jakiro
Source: Hashkey Capital
In the first half of 2024, we observed that more and more ZKEVM projects began to turn to the ZKVM architecture, represented by the PSE team under the Ethereum Foundation.Taiko is already working with Risc0’s ZKVM, and Scroll is also preparing for this area.
The catalyst that drives this transition is Plonky3, which outperforms Halo2 in performance (although slightly less stable) and improves user experience.
Currently available virtual machines in this field include: ZKWASM, SP1 of Succinct, JOLT of a16z, and Risc0.In addition, Polyhedra’s ZK Prover performed well and plans to develop virtual machines in the future.Aztec and Mina are also developing their respective virtual machines, but their performance benchmarks have not been announced yet.
The key factors driving wider adoption will depend on multiple aspects such as proof cost, proof efficiency and development time.It is currently generally believed that zkVM is suitable for building and deploying verifiable applications, and deserves further attention.
ZK Middleware
In the middleware aspect, we see that the proof verification system is still very active, with Brevis, Alignlayer and Nebra all working with Eigenlayer for security.As zk proof is relatively expensive, the market has gradually shifted to adopting a hybrid solution of OP and ZK to improve proof efficiency.In terms of applications, catalysts such as verifiable AI and verifiable off-chain data will bring more application demands, and attention can be maintained on these innovative areas.
MEV, chain abstraction/account abstraction, intent
At Flashbots, the team has been experimenting with and developing products that leverage Intel software protection extensions, and has recently tried to use trusted execution environments (TEEs) for privacy computing on Ethereum virtual machines.These use cases include storing and processing sensitive data to ensure auctions are protected from tampering and data leakage.
Fully homomorphic encryption (FHE) is also a potential solution to combat MEVs, as it always keeps data encrypted, eliminating the possibility of selective reordering.
Block Builder
According to relayscan, the block construction market has been highly concentrated on a few builders, including some high-frequency trading companies known for meeting their own trading needs.Currently, beaverbuild, titan builder and rsync builder are the most dominant and most profitable builders on the market.This centralization phenomenon has triggered further research on the design of block auction mechanisms, aiming to maintain Ethereum’s censorship resistance.
Relay
Relay still plays a crucial role in block supply, with more than 90% of blocks being transmitted through relay.Titan builder launched Titan Relay this year, which has grown rapidly since its launch.
Usually when evaluating Relay, the following factors need to be considered:
Performance and reliability can be analyzed through indicators such as online time, delay and bid failure.
Relay’s scalability refers to its ability to serve a large number of validators.
In the MEV track, we have previously invested in many successful projects, including Primev, the inventor of preconfirmation, Titan, the leader in the block construction market, and a few successful MEV systems except Flashbots, FastLane, etc.In the next stage, how to achieve value capture and how to successfully design tokens for MEV related projects are more critical issues.
Chain abstraction and account abstraction
Chain abstraction is a lasting and critical concept that enables users to adopt at scale, aiming to enhance the user experience, so that users do not perceive the existence of the blockchain, and even need to know which chain they are using.As one of the early pioneers in the field, NEAR has introduced multi-chain signature capabilities that allow one account to be used across different chains.Supported chains include: Bitcoin, Ethereum, Cosmos ecosystem, Dogecoin, XRP Ledger, TON network, Polkadot, etc.
You can refer to the CAKE framework proposed by Frontier.tech, including permission layer, solver layer, settlement layer, etc.Where Account Abstraction (AA) can also be included in the permissions layer.The AA field is mainly divided into two categories: smart contract wallets and modular services.As we mentioned in our 2023 Domain Review, smart contract wallets play a crucial role in providing a seamless user experience through intent-centric design.
The number of active smart wallet accounts is also on the rise every week, with Polygon still the network with the largest number of smart accounts.Another popular platform is Base, which may be thanks to the introduction of the Coinbase smart wallet, which is compatible.
With EIP-7702 included in Ethereum’s Pectra upgrade, this will lead to a more seamless and user/developer-friendly experience as it aims to improve previous account abstraction (AA) designs such as ERC-4337, which costHigher and does not have native support for converting EOA (external owned account) to smart account.Therefore, it can be focused on whether infrastructure-level improvements can lead to new applications.
In addition to AA, tracks that can be paid attention to in the field include strategy engines, intention frameworks, preconfirmation, etc.Relevant projects in the field of intention are still under active development, and the specific performance and PMF remains to be seen.
Bitcoin
Bitcoin Rollup has attracted great attention earlier.However, interest seems to have diminished over time, which we have observed in Bitcoin Asia activity.With the decrease in projects, it is also difficult to raise funds in the current environment.
