Authors: Vaish Puri & Joey Campbell
Compiled by: Shenchao TechFlow
When historians look back at 2024, they may see it as a pivotal year for Bitcoin's move into the mainstream. This year, Bitcoin reached new all-time highs, became a hot topic in the U.S. presidential election, 11 Bitcoin ETFs were approved for listing, and it also experienced a halving event. Meanwhile, the global economy struggled under inflationary pressures.
This year, Bitcoin demonstrated its unique charm in versatility. In countries facing economic hardships (like Argentina and Turkey), it is seen as a haven against high inflation; in the eyes of Wall Street elites, it has become an investment tool recognized by financial giants like BlackRock; for cypherpunks and developers, it is a new canvas for innovation; while governments view it as a threat to control that has turned into an opportunity to exploit.
Bitcoin's technology is also constantly evolving. The Bitcoin network, once centered around "simplicity," is beginning to explore more new functionalities. The re-enabled opcodes (like OP_CAT) and revolutionary research (like BitVM) inject programmability and self-custody into Bitcoin's base layer. Second-layer networks (Layer 2) are rapidly developing, providing solutions for transaction scalability; at the same time, the emergence of liquid staking derivatives also brings revenue generation potential to Bitcoin.
BlackRock's iShares Bitcoin Trust (IBIT) set records, achieving $10 billion in assets under management in just a few weeks, far outpacing the development of its gold ETF. As institutional funds flood in, Bitcoin is gradually entering retirement portfolios. This phenomenon has excited Wall Street while causing concern among Bitcoin purists. The popularity of ETFs has made Bitcoin unprecedentedly easy to access—now, 62% of Americans can easily buy Bitcoin through brokerage accounts, just like purchasing Apple stock. However, this convenience also brings challenges. The Bitcoin ethos of "not your keys, not your coins" is gradually being overshadowed by the noise of institutional trading.
However, Bitcoin always finds vitality in contradictions. In the U.S., Trump's crypto-friendly policies have made Bitcoin a legitimate institutional asset; in India, despite regulatory pressures, 75 million users have adopted Bitcoin as a tool for financial empowerment; in Turkey, with a 50% inflation rate, Bitcoin has become the savings choice for millions; while in Argentina, when currency rapidly depreciated due to 140% inflation, citizens had no time to dwell on custody methods and instead used Bitcoin to protect their savings. In Latin America and Africa, Bitcoin is not just an investment tool but a means of survival.
This adaptability has permeated Bitcoin's development throughout 2024. Each region assigns different meanings to Bitcoin based on its own needs. This flexibility has not only not weakened Bitcoin's core objectives but has proven its robust vitality. Bitcoin serves as a mirror, reflecting the needs of different users while maintaining its core characteristics.
As 2024 approaches its end, Bitcoin faces important choices. It has gained the legitimacy that early supporters hoped for, but this legitimacy may not be realized in the way they originally envisioned. The rise of ETFs has brought about significant changes, but it has also introduced risks that Bitcoin's design initially sought to avoid. Meanwhile, the network's scalability issues are finally starting to be addressed seriously, and the future of 2025 is filled with hope and possibilities.
Is the Bitcoin ETF a bridge to mass adoption or a risk of centralization? Can Bitcoin staking enhance the functionality of the network, or will it further divide its core principles? With the emergence of Layer 2 solutions and tokenized Bitcoin, can Bitcoin truly achieve scalability, or are we just repeating past debates? Does Trump's victory and the end of the Gensler era mark a new chapter for cryptocurrency in the U.S.? From the revival of OP_CAT to record ETF inflows, from MEV on Bitcoin to the exploration of recursive contracts, the Bitcoin story of 2024 is still being written.
Institutional adoption: ETFs and MicroStrategy
Bitcoin ETF: Institutional demand
Bitcoin ETFs (like BlackRock's IBIT) achieved $20 billion in assets under management (AUM) in just 137 days, setting a historical record. In contrast, the previous fastest-growing ETF (JEPI) took 985 days to reach the same scale.
Currently, the total amount of Bitcoin held by ETF custodians has surpassed 1 million, accounting for over 5% of the current total Bitcoin supply.
Hedge funds and financial advisors make up a significant portion of the investors in these ETFs, indicating strong institutional interest in Bitcoin.
