Open high and go low, I feel "regretful" about the Bitcoin ecosystem in 2024

Author: Golem

Editor: Hao Fangzhou

2024 is coming to an end, and people in the currency circle also have their own year-end summaries: first, to see whether the return on investment this year has outperformed the market (as a reminder, BTC has increased by more than 130% during the year); second, to look at the games that they are concerned about. To summarize the development of Tao/ecology in this year.

Solana Ecosystem, Base Ecosystem, TON Ecosystem and AI Agent Track all had their highlights this year. As for the Bitcoin ecosystem, although many things have happened this year, and ecological infrastructure, application innovation, etc. are all developing, they are far from reaching people's expectations in early 2024.

Therefore, some people use "failure" to summarize the silence of the Bitcoin ecosystem this year, but there are also firm ecological OGs who choose to "believe" as always. As an ordinary player in the Bitcoin ecosystem from beginning to end, I choose to use "regret" One word to end the year.

2024 actually has a good start

2024 actually has a good start for the Bitcoin ecosystem. People had high expectations for the Bitcoin ecosystem at the beginning of the year, thinking that 2024 would be the year when the Bitcoin ecosystem completely explodes and enters the mainstream view, just like 2025 is now considered The annual meeting is the year when the AI ​​Agent ecosystem explodes.

Why did we have such great expectations for the development of the Bitcoin ecosystem in 2024? Perhaps it is because since the birth of the Ordinals protocol in December 2022, the Bitcoin ecosystem has experienced a year of growth and consensus gathering. The overall transition has been from the "barbaric era" to the "industrial era". Project parties, VCs, and mainstream exchanges have Entering the game, three main tracks have been formed: layer one asset issuance protocol, L2 and Bitcoin staking.

From the perspective of the first-level asset issuance agreement, influenced by Binance’s launch of BRC 20 token ORDI and SATS spot trading at the end of 2023, the inscription concept became popular on the entire network again in early 2024. Not only did the popularity affect other chains, they also followed suit and started the inscription model. , and also led to the rise of other layer asset protocols such as ARC 20, SRC 20, PIPE and other protocol tokens. At the same time, the rune pre-mining and airdrop gameplay launched by RSIC and Runestone in January 2024 also make people full of expectations for the Runes protocol that will be launched in the future.

Judging from the development of L2, Bitcoin L2 will develop explosively in early 2024. With the popularity of the issuance and trading of first-level assets, the congestion problem of the Bitcoin main network and players' demand for improving the playability of main network assets have made Bitcoin L2 a popular entrepreneurial direction. At the beginning of 2024, some people counted that more than 100 Bitcoin L2 projects had appeared in the market in a short period of time. Although many of them were shoddy and "cut and run" entrepreneurial projects, on the whole, domestic and foreign VCs began to invest on a large scale. Bitcoin L2, everyone is looking forward to Bitcoin L2 returning to the glory of the Ethereum L2 ecosystem in 2024.

 69 Bitcoin L2 summarized by @Bitvmclub in March 2024

From the perspective of Bitcoin pledge, the Bitcoin pledge agreement Babylon announced the completion of US$18 million in financing in December 2023, officially opening the narrative of Bitcoin pledge and re-pledge. EigenLayer, a king-level project in the Ethereum ecosystem, has been used as an example, and people believe that with Bitcoin’s stronger consensus foundation and security than Ethereum, the prospects for the Bitcoin staking and re-pledge track will be very broad in 2024. , will not only awaken the sleeping Bitcoin whales to participate in the Bitcoin ecosystem, but also form a re-pledge ecosystem that is no less than that of Ethereum.

In addition to the above three main tracks showing an overall positive trend in early 2024, the construction of the general infrastructure of the Bitcoin ecosystem (such as wallets, cross-chain bridges and trading markets, etc.) has also been gradually improved during this period. Unisat and OKX Wallet has technically supported multiple asset protocols and has become the main wallet and trading market in the Bitcoin ecosystem.

