GM and Happy New Year!

I hope 2023 was a great year for you all. The first ten months of the year were so terrible that we almost pivoted to AI… The later months proved a lot more palatable, with some assets that were really in the mud picking themselves up and shining bright again.

With the Bitcoin ETF approved, the Bitcoin halving on the horizon and what feels like the worst of the regulatory fallout behind us, it feels like we have a nice few years ahead of us. !Pray

Anyway, you survived, so kudos. I didn’t think we would make it there for a second. Anyway, let’s get to it…We will start this mystical journey through the shitcoin arena by taking a look at the blocmates 2023 thesis as written by me, Grant - Founder and Chief LARP Officer at blocmates and what we picked up from a somewhat ok year.

2023 in review and what we can learn from it.

Released on the 12th of January 2023:

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Skimming over each section of this post below will give us an indication of whether I and the blocmates team are full of shit or that we might actually know what we are talking about.

Uni V3 and concentrated liquidity -

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The idea at the time was that Uni V3 and concentrated liquidity AMMs (CLAMMs) were pretty tricky to understand despite it being an infinitely more efficient way to trade on a decentralised exchange (DEX). That is fair enough to say, and also, CLAMMs are a part of the future of the DEX space, as are automated liquidity managers like Arrakis, Gamma strategies and others...

I think this was an OK prediction, not the best, as there was only a 2-3 week window where this basket of assets actually moved, and naturally, this was around the expiry of the Uni V3 business license in April.

With the Uni V4 announcement making it possible for anyone and everyone to create their own bespoke trading experience through hooks and the like (see more here), I still think the design space for AMMs hasn’t run its entire course, sorta.

I’m seeing a new trend emerge in the DEX space, which feels like a backward yet natural progression, which we will cover in the 2024 predictions section… ⛺

Adjacent to that, we are Still Early to new primitives leveraging Uni V3 for interesting new products such as trading volatility, options, perps and more… I think we will see more from GammaSwap, Panoptic, Good Entry, Infinity Pools, Smilee and others in 2024.

LayerZero expansion

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From a builder's perspective, LayerZero had an extremely impressive 2023. With a recent V2 announcement and a plethora of protocols adopting the OFT standard (all of them apparently the first to do it, which is strange…), I think LZ had an incredible year.

I only see this continuing with the new L2s and L1s popping up every day and it seems we will now, in 2024, have more L2s than users. With that comes an interop, fragmentation and composability issue, which LayerZero is the market leader's choice to implement.

That said, we’ll see a huge amount of similar in-house messaging layers being built this year.

Again, we are a little early to see the likes of Tapioca in all its glory, but February is when things get interesting.

LSDs

Probably the most obvious play of 2023 heading into Shapella and The Merge, which feels about 69,420 years ago at this point. A lot of interesting LSD or LSTs as we now call them (don’t say the “D” Word, not in this regulatory environment), had their day in the sun. Now all we need is the Lido Ladyboys to stop selling every time the price increases, and we can all live happily ever after.

Solana and The DeFi Revival -

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The pièce de résistance of this whole thesis. I will never stop revisiting this and running circles of victory laps around this post for as long as I shall live.

To top it all off, we released a 32-page monster in August, which still gave people plenty of time to reassess their biases and bridge.

Anyway, aside from those picks, some notable mentions were:

• Maker and its foray into RWAs
• HNT and FIL catching a bid before I knew what DePIN was
• I wasn’t overly bullish on crypto x AI and I was wrong to assume that. I mentioned it is a very easy narrative for normies to buy into, and I still believe this to be true.

Right, so here we go… New Year, New Coins.

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2024 Predictions

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Experimentation with the EVM: AlternateVMs, Parallelization and more.

The Ethereum Virtual Machine (EVM) is the dominant smart contract execution engine and it has gotten us so far, but now I think we are ready for the next phase.

Despite the EVM showing us the way and countless DApps being built on top of it, there are specific limitations that are really holding it back. This isn’t just for Ethereum, either. Avalanche, Binance Smart Chain, Arbitrum, Optimism, Base and others all utilise the EVM. Any chain utilising the EVM is hindered by this design of this linear/sequential style of throughput. If a highly anticipated mint is happening on the same network that you’re trying to go about your business on, you will have been met with ridiculous gas fees. The current structure of the EVM is designed in such a way that two unassociated areas of the network will all compete for the same block space and this becomes a war of gas. This is true even if the transactions are entirely independent of one another. The recent flurry of activity due to inscriptions, minting, trading, CTs liquidations, etc., all had nothing to do with one another, and yet everyone paid the price for it as the EVM processes each of these sequentially. It isn’t wild to say that if people are in a bidding war to mint a specific NFT collection, if you are trying to swap your ETH to USDC for whatever reason, you shouldn’t have to pay for their fuckery. But we do.