Nevertheless, we have witnessed some significant technological breakthroughs, such as BitVM.Some Rollup projects are exploring integration with BitVM.BitVM has made rapid innovations recently, such as the creation of a BitVM cross-chain bridge.The bridge can be used for large-value cross-chain transactions, while smaller transactions are expected to continue to rely on multi-signature or HTLC exchanges for economic efficiency.For more details, please refer to previous research.
Overall, despite the challenges Rollup faces, technological developments like BitVM may still provide opportunities for Rollup, such as interoperability.
Income-oriented Bitcoin strategy
Revenue-oriented strategies are also attracting attention, and more and more projects provide holders with packaging BTC to provide users with benefits, and it is also easy to make TVL.For example, projects like Mezo integrate multiple products, with Rollup just one of many components, as well as others like tBTC and Acre’s stBTC (liquid staking).
In this area, we continue to be cautious and invest in teams with clear technical advantages, clear market strategies or proven successful experiences.
The performance of the BRC-20 tokens is still weak, and ORDI is not performing well compared with the beginning of the year. Overall, BRC20 has not found much highlights or improvements.Although Runes has attracted strong attention after the Bitcoin halving, this interest has faded.This is consistent with a trend of decline in network activity and expenses.The integration of Taproot assets with the Lightning Network may rekindle market interest and momentum.
Overall, infrastructure providers serving this growing asset class can become attractive investment opportunities under the premise of sustainable adoption of Bitcoin assets.
Bitcoin Staking
Staking (restake) is a function that originally did not have in Bitcoin but was later modified.This track is also because it can be considered to solve the two problems of BTC interest generation needs on the capital side, and the need to be bound to the Bitcoin main chain.
Staking can be roughly divided into three categories according to the reduction mechanism:
Will slash for principal: Babylon is an example of this method
To interest slash (lost profit opportunity): CoreDAO focuses on cutting potential returns rather than cutting principal.
No slash: This category includes self-hosted layer two networks (such as Rollups designed to boost TVL and promise profits) and financial-oriented projects like BounceBit, where users’ bitcoins are managed by asset management teams to earn profits.
Babylon, the earliest Staking (restake) track, has already formed its own ecosystem. Basically, many Bitcoin-related applications will consider using Babylon to achieve correlation with the main chain.The staking related projects in the Babylon ecological project will mainly focus on implementing auxiliary functions. For details, please see the Babylon ecological section.
This track is probably similar to EigenLayer, imitating some applications and infrastructure, and market performance and ecological development need to be further observed after the main network is launched.For example, the Babylon mainnet reached its upper limit shortly after it went online.We are optimistic about the future development of Babylon.
Bitcoin DeFi, MEV
BTCFi: Recently, there have been many projects about Bitcoin Finance (BitcoinFi, BTCFi).What we can see at present is still focused on the application of lending and stablecoins.Using multiple methods, such as locking assets on Bitcoin, processing logical issuance assets on L2, or choosing different asset issuance methods, will lead to different trade-offs.
Wrapped BTC:WBTC, tBTC, FBTC and SolvBTC have attracted significant attention recently.Competition in this field is expected to become increasingly fierce.For example, Solv Protocol has witnessed a huge demand through extensive partnerships, DeFi integration, and cross-chain composability, driving protocols to obtain more than 13,500 Bitcoin stakes.As more projects seek to leverage Bitcoin in DeFi applications, we expect competition in this area to intensify further.
Bitcoin DEX and related applications: On-chain DEX still mainly uses PSBT, while some projects such as Satflow use pre-confirmation strategies in memory pools, although this approach is at risk of being replaced.
MEV: The activation of RBF and the introduction of new types of assets have led to more active MEV scenarios on Bitcoin.Projects like Rebar aim to build MEV infrastructure similar to what Flashbot does on Ethereum, while projects like Alkimiya focus on the expense/block space market.At present, MEV-related activities mainly come from transaction acceleration services.We will continue to focus on the continued development of this area and observe new projects that continue to launch various services to mitigate the negative impact of MEV on users.For more information, please refer to our previous report.
Bitcoin Technology Development
OP_CAT
Although OP_CAT is an easy-to-implement opcode, its activation introduces many features, such as simpler Merkle tree verification (two-element hash) to more complex operations such as transaction ontology verification using overlay Schnorr signatures.However, concerns about its flexibility may introduce some unpredictable risks.
