Bankless co-owner David Hoffman has written an article outlining six major themes to watch for in the 2024 bull market, including re-collateralization and liquidity re-collateralization tokens (LRT), Solana, gaming ecosystem, data availability, and parallel EVM. This article is sourced from Bankless’ column article “2024 Crypto Metas,” compiled, translated, and authored by BlockBeats.
Since 2023, our industry has experienced some of the most pessimistic sentiments in history, but it has ended with one of the most optimistic patterns we have seen so far.
As we enter the 2024 bull market with new energy, it is time to focus on some key investment themes that will shape the new year. Stay ahead by understanding these six dominant narrative themes that will dominate in the coming months!
The re-collateralization theme has already gained significant momentum, and EigenLayer has not even officially launched yet. Over $1 billion has already been deposited into the EigenLayer contract, and the competition to become important participants in the EigenLayer ecosystem is fierce.
Therefore, the war for liquidity re-collateralization tokens (LST) is about to restart, but this time, it will be the LRT war. Liquidity re-collateralization tokens will have all the benefits of native ETH collateral and additional income generated through the addition of re-collateralization networks. Why would people settle for a 5% LST income when they can earn more income through LRT income?
What is LRT? They are like LST, but their income includes revenue from EigenLayer. EigenLayer supports AVS (Active Verification Service, i.e., the EigenLayer network), which generates some revenue or fees for re-collateralized ETH. Re-collateralizers may re-collateralize to multiple AVS to maximize the productivity and returns of their re-collateralized ETH.
In other words, it would be valuable to develop a service that can securely and efficiently complete this task for users like me who know others can do better. This is where LRT comes into play. LRT aggregates user deposits, re-collateralizes them through the EigenLayer network, captures all the income, and passes it on to depositors.
This is great, but besides its basic utility here, I believe one of the reasons why LRT will prosper in 2024 is because the latest wave of airdrops has already begun. In this flood of immense interest and activity, LRT projects have become a “double whammy,” offering airdrop hunting opportunities. For example, Swell is currently offering their “Pearls,” which I believe are placeholders for the ultimate Swell token, positioned above the EigenLayer point, which I believe is also a placeholder for EigenLayer.
Frankly, I believe EigenLayer is becoming one of the largest airdrops in history, and the competition for dominant LRT tokens in Ethereum will be as intense as the competition for dominant LST tokens.
Admittedly, I am not familiar with all the LRT strategies of all LRT teams currently in this scene. Here, I will let you do your due diligence. However, there are two projects I am closely watching due to my close relationship with the teams as an angel investor or through Bankless Ventures investment. These two projects are the previously mentioned Puffer and Swell.
It is worth noting that Puffer has a unique advantage in its collaboration with SGX, namely additional reduction protection as an additional defense layer against capital loss. This mechanism, combined with Puffer’s collaboration with Justin Drake on smooth commitments and collaboration with Flashbots’ Andrew Miller on remote attestation, enables the project to release the efficiency and opportunities that other LRTs may need to catch up on.
As for Swell, it is an LST project that switched to Liquidity Restake when they saw ominous signs. By the time EigenLayer opened its deposit gate, Swell was already leading the competition. Now, Swell ranks first in the LRT project for EigenLayer deposits and second in LST deposits, second only to Lido.
However, there are some projects in this scene worth paying attention to, including Rio Network, EtherFi, Renzo Protocol, and Kelp DAO.
Is the current narrative theme “Bitcoin, Ethereum… and Solana”?
Solana is currently being heavily promoted. This happens when a token rises 900% within a year. It has attracted capital and attention from venture capitalists and bolstered the confidence of its previous believers.
It is certain that the launch of Jito has just sparked a version of Ethereum’s 2020 DeFi summer on Solana. Now, it is evident that the application layer of the network has risen from the ashes of the bear market from 2022 to 2023.
With Solana’s SOL just entering the top 5 cryptocurrencies, everyone is watching whether Solana can achieve what its biggest supporters believe it can do: become the most likely place to host breakthrough consumer crypto applications in the upcoming bull market.
Assuming Solana realizes its potential here, it will need to attract more innovative founders who build more novel applications, not just shinier versions of the same thing Ethereum already has. Solana will need to develop new types of applications that have never been seen before in the crypto world, enabled by the unique properties provided by the network.
DePIN seems to be an early standout competitor here. However, I believe there is still no consensus on whether there is any substance here. Nevertheless, we will see that the industry is worth closely monitoring in any case.
Meanwhile, a large number of tokenless Solana protocols still need to airdrop tokens in 2024, which means that the hype and attention on Solana will continue until they do so. Whether Solana can maintain people’s attention after the end of Solana’s version of DeFi Summer remains to be seen.
Internally, Solana’s attention has shifted to its economy. With some of Solana’s most challenging issues becoming a thing of the past, it is now time to focus on the next easiest-to-achieve goal in the project, namely its native fee market and overall economic structure. Can Solana solve its economic problems? Only time will tell, but its community is more optimistic about its chances than ever before.
Gaming seems to be the most reliable category for breakthrough crypto applications in the near future. This is mainly because we know that many highly anticipated games are currently under development, and some of these games will be released in 2024.