Parallelism would certainly require increased hardware requirements to enable much more performant validators. And there are arguments that standard home validators would fall by the wayside that are using commodity hardware vs the big beefy boys.

TLDR: Crack the parallel EVM and increase the throughput quite significantly.

Coupled with Isolated Fee Markets

Now, if both areas of the network could be handled in parallel and even have different isolated priority fees associated with it, then we could be on to a winner… but alas, this is already a thing, and it’s called the Solana virtual machine (SVM) which has had parallel execution and isolated fee markets for a while now.

Solana fees are split into two: the base fee, which is static, and a dynamic priority fee that you can pay to increase your chances of being included in the next block and push your transaction through, even in highly active times.

More info on that here.

This performance was shown on the day of the MadLads mint, where simultaneously, the Helium Network migration was also ported over to Solana…

Yes, those spamming priority fees towards the specific MadLads mint account/hotspot/contracts on Solana paid a pretty penny, but the rest of the network didn’t even know it was happening.

Now the big questions are:

1) Can it actually be applied to current EVM chains?

2) What protocols can you get your grubby little hands on that are building towards this?

1. Ans: A major limiting factor is if a network was to use Ethereum for its Data Availability Layer (DA).

Jay from Sei Network has recently pointed out that the upper bounds when using Ethereum for DA restrict the throughput of a parallel EVM and would cause stupid gas. I’d love to say I know all about how you go and build a parallel EVM but I know surface level at best… What I do know, however, is how to bet on who can build it.

Now, this leads me on to point 2…

The following protocols are being built in this space that may be of interest to you in 2024.

Monad - This really was the market leader who brought this whole idea to everyone's attention. The team are ex-Jump engineers working on creating an EVM on top of a system akin to Solana.

So, you get all of Solana's performance but all the benefits of thousands of protocols, builders and developers familiar with the EVM. Feels like a win-win.

A lot of people are beginning to pay serious attention to Monad for more reasons than the tech. Their marketing, growth and community leads are some of the best in the business, and there appear to be some highly prominent figures on the cap table. Whatever that means.

Anyway, hopefully, we see Monad in 2024 and see what all the fuss is about.

If you want to watch an early interview I did with Keone from Monad you can do so below. I’m no longer that fat; it was a bad phase for me personally lmao.

Sei Network - Another more recent contender which seems to be picking up steam is Sei Network. These guys are another early blocmates pick; I believe we interviewed them on Twitter Spaces over 18 months ago.

Anyway, recently their V2 was announced, and they were all in on cracking the parallel EVM. The recent ecosystem has just begun to develop, and many of their low-cap shitcoins have been performing well.

The benefits of this are that the token is live and trading well (at the time of writing). I think this is currently the best way for the market to express its interest in this emerging narrative.

The team is pretty stacked and ex-Robinhood, so let's see how this plays out. Competition is good for you and me.

Eclipse - This is not really the EVM, but bear with me. This is a modularMegazord Ethereum L2 that utilises Solana’s virtual machine (SVM) for execution and also uses Celestia for DA and Risc Zero for fraud proofs.

We will get into modular vs monolithic later in the article, but I really think this structure is using the best of all tech currently available.  

The team has been extremely impressive each time I have interacted and talked with them and that’s always a big bonus.

I’d expect to know more about this launch around the time this article is released.

This brings us to a point where we can segue into Move as an emerging language not to be missed in 2024. And yes, this has parallel execution too.

Mode Network also hinted that they may be about to announce that they are working on this very subject, too… someone took the bait.

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Move-over Solidity

Remember Aptos and Sui? These two launched in the depths of a bear after raising a fuck tonne of cash and still to this day have fully diluted valuations (Sui $8.1bn) (Aptos $10.7bn)...

Anyway, something that did actually come out of this whole thing that is worthwhile is the smart contract language of Move.

Move is (by all accounts, I am redacted) a much friendlier, safer and performant language to use when developing blockchains and smart contract environments.

The number of reentrancy attacks and exploits that have happened over the years on Ethereum and EVM-based chains is completely unacceptable. Move is designed to silo away risk and has been built with these shenanigans in mind.

