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With rising values, noteworthy advancements, and fresh ideas, the cryptocurrency and blockchain sectors are at last making a comeback to the forefront following two years of “crypto winter” and a weak global economy. This post will discuss some of the most important cryptocurrency themes for 2024, with an emphasis on Layer 2s/ZK Rollups, Ethereum scaling, DEXs, DeFi generally, and Layer 3s.
# 1 ETHScaling
The Goerlitestnet will end in Q1 2024 because of the Dencun hard fork, and a new Ethereum (ETH) testnet named Holešky will be launched. Less data will need to be kept permanently on the Ethereum blockchain as a result of the hard fork. The fork will result in a decrease in ETH’s gas fees related to storing data during smart contracts. Additionally, resolving the goETH supply difficulties would streamline the data exchange flow between Layer 1 and Layer 2 protocols and enable validators to conduct tests in a more authentic on-chain environment.
Like the 2023 roadmap, VitalikButerin has the following plans for Ethereum in 2024:
- Concentrating on guaranteeing the stability of the new Proof-of-Stake (PoS) consensus, removing many of its existing flaws through Single Slot Finality (SSF), and promoting decentralization by enabling anybody to engage in staking.
- Addressing the two main areas of concern associated with economic centralization in PoS: Maximal Extractable Value (MEV) and generic stake pooling issues.
- Network upgrading for Electra. EIP-6110, one of the upgrades’ suggestions, offers a fresh approach to validator deposits on-chain in place of the antiquated Eth1 bridge technology.
- This calls for extensive technical assessments and discussions, with Verkle Tries on the Execution Layer and Data Availability Sampling (DAS) on the Consensus Layer.
# 2 Layer 2s/ZK Rollups
Proto-DankSharding will be introduced by ETH’s Dencun Upgrade, which was initially scheduled for late Q1 but moved to early Q2 2024.
If, as a result, the net profit margins increase, Layer 2 tokens and associated ecosystems will see a rally driven by fundamentals. Most EVM-compatible TVL may be captured by Optimistic Rollup and ZK Rollup Layer 2s like Base, OP Mainet, and Arbitrum One, and they may also draw in more financial activity.
# 3 Layer 3s
Not to mention, Layer 3s are a new component of Layer 2 development as of right now. To address the shortcomings of Layer 1s and Layer 2s, Layer 3s are being constructed on top of Ethereum Layer 2 Rollups (scaling, customization, integration, security, privacy, liquidity, and productivity, to name a few). In 2024, Layer 3s will experience tremendous growth and advancement thanks to the core infrastructures provided by companies like Polygon zkEVM, zkLink, Starknet, Arbitrum, and zkSync.
Layer 3 solutions, such aszkLink Nexus and others, are frequently built using zero-knowledge technologies. Specifically, zkLink has unveiled the first Multi-ZK-Rollup Layer 3 in the industry, which combines the different Layer 2s and is protected by zk-SNARKs.
In order to provide developers and consumers with enhanced security, cost-efficiency, interoperability, and instantaneous transactions with nearly frictionless multi-chain transfers (between Layer 1s and across Layer 2s), zkLink Nexus’s Layer 3 aims to consolidate liquidity across Layer 2 zkEVMs and zkVMs.
Furthermore, as per Vitalik’s tweet on X on the penultimate day of 2023, his outlook for ETH’s long-term enhancement encompasses interoperability and cross-rollup standards together with the swift advancement of Layer 2 and Layer 3 development. With a clear 2024 roadmap, the Ethereum Developer Community is committed to ongoing innovation and network improvement, strengthening its capabilities.
# 4 DEXs
The environment for trading cryptocurrencies has been continuously altered by Decentralized Exchanges, or DEXs. DEX trade volumes climbed by more than 150% in 2023, and the overall trading volume surpassed $1.5 trillion. The demise of FTX, founded by Sam Bankman-Fried, and Changpeng Zhao’s resignation from Binance brought to light the flaws of Centralized Exchanges (CEXs) for cryptocurrencies. Therefore, because of their low trading fees and secrecy, among other benefits, Decentralized Exchanges have grown in popularity as an alternative and choice for many institutions and retail investors. Top DEXs available today include Curve, PancakeSwap, Uniswap, dYdX, Balancer, and SushiSwap.
Additionally, like it did in July 2023, the market share of spot cryptocurrency trading volume will reach a record high. Furthermore, Decentralized Exchange currently holds a 2% to 10% market share in cryptocurrency derivatives; but, in the next bull market, that proportion might rise to 20%.
DEXs still have to overcome a number of difficulties, though, including a lack of liquidity, subpar user experiences, security flaws, and regulatory issues. These platforms must therefore work to provide creative answers to these problems in order to guarantee a reliable, compatible, and safe trading setting and platform for Web3 consumers.
