Author: Paul Timofeev & Gabe Tramble, researchers at Shoal Research; Translation: Golden Finance xiaozou
Cryptocurrency is the attention economy. Therefore, we believe it is important to focus not only on fundamentals but also on trends and narratives that capture attention and generate value.
1. Restaking
With the Shapella upgrade enabling ETH stakers to withdraw their funds, we are witnessing the rise of the Liquidity Staking ecosystem, which is currently valued at $48 billion and is the largest active sector in the cryptocurrency world. Liquidity Staking Tokens provide stakers with the opportunity to earn additional yield on their native assets (such as ETH) by minting a derivative asset called Liquidity Staking Tokens (LST), which can be deployed in various DeFi applications to earn additional yield.
Restaking is the process of re-staking an already staked asset, and the core idea is to develop Ethereum's merged security (ETH staking) as a way to bootstrap the security of a new network. It is important to distinguish between native restaking and liquidity restaking - native restaking is staking ETH and generating an "EigenPod" that sets up withdrawal vouchers for the EigenLayer smart contract. This allows the EigenLayer system to recognize your re-staked amount, and then you can choose new services to write into the service contract. Liquidity restaking allows LST holders to "stake their stake" and in turn obtain a derivative token representing their re-staked position, which is LRT.
Overall, re-staking brings a new yield layer to asset holders, theoretically bringing more security to the underlying network, but also potentially more risk, depending on the network. People are increasingly excited about this new development, with over $8.9 billion in deposits and over $4.6 billion in liquidity re-staking protocols currently on Eigenlayer.
There are some important risks to consider; many liquidity re-hypothecation platforms do not yet support withdrawals, so be careful when depositing into one-way contracts. In addition, it is important to ensure that the market for re-hypothecation strategies does not converge and lead to new centralization risks at the level of staking operators.
We conservatively expect the re-pledge protocol to perform well in 2024.
EigenLayer — As a pioneer in the re-staking space, EigenLayer is a key layer to enable re-staking strategies. The protocol has surpassed Uniswap in terms of cumulative deposits (TVL) and is likely to easily surpass Aave and Maker (ranked 3rd and 2nd, respectively) by the end of this year or in the following months. There will be an airdrop soon, so it will be interesting to see how user retention and outflows normalize after the token launch. While TVL and user numbers are expected to decline, the key question is to what extent and for how long, as this will provide valuable insights into the formation of long-term beliefs about the potential of EigenLayer and the re-staking ecosystem.
Etehrfi — Etherfi allows users to deposit ETH and perform native re-staking through EigenLayer. The protocol has the highest deposit value of all liquidity re-staking protocols ($1.1 billion) and is one of the few re-staking protocols that supports user withdrawals. Stakers retain custody of their ETH while delegating staking, and Etherfi generates an NFT for each validator launched through the protocol.
Picasso Network (PICA) — While restaking is native to Ethereum, it is still an underexplored, early stage space, and a multi-chain future seems inevitable. As restaking on Ethereum becomes more crowded, teams will begin to explore other ecosystems and blockchains. This is already happening on Solana, which has a mature, $1.9 billion liquid staking market. Picasso is a new DeFi interoperability layer developed by the Composable Finance team, native to the Polkadot and Kusama networks, supporting cross-ecosystem communication through the Composable IBC module. The Solana<>IBC connection is the first AVS of the Picasso restaking layer, supporting users to stake SOL or any supported Solana LST. This opens up a new area of cross-chain applications and use cases between Solana and IBC chains, and other ecosystems will be able to take advantage of Solana’s high speed, low fees, growing user base, and liquidity.
2、Solana 2.0
After the FTX crash, Solana went parabolic across all metrics in Q4 2023, around the time of the JTO airdrop and the annual Breakpoint conference. We believe this is just the beginning. With growing excitement about the upcoming airdrop (stimulating ecosystem activity, key infrastructure, and network development), and growing mainstream media endorsements, Solana is well positioned to perform strongly over the coming year and beyond. The simple long-term thesis relies on Moore's Law, and user-facing performance specs (such as high throughput and low cost) have put Solana on the path to the consumer chain of the future.
