control, ensuring that scientific discoveries can be disseminated and recognized faster .
Additionally, DeSci has introduced innovative funding models such as Decentralized Autonomous Organizations (DAOs), allowing community members to directly fund research projects they believe in. This model speeds up the funding process and democratizes decision-making, aligning research incentives with the interests of the community rather than pandering to the interests of a few.
Notable projects in Decentralized Science (DeSci)
VitaDAO: VitaDAO is focused on funding longevity research. By leveraging blockchain technology, community members can have a say in the research projects they fund, facilitating direct connections between researchers and the public.
Athena DAO: Athena DAO focuses on biomedical research, using blockchain to promote funding and collaboration in the field of medical research, ensuring that research results are widely and transparently shared.
Vallet DAO: Vallet DAO is another important player in the DeSci space and aims to decentralize the funding and publishing process of scientific research, making it more accessible and efficient.
In summary, DeSci will redefine scientific research and publishing paradigms, break down barriers to information access, ensure greater transparency, and promote more inclusive, collaborative approaches to scientific inquiry. Through projects like VitaDAO, Athena DAO, and Vallet DAO, decentralized science (DeSci) is not just a concept, but an evolving reality with the potential to have a significant impact on how scientific research is conducted and shared around the world.
Tokenized Real World Assets (RWA)
Real-world asset (RWA) tokenization is an emerging niche in the cryptocurrency space in 2024, gaining momentum due to its innovative approach of blending the physical and digital realms. RWA is a blockchain token that represents ownership or equity in physical and traditional financial assets. The industry is expanding rapidly, with various projects tokenizing a range of assets including cash, commodities, real estate, and more, thereby bringing these assets to the blockchain to enhance liquidity, accessibility, and efficiency.
How asset tokenization works
Asset tokenization involves converting the rights to an asset into digital tokens on the blockchain. The process begins by validating and valuing the asset, then creating a digital representation (i.e. a token) that reflects ownership or the asset’s value proposition. These tokens can then be bought, sold or traded on digital platforms, allowing for fractional ownership and wider access to investment opportunities that were previously inaccessible due to high barriers to entry or lack of liquidity.
RWA Industry - Image via Galaxy Digital
Benefits of RWA
Accessibility and Inclusion: Tokenization democratizes access to investment opportunities, enabling more people to invest in high-value assets through fractional ownership.
Liquidity: Tokenizing real-world assets can enhance their liquidity, making it easier to trade these assets without the need for traditional intermediaries.
Transparency and Efficiency: Blockchain technology ensures transparency, providing a clear understanding of the ownership and transaction history of assets, thereby reducing fraud and speeding up transactions.
Risks of RWA
Regulatory Uncertainty: The tokenization of real-world assets navigates a complex regulatory environment in which clarity and compliance are still evolving.
Market Risk: The value of a token may fluctuate, affected by the performance of the underlying asset and broader crypto market dynamics.
Operational risk: This process involves various stakeholders, including legal entities, custodians and token issuers, whose operational integrity is critical to the tokenization and ongoing management of the asset.
Project construction of RWA section
ONDO: ONDO is focused on democratizing financial assets, providing a platform to segment and invest in a diversified portfolio of real-world assets through blockchain technology.
Polymesh: Polymesh is a blockchain designed for regulated assets that facilitates compliance and provides a framework for issuing and managing securities on the blockchain.
MANTRA: MANTRA operates in the DeFi space, expanding its offerings into the tokenization of real-world assets, aiming to bridge the gap between traditional finance and DeFi.
In summary, the tokenization of real-world assets represents a major leap in the convergence of the physical and digital worlds, providing countless benefits while also presenting unique challenges.
Summarize
When we look at the dynamic landscape of cryptocurrencies in 2024, it’s clear that the industry is not just rebounding; it is evolving, diversifying, and maturing. Underlying this renaissance is a wave of innovation that expands the boundaries of possibility in the blockchain and crypto space. From liquidity-enhancing mechanisms for liquid staking tokens to groundbreaking integration of blockchain with the physical world through a network of decentralized physical infrastructure, each narrative we explore marks a move toward a more connected, efficient, and trustworthy world. A step forward for the digital future of access.
The emergence of tokenized real-world assets heralds a new era of integration of traditional asset markets and blockchain technology, providing unprecedented investment and asset management opportunities. At the same time, decentralized science (DeSci) promises to revolutionize the foundations of scientific research and publishing, fostering a more collaborative, transparent, and inclusive global research community.
However, as we marvel at these advances, it is crucial to view this new frontier with a balanced perspective. Many of these innovations are in their nascent stage, meaning they are still being tested against the challenges of real-world application and market acceptance. In addition, the regulatory environment continues to evolve, creating potential challenges and shaping the trajectory of these emerging industries.
The cryptocurrency environment of 2024 is a testament to the resilience and relentless innovation of the blockchain community. As we embark on this promising but unpredictable journey, staying informed, adaptable and insightful will be key to leveraging the opportunities and navigating the challenges of this new digital era. The future of cryptocurrency is unfolding before us, and it’s full of potential and possibilities waiting for us to seize.
