Bitcoin Ecosystem, Staking and the «Maturation» of DeFi: Industry Predictions for 2024

Nick Ashley, Marketing & Community Manager at Rocket Pool

On development of the liquid steak segment

It’s been great to see an increasing trend towards decentralization. For years, Rocket Pool stood alone as the only permissionless Ethereum liquid staking protocol.

In 2022, we saw many cautionary tales of centralized entities collapsing and highlighted the benefits of increased levels of decentralization.

While arguably a little late, the segment as a whole should benefit from increased transparency and reduced risks as a result, so long as decentralized technology is implemented in a safe and considered manner.

On the challenges LSD-segment teams may face

The main challenge is that liquid staking, at least in a decentralized manner, is not as easy to implement as it may first seem.

Proof of Stake system itself is continuing to evolve, and it’s not easy to hit this kind of moving target such that some projects may struggle to keep pace and scale.

On general expectations for 2024

By early 2023, liquid staking received increased attention towards the start of 2023, but with the amount of DeFi protocols building on top, it’s possible that next year could see renewed interest in the space.

Another potential catalyst is EIPs that could help liquid staking protocols to scale, something that Rocket Pool is well positioned to capitalize on.

On Rocket Pool’s plans for 2024

A significant protocol upgrade called Houston is undergoing audits right now and will be deployed sometime in the new year. This will further strengthen Rocket Pool’s governance processes and improve protocol efficiency.

Work is underway to scope out the next upgrade, codenamed Saturn, and development of this will take up a large amount of 2024.

Further work will also likely be completed to help Rocket Pool scale by improving node operator capital efficiency.

The Everstake Team

On development of the steaking segment

Advances in L2 solutions, liquid-stacking and restaking protocols, the introduction of stacking mechanics into the bitcoin network, and the emergence of cross-network stacking capabilities will play a key role. These developments signal the transformation of the sector in 2024.

Regulatory transparency is also expected to play an important role.

On the development of cryptocurrency industry

We see the following trends: 

• development of L2 solutions;
• innovation in the DeFi sector, particularly in the liquid staking segment;
• development of the regulatory landscape;
• strengthening of cross-chain interactions;
• diversification of staking protocols, including the integration of such mechanics into the bitcoin network and the evolution of restacking;
• development of trends related to tokenization of real-world assets (RWA);
• the merger of blockchain and artificial intelligence will catalyze innovation across sectors;
• improving the user experience to attract a larger audience.

About the projects Everstake is monitoring

The Everstake team is keeping a close eye on several groundbreaking projects. One of them, Babylon, challenges the historical limitations of the Proof-of-Work algorithm on which bitcoin operates.

In the Ethereum ecosystem, we are focused on projects such as ssv.network, Obol Network and EigenLayer.

In addition, Everstake is closely following Espresso, Astria, and Radius in exploring common consistency solutions in blockchain architecture. Each introduces unique features within their frameworks to address the centralization challenges faced by L2 solutions.

Oisin Kyne, Co-Founder of Obol Labs

On industry development in 2024

It’s a very exciting time for Ethereum, as we continue to improve capabilities around staking, like “forced” exits of validators via smart contract logic (EIP-7002) and also our Distributed Validator (DV) Protocol, allowing for trustless coordination of DV clusters.

With a Bitcoin ETF on the horizon, an Ethereum ETF can’t be far behind, and it won’t be long until the newest class of Ethereum holders are looking for staking yield on their ETH holdings.

I’m looking forward to seeing how Distributed Validator Technology (DVT) gets built into the next generation of staking pools and staking products, across the entire Ethereum ecosystem.

On distributed validator technology

DVT can be used by any ethereum validator type. At the moment, we’re very focused on supporting the integration of DVT into liquid staking protocols. We’re working with Lido and Ether.fi, for example, to onboard at-home community stakers to their protocols via DV clusters.

Because we chose to build our solution as an infrastructure agnostic middleware, others are free to decide how best to integrate it into their products. We also provide an SDK and a set of smart contracts for splitting ETH or ERC-20 tokens to make DV adoption easy.