Now, is it 100% safe? Probably not, no... Is anything? Is it going to be better than what we currently have with Solidity and the EVM? Almost certainly.

The hurdle is getting developer adoption to the point where apps can actually be developed at scale on these pre-existing baron chains.

So, with that in mind, Movement Labs could be something to keep an eye on this year.

These guys are providing absolutely everything a chain needs to be running on the Move. They even stated in a recent interview that I did with them that ANY chain could basically be run on Move, given their platform and its capabilities.

I wouldn’t be surprised to see different L1s and L2s spin up and use Move and the MoveVM. OP stack? Arbiturm Orbit? Polygon CDK? All possible and fully modular.

Just as we have seen with a lot of Rust-based networks (Solana/Cosmos), developers will build on what they find the most compelling for their specific product. Nobody is building a CLOB on Ethereum.

If you want to listen to the full interview, check it out below. Also, subscribe to Still Early if you like this kinda thing.

TLDR on Move: Parallel execution, fully modular with Movement Labs stack, significantly higher security and a much more developer-friendly code base.

Modular Chains & Data Availability: Frankenstein Chains or Modular Megazords?

This isn’t a surprise to anyone, but I believe the modular vs monolithic debate will continue and only heat up in 2024.

Before I get into it, what is a modular blockchain, and what is a monolithic blockchain? Here’s Margot Robbie in a bubble bath to explain… just kidding. It’s an infographic I stole from Celestia.

Info: https://blog.celestia.org/modular-vs-monolithic-a-beginners-guide/

A TLDR: On a monolithic chain, everything from execution, settlement, data availability and consensus are all handled in-house on the blockchain. The opposite is true for a modular chain. It utilises and outsources different pieces of the full stack to come up with their optimal solution for the desired use of the chain.

Solana = Monolithic

Eclipse = Modular

Celestia has had probably the best launch of 2023 coming out of the gates and is now sitting at around $2bn market cap with an FDV of around $15bn. No additional tokens will come onto the market until the 30th of October 2024.

Celestia is a Data Availability (DA) layer that enables L2s to outsource their DA to drastically reduce costs by removing this aspect from block production on the said chain.

Here is our research report on Celestia.

If you’re lazy (like me), you can watch our video explainer below:

As I mentioned above, the likes of Eclipse are utilising Celestia for DA, and many have already come forward stating they will follow suit.

Manta Network is another L2 utilising Celestia for DA. Manta is actually quite interesting; it looks like the non-scammy version of Blast and comes without the notorious dumping bandit cap table.

Manta and Blast have certainly opened up the design space not just on a tech level but also on a ponzinomics level (I mean that in the most polite way possible) in that any stablecoins or ETH on the platform are inherently yield-bearing.

The protocol (multi-sig) will take the deposited ETH or stables and either deposit into Lido for stETH or use MakerDAO’s DAI savings rate (DSR) to earn interest on the stables deposited.

There is $1.1bn TVL currently on Blast 🤯… those points best be worth it.

Info on Blast deposits: https://dune.com/alec/blast-the-new-eth-l2

Arbitrum Orbit, which is the tech stack to deploy app-specific L3s on top of Arbitrum, has also recently announced it will have full Celestia integration for any emerging chains that wish to deploy using it.

The interoperability between DA is also underway with Hyperlane, which boasts the tagline “The Permissionless Interoperability layer built for the modular future” - These guys have also integrated with our friends at Movement Labs to enable data transfer across Move-based networks.

There will be a lot more confluence throughout this report between aligned projects and protocols, so keep up and bookmark this article to keep track.

The other major player in this space will be EigenDA… I’ll get into Eigen Layer and Restaking further into the article, but if we jump ahead for just a second whilst we are on the topic of DA and Modularity.

EigenDA is the first product to utilise Eigen Layer to create its own DA chain to enable roll-ups to outsource this part of their stack. This is very similar in essence to Celestia, and there will be some huge BD wars happening right now to see which DA layer can attract the most chains.

The DA wars are beginning, and flags are being placed. If Arbitrum Orbit is using Celestia, who do you think is using EigenDA? Yes, you are correct… Optimism.

There is a dark horse in this race, too, that might catch everyone by surprise.

Avail is basically a Swiss army knife of modularity. They have a full stack to get any sovereign roll-up deployed “within minutes”. They also have an in-house DA solution on top of everything else that you would need to spin up your own L2.