In May 2024, OP_CAT was enabled as a soft fork in the Bitcoin Trial Client (a client on the signet network).The soft forking method actually had various debates and variables in the last Taproot upgrade.Not only the upgrade content itself, but also the process of soft fork upgrade, there are relatively discussions. Therefore, OP_CAT may not be enabled in a short time; if enabled, it will definitely be accompanied by various debates.The same applies to other soft fork upgrades, including OP_CTV (which has been debated on a large scale in 2022), APO, etc.
BitVM
BitVM has made a major breakthrough in improving Bitcoin’s expression capabilities. BitVM2 has improved on its previous design, enhancing the verification capabilities of complex computing and reducing the trust assumptions.The key recent progress has focused on the development of BitVM bridges, and has reached a certain level of maturity and security, and it is possible to achieve the maturity of testnet/mainnet online by the end of 2024.BitVM bridges may primarily deal with large assets, leaving room for other cross-chain bridges to continue to exist.Alternative BitVM bridge cross-chain solutions through multi-signature bridges or atomic exchanges are still practical for end users, providing faster and less costly alternatives.In addition, we may also see a new network of validators on BitVM2 in the future.
Channel, Joinpool class scheme
Significant progress has been made in the channel and Joinpool-related solutions.These solutions allow two or more users to share a UTXO on the main chain, while the off-chain can perform allocations (vTXO) according to business logic.When users want to exit, they can return to the main chain by unilateral exiting.
Aside from Hedgehog, recent focus has been on Ark.Burak launched Ark v2, which provides greater funding efficiency and proposes a related concept called Brollups.
Statechain is another interesting solution, similar to the Joinpool-based UTXO Mercury Layer.Mercury Layer has made significant progress in this area, and new projects like Mach are developing underlying infrastructure.
Bitcoin, as the largest asset, has historically been regarded as digital gold.However, with the advent of innovations like BitVM2, OP_CAT and Bitcoin staking, we are witnessing more applications of Bitcoin.Although the Bitcoin DeFi ecosystem is still relatively emerging compared to Ethereum’s DeFi ecosystem, we believe these catalysts will enable the Bitcoin DeFi ecosystem to achieve similar success in the future.
Solana
During Consensus, Paypal announced the launch of PYUSD in Solana.Since then, PYUSD’s market capitalization has grown rapidly due to integration with some of the large DeFi protocols on Solana such as Kamino Finance, Jupiter and Orca.Another signal that shows the agency’s interest in the field is that Stripe announced a re-entering Solana, allowing users to accept and make USDC payments.
Solana Labs, the company behind Solana, announced the launch of Bond, a blockchain-based platform designed to enhance brand-to-customer interactions and potentially accelerate institutional adoption.
In addition to the growing interest of Solana, we have also noticed a high focus on topics such as Blinks and memecoins, which are primarily aimed at retail consumers.
Blinks
At the end of June this year, Solana launched Solana Actions and Blockchain Links (Blinks), creating a more seamless experience for retail users to join Web3.Through the Solana Action API, users can convert any transaction into a blockchain link and can share it on any interface.
The impact of Blinks is that application developers (especially Web2 developers) can more easily embed on-chain operations between devices and platforms.Accordingly, dedicated browsers (or components) can visually display these elements, including links, QR codes, push notifications, buttons, etc.
This approach is consistent with Solana’s goal of promoting large-scale adoption.Currently, there are about 155 projects in the Blink ecosystem, and these projects need to undergo official review before adoption.Among them, 25 projects specifically registered Blink domain names, while others registered Blink compatibility.The community has shown strong interest in blnk.fun and BlinkEditor (although BlinkEditor’s official Twitter account is currently suspended).
This process is similar to Pump.fun, where users only need to set parameters such as quantity, price and description to issue tokens.Once shared on platforms such as Twitter, users can directly purchase the token without leaving the platform.In addition, well-known projects such as Jupiter Exchange and Pump.fun are also integrating Blinks.
Solana’s Meme Culture
On Solana, memecoin remains an important part of the ecosystem, and the launch of pump.fun further validates this observation.Pump.fun enables anyone to issue memecoin at zero cost, which has led to a large influx of memecoin into the ecosystem.Since its launch in January this year, the agreement has generated nearly $50 million in revenue.However, despite the lower threshold for issuing tokens, the number of projects and transaction volumes increase, we note that there is a lower probability of successful projects.
On Solana, notable developments include the introduction of the token extension feature, allowing tokens to have more features tailored to different project needs.With the Firedancer client expected to be online, this not only brings about a diverse range of verification clients, but also significantly improves network throughput and reduces costs, thus strengthening its appeal to developers and users.
