What is Crypto Narrative? 11 Narratives could become a trend in 2024
What is Crypto Narrative?
Crypto Narrative refers to the prevailing ideas, stories, or beliefs that shape the way people perceive and evaluate crypto. These stories can influence investor sentiment, market trends and acceptance of new technologies.
Market participants are always looking for trends to better understand what is happening, why it is happening, and its potential impacts. Historically, they use the dynamics of market cycles to act more proactively in future market environments. From Elon Musk's tweets that move the price of DOGE, to confidence in Bitcoin halvings that fuel bull runs every four years, many investors use cryptocurrency stories to predict price action.
For example, Crypto Narrative as a means of storing value has attracted many investors to view digital currencies as a hedge against economic instability. Similarly, the narrative of blockchain as a disruptive technology has attracted many entrepreneurs and developers working to build new applications on blockchain.
Why is Crypto Narrative important?
The Crypto Narrative is woven from a combination of factors, including its technological capabilities and blockchain, economic and social events, and the beliefs and motivations of individuals involved in the industry. This. Mainstream media, social networks, online forums, influencers and market trends can drive stories. In 2024, we are seeing a trend of stories exploring the possibilities and applications of blockchain, such as Decentralized Physical Infrastructure Networks (DePIN) and Decentralized Science Decentralized Science – DeSci.
Stories are important because they play a vital role in shaping public perception and subsequently market movements. They provide a framework for people to understand the potential risks and benefits of different cryptocurrencies and can influence the trajectory of the entire crypto industry.
However, stories can also be misleading or harmful based on false or exaggerated assumptions. Therefore, it is important to critically evaluate the stories and make investment decisions based on sound analysis and research.
Currently, there are many emerging trends and themes trying to shape 2024. We will look at the top 11 crypto stories to watch in 2024 in this guide:
Token staking liquidity
Restaking is a narrative that increasingly focuses on capital efficiency, by allowing users to stake the same token into other protocols to secure multiple networks at once. This helps protocols solve the challenges of building their own set of validators, while also providing scalable security based on each protocol's needs. In return, restakers enjoy additional rewards based on their staking strategy when securing other protocols (although this comes with a series of slashing risks).
EigenLayer is a pioneer project in the staking space, with over 3.5 million ETH in total value locked at the time of writing. Users can restake their liquid staking tokens, such as stETH, rETH, and cbETH, to secure Actively Validated Services (AVS) on EigenLayer.
Liquidity staking derivatives
Liquid staking derivatives (LSD) are cryptocurrencies issued by liquid staking platforms, allowing stakers the means to unlock their illiquid staked assets and generate more profits. With standard staking, stakers secure the PoS blockchain by depositing assets into a protocol. But this leads to the problem of capital inefficiency as stakers miss out on opportunities to generate additional profits because their assets are illiquid and locked up.
Therefore, liquidity staking was born to solve this problem. The value of the derivative asset is tied to the underlying asset (locked when staking on the PoS blockchain), continuing to accumulate rewards and increase in value over time. Meanwhile, derivative tokens can be used to participate in other DeFi activities such as lending and liquidity provision. In return, most liquidity staking providers take a portion of 5-10% of staking rewards as their revenue.
LSD solves the problem of capital inefficiencies, lowers the barrier to entry for staking, and improves network stability and security.
Modularity of blockchain
Older blockchains like Bitcoin and Ethereum were monolithic, i.e. one blockchain performed all the tasks. However, as the competitive platform shifted from performance to cost and flexibility, the modular era began. Modularization breaks the blockchain into individual components, allowing blockchains to scale beyond their current limits.
– Execution: execute the transaction
– Payments: settlement/fraud proof/bridge between other execution layers
– Consensus: agreement on transaction order
– Data availability: making data accessible to all network participants
Execution takes place on layer 2 layers such as Optimism and Arbitrum, executing and sending transactions in batches to the root chain. Even layer 2 is becoming modular, as seen in the OP Stack, modularizing all layer 2 chain components into standardized open source modules that developers can use to build chains. new.