Near also recently announced a DA layer, which has put it in the conversation of other avenues for posting data from other chains.

As I said, these guys are the first but won’t be the last. There are certainly pros and cons of all, but maybe DA will become commoditised off the back of both EigenDAs and Celestia’s success, and there will be a race to the bottom in fees. Who knows…

I suppose this is the best opportunity to transition into talking about Restaking…

Restaking will be HUGE: Eigen Layer, AVSs and LRTs

Eigen Layer has been the talk of the town for over a year now, and since opening its restaking pools has amassed over $1bn in TVL. People are also speculating, given its potential valuation, that the inevitable Eigen airdrop could be one of the biggest seen in this space.

A quick refresher on EigenLayer - Liquid staking became a huge part of 2023 with The Merge and the Shapella upgrade. This is why we included a number of LST protocols in the 2023 thesis, and they did extremely well in H1.

Now we are at the next stage of the evolution of liquid staking with EigenLayer. EigenLayer allows staked ETH, i.e. natively stake and/or LSTs (stETH, rETH, swETH and others) to then be reused (rehypothecated) to secure other aspects of critical DeFi infrastructure such as:

• Sidechains
• Rollup sequencers
• Data Availability layers
• New virtual machines
• Keeper networks
• Oracle networks
• Bridges
• Threshold cryptography schemes
• Trusted execution environments

Those protocols that use restaking to secure their protocol are known as Actively Validated Services (AVSs). So, when we mentioned EigenDA in the section above, this leverages restaked ETH from numerous providers to provide security to the EigenDA Network, enabling L2s to use this as their DA layer.

I think a lot of app-chains/L2s will look to restaked ETH as another way to secure their network. It is less reflexive on a down turn i.e. no security death spiral, liquidity is orders of magnitude higher using ETH and the volatility of ETH is almost certainly going to be lower than whatever other token is used.

This means you as a user or liquid restaker can earn additional yield by providing your LSTs to various AVSs (Apologies for the abbreviations here), but that also comes at additional risk, mainly through slashing, smart contract risk and general rugability.

This new primitive opens up the design space for some hyper-efficient innovations in DeFi but also comes at a cost of increasing the attack surface and potential systematic risk if anything nefarious was to happen.

I’d imagine there will be soooooooo many token incentives, and there will be a power law for the clear winners in this race to conquer a new field in DeFi.

Opportunities I see are indexes of AVSs that diversify your exposure to lots of underlying shared security protocols. Also, protocols such as Puffer Finance working on anti-slashing for Liquid staking and SSV Network enabling a more resilient and distributed liquid staking landscape could be potential winners.

The blocmates team and I believe that a massive tidal wave of AVSs will come to market, and we are about to release our first edition of Liquid Restaking projects to watch. We were going to hold this back for the Meal Deal section, but we will release it to the public to give you all a heads-up on what is coming in the LRT space.

Subscribe to the blocmates newsletter to be the first to know when this is released.

Cross-Chain Restaking - Composable Finance/Picasso Network

I can’t imagine it will be long before others enter the liquid-restaking landscape. I think Eigen Layer is extremely “Ethereum-aligned” or whatever that means, which enables the non-Ethereum-aligned voids to be filled.  

Funnily enough this very sentence you are reading is the last part I will write in this thesis because new information has emerged about this very topic of cross-chain staking.

Eigen layer is looking to bring Ethereum’s shared security to Cosmos. Again, this thing is only going to get more and more crazy. The possibilities are truly endless.

Looking further afield to new emerging networks and ecosystems Composable Finance came up during my research.

These guys originally started out as Kusama Parachain and have built and shipped some seriously impressive tech during the bear market. Picasso Network is one of their products that has recently caught the attention of the market and for good reason.

Their primary objective is to connect any and all chains through the Inter-Blockchain Communication Protocol (IBC). Previously siloed away to Cosmos and the Polkadot/Kusama ecosystem, the protocol which enables cross-chain messaging, i.e. bridging, swapping and more complex composable transfers, is now on Ethereum testnet and is about to start deploying on Solana.

Where this fits into our section on restaking is that they recently released a Polkadot LST (LSDOT), which they have said will soon be able to be used to secure the Composable Network and other ASVs/Middleware solutions via Restaking.

Now for the kicker, they also announced in the middle of December that they will be bringing restaking to Solana.

A variety of SOL LSTs will initially be enabled to enable this rehypothecation across various different Solana AVSs.

