The blockchain industry has shown its resilience in the face of even the most adverse external conditions. The overall market capitalization of the crypto-space has grown from the “crypto Winter” of January 2023, to $1.69 trillion . Bitcoin’s price has more than doubled, going from 16k to over 40k in December.

This article is part of CoinDesk’s “Crypto-2024” prediction package.

In 2023 we have continued to feel the aftershocks from the 2022 wave of major collapses, including the FTX verdict and Binance’s plea agreement in November as well as the temporary depegging the USDC stablecoin during the banking crisis in March. In the meantime, we have seen a number of breakthroughs, such as the upgrade of Ethereum’s Shapella to a Proof-of Stake network in March, as well the ruling in July that XRP is not a security. We’ve also seen the launch of PayPal’s PYUSD stablecoin, Grayscale’s victory over the SEC in August for the Bitcoin spot-ETF, and the advent of novel tokenized social experience, like the rise of Friend.tech.

In this way, we enter 2024 with great optimism. Here are my top crypto predictions for 2024.

1. Bitcoin’s resurgence and the “DeFi Summer 2.0”.

Bitcoin made a big comeback in 2023. Its dominance (the proportion of Bitcoin’s crypto market capital) rose from 38% to 50% by December. This makes it one of top ecosystems that you should be watching in 2024. Three major catalysts are driving the renaissance of Bitcoin in the coming year: the fourth Bitcoin halving scheduled for April 2024; the expected approval by institutional investors of several Bitcoin Spot ETFs; and the rise in programmability, including Layer 2s, Stacks, Rootstock, and other scalability layer features.

We believe that on the infrastructure side, we will see an increase in Bitcoin L2s as well as other scalability layers to support smart contract. The Bitcoin ecosystem will coalesce around a Turing-complete language for smart contracts. Top contenders include Rust or Solidity. This language will be “standardized” in Bitcoin development. It is similar to the way Solidity has become “standardized” in Ethereum development.

We can also see the foundations of a possible “DeFi Summer 2.0” on Bitcoin. Wrapped BTC’s (WBTC) current market cap, and the Total Value Locked(TVL) around $6 billion shows that there is a huge demand for Bitcoin within DeFi. Ethereum’s market cap is about 10% in television ($28 billion). The Bitcoin DeFi Total value locked (TVL) could rise to between 1-2% ($300M) of the Bitcoin market cap as Bitcoin DeFi infrastructure matures ($10-15 billion at current price). This process will likely see many Ethereum DeFi techniques “naturalized” onto Bitcoin. Examples include the recent growth of BRC-20 inscriptions, and ideas like staking, as seen in Babylon’s L2.

Bitcoin NFTs may be more popular in 2024, especially those inscribed on ordinary coins. Bitcoin’s cultural and memetic recognition is much greater than that of other currencies, so it’s possible web2 brands, such as luxury retailers, will release NFTs in Bitcoin. This would be similar to the way Tiffanys partnered up with Cryptopunks for their “NFTiff” pendants collection.

2. Tokenized social experience for new consumer uses

Web3 has moved from finance to social, while Web2 was social. In August 2023 Friend.tech introduced a new tokenized social experience on base L2. Users were able to purchase and sell fractionalized shares of other people’s X (fka). In October, the account reached a peak of 30k TVL, which was approximately $50 million USD. This inspired several “copycat” projects, such as Post.tech, on Arbitrum. friend.tech has pioneered the tokenomics model in SocialFi by financializing Twitter accounts.

Read more: Amanda Cassatt- How Asia drives the next crypto bull market

We expect to see more social experiments in the coming year. Tokenization (both fungible and not fungible) will play a major role in reinventing social experiences. Non-fungible (NFT) tokens will likely serve as social resources and profiles, while fungible (FFT) tokens may be used as a novel form of loyalty and points systems. Both tokens would be able be traded on-chain, and both would participate in DeFi ecologies.

Lens, and farcaster represent two of the most popular web3-native apps that integrate DeFi with social networking. Projects such as Blackbird are also set to popularize tokenized loyalty points for specific verticals, including restaurants. They will do this by combining stablecoin payment and tokenized rebates with stablecoins in order to provide a functional on-chain alternative to traditional credit cards.

3. Increased use of “bridges” between TradFi and DeFi, such as stablecoins or mirrored assets

In 2023, there will be a lot more legal action in the crypto industry, with several high-profile wins, such as the XRP decision and the Grayscale ETF lawsuit win. There has also been justice served in Binance’s and FTX’s financial fraud. This is accompanied by a significant increase in institutional interest, and the potential approval of ETFs for Bitcoin and Ethereum.

We expect to see a significant increase in 2024 of institutional adoption. These institutions will not only be looking for ETFs but also tokenized assets (RWAs) and TradFi products. TradFi assets are “mirrored” into DeFi while crypto assets have a greater exposure to TradFi markets.