Meanwhile, EigenDA is a decentralized data availability layer built on Ethereum and is currently used by the Mantle layer 2 chain to provide data availability.
Layer 1s like Celestia are also applying modular architecture to their blockchain. In the case of Celestia, the project focuses on consensus and data availability, optimizing storage. This allows layer 2s built on Celestia to focus on building the optimal execution environment for their applications.
Layer 1
Layer 1 (L1) is the basic architecture on which other blockchain applications such as smart contracts are built. They perform most on-chain transactions and serve as the source of truth of public blockchains. Traditional L1 blockchains, like Ethereum, often have slow transaction speeds, low scalability, and high gas fee issues. This is where layer 2 blockchains come in to handle the execution of transactions, helping L1 focus on issuing and verifying these transactions on the blockchain. However, new L1 networks are changing the game in terms of transaction speed, cost, and interoperability.
Here are some examples of layer 1 projects to keep an eye on as the layer 1 story starts to heat up:
Celestia
Celestia is “the first modular blockchain network to support secure and scalable Web3 applications.” The project does this by “decoupling the consensus layer from the execution layer,” with Celestia fulfilling the core functionality of the consensus system. It is about ordering transactions and ensuring their availability, leaving transaction execution and validation to the client (client) running on Celestia. Celestia aims to enable projects to seamlessly deploy their private networks without having to create new consensus. Furthermore, the project also has an impressive team led by Mustafa Al-Bassam. He received his PhD in blockchain scaling.
Sui
Sui is a “boundless platform for building rich and dynamic on-chain assets from gaming to finance.” This is the first permissionless L1 network designed from the ground up to help creators and developers create experiences that serve the coming billions of users on Web3. Sui was founded by a team of former Meta engineers operating under the name Mysten Labs.
Sui scales horizontally with no upper limit to meet application needs while ensuring cost-effective transaction costs. Furthermore, the project significantly improves scalability by facilitating parallel agreement on simple transactions, like minting and transferring NFTs. Complex transactions, such as asset management and DeFi applications, will be executed through a mempool based on Narwhal and Bullshark DAG and an efficient Byzantine Fault Tolerant (BFT) consensus mechanism.
Layer 2: Rollup Optimistic
The vertical scaling story focuses on layer 2 (L2), which are protocols built on top of L1 to scale and grow further. L2 minimizes the computation of L1 by moving transactions off-chain, significantly improving throughput. Total value locked (TVL) into L2 grew steadily, dampening overall DeFi market sentiment and total crypto market capitalization.
Optimistic rollups are L2 scaling solutions that attempt to increase transaction throughput and reduce fees while maintaining the security guarantees of the underlying blockchains. They leverage a trust-based model to confirm off-chain transactions and add them to the underlying blockchain after being confirmed by a small group of “witnesses.”
Source: Beat
Here are some Optimistic Rollup L2 projects to keep an eye on in 2024 (sorted by TVL):
Arbitrum
Arbitrum is an L2 scaling solution that leverages Optimistic Rollups to achieve high throughput and reduce user transaction costs. Even after The Merge, Ethereum's speeds and gas fees are still high compared to other networks, like Arbitrum. This prompted many Web3 users and creators to switch networks, helping Arbitrum's TVL rise to a high of $3.2 billion in November 2021.
The recent ARB airdrop injected a lot of liquidity into Arbitrum Network. Many users receiving ARB tokens are encouraged to use them to trade, stake or provide liquidity on various decentralized exchanges and protocols built on Arbitrum. The airdrop has also helped raise awareness of the Arbitrum network and its potential as an L2 scaling solution for Ethereum.
Optimism
Optimism defines itself as “a fast, stable, and scalable L2 protocol, developed by Ethereum developers, for Ethereum developers.” It is designed as a minimal extension to the existing Ethereum blockchain to scale Ethereum applications seamlessly. Unlike the more popular EVM compatible chains, Optimism is EVM equivalent, meaning that Optimism is fully compliant with the official specifications of the Ethereum blockchain, in that Optimism moves with Ethereum. Optimism has also released the OP Stack, modularizing the layer 2 chain components so developers can build new chains that can interoperate with Optimism. According to Defillama, in August 2022, TVL Optimism reached a record high of $1.15 billion.
