As we step into 2024, the blockchain and cryptocurrency industry is undergoing rapid and transformative changes. This year is poised to be a pivotal one, marked by potential significant advancements and shifts in technology, regulation, as well as market dynamics.
In this article, we’ll explore some key trends and developments that Figment has seen that have already come to pass and how the next chapter will shape what ‘could’ come in 2024, offering insights for investors, enthusiasts, and developers in the space.
ETH Staking Evolution Post-Beacon Chain
Growth Over Time:
The launch of the Beacon Chain in December 2020 marked a significant increase in ETH staking. Initially driven by early adopters, the volume of staked ETH has continued to grow steadily, reflecting rising confidence in Ethereum’s future, especially as the network transitioned from Proof-of-Work (PoW) to Proof-of-Stake (PoS). We expect the volume of staked ETH to continue its upward trend in 2024, especially if we use past staking performance as an indicator:
Dollar Value of Staked ETH:
The total dollar value of staked ETH is a key indicator of network health and stakeholder confidence, signifying a stronger financial commitment to Ethereum’s ecosystem and its long-term potential. We expect the volume of staked ETH to continue its upward trend in 2024.
Transition to Stability Post ETH 2.0:
We expect this year to be a pivotal one for Ethereum, as the network solidifies its transition to a more stable and mature phase post ETH 2.0. This phase is characterized by enhanced network security, scalability, and sustainability, which should continue to attract more users and developers to the Ethereum platform.
We can also expect in 2024 that the amount of ETH staked will continue to be the ‘beating heart’ of the network with increasingly more validators coming online to partake in growing the ecosystem.
Implications for Investors and Ecosystem:
This evolution impacts investors and the Ethereum ecosystem by boosting investor confidence, fostering ecosystem growth, influencing market dynamics through the locking of ETH in staking contracts, and enhancing governance participation by stakers. JP Morgan is especially hopeful for Ethereum in 2024, asserting that it has the capability to outperform Bitcoin.
The Rise of New Networks
Network Dynamics:
As we move forward into 2024, the industry continues to experience a dynamic interplay between network failures and the emergence of new networks. This is crucial for maturity and innovation. New networks, learning from past challenges, are expected to introduce more resilient and advanced platforms with user adoption at the forefront.
Driving Industry Growth:
This coming year we expect to see these emerging networks significantly contribute to the industry’s growth. By bringing novel features and user-centric designs, they are poised to attract a broader user base and foster a vibrant ecosystem, enhancing the blockchain landscape.
Decentralization and Innovation:
We expect new networks to be instrumental in reinforcing decentralization and spurring innovation. We expect that these networks’ role in experimenting with cutting-edge technologies and expanding blockchain use cases will be more pronounced, strengthening the industry’s foundation and broadening its horizons.
The rise of new blockchain networks in 2024 is set to be a key factor in shaping the industry, driving growth through innovation, and maintaining the ethos of decentralization.
Restaking Revolution: The Emergence of EigenLayer
EigenLayer offers Ethereum holders a new way to utilize their assets, different from traditional liquid staking methods like Lido. This approach allows for more strategic use of staked ETH, expanding its potential beyond standard practices.
Key Benefits of Restaking with EigenLayer
Earn Extra Rewards: ETH holders can delegate their staked ETH to operators of Actively Validated Services (AVSs), with the opportunity to earn additional rewards.
Staking Efficiency: Restaking through EigenLayer enables staked ETH to secure multiple services, not just Ethereum, optimizing the use of staked assets.
Simplified Infrastructure Security: Developers can secure their projects on Ethereum without the need to establish their own validator sets or issue new tokens.
Diverse Ecosystem Development: The shared security model encourages a wider range of applications and services to be built on Ethereum.
Reduced Capital Costs: The pooled security approach of restaking lowers the capital requirements for stakers and enhances trust in individual services.
Marketplace for Trust: EigenLayer creates a platform where validators and developers can exchange security and trust, benefiting both parties.
Incentives for Network Diversification: The platform can drive improvements in Ethereum’s network diversification, a task more complex to achieve at the base layer.
Flexible Staking Options: Stakers can choose between direct ETH staking or using Liquid Staking Tokens (LSTs) like LSETH.
As EigenLayer continues to evolve into 2024, it’s expected to introduce more operators and services, expanding opportunities for ETH stakers.
EigenLayer’s restaking model offers ETH holders a chance to engage their assets more dynamically, potentially leading to additional rewards and contributing to a more versatile Ethereum ecosystem.
TradFi Meets Crypto with ETFs and ETPs
Traditional financial markets are increasingly integrating with the digital assets sector. This is evident in the development and offering of crypto-related financial products like exchange traded funds (ETFs) and exchange traded products (ETPs). These products are designed to provide investors with exposure to cryptocurrencies without directly owning them.
Role of ETFs and ETPs in Crypto Integration
ETFs and ETPs play a crucial role in bridging the gap between traditional finance and the crypto market. They offer a regulated and familiar way for traditional investors to gain exposure to digital assets without having to buy and store the digital assets themselves.
Potential Outcomes and Trends to Watch
One of the most anticipated developments is the potential approval of spot Bitcoin ETFs in the US, which could happen in early 2024. This approval is expected to significantly boost mainstream acceptance and adoption, particularly in the North American market.
The approval of a spot Bitcoin ETF is a pivotal focus for investors, as it holds the potential to significantly broaden access to Bitcoin. This development could lead to enhanced investment and greater stability in the broader crypto market, injecting a sense of mainstream acceptance that will advance the industry forward.
Layer 1 and Layer 2 Innovations Leading the Next Phase of Growth
Let’s take a look at some of the networks that have achieved significant progress in 2023 and expect further advancements and development in 2024.
Stacks, a Layer 2 solution for Bitcoin, enables smart contracts and dApps on the Bitcoin network. It brings the power of Ethereum-like functionality to Bitcoin, enhancing its utility.
The network has surged in prominence over the course of this year following the rise of bitcoin-based NFT projects such as Ordinals. The amount of capital locked on Stacks has risen significantly from approximately $7 million at the beginning of 2023 to over $55 million at the time of writing.
Similarly, Sei Network, a Layer 1 blockchain, launched Sei v2, a significant upgrade from v1, establishing it as the first parallelized EVM chain. This upgrade followed the successful deployment of Sei v1, which achieved the fastest block finalization at 390ms and a transaction rate of over 45 TPS. Sei v2 further enhances Ethereum compatibility and optimizes transaction processing, reinforcing Sei’s position in the competitive blockchain market.
Conclusion
As 2024 unfolds, we believe the blockchain industry is on the cusp of transformative growth.
Numerous developments, including the evolution of ETH staking, the emergence of new networks, the Bitcoin halving are driving the ecosystem towards greater maturity and diversity. The potential approval of a spot Bitcoin ETF in the US further highlights this trend.
Advancements in Layer 1 and Layer 2 technologies, complemented by platforms like EigenLayer, could herald a new period of widespread adoption and integration with traditional finance. For investors, enthusiasts, and developers, staying informed and adaptable is more important than ever. 2024 is set to be a landmark year, brimming with significant advancements and opportunities in this dynamic and rapidly evolving landscape.
The future looks bright.
The information herein is being provided to you for general informational purposes only. It is not intended to be, nor should it be relied upon as, legal, business, tax or investment advice. Figment undertakes no obligation to update the information herein.