From our end, we’ll start issuing Techne Credentials on-chain to node operators who have proven an ability to run a node in a DV cluster with high performance, that should at least allow other projects to understand who are good candidates to onboard to their evolving node operator set.

On the development of Obol Network

In 2024 we are looking to publish more of our roadmap towards a distributed validator protocol.

As I presented earlier, this will allow a validator cluster to punish and/or eject malicious or lazy nodes from a cluster, which is a pretty complicated problem to solve. 

Obol V2 will mean that clusters can be spun up with node operators who don’t know each other, and don’t even necessarily trust each other to continue attesting – this makes DV clusters much more trust minimized.

Adam Efrima, Founder of the Core Team of ssv.network

On industry development in 2024

2024 will have three main market drivers:

• bitcoin halving;
• ETFs;
• interest rates.

The bitcoin halving is hard-coded and is sure to cause some interesting price movements. If ETFs are approved, or interest rates are lowered, or all at once, the market is sure to react strongly.

In terms of technology, I think that 2024 will be a year of accelerated adoption for many of the technologies being built during a bear market, L2, DVT, account abstraction etc. We will see more adoption as well as consolidation. For example, L2 with native staking running on DVT.

EIP-4844 will probably be integrated into Ethereum next year. This will pave the way for hyper scalability and increased adoption of L2 chains. Around two years ago, Vitalik Buterin shifted the Ethereum roadmap to a “rollup centric Ethereum”. 2024 will be the year in which this design takes full shape and L2s transactions become truly dominant.

On development of the staking segment

Staking will decentralize. We will see more companies sharing the Ethereum staked TVL, instead of the current five to eight major players which hold most of the stake

There will also be more innovation coming, and as the segment “matures” there will be more room for consolidation. DeFi+staking, L2+staking, and so on.

And, most importantly, 2024 we will see the adoption of DVT, the technology that has been developed for around three years. Every staking company in the world is testing or implementing it. 2024 will be the year of DVT.

On the development of ssv.network

We will introduce many upgrades and changes to the protocol. We want to make sure it’s scalable and to maintain best in class performance. We will also reveal our next roadmap which will take DVT to the next level.

Sergej Kunz and Anton Bukov, Co-Founders of 1inch Network

On industry development in 2024

Sergey Kuntz

I see the need for increased decentralization of storage and access in the Web3 area, where even our own application controlled by the 1inch Foundation is stored in the cloud. There is potential to develop a P2P infrastructure for decentralized storage and operation of Web3 applications. This would provide a robust level of protection against access denials, user confidence in the authenticity of applications, and reduce the risk of complete service outages due to centralized points of failure.

Moreover, the future development of Web3 depends on the introduction of clear regulation. Active regulation in the US, lawsuits against Uniswap and fines for 0x emphasize the need for clear and transparent regulation. A well-regulated environment is vital for Web3 to thrive. Such an environment will provide clarity for all stakeholders and sustainability of platforms free from sudden closure.

Anton Bukov

Over the next one to three years, I expect significant diversity in the application of DeFi. Looking back at the past two market cycles, we saw a surge of interest in tokens and decentralized exchanges, followed by the emergence of aggregators, money markets, and other less visible innovations.

I envision that DeFi will begin to actively attract the attention of ordinary users in the coming cycle, which will broaden their range of applications. In ten years, I see DeFi taking its place in the global financial system.

Blockchain and smart contracts promise to become the primary level of settlement for the world’s largest entities, such as central banks and governments. I am convinced that the countries that are quickest to realize the benefits of integrating into this global economy and link their economies without imposing unnecessary restrictions will benefit and provide their citizens with first mover advantages in this area.

Mark Letsyuk, COO of HAPI

On the role of AI tools in cyberattacks and their prevention

We expect a surge in hacker activity as the use of AI tools for fraudulent purposes will only increase. We are absolutely certain of this.

The reality is that our industry will not benefit from artificial intelligence. For good causes, the technology works too, but the crooks are always two steps ahead. I think in the second half of next year, we’re going to see AI-based malware skimming cooler than the most sophisticated crooks.

In 2025, we may witness the following situation: a decentralized protocol written entirely by artificial intelligence will be attacked by an AI-created malicious utility, and a security-oriented module, also developed by a neural network, will investigate or try to prevent it.