TON
Ton performed well in the first half of 2024, recording a gain of more than 200%, due to the scrambling of mini-programs developed on TON to attract Telegram’s huge user base.The reasons why we choose to focus on TON can be divided into the following points:
Active ecosystem on Telegram: Telegram has about 900 million monthly active users, making it attractive to developers looking for a share of the pie.Coupled with in-app wallets and built-in fiat currency deposit channels, we are optimistic about Telegram bringing a large number of Web2 users to Web3.
Compared with other popular messaging applications (such as WeChat), we believe TON has the potential to replicate WeChat’s success in large-scale monetization.WeChat currently has 1.3 billion monthly active users, of which about 400 million are active in the gaming field.Games are the most popular category among mini programs, followed by e-commerce and daily services.The top 100 mini-games generate $1.3 million in revenue per quarter, while popular games can earn $15 million in monthly revenue.
Notcoin is a tap-to-earn game on TON, which received widespread attention in the first half of 2024.Notcoin, with more than 40 million users, sets a positive example and provides developers, investors and retail users with the motivation to join the TON ecosystem.However, this also leads to traffic swelling and a certain degree of overhype.
In terms of ecological development, TON launched an advertising sharing mechanism in February this year, allowing channel owners to obtain 50% of advertising revenue and settle with TON.Currently, TON has set up a $90 million eco-fund and a $220 million community incentive program dedicated to investment and grants.In terms of compliance, TON has launched the TON Star Coin model, which is directly bound to the Apple Store. Users can purchase virtual props in the game through Apple Pay, and Telegram will still use TON to settle to the project party.For on-chain recharge requirements, most applications have robots that support third-party recharges, rather than taking a one-size-fits-all approach.
However, Telegram CEO, Parel Durov, was recently arrested on charges of cyber and financial crimes, and network disruptions caused by TON native meme coins, DOGS, have become unfavorable factors for the ecosystem.Although this is worthy of warning, the team behind TON reiterates that the project will continue to operate.Given our focus on the TON ecosystem, the team will wait for TON to further develop its infrastructure to improve the maturity of the ecosystem.
Restaking (Restaking)
Eigenlayer
In the first half of 2024, re-staking became one of the hottest topics, and Eigenlayer was the main driving force behind this trend.
The success of Eigenlayer is reflected in many aspects:
The total value of locked positions (TVL) reached a maximum of US$20 billion.
Eigenlayer’s restake feature has spawned at least 5 liquid restake tokens (LRTs) and over 20 Active Verifier Services (AVS).
This brings new life to the Ethereum DeFi field represented by Pendle and AAVE.
Eigenlayer successfully transforms its narrative from simply providing shared security (providing additional rewards to Ethereum nodes) to complementing the important role of the Ethereum governance system.
The core of Eigenlayer is its AVS.Currently there are 16 active AVS (Active Verifier Service), of which only EigenDA supports restaking Eigen tokens, involving 3.7 million ETHs.Other AVS such as Omni and Eoracle have 800,000 to 2 million ETHs respectively, with a total of at least $2 billion in assets used to ensure safety.The ZK (zero knowledge) project has a high degree of fit with AVS. By transferring some of the ZK verification tasks off-chain and being processed by the stakeholder, it reduces costs and improves efficiency.If AVS-based infrastructure has a strong substitution effect on the infrastructure of the existing Ethereum ecosystem in the future, it will exert the effect of Eigen tokens and support its price.
In terms of LRT, each project party adopts different designs and strategies, which also leads to different performances of each project.But overall, LRT’s performance also depends largely on overall market performance and whether EigenLayer will perform strongly in the future.Despite initial success, we need to pay attention to the possible challenges that LRTs face in the future.Excessive financialization of LRTs may affect the stability of the Ethereum chain ecosystem.It is expected that competition in this field will become increasingly fierce, leaving few opportunities for new players to enter the market.
Babylon
Babylon is a platform that allows Bitcoin holders to stake Bitcoin without trust to protect the security of the Proof of Stake (PoS) chain.
According to Babylon’s official website, there are currently 91 ecological projects listed, covering 7 categories: Layer 2, DeFi, liquid staking, wallets and custodians, Cosmos, end-of-life providers and Rollup infrastructure.in:
Wallets and Custodians: Mainly mature wallets and custodial solutions.
Final provider: mainly pledge services.
Cosmos: Mainly an older project in the Cosmos ecosystem.