The Bitcoin spot ETF was approved and listed on January 11, 2024, marking the official integration of Bitcoin into traditional finance. At the same time, this has once again strengthened people's expectations for the Bitcoin ecosystem, because a network worth trillions of dollars will develop its ecosystem to a market size of hundreds of billions of dollars.

However……

Unfortunately, the Bitcoin ecosystem in 2024 has not received the attention and development that surpassed the previous bull markets, and has also begun a long period of silence.

Mainnet asset performance is deteriorating

On April 20, 2024, Bitcoin ushered in its fourth halving, and Runes, a token protocol developed by Ordinals founder Casey, was also announced to be online. In order to grab the inscription number, the project team did not hesitate to raise the on-chain handling fee to more than 2,000 satoshi/byte. People thought that this was the beginning of Rune Relay BRC 20 to make the Bitcoin ecosystem continue to prosper. However, they did not expect that Rune would reach its peak at the beginning, and speculation would Enthusiasm faded after only two weeks. Although Rune’s market value briefly exceeded US$2 billion in June and November, the vitality and liquidity within the ecosystem have been sluggish for a long time.

At the same time, the performance of other asset protocols was similar this year. ORDI fell by 70% at its high point during the year. When the new asset was born, it caused FOMO on the market, but then it became worse because there was no new capital and flow participation. For example, PIZZA was airdropped by Unisat, CAT 20 was born from Fractal Network, etc.

The reasons are: first, perhaps because of the previous Bitcoin bull markets, the fair asset issuance narrative of Bitcoin after the rune has failed to arouse excitement from the outside world and cannot produce wealth effects again; second, China and foreign countries do not take over each other, and the ecosystem has not formed a synergy. , the communities with larger runes are mainly built by overseas users, while the main funds in the Chinese-speaking area are still on BRC 20, such as the popular inscription "DiTui coins" 𝛑, 𐊶, etc. this year.

Bitcoin L2 survival rate is less than 20%

At the same time, it is a pity that the Bitcoin L2 ecosystem in 2024 will not be as prosperous as originally expected. “Except for the Lightning Network, all other Bitcoin L2s are castles in the air,” Casey, founder of the Ordinals protocol, criticized when referring to Bitcoin L2 in an interview.

In the past 12 months, there have been more than 100 Bitcoin L2 projects in the market, but according to data from DefiLlama, there are only 19 L2 projects left, with a TVL of only about US$2.8 billion. On the other side of the Ethereum ecosystem, L2, Arbitrum alone has a TVL of US$3 billion.

So for the same expansion, the L2 ecosystem on Ethereum has been verified to be feasible. Why is it not satisfactory when moving to the Bitcoin ecosystem?

Most early Bitcoin L2s lacked innovation. In the early days of the Bitcoin L2 track, in order to attract investment and quickly build an ecosystem, many L2s adopted an EVM-like architecture + cross-chain bridge method to expand the Bitcoin main network. Although this method drew on the experience of Ethereum, Not only is it convenient and fast to build a chain, but the user education cost is also low, but there is no innovation. It is generally questioned by voices such as "If this is also called Bitcoin L2, then Ethereum is the best Bitcoin L2." This proved to be the case, but the craze faded and these quickly cobbled-together L2s quickly died.

Bitcoin L2 started the battle for TVL too early. Perhaps influenced by Ethereum L2 Blast, Bitcoin L2 players have learned from the beginning to use points and team incentives to stimulate the growth of TVL. Merlin is a popular chain in Bitcoin L2. On February 9, 2024, Merlin fired the first shot in the Bitcoin TVL scramble. Its TVL reached US$543 million in just 24 hours. At the same time, B² Network, BEVM and Bitlayer also opened TVL snatch.

In the end, Merlin won the battle with more than 3 billion US dollars in TVL within a month, and listed the official token MERL on OKX on April 19. After the listing, the price of MERL reached a maximum of 1.78 USDT, but it quickly collapsed after that. The drop reached 85%. Since then, those who pay attention to the price have turned from their expectations for the Bitcoin L2 ecosystem to disappointment and criticism.