Regarding the latter – HAPI is working on a similar product, our competitors are working on it.

On smart contract audits

The problem is that a smart contract is usually audited once – at the deployment stage. After that, it is repeatedly updated and, in theory, should be re-audited each time.

Most don’t. We did a study last year and yes, dozens of audits per contract renewal are done by 1inch. According to our data, they are leading in this respect.

After the Wormhole hacking incident, the team also did over 40 audits – that’s outdated data, it’s probably more now. Aave has a lot of serious audits.

However, not everyone is as mindful of their safety. This is probably due to the fact that not everyone has Jump Trading under their belt. But if you want to be a big player, it’s important. That’s why we think cross-chain solutions will still be vulnerable. Similarly, L2 projects with their centralized management are far from secure.

Trust Wallet Team

On industry development in 2024

We expect the crypto industry to continue to grow and mature. We envision the DeFi sector to consolidate its position with increasing user engagement and innovation. In addition, the integration of new technologies like NFT and GameFi is likely to get a fresh impetus.

About Trust Wallet plans

In 2024, Trust Wallet aims to deliver a seamless and functional experience. We plan to integrate L2 solutions for improved scalability and lower transaction costs.

Our focus includes improving integrations of decentralized applications (dApps), optimizing cross-chain features, and exploring new security opportunities.

NEAR Protocol Team

On industry development in 2024

We are very positive about 2024 – we are expecting bitcoin halving and possible major airdrops from L2 solutions. We would highlight the following trends:

• RWA;
• zero-knowledge proofs (ZKP) and offchain computing;
• AI integration into blockchain and more accessible data and the infrastructure to store it.

On the development of the NEAR Protocol and the project ecosystem

We are developing in areas related to ZKP, AI tools, and data availability layer. The team also develops the web application stack.

Undoubtedly, consumer dApps are the strongest and most promising part of the NEAR Protocol, which already has millions of transactions.

Andriy Velykyy, Co-Founder of Allbridge

On industry development in 2024

We are quite optimistic about 2024. We are already seeing rapidly growing activity in DeFi and trading volumes. In addition, halving will happen, and this has historically contributed to bullish sentiment in the market.

On DeFi sector trends

Of course, I’d like to highlight multichain and how many dApps and wallets are introducing support for bridging as well as cross-network solutions that attract additional liquidity and users to the protocols.

The DeFi sector itself, it seems to me, is in search of smarter business models and has distanced itself from the guaranteed income system after the Terra debacle. There are a lot of protocols emerging that provide dynamic rewards tied specifically to business activity.

I would like to single out RWA as one of the recent and gaining popularity trends.

On the development of cross-chain bridges

I think we will see a big shift from B2C to B2B solutions. Integrating bridging “under the hood” protocols will reduce slippage and make the liquidity transfer process more efficient.

We also speculate that Tether may launch a solution similar to Circle’s Cross-Chain Transfer Protocol (CCTP) and, if that happens, consider integrating it.

I would personally like to see blockchains work towards reducing the time it takes to finalize transactions. The longer it takes, the more inconvenience it brings to users whose main goal is to move assets from network to network quickly, cheaply and conveniently.

On the development of Allbridge

We are working on a large number of business integrations, actively utilizing our SDK, as well as extending the product functionality with new networks and assets.

Of the other big releases that will leverage our expertise in EVM-incompatible networks – we plan to connect our Stablecoin-centric product to the Stellar ecosystem via Soroban.

In addition, we want to add new directions on Optimism and Base. Along with this, we are focusing on user experience, adding a variety of improvements to the bridge UI to make it easier for people to interact with the product.

The last thing I would like to touch on is a problem that DeFi applications often face. If nodes suddenly stop working, it can slow down protocols. We are working on an automated product that will change a non-working node to a working node by itself.

Nick Schteringard, Head of Boosty Venture Studio

On industry development in 2024

I think the DeFi ecosystem around Bitcoin in general and staking mechanisms in particular will gain popularity over the next market cycle, especially after halving.