Solana recently experienced a temporary network outage (February 6th) after operating normally for over a year. The root cause of the network outage was a bug that was fixed on the testnet but not deployed to the mainnet for testing. While it is clear that network outages can hurt Solana's public perception, the fact is that the network ultimately returns to normal within an hour and has only become more resilient in these situations, especially as the ecosystem becomes more diverse with validator clients.
JupiterExchange（JUP）
Firedancer — A high-performance validator client developed by Jump Crypto that promises to bring significant improvements in performance and throughput, and more importantly, enhance the diversity of Solana validator clients.
Kamino Finance - Simply put, Kamino aims to be the liquidity engine for Solana DeFi. Users can borrow/loan on leverage, earn money as an LP (liquidity provider) through CLMM automatic vaults, and even go long/short on tokens for leveraged trading. A one-stop shop like Jupiter, which may become a competitive relationship over time. In addition, points are real-time and airdrops are expected in the second quarter.
3、DePIN
As our world becomes increasingly digital and the amount of data generated continues to grow exponentially, computing power is an ever-increasing resource requirement in our time, and with the rise of LLM and consumer/business-focused AI, computing power will only accelerate further.
As computing power becomes an increasingly scarce resource, optimizing its distribution and availability becomes more important. The Decentralized Physical Infrastructure Network (DePIN) unlocks a more efficient computing market by disintermediating distribution and value accumulation. DePIN provides an exciting and tangible use case for cryptocurrencies; it treats crypto and blockchain technology as a key component of a greater whole, rather than a standalone new technology with a new cheesy buzzword.
DePIN’s growth will continue beyond 2024, with the industry’s popularity surging significantly in recent years. It's important to be able to distinguish between hype and fundamentals, but the combination of the two is exciting.
Render (RNDR) — An OG GPU marketplace since 2017, connecting 3D artists with the resources they need to render graphics for virtual scenes in games or movies. The platform recently migrated to Solana, joining some of the leading DePin platforms like Helium and Hivemapper.
Akash (AKASH) - GPU as a Service (GPUaaS) is expected to reach $25 billion by 2030, which means that supply and distribution methods will undoubtedly come under pressure. Akash is a decentralized peer-to-peer GPU rental marketplace that launched as a Cosmos chain in September 2020 - think of Akash as the airbnb of GPU computing. Akash uses a hybrid architecture, handling coordination and settlement on-chain, as well as execution off-chain. There is a more critical value proposition here - Akash's speed on Nvidia A100 is extremely competitive compared to leading providers such as AWS, Azure, etc.
Helium (HNT) — Helium is a decentralized network that provides low-power, long-range communications services for IoT devices such as sensors and trackers. Helium allows individuals to host hotspots (mini towers used to extend network bandwidth) and earn Helium tokens (HNT) as rewards.
Hivemapper (HONEY) Decentralized Google Maps - Users purchase a webcam and use it to record their driving surroundings, contributing to building Hivemapper's decentralized mapping system and earning HONEY tokens.
Teleport — Teleport is a new decentralized ride-sharing protocol. Remember the huge returns Uber gave to early investors? Imagine bringing “Uber” to the blockchain.
4. Encryption and AI
Artificial intelligence has recently experienced its pop culture moment with the rise of consumer-focused AGI applications such as ChatGPT, which have entered many aspects of people's daily lives and are expected to eventually change the world for better or worse. OpenAI has just launched a new text-generating video AI model, which is a further reminder that there are many capabilities of this new technology that we have not yet seen.
As Lucas Tcheyan of Galaxy Research puts it, “Innovations in both industries, crypto and AI, are opening up new use cases that are likely to accelerate adoption of both in the coming years.” Blockchain brings breakthroughs in settlement, data storage, and system design (backend), while AI is revolutionizing computing, analytics, and content delivery (frontend). VanEck AI estimates that revenue from the convergence of crypto and AI will reach $10.2 billion by 2030. However, it’s worth noting that it’s not practical to directly integrate AI models on the blockchain given today’s limited computing power. That may change 10 years from now, but it’s a big gamble on blockchain scalability.
The benefits of encryption for artificial intelligence
Cryptography provides a permissionless, trustless, composable settlement layer for AI.