Source: Defillama
Base
In February 2023, Coinbase launched Base, an L2 blockchain designed to serve millions of upcoming Web3 users, using Optimism's OP Stack. The network will provide a secure, cost-effective, developer-friendly solution for creators to build Web3 applications. Furthermore, Coinbase has established the Base Ecosystem Fund to support Base startups.
Layer 2: ZK Rollups
Zero-knowledge (ZK) Rollups are layer 2 scaling solutions that improve layer 1 throughput by performing off-chain computation and state storage. This way, they can process multiple transactions in batches and post summary data on-chain. ZK Rollup allows you to demonstrate knowledge of something without revealing it. This makes them an attractive solution for applications that put privacy first, such as digital identity verification and confidential transactions. Here are examples of ZK Rollups to watch out for in 2024:
zkSync Era
zkSync Era is another layer 2 rollup that leverages ZK proofs to scale Ethereum without sacrificing security and decentralization aspects. It handles computation and stores most of the data off-chain. Using zkSync, you enjoy the security of Ethereum but with higher transaction speeds and lower costs.
Polygon zkEVM
Polygon launched the Ethereum ZK Virtual Machine (zkEVM) Beta Mainnet on March 27, 2023, which is a huge step towards scaling Ethereum and achieving mainstream Web3 adoption. Like Optimism, Polygon zkEVM is equivalent to EVM, meaning most Ethereum-native applications can work on zkEVM and developers do not need to modify or redeploy the code.
Scroll
Scroll is an L2 solution that strives to provide unlimited scalability, high throughput, complete decentralization, and privacy with minimal trust. It achieves this by leveraging the ZK Rollup system and high-performance off-chain decentralized systems.
Taiko
Taiko is a layer 2 ZK designed to be the closest equivalent to Ethereum's ZK Rollup, providing dApps with an efficient and scalable platform without the need to make any changes to the existing protocol. Have. Unlike many other layer 2 ZKs, Taiko focuses on achieving full compatibility with Ethereum through ZK proof generation rates, allowing reuse of execution clients with minimal modifications. minimal. To try out Taiko, you can participate in protocol usability tests on their testnet.
Bitcoin: Ordinals and BRC-20 tokens
Ordinals is one of the latest trends taking Bitcoin by storm. In January 2023, software engineer Casey Rodarmor implemented the Ordinals protocol on the Bitcoin blockchain, allowing NFTs to be minted on the mainnet. This move has caused mixed reactions from the Bitcoin community. Some saw the move as a threat to the Bitcoin blockchain, while others got excited and started creating inscriptions, which are seen as Bitcoin's version of NFTs.
Just like NFTs, Ordinals are digital assets inscribed on Satoshi, the smallest denomination of BTC. However, unlike NFTs that use a decentralized file storage system, Ordinals are stored directly on-chain. The engraving was made possible by the Taproot upgrade introduced to the Bitcoin blockchain in November 2021.
The number and order of BTC Ordinals is closely monitored and there have been some notable collections and high-priced sales made to date. These include Ordinal Punks, Taproot Wizards, Bitcoin Rocks, Timechain Collectibles, Ordinal Loops, Ripcashe's Power Source, Bitcoin Shrooms, The Shadow Hats, The Dan Files and Toruses.
To date, there are nearly 55.8 million Ordinals inscriptions on the Bitcoin blockchain.
Source: Dune
In addition to Ordinals, there is also interest in BRC-20 tokens, which use the Ordinals inscription to enable the minting and transfer of fungible tokens on the Bitcoin blockchain. The BRC-20 token is similar to the ERC-20 token standard on Ethereum and EVM networks. The BRC-20 token is minted by the community, with the Ordinals wallet free to mint BRC-20 once deployed. Although still in its early stages, there are already platforms that allow decentralized minting and trading of BRC-20 tokens.