There are few new projects in these three categories.The new projects are mainly concentrated in Layer 2, liquid staking and DeFi fields:
Layer 2: Bison Labs, BSquared Network (our portfolio company), Lorenzo, Map Protocol, etc.
DeFi: Kinza Finance, LayerBank, Levana, Mars Protocol, Stroom and Yala Finance (Ports Companies).
Liquidity staking: Bedrock, Chakra, Lombard, pSTAKE, Solv, Nomic, PumpBTC.
In addition, we have seen other protocols such as Satlayer building a restake platform on Babylon, while Nubit uses Babylon to enhance its Bitcoin native data availability layer.
As many DeFi earnings projects revolve around Bitcoin, the need to generate earnings with idle bitcoins is evident.We expect more projects to offer Bitcoin liquid staking services, and as the Bitcoin Income/Bitcoin DeFi narrative continues to grow, we may see money flowing into Bitcoin from other ecosystems.
Modularity
Data Availability (DA)
There are fewer participants in the data availability (DA) field, including Ethereum, Celestia, EigenDA, Avail and NearDA, and these projects are progressing vary.DA projects focus mainly on security (including data integrity, network consensus), customizability, interoperability, and cost.The DA sector has been complex in the first half of 2024, such as Celestia’s DA tokens have fallen from all-time highs, while rival Avail has raised $75 million in its latest Series A round, led by Founders Fund, Dragonfly andCyber Fund led the investment.
In the DA space, major competitors include Ethereum and Celestia.When comparing Celestia and Ethereum, we see that Ethereum is still the first choice for rollups.
The main users of Ethereum DA include Taiko, Base, Scroll, Arbitrum and OP Mainnet.By contrast, Celestia’s main users include Orderly, LightLink, Manta Network, Lyra and Hokum.Despite the high cost of Ethereum DA, its demand and usage have exceeded Celestia, thus bringing significant revenue growth to Ethereum.
As the DA field matures and competition intensifies, the market is approaching saturation, and the key to project success lies in customer acquisition and ecosystem activity.Projects should also focus on other areas such as decentralized exchanges (DEXs), games, bridges and payments to achieve scale expansion.In addition to being a purely data availability service, providing different services will also help attract and retain customers more easily.
Overall, we see increasingly fierce competition in the data availability field, with increasing competition among players in pricing, which could pose a challenge to their long-term profitability.
Rollup Frameworks & RaaS
In the rollup field, Arbitrum, Base and OP Mainnet have a clear lead, with Arbitrum leading the way.With the strong support of Coinbase, Base has continuously narrowed the gap and branded itself into a consumer user application center, launching applications such as Farcaster and Friend.tech.
OP Rollups and ZK Rollups have achieved varying degrees of success, with OP Stack-based OP Rollups taking the lead.Overall, RaaS (Rollup-as-a-Service) is provided by 4 main solutions: Arbitrum Orbit, OP Stack, ZK Stack and Polygon CDK, each with its own advantages and disadvantages.However, the common result of these different RaaS providers is the increasing number of rollups.
Taking advantage of the OP Stack, there is an opportunity to unify the OP Stack chain through concepts such as OP Superchain, such as through shared sorting.In addition to scaling Ethereum with high throughput performance, these rollups can also be differentiated by implementing AA capabilities and introducing durable and popular consumer applications.This will keep them competitive as they continue to face challenges from L1s like Solana and Sui.
There are not many new projects in the sequencer track related to rollup recently. Old projects mainly focus on optimization and improvement in three directions: UX, MEV, and decentralization.
As rollup deployment becomes less difficult, Rollup-as-a-Service service providers will compete on ecosystem scale, cross-chain interoperability, and equipped with fully integrated modular toolkits.
DePIN
As one of the most enduring use cases in blockchain technology, DePIN received significant attention in the first half of 2024, which can be attributed to Solana’s appeal as a center for DePIN applications and its great interest in the field of artificial intelligence.The intersection of AI and cryptography highlights the growing synergy between these two areas.Node Sales is a very popular monetization strategy in 2024 and has proven successful in launching communities and raising additional revenue for projects.However, despite the widespread attention, DePIN’s return rate has remained unsatisfactory in the past three months.
IoT sensors/wearable devices
This field covers a variety of IoT sensors and consumer wearable devices, such as watches, bracelets, rings, etc.The core fundamental proposal in this field lies in the collection of data, using Web3 technology to make data more accessible and monetized.A key issue in this segment is incentivizing users to participate in data mining and earn rewards through data distribution, which has not been widely successful compared to Web2 solutions.For wearable devices, the top three motivations for consumers to purchase are (1) health and wellness, (2) fitness tracking, and (3) enhance access to smartphones and other smart devices.It is crucial to provide a satisfying user experience and combine sustainable token economics and value accumulation mechanisms during community launch.