# 2 DeFi
Macro Liquidity
The year 2024 has great promise for the widespread and sustainable acceptance of digital assets and cryptocurrencies. This might begin in January 2024, when the Securities and Exchange Commission (SEC) approved Bitcoin (BTC) as a spot ETF in the US.
Given the market’s strong price activity in Q4 2023, this occurrence has been seen as a sign of the closure of the “crypto winter” (bad market if you prefer) of the previous two years. The Federal Reserve and other central banks are expected to begin Quantitative Easing (QT) this year, according to a large number of economists, investors, and analysts worldwide. As a result, macro liquidity is anticipated to hold steady and may even get better through 2024. Strong liquidity inflows could be very beneficial for projects like NFT, Ethereum, Solana, Avalanche, DeFi applications, and Bitcoin.
Regulatory Changes and the Approval of a Spot ETH ETF
A spot ETH Exchange-Traded Fund (ETF) is the next item on the agenda, pending SEC clearance after spot BTC ETFs were approved in the US and beyond an overall boost in macro liquidity.
The likelihood of a spot Ethereum Exchange-Traded Fund being approved has significantly increased, since spot Bitcoin ETFs were approved on January 10. Specifically, the SEC didn’t offer a convincing legal justification for declining an ETH spot ETF when they’ve previously authorized futures-based products. Consequently, some prominent and substantial asset managers in the US, including Fidelity, Blackrock, VanEck, Ark Invest, Grayscale, and numerous others, have submitted applications for their own Ethereum Exchange-Traded Funds.
A spike in liquidity could be experienced by the ETH ecosystem if other nations and organizations decide to approve cryptocurrency ETFs in the new legal environment. In this circumstance, a large amount of innovation, additional use cases, and sophisticated financial products could arise from this money inflow. Assuming a positive outlook, 2024 will see the establishment of more precise worldwide regulatory frameworks for the cryptocurrency and DeFi sectors, offering prospective market players guarantees on consumer safety, security, transparency, and compliance.
Tokenization of RWAs
In 2024, the tokenization of Real-World Assets (RWAs) like equities, real estate, bonds, and carbon credits will continue to gain popularity and become a significant trend.
The DeFi ecosystem will benefit from more liquidity and new opportunities brought about by the tokenization of RWAs. Tokenizing Real-World Assets is a complicated matter from a legal and regulatory standpoint, though.
CBDCs
Research and pilot program development are underway at central banks across the globe for their own national Central Bank Digital Currencies (CBDCs).
Governments all around the world are embracing blockchain technology in particular and incorporating CBDCs into their established financial systems. These efforts will keep up until 2024.
Stablecoins
Presenting Proof-of-Reserve (PoR) on platforms for the cryptocurrency industry has already become normal practice following the collapse of Terra Luna (UST), one of the most well-known stablecoin issuers and Layer 1 blockchains in the sector, in 2021. Nowadays, CEXs frequently and consistently carry out PoR to demonstrate their liquidity and strong financial standing. In particular, Tether, the firm that created USDT, has grown to be the most reputable and well-liked stablecoin among traders and crypto investors. This is demonstrated by the company’s significant market cap in 2023, during which time its net worth increased by around $30 billion.
Tether has made an effort to be open about the reserve assets supporting their USDT supply. Specifically, they have a lot of financial assets in addition to cash, including corporate bonds, US Treasury Bills, Money Market Funds, Overnight Reverse Repurchase Agreements, Bitcoin, precious metals, and other loans and investments. After all, it’s logical as all Tether tokens are 100% backed by Tether’s reserves and are tied at a 1:1 ratio to the US dollar, as you’re undoubtedly already aware. In the current cryptocurrency market, USDT is the most popular stablecoin, with a market valuation of around $83 billion as of September 2023. However, unlike Bitcoin, for example, USDT isn’t a widely utilized payment mechanism for online purchases, even though some retailers or web-based companies may accept it. On the other hand, it competes with more established cryptocurrencies like Ethereum and Bitcoin for some other kinds of online transactions, like betting. Tether is a game-changer in the rapidly changing online betting market because it offers lower transaction costs, better security features, and eliminates the need for complicated currency conversion for those who decide to try their luck on the best Tether bookmakers in 2024 from the list here.
Final Thoughts
With an increase in finance and liquidity in the market, 2024 is expected to be a very dynamic year for the five aforementioned breakthroughs. This will encourage innovation and speed up the resolution of problems pertaining to the scalability and widespread use of blockchain technology.
Along with the overall rise of DeFi, DEXs, and the advancement of Layer 2s and ZK-Rollups, as well as intriguing notions like Layer 3 ecosystems for developers to build application-specific, configurable, and more scalable DApps (Decentralized Applications), it will be exciting to observe Ethereum expanding.
Let’s see how the tendencies we picked develop throughout the course of the year.