Interest in the BRC-20 token spiked in December 2023, leading to average transaction fees higher than $27 in December 2023.
Decentralized Physical Infrastructure Network (DePIN)
DePIN are decentralized physical infrastructure networks that use blockchain and token rewards to develop infrastructure in the physical world across various domains, such as wireless connectivity, mapping Geospatial, mobile, health, energy, etc.
DePIN's goal is to create a resource-efficient physical infrastructure through incentivizing providers to commit their physical resources to a decentralized network. DePIN then makes these resources available to users looking for cheaper service fees (compared to centralized facilities), and the network generates revenue through fees paid by users.
Decentralized Science (DeSci)
DeSci is about decentralized science, using blockchain technology and its features to make various aspects of scientific research and collaboration more open, motivated, and community-oriented. more uniform. DeSci aims to overcome the “valley of death” in scientific research, where it takes time to develop and translate scientific research into innovations that benefit patients.
Decentralized science focuses on improving the following areas: data sharing, research and publishing, and funding. This is done through incentivizing users with tokens, using NFTs that can be used as keys to the underlying project, and DAOs that distribute funds, controlling the processes.
GambleFi
GambleFi refers to decentralized applications that offer cryptocurrency-based betting services. These applications are bringing online gambling on-chain to improve user experience, focusing on transparency and fairness. Furthermore, in GambleFi, users can now side with the house as they can hold the protocol's tokens and profit from the revenue generated by the protocol.
GambleFi's story takes place during a bear market, and it will be interesting to see how it develops when a bull market emerges.
Real-world assets
Real-world assets (RWA) are assets that exist in the physical world or off-chain but are tokenized and transferred on-chain to act as a source of profit in DeFi. These assets include real estate, precious metals, commodities and works of art. RWA is a core component of the global financial system. For example, in 2020, global real estate was valued at $326.5 trillion while gold market capitalization stood at $12.39 trillion. A growing portion of RWA is focused on leveraging U.S. Treasury Bills and high yields as a way to bring investors returns with lower risk, including firms like Ondo Finance .
MakerDAO has also entered the RWA space by deploying idle assets into short-term bonds, using the proceeds to enhance the MKR buyback program and increase the DAI Savings Rate, providing a wallet Clear example of how protocols can benefit from RWA investment. MakerDAO shows how value can flow to token holders, with a buyback program driving MakerDAO's growth.
RWA's potential impact on DeFi looks huge:
– Can provide a sustainable and reliable source of profit for DeFi because it is supported by traditional assets.
– Can help DeFi become more compatible with traditional financial markets, ensuring liquidity, capital efficiency and higher investment opportunities.
– Can bridge the gap between DeFi and traditional finance (TradFi).
Maple Finance (MPL), Goldfinch (GFI), and Centrifuge (CFG) are other examples of lending-focused RWAs you can check out.
Telegram trading bot
In 2023, cryptocurrency trading bots on Telegram increased, providing users with convenience and efficiency when making transactions. Instead of needing a computer to connect a wallet and approve transactions, all users need to do to buy tokens is copy and paste the token's contract address and send it as chat to buy. This also speeds up the selling process because you can pre-approve and sign the transaction.
Some Telegram trading bots also come with additional features like multi-wallet sniping that bypasses individual wallet restrictions for tokens and liquidity sniping to execute buy orders once the bot detects added liquidity to maximize profits on the new token.
Conclude
In 2023, we have seen stories like Artificial Intelligence, Chinese tokens, and decentralized social media, along with others like layer 1, layer 2, derivatives Liquid staking, real-world assets, Bitcoin Ordinals and BRC-20. Entering 2024, there are new stories emerging such as staking, DePIN, DeSci, GambleFi, along with interest in blockchain modularity.
Note, this article is for educational purposes only and should not be considered financial advice. Please do your own research (DYOR) before investing in any asset.