The beauty of this is by their very nature of providing seamless cross-chain messaging infrastructure, Picasso/Composable Finance opens up the door for restaking to be abstracted away from whatever chain you are on.

Another few projects to keep a close eye on in this space are:

• Ethos stake: https://twitter.com/ethosstake
• Lay3rLabs: https://twitter.com/Lay3rLabs (these guys don’t even have a Twitter pfp… beyond early).

Quietly bullish.

The winner stakes it all and DVT

The downstream effects of Shanghai and The Merge have resulted in a power law seeing Lido becoming the dominant liquid staking provider on Ethereum, which has many concerned.

Info: https://dune.com/hildobby/eth2-staking

Lido currently owns 31.5% market share of ALL ETH STAKED and, depending on where you get your data from, accounts for around 73-85% of all Liquid Staked ETH on the market.

Sources:

1. https://dune.com/hildobby/eth2-staking
2. https://dune.com/21co/fundamentals-liquid-staking-derivatives

Anyway, at those levels, it doesn’t really matter. It is a bit of a problem. The self-limiting debate actually went to governance in the middle of 2023 and in a landslide vote, 99.81% voted to NOT self-limit, i.e. don’t cap or create disincentive structures when Lido reaches certain staking thresholds.

I think it was pretty silly to suggest that a business would create its own glass ceiling, particularly when it takes a performance fee from the staked ETH rewards that is on their protocol. It doesn’t send out a good message to its investors, even if the LDO token is worthless.

So, what can be done about this?

Well, Lido’s market share isn’t going anywhere; if anything, with Lindyness (not sure if that is a word but we will go with it), it will only continue to grow. We have seen incentive programs for emerging liquid staking providers do well but hardly put a dent in Lido’s percentage share.

If you address the actual concern of overbearing control over a network, even if they do distribute your ETH across many different validators, the outlook isn’t the best.

Distributed Validator Technology (DVT) through Secret Shared Validator technology is the next stage of ETH staking whereby a validator can increase their validator up-time, non-intentional slashing risk, and network consistency.

Vitalik himself has recently aired his thoughts on “decentralizing [the] stake pools” through DVT, and we tend to see the industry catch on to these thoughts not long thereafter.

Validators can run into a number of different issues that cause centralisation issues and single points of failure. Hardware issues, perpetually having your keys online, validator client bugs and even geolocation censorship issues could all have an effect on the Ethereum Network.

With DVT, your validator key gets broken up into different keyshares and is distributed across different node operators, validator clients and different geolocations. This creates a much more decentralised and robust network, which doesn’t wholly negate things like the self-limiting debate but enables a much more reliant, decentralised and democratic system.

You can even use DVT to reduce the amount of ETH needed to create a node. I believe Stader and others use DVT to lower the initial amount of ETH required to bond.

SSV Network seems to be the market leader in this field and if the above wasn’t enough to pique your interest, they also recently announced that their infrastructure can also be used to increase liquid restaking reliability and robustness.

So, this feels to me like a great middle-ground play for Liquid Staking and Liquid Restaking, which will inevitably be big narratives across 2024.

Decentralized Physical Infrastructure (DePIN)This was a part of the 2023 thesis but for the wrong reasons. I thought Starlink may have gone public last year, and DePIN assets caught a bid. I think I’ll stick with this and roll the prediction into this year.

Assets that would fall into this bracket are basically anything that decentralises large incumbent emerging products or services like IoT, GPUs, oracles, 5G, ride-sharing, map generation etc. It is a wide, weird and wonderful basket of assets and I think it is a very easy pitch to new entrants to the market.

We saw a lot of this kind of thing in 2017 during the ICO craze that was complete vapourware. I think we are now at the point where the infrastructure is built to enable ridiculous ideas for better or for worse. There has certainly been an uptick in interest surrounding DePIN assets, including; RENDER, HNT, MOBILE, IOT, HONEY, etc. what links them all together? They are predominantly on Solana.

Helium even migrated their whole stack over to run solely on Solana, and we have seen Render, probably the largest decentralised GPU project, recently migrate over to the manlet chain.

I’m not going to go into too much detail about new and exciting projects that we are looking at. However, I will direct you to this BIBLE of DePIN that we recently released. It’s 42 pages long, and it’s a masterpiece from 563 DeFi.

Bitcoin expansion through experimentation: EVM, BRCs and more

This caught me off guard, if I’m being completely honest, and even though we were very early to report on this new narrative, I completely faded it, like an idiot.