If games are funPlayers will play. If game developers know what they are doing, they will cleverly introduce cryptographic elements as needed, rather than making them overwhelming elements of the game. The gaming content itself is a huge industry, and the distribution of cryptocurrencies through the gaming field is also huge.
The best thing about the contemporary cryptographic gaming industry is that it is moving away from explicit focus on native cryptographic players. Many new games are developed for those who are unaware of cryptocurrencies.
This shift puts our space far from one of the most populous countries on Earth, as there are currently about 3.2 billion gamers worldwide. If we can build a game that attracts cryptocurrency agnostics, it will be a groundbreaking example for cryptocurrencies and will offer something to those who do not care about cryptocurrencies.
Meanwhile, take a look at game ecosystems like Immutable and its IMX token, which are exciting representatives. Immutable is developing a game-specific zkEVM chain based on Polygon, currently valued higher than Arbitrum!
The battle for data availability has already begun, and the start of this war can be traced back to the TIA airdrop, which started with a valuation of $20 billion and then saw the FDV rise to $14 billion.
So why is everyone obsessed with data availability now?
In other words, it can be fairly assumed that DA is like the bandwidth layer of Web3, and a cheap DA layer will transform cryptocurrencies from slow and expensive to fast, cheap, and abundant without sacrificing decentralization. In fact, DA is the main bottleneck that prevents chains from braking in terms of resource costs and throughput levels. Therefore, any DA chain that can meet these requirements can be seen as a long-term sustainable value flow in the crypto economy.
I am interested in the upcoming EigenDA, which is the first AVS launched by EigenLayer and will be the first additional source of revenue for the LRT token I mentioned earlier.
EigenDA is built differently from Celestia and has some unique network properties. Since EigenDA is protected by staked ETH rather than an alternative L1, this makes EigenDA’s DA properties closer to Ethereum, reducing some security assumptions and making it an easier choice for Rollups that still need more DA than Ethereum L1 can provide.
Celestia and EigenDA are currently the two main competitors, but others have also joined the DA war. For example, NEAR has added DA functionality to its chain, which also has some unique attributes due to the sharding research NEAR has done in recent years. I believe there are more that I haven’t heard of or secret projects that will launch in 2024, as the rewards for the DA race are now so huge.
Solana has sparked the urgency of building optimized virtual machines for Web3. In an episode I recently asked Solana founder Anatoly Yakovenko, “What is the most critical component of Solana?” and he replied, “Parallelization of the SVM.” This unique attribute of Solana being pushed to the market is the ability to process multiple transactions simultaneously as long as these transactions do not touch the same state.
This is a major advantage of the SVM and a major weakness of the EVM. Now, the war of parallel virtual machines is taking place on Ethereum L2 and new L1s. For example, the Eclipse project is adopting SVM and building an aggregation based on Ethereum (using Celestia for DA), and it is not the only project doing so.
Monad is another project that has been working on parallelizing the EVM for some time. Rebuilding the EVM from single-threaded to multi-threaded is not an easy task, but the rewards for successful execution are enormous. Imagine the scale, speed, and affordability of Solana but with the Ethereum ecosystem. Monad aims to achieve bytecode equivalence for the EVM, which means any code written in the EVM environment can be immediately ported to Monad without any cost.
The strategy of “Solana’s speed and Ethereum’s distribution” is not only recognized by Monad and Eclipse. Sei has also embraced this strategy, as they recently announced becoming a proof-of-concept for a parallel EVM chain.
Please note that when I started writing this article in December, since then, SEI’s price has exploded, as the attention to this narrative has been faster than I expected. Since Monad has not yet launched, SEI is the only way to access the parallel EVM narrative easily, and therefore its token has appreciated accordingly.
While Monad seems to intend to remain as an independent L1, I predict that Monad EVM will become the target for Ethereum L2 to replace the EVM. If Monad open sources its EVM, it will become a very popular software for Web3. For Monad, having both ETH L2 and an independent L1 simultaneously may also be a viable strategy to ensure it fills the competitive landscape as much as possible.
My very secure prediction for 2024 is that $2 billion will be airdropped to users. EigenLayer may even achieve this on its own.
Airdrops were not new in 2021, but the traceable Uniswap airdrop did create a new paradigm for the meaning of airdrops and how applications leverage them. Fast forward to today, some of the biggest projects in the field have been fine-tuning their token distribution plans for years.
So now is the time to take action. For example, StarkNet and LayerZero have recently confirmed upcoming token launches, and I expect both to happen in the first quarter of 2024.
These airdrops will also force others to speed up the pace of their token launches. Once the full momentum of the new airdrop season begins, it will be hard to stop. After all the giants give up their tokens and hand over billions of dollars to users, you’ll see the followers quickly develop their “apps” and release their “tokens” to catch up with the wave.
Once this happens, you’ll know we’re approaching the peak of the bubble, and it’s time to start selling instead of buying. Be careful, as the trap of airdrop mining may attract most of your funds to maximize returns, but this will happen when you have a reason to withdraw your funds.
For example, Alameda started risk-free Bitcoin arbitrage on exchanges and eventually fully exploited illiquid garbage coins as the bull market progressed. You want to do the opposite. Start by fully utilizing illiquid garbage coins and then sell dollars, BTC, ETH, and other hedge positions as the bull market progresses.
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