Commissions in the bitcoin network will increase under the influence of various experiments like Ordinals and due to the need to recoup mining after halving. In this regard, bitcoin L2 experiments will intensify (rollups and other various networks will be released).

Miners will be the first to look for additional opportunities to get a return on their capital. Their demand will be the driver for staking mechanics and the rest of the DeFi sector.

We at Boosty are heavily involved in this area, so we may be biased, but roughly the same predictions are made by asset manager VanEck.

Ethereum will certainly remain at the forefront of non-money applications, and the use of network-centric L2 solutions (rollups) will grow – it seems that all major industry participants will be launching their own rollups on one of the stacks like OP Stack, as Coinbase has done.

On geographical distribution of investments

It seems that due to regulatory tightening in the US and MiCA in Europe, the epicenter of the boom may be shifting to Asia, where there is more room for experimentation. But in any case, so far the most desirable users are Westerners.

On expectations regarding the approval of spot bitcoin ETFs in the U.S.

No predictions, but it seems BlackRock isn’t taking no for an answer. The market purge, including the recent Binance deal, is preparing it for new rules so that ETFs are not heavily influenced by pricing on venues that don’t report to the US.

Kyrylo Khomiakov, Regional Head of Binance in CEE and Central Asia

On industry development in 2024

Certainly the community is frozen in anticipation of spot bitcoin-ETF approvals, many are betting on an April halving, all of which could certainly lead to the start of another bullish phase.

Stablecoin capitalization is also expected to grow due to institutional adoption.

Speaking about global and local trends in regulation, I would like to note the importance of MiCA for the entire crypto industry and for Ukraine in particular. Through MiCA, the European Union creates a clear regulatory framework for companies in this jurisdiction.

On the development of Binance

We are entering a new phase of Binance’s development. Binance 2.0, if you will. We will continue to create useful products for our users, cooperate with regulators and all sorts of local partners, jointly creating transparent conditions and developing “crypto adoption” in order to increase the number of cryptocurrency users to 1 billion in the next 24 months.

On interest of centralized exchanges in DeFi

The DeFi sector is the future of cryptocurrencies and, in my opinion, the main driver of the next stage of blockchain development. There are two main reasons for this.

DeFi is about new financial options and models that give a greater range of features and services to users, ahead of and beyond traditional finance. And second and obvious, it is a response to demand from users who want a greater degree of autonomy and control over their finances.

Certainly the trend will strengthen in 2024 and the DeFi sector will grow. I think we will see more projects between CEX and DeFi soon.

Gleb Jout, Head of Bitget in the CIS region

On industry development in 2024

There will be six catalysts for positive market development in 2024.

1. The spot bitcoin-ETF is expected to receive approval from the U.S. Securities and Exchange Commission (SEC) in January 2024. Institutions are considering using bitcoin to achieve diversified asset allocation.
2. The Ethereum Cancun update is scheduled for Q1, during which the Ethereum and L2 solution ecosystems will further unlock their potential. ZKP-based Layer 2 networks expect a boom in token issuance.
3. USDC stablecoin issuer Circle is preparing for an initial public offering (IPO) that could take place in the first half of the year. The move is expected to support the adoption of stablecoins.
4. Bitcoin’s halving will take place in April, which will lead to an increase in its scarcity.
5. The FTX case is gradually entering a late stage, facing restructuring. It is expected to attract new retail funds as regulatory clarity emerges.
6. The cycle of interest rate hikes in the US is coming to an end. The market expects the first reduction as early as May. Under the influence of this impulse, positive sentiment in the cryptocurrency markets is expected to strengthen, which will increase the attractiveness of bitcoin.

On development of cryptocurrency exchanges

Future development trends may include the integration of decentralized and centralized exchanges to create a more flexible, secure, user-friendly and intelligent trading platform.

As the market evolves and government oversight of digital assets increases, exchanges will focus more on compliance.

On interest of centralized exchanges in DeFi

Centralized platforms realized that users who entered the cryptocurrency world during the last bull market grew up with it, gaining a deeper knowledge of DeFi. Consequently, their demand for such tools quickly increased. The meme season also attracted users to speculatively trade new low-capitalization tokens on the blockchain.