After licking my wounds and taking a deeper look at what is happening in the Bitcoin space, I stumbled upon what I think could be a very interesting play for 2024.

Botanix…

Botanix is building an EVM equivalent L2 on top of Bitcoin, implementing its core innovation, the Spider chain.

Existing apps can easily port over to the L2 with zero friction. Everything eventually settles back to Bitcoin, and even gas is paid for using BTC… that will feel weird the first time you see it in your Metamask or Rabby (eventually).

I think Ordinals, BRC20s, and any infrastructure connecting the EVM/non-EVM to Bitcoin will continue to grow, and despite it being extremely difficult to keep up with, we will do our best to cover what is happening in that ecosystem as it emerges.

Intents for Everything

Intents have come to everyone's attention recently with protocols such as CoW Swap, IntentX, 1Inch, Symmio and Pear Protocol.

The largest DEX in this whole space also announced a foray into the world of RFQ/Intents-based trading this year with UniswapX. This was particularly interesting as it came not long after their Uniswap V4 announcement. I have said this multiple times, but this move feels to me that they are hedging their bets against the AMM model becoming redundant in the future or, at best, the design space has peaked.

Intents basically run in a few different ways, but the vast majority enable you as a trader to say you want to swap x amount of TokenA for y amount of TokenB and in doing so, the protocol will effectively post this trade to a market of Solvers who will then use a variety of off-chain and on-chain liquidity sources to outcompete one another to get you the best price.

We have seen a significant uptick in spot trades this year, and also, with IntentX going live, perps are now available through an intents-based model.

I’d imagine we see a lot of cross-chain implementations through existing intent/RFQ-based DEXs, which can begin to look like a bridge. Matcha has recently implemented a cross-chain solution which I didn’t have the best experience with, if I am being honest, but it’s still early days.

Across is already underway with this cross-chain implementation across Ethereum and its L2s.  

You may do well to figure out the existing protocols that are going to provide cross-chain swaps and/or bridging and see if they get repriced to current bridge valuations.

I’d also imagine we get a lot more complex order types, as seen recently with CowSwap DCA, Limit and more coming in early 2024.

Pear Protocol is another that will offer one-click spread trading on a variety of different tokens and token baskets. This is a cool way to gain long/short exposure to a narrative i.e. Long AI, short proof of work coins or something like that.

I do wonder if we will begin to see different usages of intents for money markets, options, and maybe different primitives too. I’ll be keeping an eye out for these kinds of products, and we will indeed be reporting on them if and when we find them.

Right, now I’m going to get into some shorter points and some of the protocols that may benefit from these outlandish claims. Enjoy.

RollApps?!

Yes, RollApps… not Roll-Ups. Dymension is creating the “Internet of RollApps”, basically enabling anyone and everyone to deploy a RollApp using their infrastructure.

So, what the hell is this and why should you care?

Well, if you think the explosion of new L2s is getting a little out of hand, you have to ask yourself what issues present themselves if this continues.

Fragmentation of liquidity decreased composability across roll-ups and other chains, reliance on additional multi-sig bridges and centralised sequencers and the list goes on…

Dymension is its own L1 built on Cosmos which enables quick and easy deployment of App-specific roll-ups all interconnected back to the main Dymension chain. This enables shared liquidity for swapping, asset pricing, transfers etc., whilst the team has also taken IBC and recreated it for RollApps in the Dymension ecosystem.

This means no more meaningful bootstrapping of liquidity for applications and for network security and goodbye to fragmentation across applications.

The aim is to make RollApps as standardized as we know ERC20 tokens today.

Apps can also tap into any Data Availability layer of their choosing. Given the first staked TIA airdrop is the DYM token itself, I’d imagine a lot of protocols will choose to go with Celestia. Modular. Money. Movement.

IBC and Cosmos

If the Cosmos ecosystem pumped in previous cycles or intra-cycle moves to the upside, I would previously get very worried. It was usually a sign of other more prominent ecosystems being rung dry, and Cosmos was a last-ditch effort to make some ill-gotten gains.

I now feel like we are at the point where modularity, app-chains and blockchain-specific use cases are coming home to roost. Finally, the people are waking up.

IBC has always been undervalued and underrated hence why I mentioned Picasso Network and Compossable Finance so heavily. They will connect IBC to Solana and the EVM, plus all the other cool shit they have going on.