Use cases include decentralized computing markets (which already exist), building intelligent agents that can execute a variety of complex financial strategies, and developing identity and privacy solutions to combat the negative externalities of AI (such as sybil attacks).
Benefits of AI for the Crypto Industry
Enhanced user experience (UX) for both users and developers through large language models, namely specially trained versions of ChatGPT and Copilot.
Has the potential to significantly improve smart contract functionality and automation.
There is a lot of potential to be tapped into at the intersection of crypto and AI, but as anyone familiar with the history of the dot-com bubble will tell you, be wary of trends toward new, unproven innovative technologies and the reversals that follow.
Projects we are focusing on
Bittensor (TAO): A decentralized blockchain open source network that supports a peer-to-peer market for machine intelligence. In short, Bittensor allows participants to submit AI models and then make them available for purchase by those in need, such as application developers and other researchers. When participants contribute their AI models and training to the Bittensor network, they are compensated with TAO tokens - considering the cost inefficiencies of machine learning R&D today, it is conceivable that Google or IBM may use the Bittensor network in the future. Bittensor has 95,000 accounts, processed 292,000 transfers, and generated 2.3 million blocks. TAO has a market cap of approximately $4 billion, 89% of the supply is staked, and the maximum supply is 21 million, similar to Bitcoin.
Get Grass — The Get Grass protocol aims to democratize the availability of training data for AI models, building an “AI data layer”. Users can download their chrome extension to start earning points, with the idea being to compensate everyday internet users for collecting and selling data representing their digital footprint. The team has built a database specifically for training LLMs (currently this is often prohibitively expensive for developers), with the vision being that one day even regular people will be able to develop new applications using AI models, not just greedy corporate overlords. Furthermore, the idea of compensating people for their online data seems inevitable, and is a use case where cryptocurrency could be the perfect digital native currency. No data is available yet, but it’s expected to be soon.
Nosana (NOS) - Nosana is building a decentralized GPU marketplace for AI applications, connecting users' GPU networks to AI developers, similar to Bittensor. Anyone with an idle consumer-grade GPU can become a node on the Nosana network, and anyone can access Nosana's own AI models to meet different needs. Since November 2022, Nosana has completed 180,000 inferences on its network, which refers to completed tasks submitted to the network queue. NOS is used to provide collateral for nodes on the Nosana network and is a medium of exchange with a current FDV of $370 million.
5. Intents
Intents have become a buzzword in the crypto space, and some people question the use of the word "intent" itself, but the concept is very simple - intents are signed transactions that outsource transaction execution on behalf of users in order to have a better settlement price. Whether you want to call this mechanism an intent is entirely up to you, but in the context of our attention economy, we believe that "intents" will be more popular.
A key feature of intent-based trading protocols is the outsourcing of trade execution to a subset of competing searchers (solvers, fillers, etc.), who compete in auctions to find the best price path for a user’s trade. These searchers are often able to leverage off-chain sources like centralized exchange liquidity to fund a user’s trade, in addition to various on-chain liquidity sources (liquidity pools on decentralized exchanges). The benefits of using off-chain liquidity are gas cost savings and higher liquidity. That said, the shift toward increasing reliance on off-chain components has worrisome implications on a larger scale.
Private memory pools provide users with a “fast track” to directly connect to block builders and are being widely adopted by users and applications that integrate various MEV protection services, such as MEV-Blocker, which now has over 600,000 unique address users.
infrastructure
Many teams are working on building the core infrastructure for intent-based applications. The most important developments we see are:
SUAVE — A sidechain being developed by Flashbots that will serve as a developer toolbox for building auction-based models.
Anoma — The Anoma team is developing a complete network to support intent-based applications with a focus on privacy and security.
Essential - Builds various models and standards for intent applications, including a DSL for intents, an intent-centric account abstraction, and a modular intent layer.
application
CoWSwap (COW): Not all intent-based protocols are created equal, and Flashbots’ research into the Ethereum order flow market shows that CoWSwap solvers are the only competitive model in practice. In contrast, 1inch Fusion’s resolver market and UniswapX’s filler market are clearly centralized. Cow DAO recently voted to start charging fees on CoWSwap, creating an organic revenue stream for the development of the protocol. There are many other innovative features, such as TWAP orders, programmable orders - which can be used to help prevent people’s loans from being liquidated, “CoW Hook” transactions - which allow users to merge multiple transactions into one, and the recently released CoW AMM - an LVR capture AMM that takes LP interests into account.