In the future, we expect a trend towards convergence between CEX and DEX. Trading platforms will be able to combine the efficiency of CEX and the decentralized functions of DEX, guaranteeing efficient and transparent trading.

In addition, CEXs can integrate separate DeFi financial pools with relatively low risk.

Lennix Lai, Chief Commercial Officer OKX

On industry development in 2024

In my opinion, three key directions can be distinguished.

1. The approval of a spot Bitcoin ETF and possibly an Ethereum ETF has the potential to spur significant growth and adoption of digital assets. These products could become robust financial instruments that allow organizations to more easily participate in the cryptocurrency market, leading to increased capital inflows and liquidity.
2. Layer 2 ecosystems for Ethereum are booming right now, and I expect to see more of them in the next year. The segment will see more and more applications created using technologies such as ZKP and account abstraction.
3. There will be a trend towards greater transparency and stability in the regulatory system at the international level.

On OKX development

OKX is a pretty unique cryptocurrency exchange in the sense that our business has always been technology-centric.

The recently launched L2 network X1 is a significant step towards this vision. We look forward to the official launch of the mainnet in the first quarter of next year, which will be a major milestone for us.

On interest of centralized exchanges in DeFi

It is important to note that CEX and DeFi are not competing concepts; rather, they complement each other.

CEXs recognize the growing trend and demand for DeFi services from their users. In addition, CEXs have already built a large community within the Web3 sector, making them an ideal testing ground and catalyst to scale and drive the development of DeFi.

Innovations emerging from DeFi such as identity verification and wallet solutions are also of value to CEX. By integrating DeFi innovations, centralized platforms will be able to expand their product offerings and enter new markets.

Dmytro Budorin, Co-Founder and CEO of Hacken

On the major trends and narratives of 2024

The current year is ending with optimistic indicators, but it is too early to make specific forecasts for the next one. However, some trends can be highlighted:

• RWA;
• more active implementation of AI in blockchain;
• standardization.

On the security of decentralized networks and applications

Security has been and continues to be the industry’s weak point.

For 2023, 406 hacks have occurred in the crypto industry – cumulative losses as of mid-December are estimated at $1.73 billion. By the end of the year, these numbers could grow.

For comparison: according to Chainalysis, in 2021 the industry’s losses will reach $3.3 billion, and in 2022 – a record $3.8 billion. The dynamics is positive, but it should be taken into account that last year was the peak of scams among large centralized projects (Celsius, FTX), which accounted for a significant part of the stolen funds. This year there were no such large-scale scams, so the figures are somewhat lower.

Rug pull is the most common category of hacks in 2023. Scammers hastily make template projects, promote them through bot farms and fake influencers. Our Q3 research showed that all the projects that rug pulls happened to had clear red flags that could be detected upon close scrutiny. But users fall for the pretty wrapper without diving into the details.

The hacks in the “access control” category are leading in terms of the number of lost funds.

Projects are still not adhering to security best practices. In Q3 2023, of the 117 projects that were hacked, only nine had relevant audit reports.

However, you should not take auditing as a magic pill. With as many risks as there are now, it is necessary to ensure multi-level security of projects. Therefore, among the main trends for the next year I can single out the growing popularity of tools for post-deployment security (round-the-clock monitoring of smart contracts and prevention of hacks).

Judging by Extractor by Hacken, 2023 marks the beginning of the growth of this market in terms of products that provide these features. We expect real-time, continuous monitoring and hack prevention to become the new security standard in Web3 next year.

This prediction is based on the increasing proportion of the total Web3 companies’ budget that is allocated to security. The long-term forecast to 2030 indicates that of the 5% of the security budget now common, industry organizations will start investing up to 12% in the near future, which is a common budget in the Web2 sector.

Peter Bilyk and Danyil Voloshchuk, Juscutum Lawyers

On the regulation of the crypto industry in the US and the EU

European Union

We expect some EU countries to introduce more detailed rules for the regulation of virtual assets (VA), which will be oriented towards MiCA. In this context, there are expectations of both the creation of full-fledged separate regulatory acts in the field of transactions with VAs and the improvement of business conditions in European countries.

U.S.

In recent years, the practice of state-level regulation of VA has been developing in the United States.