Some other notable Cosmos ecosystem projects to keep an eye on include:

• Neutron
• Injective
• Kujira

The dYdX playbook coming to a perps DEX near you

I think we will also probably see a few of the million perps DEXs follow suit and launch their own chains after the recent dYdX migration.

Even if they are ecosystem-aligned with, say, Arbitrum, Optimism or even Cosmos, the L2 SDK stacks that they have all been working so tirelessly on Arbitrum Orbit, OP Stack Cosmos SDK and even Polygon CDK are all very viable options to deploy an app chain for derivatives products.

I’d imagine a lot of ecosystems want to push this use case to many protocols, too and will possibly fund them heavily through grants.

We have recently seen Lyra announce their own chain using the OP stack, which uses our friends over at Celestia for Data availability.

Lyra, for the uninitiated, is a derivatives protocol focussing on options and perps. It’s a seriously impressive product with recent hires from Robinhood. I'd keep a close eye on these guys.

Oh and before I forget… Roll Ups as a Service (RaaS) could well enable even more L2s and L3s to come into the picture in 2024.

I think another downstream effect of the DEX space expansion would be that the DEX:CEX volume ratio increases and steals market share from centralised competitors. My one to keep an eye on would be Vertex Protocol. They have consistently delivered following their long awaited launch and I think it is head and shoulders above everything else that is operating in that space.

RWAs: Yes and no

First of all, I want to bring up a Tweet from September.

I still stand by the terminology being stupid AF.

Anyway, on to the category itself. I think RWAs as in bringing traditional financial instruments on-chain was a bear market phenomenon and we won’t particularly see projects solely focussing on this outperform. They will set themselves up for high-interest rate environments, however. DeFi yields will increase, and the friction to access off-chain yield won’t make sense.

That being said, those working on interesting products such as housing (Parcl), land (LandX) and whatever the fuck you can think of could be very interesting indeed.

Crypto and AI

I thought this would do well last cycle but mid-curved it to death. I knew it would be an easy normie-friendly idea, and I still think it is. The problem is I am not smart enough in that area to understand what is vapourware and what isn’t.

I know this category could potentially be the largest basket of assets we have seen since L1s but I’m not sure (yet) where I will focus my attention and capital.

My task for Q1 is to really dive deep, learn and figure out where to place my bets for the coming years.

Pandora’s box is opened and it will print green dildos.

Meme coins are NFTs without pictures

A wise man once said NFTs are alt coins with pictures.

I think we hit the next stage of this evolution with one of the strongest performers of 2023… Pepe.

Looking at a lot of wallets during that time and judging by the people who were talking about it, PEPE drew in a lot of the NFT crowd and gave them their first taste of shitcoin culinary excellence.

From there, I think we have now hit a meta where the funnier it is, the more it shall pump.

Being able to bet on the memeability of something is extremely new and fits so perfectly into crypto. After all, most projects are meme coins with utility attached, kek.

I think meme coins will replace the NFT hype cycle this time around, and we have already seen what is possible with BONK, dogwifhat and COQ INU. I think this trend continues. Plus, they are a cheaper and more effective way of customer acquisition for new and established ecosystems.

‍

There is a method to the madness.

Solana Fee-Model Revamp

As Solana is extremely cheap for the end user, that also comes with its own tradeoffs. Validators are currently running basically purely on inflationary rewards.

Naturally, this has cause for concern and I believe discussions around revamping the Solana fee model are currently being discussed.

SIMD-0096 is a proposal launched on the 5th of January to push 100% of priority fees towards validators instead of 50% (the remaining 50% is currently burned).

Reminder: There are two fees on Solana a static base fee and a variable priority fee. The priority fee is akin to you increasing your gas on Ethereum to help your chances of being included in the next block.

Info: https://github.com/solana-foundation/solana-improvement-documents/pull/96

The conversation continued below the proposal with buffalu (Jito founder) suggesting a commission rate to priority fees which could also be distributed to stakers which is handy for jitoSOL holders.

In a recent podcast with Anatoly (Solana co-founder), he mentioned that there are thoughts around localised EIP-1559 (an Ethereum fee market mechanism) in which an exponential increase of the base fee at hotspots on the network that are being spammed.

This is an extension of what already happens with local fee markets on Solana. A wider angle of this is that an exponential increase in the base fee for in-demand areas of the network could lead to further validator rewards that calm profitability concerns.