Data Market
In this area, the key challenge is the scalability and adoption of the data market.Creating an isolated data marketplace can face challenges, especially in data-rich environments.
Wireless network
In the wireless network field, many projects try to use the Web3 concept to improve penetration, but apart from a few successful projects (such as Helium Network), common problems include poor user experience, compatibility issues, insufficient service reliability, etc.In 2024, due to various factors such as cost, geographical location and economic development, the Internet penetration rate in some regions around the world remains low.Community-powered wireless networks can fill this gap and draw on the success of Helium networks.
AI x Crypto
The huge demand for artificial intelligence triggered by OpenAI’s ChatGPT has led to a surge in demand for storage, computing and network resources.Centralized AI infrastructure providers face various problems such as high investment thresholds, mismatch in resources and uncontrollable data.Against this background, blockchain technology has become a feasible solution, and through mechanisms such as token incentives, it encourages active participation of users and the community.
AI will also be the most active subdivision we will look at in the DePIN depin field in the future, mainly because the training of AI and machine learning models does require a lot of computing power, and the DePIN project encourages users to share through distributed networks and incentive mechanisms.Its idle computing resources can generate actual income and are quite large.In terms of cost-effectiveness, the model does have great advantages over centralized services.There are projects on the market that have proved their value in practical applications. The scenarios cover AI model training and inference services, and the provision of rendering capabilities for games, which can all show that the needs in this field still exist.
In the field of computing infrastructure, privacy protections such as data privacy and model privacy can be added to the computing network.The core principle of blockchain technology is the verification of security and privacy protection.In this regard, although there are different trade-offs in various methods (such as ZKML, OPML, TEEML), they are constantly evolving.
In the past, more and more data tracks were combined with AI to serve AI.Because the main factor that distinguishes the effects between large models comes from the data set.The directions of the data track include: providing data sources (data DAO), data-related infrastructure (vector databases, knowledge graphs, decentralized databases, etc.), and data privacy (FHE, TEE, etc.).
These developments highlight the increasing attention of the data-driven AI ecosystem and emphasize the importance of data privacy and decentralized infrastructure in future AI applications.Here are some key players that have driven the thriving AI and crypto:
Data source, labeling, market: Grass, Vana, Dria, DIMO, Hivemapper, Sahara Labs, Ocean Protocol, Singularity Net
Computing Network: Aethir, io.net, Akash Network, Bittensor, Filecoin, Render, Nosana, Ritual AI, Gensyn AI, Together.ai
Verification network: Modulus Labs, Giza, Ora, Vana Labs, Aztec
Proxy network: ChainML, MyShell AI, Spectral Labs, Autonolas, Fetch.ai, Delysium
AI-driven applications: Kaito.ai, 0xScope, Ringfence AI, Kai-Ching
Significant trends in AI and encryption
As the demand for AI and machine learning training grows exponentially, computing power has become an extremely valuable resource.Many projects have emerged to gather computing resources around the world to meet this need.
With the popularity of basic models, more and more attention has turned to fine-tuning and optimization of models to meet the specific needs of enterprises.
No-code/low-code platforms have seen more innovations in personalized AI agent deployment.In Web3 AI, some of the projects worth watching include MyShell AI, Hyperbolic Labs, Prime Colony, and Wayfinder.
Looking ahead, the fields of artificial intelligence, Internet of Things, decentralized wireless (DeWi) and decentralized energy in the DePIN field deserve further attention.
RWA
The real world asset (RWA) field remains the cornerstone of cryptocurrencies, making Web3 technology closely linked to traditional asset classes.Real-world assets bring many benefits to cryptocurrencies, such as diversified real benefits and easier access to poor liquidity or private asset classes.The field continues to make significant progress in this area, from the formation of the Tokenized Alliance Charter, Mantra’s $500 million real estate tokenization, Blackrock’s BUIDL fund, to important investments in Securities and Ironlight to facilitate tokenized assetsAdoption.
There are many asset classes in real-world assets, but the areas that are most concerned are private credit and U.S. Treasury bonds.The top three issuers of U.S. Treasury bonds are Blackrock BUIDL Fund, Franklin Templeton’s U.S. Government Money Market Fund, and Ondo Finance’s USDY.In the private credit space, competition is dominated by several key players including Maple Finance, Centrifuge and Goldfinch Finance.In traditional finance, private credit is estimated at $1.5 trillion and is expected to grow to $2.8 trillion by 2028.By contrast, Web3 private credit is still small, but the future growth prospects are promising.