Across (ACX): Across implements an intent-based execution model for bridges between Eth L1<> L2, L2<> Eth L1, and L2, where solvers provide liquidity to complete user transactions and are then compensated for it. With over $5 billion in total trading volume, 357,000 users, and $101 million in TVL, Across is one of the most successful organic third-party cross-chain bridges in the DeFi space today. It inherits the security properties of the UMA optimistic oracle, which allows solvers to take inherent risks when providing funds to users and know that they will be repaid, providing users with faster bridge execution.
IntentX: Unlike most other intent-based swap aggregation protocols, IntentX introduces perpetual contract trading to the intent space. Since its launch in Q4 2009, IntentX has received $2.5 million in deposits, processed $707 million in trading volume, and generated $630,000 in revenue on Base. The intent-centric landscape is constantly evolving, and we will keep a close eye on IntentX and its novel intent mechanism for perpetual contract trading.
6、DeSoc
As Chris Dixon emphasizes in his new book, Read, Write, Own:
“Search and social ranking algorithms have the power to change lives, make or break companies, and even influence elections, yet the code that drives them is controlled by unaccountable corporate management teams that are largely hidden from public scrutiny.”
Social networks embody the essence of how people connect and coordinate, yet the vast majority of revenue generated by content created on social networks flows back to the platforms rather than to the users, entrepreneurs, and content creators. The creator economy needs an overhaul, and decentralized social media (DeSoc) can help.
DeSoc and crypto-native social networks offer new opportunities to monetize creator-fan relationships. The idea is great, but it hasn’t been implemented yet. There are glimmers of hope, but it hasn’t really been a breakout moment. Friendtech died as soon as it became famous. And, Starts Arena, rest in peace.
Friendtech proves that PVP-style social applications with economic incentives are not a sustainable growth model and will not attract a large number of users beyond crypto-native users.
Login remains a major hurdle - switching to a new social network without losing followers/audience is challenging, arguably impossible.
To quote Antonio Garcia Martinez, former product manager at Facebook:
“Web3 needs to enable cool features that were not possible with Web2 before, and make it so that users are basically unaware that they are on a blockchain.”
That’s why Farcaster is so exciting. Although Farcaster has recently hit new records in users and activity, this is not just the latest hype. Led by Dan Romero and Varun Srinivasan, the former Coinbase team has been working on it for some time. Farcaster is not a specific application, but a platform with a decentralized architecture that can support new applications to be created on it. Farcaster uses a hybrid backend architecture where all crypto elements/blockchain are abstracted off-chain, while identity management is stored in smart contracts on-chain.
Warpcast, a client developed by the Farcaster core team, provides a smooth web2 social experience. Warpcast has a Twitter-like feed, as well as specific channels similar to subreddits, allowing users to join communities and curate content they want to see.
Frames are in a class of their own, offering developers new opportunities to build embedded experiences directly into shared interfaces. In other words, do more cool stuff without leaving the app you're using. In a nod to internet culture, a core engineer put Doom in a frame. There are many other exciting possibilities - imagine reading an article about the latest AI token and being able to buy tokens without leaving the article. Or getting all the latest news and updates from your favorite research telegram in one interface. Bet on sports events directly from your live feed.
Connectivity between experiences in turn improves the quality of the experience, and therefore the value of the experience. This is what Facebook tried to do, but ultimately failed with the Open Graph protocol, mainly due to the technical and multi-party coordination issues that blockchain needs to solve.
The cool thing about Farcaster is that there are only two clients - anyone can customize the client to suit the needs of the user or enterprise. A16z has a repo with a bunch of clients available for anyone to start building today. We expect more innovation in this area and are eager to work with development teams in the DeSOC space.
7、Telegram Bots
Telegram Bots are another exciting and unique way to interact with crypto. They are a classic example of a headless market - a local distribution market (i.e. wherever the user's wallet is located) facing global demand and users.
