The major crypto trends of 2024
While the focus for years has been on understanding the underpinnings of Bitcoin and Ethereum, it has to be said that the use of crypto tools has not evolved much. Custody is still a stressful aspect of the experience, and users are still shaking their hands before validating a transaction on a DApp. Nevertheless, we can be pleased that accessibility is now a priority and that projects are making a business out of it. We mentioned the start-up Privy in the previous pages, but there are many others. These include the development of 'passkeys' to facilitate identification, and 'account abstraction', which allows wallets to be programmed à la carte. The rise of wallets using MPC technology (Fireblocks in particular) and the possibility of restoring access to them (Ledger Recover, ZenGo Pro) are also important advances. All this can not only help Web3 become more mainstream, but also make the user experience better and more secure than in Web2.
The coming year should be particularly structuring for the ecosystem, especially in Europe. Many platforms offering crypto investment to the public will be coming to terms with the fact that the step is too high to obtain PSAN approval, the compulsory regulatory sesame to continue operating between now and 2025. Expensive and demanding, this licence was designed to favour the strongest players, and few of them will start the year in good financial health. As a result, a number of companies are likely to be bought out, or even go bankrupt. More than 80 companies are affected in France. According to experts, nearly 40% could disappear.
Convergence AI / crypto
The boom in artificial intelligence has not eclipsed the blockchain sector, quite the contrary. Its rapid rise raises fears that a handful of industrial players (led by Nvidia, Microsoft, Google and Amazon) will be able to dictate the use of computing power. Blockchain seems to us to be a relevant response to this issue: it makes it possible to create global markets where everyone can contribute their computing power to those who need it and be paid in return through disintermediated networks. An idea inspired by economist Jeremy Rifkin, theorist of the third industrial revolution. Protocols such as Filecoin or the one designed by the French company iExec could play a part in this. Secondly, blockchains appear to be able to combat the development of "deep fakes", AI-generated content that impersonates real people. They could host digital identities that cannot be forged (this is the aim of the Worldcoin project). Finally, AI governance is still in its infancy, but it would make sense for it to be democratically administered on decentralised, open source networks.
A pious hope shared by the crypto community as a whole, decentralisation is still just a mirage for very many projects that operate with governance concentrated in the hands of a few. The feat achieved by Bitcoin cannot be reproduced ad infinitum: it is extremely difficult to cede total control of a protocol to a community as soon as it is launched. The founding teams want to see their vision through to a successful conclusion before sharing power, the financial powers (venture capital funds in particular) pull out all the stops to influence decisions, and so on. The evolution of DAO models will be closely monitored in 2024, with the emergence of more efficient and democratic models, while taking into account the issue of criminal liability, which has not yet been resolved in most jurisdictions. Among the experiments generating the most debate are Maker, Aave, Uniswap and Lido.
Although no application has yet been approved by the US financial regulator, the market expects the SEC to authorise the first spot Bitcoin ETFs. This news could be a catalyst for the sector, as it would mark the institutionalisation of bitcoin as a new asset class. For many, investing in bitcoin is hampered by the difficulties of custody and the lack of knowledge of trusted players to whom management can be delegated. With ETFs, American investors will be able to acquire bitcoins via their BlackRock securities account, in exactly the same way as if they were buying shares or exposure to gold. Europe is already ahead of the curve with a number of similar products (ETCs) offered by asset managers such as CoinShares and 21Shares. Once bitcoin has its ETFs, ether should quickly follow.
One of the most exciting aspects in the blockchain universe is modularity, i.e. the ability to develop new tools from technological building blocks already developed by others. This is made possible by open source, but all the projects in the world need to be able to communicate with each other to generate powerful network effects. We will therefore be keeping a close eye on initiatives that work towards greater interoperability. This is the case with 'layer 0' solutions such as LayerZero, 'bridges' such as Wormhole and protocols such as Cosmos. However, in the event of flaws, these projects could affect many ecosystems.
Layer 2 rollup solutions are expected to develop considerably in the Ethereum ecosystem, involving several major players such as Arbitrum, Optimism, Base (Coinbase), ZkSync, Linea (ConsenSys), Starknet and Polygon. They are essential to the scaling of Ethereum, and should be able to handle up to 500 times more transactions than the main blockchain. This will be crucial to support the development of transaction-intensive applications such as gaming and social networking. It is therefore likely that the rise of Ethereum rollups will mark the end of blockchains with no specific features, which until now have benefited from greater speed (at the expense of less obvious security). A handful of players specialising in very specific tasks (notably gaming) could stand out. Solana springs to mind.
The ecosystem can rejoice that institutional financial players have now committed to blockchain. Far from the proofs of concept imagined between 2016 and 2020, the projects launched by major banks around the world, such as Société Générale and JP Morgan, are now numerous. For them, tokenisation offers substantial gains in terms of efficiency and suggests an overhaul of the financial infrastructure, to which additional bricks and intermediaries have been continually added since the computerisation of the sector and the tightening of regulatory standards. The blockchain will host more and more tokenised financial assets, which will simplify processes, eliminate intermediaries, increase processing speed and reduce costs. What can we expect in 2024? The launch of exchanges based on this technology as part of the Pilot Programme launched by the European Union.