Six Predictions by Pantera: DeFi to Resurge Amidst Bitcoin, Increasing Frequency of “Cross-Chain” with Traditional Finance
Pantera, a cryptocurrency venture capital firm, predicts six major trends for 2024, as outlined by partner Paul Veradettakit in an article on CoinDesk. He believes that the DeFi boom will make a comeback on Bitcoin, ushering in DeFi 2.0. Additionally, with the support of Bitcoin spot ETFs, traditional finance will interact more frequently with DeFi, giving rise to projects like “TradFi-DeFi cross-chain bridges.”
I. Bitcoin Revival and DeFi 2.0
BTC’s market dominance has risen from 38% at the beginning of the year to 50% at the end of the year. This, along with its intense popularity, brings Bitcoin back into the spotlight for investors. Pantera predicts three major catalysts for Bitcoin’s revival in the coming year: the fourth halving in April 2024, the expected approval of multiple Bitcoin spot ETFs by institutional investors, and the enhancement of programmable features such as Ordinals protocol and L2 and scalability solutions (like Stacks and Rootstock). Pantera also predicts that more Ethereum DeFi protocols will be ported to Bitcoin, ushering in DeFi 2.0.
II. Tokenized Social Services on the Blockchain
Social applications like friend.tech have successfully integrated with Twitter accounts to create a new token economy model in the field of SocialFi. Pantera expects more experiments in the social field in the future, where tokenization will play a crucial role. Fungible tokens can become a new form of loyalty points, while NFTs have the potential to serve as personal social data and resources.
III. Increased Interaction between Traditional Finance and DeFi
Apart from predicting the approval of Bitcoin spot ETFs, which will significantly increase institutional adoption, Pantera believes that institutions will further seek tokenization of real-world assets (RWA) and traditional finance (TradFi) products. Similar to how BTC is mapped and bridged to Ethereum through WBTC, TradFi assets will also interact more frequently with DeFi, giving rise to “TradFi-DeFi cross-chain bridges” projects.
IV. Cross-Pollination of Modular Blockchains and Zero-Knowledge Proofs
Modular blockchains and zero-knowledge proofs have made significant progress in the past year, such as the recent Celestia mainnet and Espresso’s collaboration with Arbitrum. Pantera believes that the combination of these two technologies will be an interesting trend in the future. In consumer-related applications, zero-knowledge proofs may find more applications in identity protection and privacy projects, such as decentralized digital identities based on ZK.
Furthermore, Pantera highlights that the scalability issues related to high on-chain fees have been resolved. Ethereum L2 gas fees are below $0.02, and Solana’s fees are even lower. Therefore, Pantera predicts that within the next year, computationally intensive applications requiring significant resources, such as AI and DePIN, will become more economically feasible to run on the blockchain. Pantera mentions several projects, including Hivemapper, Bittensor, Modulus Labs, The Graph, and Realmsverse, as examples.
Pantera concludes by discussing the competition among public blockchains. In terms of user experience, there isn’t much difference between L1 and L2 solutions, and Solana and Avalanche can even directly compete with L2 solutions. Additionally, Ethereum, BNB Chain, and other major public blockchains already account for 80% of the total value locked (TVL). Pantera suggests that smaller ecosystems should focus their efforts on specific verticals (such as social, gaming, and DeFi) to maintain an advantage and effectively become “application chains.” In fact, among the top 10 TVL-ranked L2 solutions, projects like dydx, Loopring, and Ronin have already focused on specific verticals as application chains.
Source: DeFiLlama, DeFi, Inscriptions, Pantera, Paul Veradettakit, Bitcoin