I think this is all up in the air at the minute but we probably see a lot more of this in 2024. Whilst the layer 2 Pandora’s box has been opened, these roll-ups are somewhat achieving the same outcome as local fee markets. The issue is the drastic amount of fragmentation that this causes.

Being able to have profitable areas of the network when demand is high for specific use cases certainly feels like a theoretical path towards profitability for validators.

Anyway, I expect this to continue throughout 2024, particularly with the amount of ETH going to be burnt. Questions will be asked of Solana and its sustainability for validators.

Update: it has already begun.

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The Year of the Bera

Yes, the time is now for Berachain. Everything seems to be culminating towards this. EVM on top of Cosmos with a novel proof of liquidity mechanism.

The marketing up until now has been a masterclass in organic socials. They have built a cult army that will go to war for the beras.

The only exposure or expected way to gain exposure currently is through the NFT collections such as Bong bears, Bitbears, Babybears, Bandbears, Boobears and Bondbears.

Note: This is only speculation but based on the valuation of these, something has to give.

So yeah… the year of the Bera.

Crypto Payments are THE killer App

With a lot of global currencies losing double-digit value overnight multiple times in 2023, it isn’t too silly to assume that dollars and or stablecoins (USD-denominated) are worth their weight in gold.

Payment infrastructure with lightning-fast blockchains like Solana are primed to capture a lot of this traffic, in my opinion.

This coupled with Circle and USDC’s native expansion to any and all chains through the deployment of Cross-Chain Transfer Protocol (CCTP) I imagine USDC begins to regain market share following the depeg.

The one app I am extremely excited about is Sling.Money - This is a payments application that utilises Solana under the hood along with USDC. If you have ever used Venmo, Monzo, CashApp etc., this is crypto's answer.

The team are ex-Monzo so they come with an impressive track record in this space and the recent demo at Breakpoint was so refreshing to see such a cool product using crypto-rails.

Final points

• We will probably see more business licenses for DeFi’s most innovative products. Following on from Uni V3 and V4 business licenses, I think this trend continues for better or worse.
• KYC DeFi is certainly coming. Whether we like it or not, the rails provide a much more seamless experience, whether it is public or private blockchains.
• Token V2 launches - Immutability? Nah. I think we see a lot of token migrations, particularly from OG protocols to further increase the supply and utility of their tokens.
• Crypto’s first breakout game I would imagine, is Off The Grid. This is just a cut above the rest, in my opinion. Avalanche had set themselves up to be THE destination for deploying games with subnets. If one takes off, then it’s all systems go.
• Airdrops, LBPs and Stealth Launches on Uniswap are the only way to launch a token in a fair way. I think given the XRP case which ruled in favour of free market prices not being a security sale, these methods are the way to get a token out in the open.

Some more exciting protocols to watch this year

• Squid Router: EVM to Cosmos Router
• LayerN: A financial "N"etwork of hyper-performant zk-OP hybrid roll-ups with native inter-rollup messaging and shared liquidity.
• Privy: The easiest way to onboard all your users to web3, regardless of whether they already have wallets.
• Neutron: The Integrated Application Network

Analysts notes and picks for 2024.

563:

1. DePIN - io.net, Akash, gensyn, GenesysGo, peaq

2. Restaking - EigenLayer & eco

3. Intents - anoma, CoW swap, symm.io eco

4. Degeneracy (especially when the markets are frothy) - rollbit, only1, new consumer apps that reward degeneracy

Gaz:

- DePIN is the most interesting, imo. Especially projects that cross over into other narratives like AI.

- Agree with intents. Nice to see some innovation in a previously saturated space, which should lead to a competitive advantage for first movers.

- I’m very sceptical on RWAs as I think major adoption will be slow (may be wrong here regarding luxury items and collectors stuff), but…

- I think infrastructure plays in RWAs might be the best option. Also, infrastructure in general ie dev tools, dex plug-ins etc. (ALGB for example, despite recent issues, empyreal looks interesting and crosses into AI narrative also)

- Agree on degeneracy also. Think current macro (inflation, savings rates, cost of living, etc) will force heavier gambling so memes will get bid up. Will stick a certified mid-curve warning on my takes, though.

Conclusion  

I am sure I will have missed a few points here, but I will be sure to reassess once more information presents itself. I hope everyone has taken something worthwhile from this and I wish you all the best in 2024 on the battlefield.

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Thesis Written by Grant (Founder and CEO of blocmates). Thanks to the whole blocmates team for putting up with my terrible writing skills and 4-year-old-level grammar. Thanks for your contributions.