Who buys into the Bitcoin staking narrative?

Babylon, with its luxurious financing lineup and “sexy narrative” and the Bitcoin re-pledge ecosystem behind it, is another highly anticipated track in the Bitcoin ecosystem in 2024. When the first phase of staking on the Babylon mainnet was launched in August, it attracted the attention of the entire network. It reached the upper limit of 1,000 BTC in just 3 hours. Currently, Babylon's TVL reaches 57051.72 BTC, which is approximately US$5.64 billion. However, compared with EigenLayer’s TVL of US$15.718 billion, Babylon’s TVL is only 1/3 of it. At the same time, as Bitcoin continues to break new highs, Babylon’s market attention has not increased. What is the Bitcoin pledge narrative? Whose approval did it get?

The market and products are mismatched, and the real big investors are unwilling to hand over their Bitcoins. Babylon’s narrative slogan is to unlock the liquidity of 21 million BTC through staking, but the market may not buy it. The market more recognizes Ethereum as a native financial asset on the chain, while still treating Bitcoin as "digital gold." This can also partly explain why the fund size of Bitcoin spot ETF is much larger than that of Ethereum spot ETF.

For large Bitcoin holders, as Bitcoin continues to rise, they are even more reluctant to hand over their Bitcoins. For traditional finance, Bitcoin spot ETFs and MSTR are the BTCFi they really like. This is completely inconsistent with the Ethereum ecosystem’s mechanism of encouraging staking.

Babylon sets the stage, but someone else sings. According to data from Babylon’s official website, re-pledge protocols such as Lombard, Solv Protocol, PumpBTC, Bedrock and Chakra account for more than 60% of Babylon’s total pledge volume. The operation of these platforms can be summarized as users converting their BTC into the platform's packaged version of BTC, the platform deposits the BTC into Babylon, and users can enjoy the dual benefits of Babylon and platform points. But the problem is that the BTC deposited by users and the platform's packaged version of BTC may not be limited to 1:1. There are more packaged versions of BTC in circulation than the locked BTC value, which may contain liquidity risks.

At the same time, the security of the re-pledge protocol is also worth considering. Previously, Bedrock suffered a loss of approximately US$2 million on DEX due to an attack. Although Babylon claims to use a self-custody solution to protect the security of user funds, most of the subsequent re-pledge protocols use custody solutions, which is inconsistent with the concept originally promoted by Babylon. Therefore, not only are large investors unwilling to pledge BTC, retail investors will also hesitate to participate in staking when the benefits are unclear and security is insufficient.

In summary, although the Bitcoin ecosystem has a good start in 2024, the Runes protocol has reached its peak performance since its launch, various asset protocols have rapidly cooled down, the dramatic development of Merlin and a number of Bitcoin L2s, and the Babylon ecosystem has not brought the expected results. The BTCFi bull market has made us regret the development of the Bitcoin ecosystem this year.

Will everything be fine in 2025?

It needs to be emphasized that what I said above is not to belittle the Bitcoin ecosystem or to be the final word on it - there is always a gap between people's good expectations for the future and the actual situation in reality, and I call this gap "regret" , this is also my summary of the Bitcoin ecosystem this year.

To this day, the Bitcoin ecosystem still has staunch holders and builders. Communities such as ORDI, Rune DOG, and PUPS are continuing to build. OKX Wallet and Unisat are still continuing to build infrastructure. Although the Bitcoin L2 bubble burst, the surviving teams have not given up. A series of innovations such as OP_CAT are on the way. , Babylon may be launched on TGE in January-February 2025...

Will everything be okay in 2025? Although we did not wait for a larger explosion of the Bitcoin ecosystem this year, I still believe that the Bitcoin ecosystem will still be the protagonist of this cycle and welcome 2025 with confidence.

If it were you, what keyword would you give to the Bitcoin ecosystem this year?