Telegram bots remove many of the barriers to using cryptocurrencies today - wallets are created on behalf of interested users, and funds can be deposited and withdrawn from a CEX-linked address (i.e. Coinbase). Considering Telegram currently has 800 million monthly active users, this seems like a user base that could generate revenue.
The rapid growth and adoption of Telegram bots supports this view — but it’s important to pick the best few out of the hundreds currently available.
Banana Gun bot (BANANA) — Supports Ethereum and Solana. Banana Gun has completed $1.4 billion in total trading volume since its launch and processed over 3 billion trades for 87,000 traders.
BonkBot (TBD) — BonkBot was developed by a team independent of the BONK token. It is the top performing TG bot on Solana, processing 24 million trades from 158,000 traders and $1.8 billion in volume, more than any other bot. Bonkbot’s trades are automatically routed through Jupiter, creating a synergistic relationship with one of Solana’s top projects.
Unibot (UNIBOT) — Supports Ethereum and Solana transactions. Unibot kicked off the TG boom in 2023. Since its launch, Unibot has completed 731,000 transactions with a total transaction volume of $479 million and total fees of $4.7 million.
Telegram bots are very timely for those who want to invest in trading assets that are only available on-chain, but don't want to face the hassle of creating new wallets and shuttling between hundreds of trading venues (with implicit smart contract risks). After all, if you just want to trade memecoins, why bother with the complexity of self-custody? This may also apply to other use cases beyond trading, such as borrowing/loans on Aave through Telegram bots, minting NFTs, payments, etc.
8. Parallel execution of L1s
The Solana ecosystem has grown rapidly in the second half of 2023 and continued to grow in the first quarter of 2024, bringing greater awareness to the benefits of parallel execution of transactions on the blockchain. While there will always be intrinsic value in the security of Ethereum, which processes transactions sequentially, the fact is that as more users use cryptocurrency and/or more enterprises seek to use blockchain technology to conduct real-world business, the need for low-latency and high-throughput infrastructure will naturally come to the fore.
The key idea behind parallel execution is to enable non-conflicting transactions to be made simultaneously, resulting in faster execution and higher total throughput. On Solana, accounts need to declare which specific network state they need to access in each transaction, which is what enables parallel execution. Bob's use of 100 USDC to redeem SOL on Jupiter does not conflict with Alice's borrowing of 1000 JUP on Kamino.
“Alt-Parallel L1s” are an emerging trend, which are relatively early networks (less than 1 year old) that process transactions in parallel, similar to Solana.
In parallel processing, a key distinction is between deterministic and optimistic processing. In deterministic processing, as seen in Solana, all nodes execute a set of determined transactions simultaneously in lockstep. Optimistic processing, such as Sei’s design, processes transactions in parallel across multiple nodes, and then verifies that the submitted transactions are valid. Therefore, optimistic parallel processing chains like Sei have the potential to execute faster than Solana, but at the cost of possible rollbacks in the event of fraud.
Sei (Sei) - Sei is an L1 built on the Cosmos SDK, dedicated to trading and financial services. Sei V2 will be launched in the first half of 2024, when it will introduce upgrades to several key features, including smart contracts, parallel processing, and state storage. Sei currently has $23 million TVL and a market value of nearly $2 billion.
Sui (Sui) — Sui is an L1 developed by Mysten Labs based on MoveVM. It uses a parallel processing model for transactions, which, you guessed it, has the advantages of high TPS and low fees. Sui currently has a TVL of $649 million, ranking 10th among all chains. Interestingly, the market value of Sui tokens is close to $2 billion, which is similar to Sei, although its TVL is more than 20 times that of Sei.
Monad (pending) — Monad is an EVM L1 that aims to provide 10,000+ TPS through optimistic parallel execution and “superscalar pipelining”. Monad was developed by former Jump Trading employees with extensive high-frequency trading experience and has a very strong community (Gmonad). Monad will also use its own database MonadDB for data storage, eliminating the previous scaling limitations of the EVM blockchain.
9. Modularity
Modular blockchains are specialized chains built to meet specific purposes while seamlessly connecting with other specialized chains. Blockchains perform 4 key functions - consensus, execution, settlement, and data availability. While monolithic or "integrated" chains run all 4 of these functions on a base layer, modular blockchains take a "plug and play" approach where networks can choose to use specialized infrastructure to perform their key functions.