At the federal level, there is an understanding by the U.S. IRS of what virtual assets are, and reporting forms have already been updated to reflect that understanding.

Given this trend, we can expect modest Web3 advances in 2024, with perhaps new individual states joining in to create a legal structure for blockchain projects to operate in. Those states that have already started the Web3 regulatory movement could potentially add new regulation or new opportunities for simplified business operations.

On MiCA implementation

We will not be able to assess the effect of MiCA implementation in 2024, as the directive will become fully operational at the end of 2025.

Over the next year it is realistic to expect certain advances in the regulation of the Web3 sphere in certain countries. It is now known that Spain has declared its intention to implement all the mechanisms provided by MiCA until 2025. Thus, it is the first country in the EU, which makes sense to follow. This “trend” may be picked up by some other countries like Lithuania or Estonia, which have historically been leaders in implementing Web3 regulation.

On the potential prosecution of stock exchanges in the U.S.

Based on historical data, we can assume that there will not be much change next year. Despite the fact that in the last half of 2023 the SEC was subject to both significant criticism from the US Congress and defeats in lawsuits with some market players, we should not forget about other regulators.

In particular, about the Commodity Futures Trading Commission (CFTC), which has a significantly higher “win rate” in court cases and is more effective in proving its case in the legal field.

However, there are several possible developments that will positively impact the Web3 industry in the US.

1. Individual states will develop local legislation for the blockchain industry, creating clear rules for doing business and reducing the overall uncertainty around the issue.
2. Halving could be the trigger for SEC approval of spot bitcoin ETFs, which in turn could enable other areas of industry regulation to develop at the federal level.

On the likelihood of lawsuits against Tether

The main problematic issue with Tether is the transparency of their provision of reserves for USDT. Throughout its existence, this information has not been fully disclosed.

Tether publishes quarterly reports from which one can get a generalized picture of their business at a particular point in time, but the company has not provided details regarding the specific individuals involved in maintaining its collateral pool: which custodians are involved, what is the full list of banks, what specific securities and in what proportions are held by Tether.

These omissions are what generate the primary tension from regulators and financial analysts in the crypto space. Currently, it is not anticipated that Tether will face significant claims, but they could quickly arise if even a minor issue with their stablecoin emerges.

On the SEC case against Ripple

Overall, we assess the outcome of the case positively. Considering the text of the decision of the New York District Court, we now have a live legal precedent in the United States regarding how the Howey test can be interpreted in relation to VA.

This court decision demonstrates a specific mechanism for dealing with instruments during their sale: if you sell them to the public through exchanges where you do not have direct control over who buys your token, it will not be considered a security.

But if you plan to raise capital, for example, from funds, you execute the sale through a specific agreement with a specific party and under specific conditions. Under U.S. law, this constitutes the sale of securities, which must either be registered with the SEC or fall under an exemption from registration.

Veronica Wong, Co-Founder and CEO of SafePal

On industry development in 2024

Crypto compliance and regulation will play an increasingly important role in adoption, and battle tested utilities such as RWAs and payment systems will serve as an important foundation for over less tangible Metaverse focused verticals.

This trend might also manifest in the form of Web 2.5 products and services which combine the decentralization from Web3 and efficiency from Web2, as they can serve as an effective intermediate bridge for mainstream users.

On the development of hardware wallets

As security becomes critical for the long-term sustainability of the ecosystem, hardware wallets will become more popular among users.

Users will also become more discerning while growing proficient with crypto, making quality, price, and usability increasingly important for wallet providers to distinguish themselves

James Jewell, CEO of Hiveon

On the development of mining in 2024

The late rise in BTC price and the upcoming halving have accelerated the rush to deploy mining assets as quickly as possible.

Further innovations in the Lightning Network have improved transaction efficiency and scalability, addressing some of the earlier concerns about Bitcoin’s viability for daily transactions.

Regulatory developments have played a pivotal role in shaping the industry, with some jurisdictions embracing and regulating cryptocurrencies, while others continue to grapple with establishing clear frameworks.

Additionally, continued institutional adoption is expected, with more traditional financial entities incorporating Bitcoin into their portfolios. However, regulatory challenges persist.