Gold remains the dominant asset in terms of tokenized commodities, with the top two being Paxos Gold and Tether Gold.
In terms of tokenized collectibles, this field remains quite niche and isolated, so creating lasting demand and providing asset composability for tokenized collectibles is crucial for the project.
Institutional demand for tokenization
Institutional investors are growing in interest in tokenizing financial products using blockchain technology.However, most executives still put regulatory risks first, so exposure to public blockchains remains limited.To move forward in this field, we need to pay attention to market structure development, default risk management and liquidity management.Only by focusing on compliance and infrastructure security can players in real-world asset sector capture retail and institutional adoption.One of the things that has made significant progress in the blockchain field is Avalanche.Through Avalanche Evergreens, the network has established partnerships with Citi, JP Morgan and ANZ, demonstrating its appeal to the organization and is able to successfully provide an on-chain RWA platform for organizations to be a secure, customizable and efficient on-chain RWA platform..Currently, we are excited about the RWA-related narratives including RWA index tokens, RWA-backed stablecoins, RWA-backed DeFi use cases, etc.
RWA adoption may be driven more by institutions than by retail users.However, as regulatory policies gradually become clear, we expect more projects to emerge, providing various tokenized securities beyond Treasury bonds to meet the risk preferences of different investors, prompting investors to increasingly embrace the concept of RWA.
Games and Entertainment
In the first half of 2024, the market sentiment towards games remained low except for TON mini games.Games that perform better include TON mini games such as Notcoin, Catizen, Hamster Kombat, etc.
Ecosystem
In addition to the Telegram gaming ecosystem we discussed in the TON section, IMX, Polygon and Ronin are currently popular game chains calculated by average daily UAW (active wallet users).Ronin continues to take the lead in the first-level gaming ecosystem, thanks to games like Pixels that have a strong gaming community, with 7-day UAW reaching 600,000.It has approximately 3.8 million monthly active users (MAU) on its network.Ronin is still attractive to small and medium-sized games, and the ecosystem is able to provide user traffic to game developers.So far, Ronin has attracted more than 12 game studios to settle in.In addition, Ronin has partnered with Polygon’s CDK to enable zkEVM, allowing developers to launch their own L2 chains on Ronin.This could be a positive catalyst for RON.
On the other hand, IMX mainly covers medium and large games and continues to attract large Web2 game studios to provide them with comprehensive deployment solutions.Immutable and Netmarble’s subsidiary Marblex jointly launched a $20 million ecosystem support program to further promote the gaming ecosystem on Immutable zkEVM.
We continue to welcome studios in the Web3 space, as well as game producers and KOL founders who are good at learning, sensitive to crypto culture and are user-centric.
Games and Artificial Intelligence (AI)
There is still no obvious progress in the combination of gaming and AI.Gameplay is still highly concentrated, and consumer-driven, AI-generated content in Web3 is still in its early stages.Interest in applying AI in NPC, partners, and scripting is mainly focused on B2B game developers.
Overall, the competition in the gaming ecosystem is fierce, and the key lies in balancing incentives and community building.Strategies focused on fostering loyal users, such as providing quality gaming experiences, positive user feedback and strategic partnerships, may play an effective role in achieving long-term success.
SocialFi
SocialFi has become a hot topic, summed up as the continuation of Friend.tech, Farcaster’s breakthrough and the outbreak of Ton/TG social applications, three main factors.
Friend.tech
Since its launch in 2023, Friend.tech has sparked ongoing discussions about the long-term and sustainability of its model.Despite the very successful initial launch, user activity has declined this year.The V2 release in May 2024 has sparked new interest, introducing features such as paid group clubs, innovative fee structures and high APY, resulting in a temporary surge in user numbers.However, community criticism of token liquidity and airdrop allocation, as well as fierce competition from other social platforms, has led to a steady stream of user engagement.Despite doubts about its long-term feasibility, the launch of friend.tech has brought a new model to the social finance field, with three key inspirations: (1) the possibility of tokenization of social influence, (2) in Web3paid group club, (3) social assets with cross-platform interoperability.