Take putting together an outfit for example – you can wear the same brand from head to toe (monolithic), or you can wear a Hanes shirt, a pair of Levi jeans, and a Carharrt jacket (modular).
Celestia (TIA): Celestia co-founder Mustafa Al-Bassam wrote a research paper on Lazy Ledger back in 2019, which laid out the basic concept of a dedicated system that can help other networks scale - what we call modular blockchains today. Celestia acts as a dedicated data processing layer, providing a low-cost alternative to L2s publishing data.
Eclipse: is a new L2 that uses SVM for execution, Celestia for data availability, Ethereum for settlement, and RISC ZERO for zk fraud proofs - it doesn't get more modular than this! We are excited to see new use cases for SVM emerge, especially with the rise of modular blockchains. Given Eclipse's Frankenstein-like experiment, there is some uncertainty about how it will actually perform, but the team is strong and expectations are high for this novel L2.
10. Rollups-as-a-Service
Developers building dApps have several deployment options, such as existing blockchains, second-layer solutions (L2), custom application chains, and rollups. Rollups can achieve a perfect balance between customization, performance, and development effort, especially with simplified setups provided by Rollup-as-a-Service (RaaS) providers. These providers provide tools and services from rollup management to code-free deployment, making it easy to create and maintain custom rollups.
Imagine running a busy restaurant (traditional blockchain): you handle everything from cooking to delivery. RaaS is like hiring a delivery service (RaaS provider): they manage the delivery, allowing you to focus on cooking (development) and providing a smooth experience for your customers (users).
Conduit: This platform allows anyone to quickly and easily publish their own rollup without writing any code. The self-service platform takes care of everything from infrastructure to security, so you can focus on what’s important — building your product. Leading companies like Zora and Gitcoin trust Conduit to handle the technical complexity.
Dymension (DYM): Dymension uses a modular blockchain architecture. Users interact with RollApps (frontend), while Dymension (backend) coordinates the ecosystem and handles communications. The Data Availability Network (decentralized database) provides temporary data storage.
Cartesi: Cartesi provides dedicated CPUs and rollups for your dApp, maintaining decentralization, security, and censorship resistance while enhancing computational scalability. It uses the Cartesi virtual machine, allowing users to use familiar libraries, languages, and tools to conduct activities beyond the EVM.
11. Games
Crypto players have been waiting for AAA Web3 games for a long time. In the last crypto cycle, Axie Infinity, Sandbox, Decentraland, and Enjin were all talked about, and emerging game companies realized that Web3 could be a new place to test ideas. In the last cycle, we found many games similar to "DeFi with lore", which paid more attention to the interaction of yield farming/yield generation strategies rather than the game itself.
For many of these games, a lot of the feedback revolves around the genuine fun of the game as a core gaming application. While these games perform well in bull markets, sentiment fades due to unstable token economics or broken incentives despite massive price increases.
Ronin (RON): Developed by Sky Mavis, Ronin is an EVM-compatible blockchain tailor-made for gaming. Ronin is best known for hosting the popular Web3 game “Axie Infinity”. Ronin focuses on near-instant transactions and minimal fees, and also stands out for supporting a large number of in-game transactions.
Beam (BEAM): The Beam network is a gaming-centric ecosystem incubated by Merit Circle DAO. It provides developers with the Beam SDK, which supports the integration of blockchain elements into games. BEAM is the network's gas token, which is essential for transaction payments and smart contract interactions in the BEAM ecosystem.
Echelon Prime (PRIME): Echelon Prime is a gaming platform focused on developing and distributing tools designed to create new game modes and economic systems. Its token, PRIME, has been integrated into the sci-fi card game Parallel as its first application. Through PRIME, Echelon Prime aims to support the expansion of cutting-edge gaming experiences and economies, such as AI and AR games.
12. Conclusion
We are eager to work with teams and founders to promote innovation in blockchain infrastructure and on-chain economy. The digital asset field is full of opportunities and noise. To find the needle in the haystack, we must conduct continuous research and continuously improve our ideas.