As Circle is said to be considering a 2024 IPO, we may also see an increase in the issuance and usage of non-USD stablecoins. This includes Euro-backed stablecoins like Circle’s EURC as well as British Pound, Singaporean Dollar and Japanese Yen stablecoins. Circle has said that it is considering a 2024 IPO. We may also see an increase in issuance and use of non-USD-backed stablecoins. This includes British Pound, Singaporean dollar, Japanese Yen, and Euro-backed stablecoins like Circle’s EURC. These stablecoins could be launched by actors with state backing. This could also lead to a growth in an on-chain foreign exchange market. Tokenized Treasury has already been a success with $800m being tokenized on platforms such as .

4. Cross-pollination between modular blockchains, Zero Knowledge Proofs

The idea of modular blockchains as well as ZKPs has matured in the past year. Examples include the launch of the Celestia mainnet, Espresso’s integration of Arbitrum, RiscZero’s open-source Zeth proofer, and Succinct’s launch of a ZK market. This is a trend that’s interesting. Companies in the ZK industry are “modularizing”, focusing on verticals such as coprocessors and privacy layers. They also focus on proof marketplaces and zkDevOps.

Zero Knowledge Proofs will continue to be used as a bridge between the different components in the modular blockchain stack. Axiom’s ZK Co-processor, for example, leverages ZKPs as a way to provide historical proofs that can be used by DApp developers to perform calculations. ZKPs will be the interface that connects these providers. This will lead to a new age of smart contracts. It gives developers who are building DApps a greater degree of flexibility and lowers the entry barrier for blockchain stacks. ZKPs could be used by consumers to protect their privacy and identity, for example, in the form decentralized IDs based on ZK.

5. AI and DePIN are two of the more computationally intensive applications that will be moving onto the chain.

The scalability issue for decentralized apps has taken a lot more time, effort, and money. Gas fees for Ethereum L2s is below 0.02 USD, compared to 11.5USD for Ethereum mainnet. On Solana fees are three-four orders of magnitude lower.

Read more: Marc Hochstein, What Markets are Forecasting for Cryptocurrency in 2024

We believe that as this trend continues over the next year, computationally expensive (apps that can consume gigabytes or RAM) applications will be much more feasible to run on-chain. Vertical applications include on-chain AI, Decentralized Physical infrastructure Networks ( DePIN ), knowledge graphs on-chain, and on-chain social networks and games. All of this could radically change the on-chain economy. It would also improve user and developer experiences, since they will no longer be subject to onerous gas charges and strict constraints on computing power.

The Graph plans to build on-chain knowledge graphs and The Graph is working on ZKML-generated NFT artwork. The Realmsverse has created an on-chain gaming world and lore using Starknet.

6. Consolidation and “hub-and-spoke” model of appchains

Over the last few years, infrastructure projects have proliferated. There is little difference in user experience between Layer 1 (L1) and Layer 2 (L2) despite the common categorization. This is particularly true for general-purpose public Blockchains. Today, an L1 like Solana or Avalanche competes directly with an L2 like Arbitrum or ZkSync in terms of users, projects and volume.

This homogeneity is a driving force behind the general-purpose public chains. It benefits larger incumbents such as Arbitrum , Optimism, and Solana . The top four ecosystems account for about 90% of the Total Value Locked. To maintain an edge over smaller ecosystems, they must focus on verticals such as gaming, social, or DeFi. Three of the top 10 L2s in TVL are appchains. In order to “break in” smaller and newer L2 chains, such as Blast, TVL relies heavily on single “killer apps” (e.g. friend.tech, Blur and other smaller L2 chains are relying heavily on single “killer-apps” (eg.

Moreover, the majority of leading public general-purpose blockchains have released toolkits for appchains (OP Stacks, Arbitrum Nitros, StarkExs, etc.). Appchains can tap into these networks’ liquidity and integrate them into their ecosystem. We’re now beginning to see the “hub-and-spoke” model, where a few public blockchains are acting as “hubs” and around them there are many “spokes” that represent specific appchains. It may be worthwhile to pay attention in 2024 to rollup-as a service vendors like Caldera Conduit and Eclipse who take advantage of the “hub-and spoke” model.

The conclusion of the article is:

We are now at the end of 2023 and have probably made it through the worst part of the bear markets. We have turned the page on all the brutal collapses we’ve seen in the last year and a quarter and we are ready to explore new use cases. We’re now at a turning point where blockchains are no longer just about financialization. They can be used to redefine the consumer, social and developer experience. I am very interested in what the future holds for our still-nascent digital industry as we use decentralized technology to reimagine it.

Benjamin Schiller is the editor.