Farcaster’s Breakout:
This year, Farcaster has made significant progress to become the dominant player in the field.By contrast, most other social protocols have disappeared from the spotlight, and some even seem to be on the verge of recession.Frames launched by Farcaster received positive feedback, introducing a new social, on-chain interaction method, using the familiar Web2 interface, significantly improving Farcaster’s user experience, making its DAU surge, and attracting crypto developers.and users’ attention.In addition, the combination of Farcaster and meme tokens, especially the success of tokens like Degen, has significantly driven the platform’s user growth and activity.Airdrop activities effectively increase user engagement and promote the formation of a vibrant community.
The Farcaster ecosystem can be roughly divided into the following categories:
Clients: Warpcast, Recaster, Supercast, ampcast, Farcord, Firefly, far.quest, etc.
Decentralized applications (dApps): Jam.so, DeBox, Paragraph, CasterBites, Unlonely, Bountycaster, Wildcard, AlfaFrens, etc.
Tools: sharecaster, Alertcaster, Searchcaster, Farcaster storage, farcaster.vote, etc.
API services: Neynae, Pinata, Airstack, etc.
Overall, the success of the SocialFi field is uneven, and network effects remain a key factor in determining the success of the project.In this area, we focus on projects that can overcome cold start issues and attract diverse user bases, demanding that they provide a Web2-like user experience and finding a delicate balance between rewarding creators and platform growth.
DeFi
DeFi growth in the first half of 2024 was mainly attributed to the huge focus of Eigenlayer, which introduced the concept of restaking to Ethereum, and Ethena, a hedging neutral that has accumulated over $3 billion in TVL.Stablecoin.
Stablecoins are receiving a new round of attention from developers, with more RWA-backed fully-staked stablecoin projects trying to replicate the successes made by Maker and Tether.Despite increased interest, it is still challenging to find durable usage scenarios on the chain, currently mainly used in centralized exchanges.This could pose a challenge for decentralized stablecoin projects that want to provide value through local governance tokens.
Eigenlayer has taken the majority of its focus in the first half of 2024, with eco-projects such as Ether.Fi, Pendle and Renzo leveraging a surge in interest in heavy staking to gain significant market share.Despite a lot of attention, Eigenlayer failed to fully meet user expectations, partly due to the weak macro environment.
From a blockchain perspective, Ethereum continues to be a leader in TVL (total locked value).Blast and Base performed significantly in the first half of 2024.With the launch of various incentive campaigns, Scroll’s TVL has exceeded $1 billion.
In the non-EVM chain, Solana’s largest TVL contributor is JitoSOL, and other catalysts include the thriving meme culture and lending ecosystem.Chains associated with BTC have also attracted interest, but maintaining interest is still challenging due to the decline in TVL after the incentive program ends.
The recent popular CeDeFi model reflects the need for sustainable and secure returns on-chain assets.Whether it is through ENA fee mining or RCH’s option structure, the ultimate payer is a centralized exchange user.
DeFi has demonstrated its ability to attract capital through generous returns.At present, AAVE is still the main funding destination for many Layer 2 and public chains, while Uniswap is still the main funding pool.However, the key to long-term success is whether the agreement can accumulate value for the holder and meet long-term expectations.As the number of chains increases, liquidity gradually disperses, which shows us opportunities.Diversified DeFi solutions meet different needs, thus driving potential demand for intent-oriented platforms.
Organizational Services
From the end of last year to the beginning of this year, the market generally expects that with the approval of ETFs, 2024 will be a record year for institutions to adopt cryptocurrencies, including transaction infrastructure/institutional-level pledge/CeFi lending/income-based stablecoins/derived products platforms, etc.It will be a bet worth the direction.From a first-level perspective, investors are indeed betting on these directions. The representative projects completed this year include sercuritize (rasied $47M), Bitstamp (acquired with $200M), Flowdesk (raised $50M), Sygnum (raised$40M), Kiln(raised $17M), Agora(raised $12M).However, the targets that benefit from ETFs in the open market are currently mainly Coinbase, and other companies that are more likely to go public are mining companies.
From our perspective, we will increasingly regard this track as the fintech field.Judging from the financing trends of fintech-related companies around the world, as the financing amount continues to decline, financing in the financial technology field in the first quarter of 2024 was the lowest quarterly level since 2017, and investors prefer mid- and late-stage companies., preferring companies that are already able to produce blood and are close to profitable.However, the positive aspect is that crypto-related fintech companies are relatively active in this big field, but are mainly concentrated in the early + A round.
In summary, on the track, we still set the main observation direction of trading infrastructure/institutional pledge/CeFi lending/income-based stablecoins/derivative platforms.When it comes to investment, pay more attention to companies that have shown growth potential and stability.