The decline of Grayscale
Due to management fees as high as 1.5% and inefficiencies in the redemption mechanism, Grayscale's GBTC is no longer the market leader. A large number of users have turned to lower-fee ETFs, leading to a significant shrinkage of GBTC's managed assets, which decreased by 152,000 BTC in just one month.
MicroStrategy's strategy
Under the leadership of Michael Saylor, MicroStrategy has accumulated a total of 402,100 Bitcoins, valued at approximately $39.8 billion. They have raised funds by issuing convertible bonds and increasing stock issuance to continuously increase their Bitcoin holdings.
Despite some controversy surrounding this strategy, MicroStrategy remains one of the largest holders of Bitcoin globally and is viewed as an indirect way to invest in Bitcoin, with its stock trading price commanding a threefold premium over pure Bitcoin exposure.
Wider impacts
As institutional investors entered, the price volatility of Bitcoin gradually decreased. Options trading on ETFs further solidified Bitcoin's position as a long-term store of value, becoming an important component of many portfolios.
ETFs provide a convenient investment channel for retail investors and financial advisors, but they have also been criticized for being overly reliant on custodial models, which contradicts Bitcoin's advocacy for "self-custody."
BRC-20, Ordinals, and Runes
Through Taproot and SegWit upgrades, the Bitcoin network introduced Ordinals and Runes, making NFTs and fungible tokens possible. These innovations have driven network activity growth but have also sparked controversy. Critics argue that they add burden to the network, while supporters believe they help enhance the sustainability of transaction fees and showcase Bitcoin's permissionless innovation capabilities.
Trends and network impacts
Due to the popularity of Ordinals collectibles, Bitcoin transaction activity surged, and network transaction fees increased accordingly. In May 2024, during the peak of the Ordinals craze, transaction fees accounted for over 75% of miners' revenue, setting a historical record.
The mempool size gradually returned to normal after peaking at 350 million bytes at the end of 2023, while the introduction of Runes improved the management efficiency of UTXOs.
Throughout the year, Ordinals, Runes, and BRC-20 took turns as the main drivers of trading activity, with Runes having the highest trading share.
Markets and adoption
Platforms like Magic Eden and OKX dominate the trading market, accounting for over 95% of the trading volume. With optimized user experience and cross-chain bridging with Solana, the adoption rate of Bitcoin NFTs has significantly increased.
Although Ordinals collectibles performed well at the beginning of the year, their prices have fallen by over 50% since the halving.
Protocols like Liquidium allow users to use Ordinals and Runes as collateral for loans, further expanding the application scenarios of Bitcoin-native DeFi. Meanwhile, stablecoins (like USDh launched by Hermetica) attempt to use Bitcoin as collateral, despite facing technical limitations.
Cultural and economic shifts
Memecoins, digital art, and decentralized marketplaces are redefining the ways Bitcoin is used. Although these trends are speculative, they also showcase Bitcoin's core values of censorship resistance and permissionless innovation.
Tokenized Bitcoin: BTC on EVM chains
Currently, using tokenized Bitcoin on EVM chains (Ethereum Virtual Machine chains) is the most popular way to unlock Bitcoin's utility, rather than relying on second-layer networks (Layer 2). Due to changes in the WBTC custody model, the market landscape for tokenized Bitcoin has undergone significant changes this year.
Tokenized Bitcoin and DeFi applications
Tokenized Bitcoin (e.g., WBTC, tBTC, and emerging cbBTC) accounts for over 25% of the total value locked (TVL) in decentralized finance (DeFi).
While Ethereum remains the primary testing ground for DeFi innovation, some Bitcoin-centric solutions (like Bitcoin's second-layer networks) are attempting to reduce reliance on custodians and better align with Bitcoin's decentralization ideals. However, these second-layer networks have a long way to go before launching officially.
Failures and lessons learned
Early tokenized Bitcoin projects (like renBTC, imBTC, and HBTC) failed due to low adoption rates, hacks, or centralization risks. We summarize these failures as the "Bitcoin Wrapper Graveyard" to analyze their key vulnerabilities.
As BitGo's custody model changes, the dominance of WBTC is challenged, and user trust has declined. Meanwhile, Coinbase's cbBTC has rapidly risen, with total value locked (TVL) exceeding 20,000 BTC.
tBTC and decentralized alternatives
tBTC provides a decentralized tokenized Bitcoin model, avoiding the risks of centralized custody. With extensive applications in protocols like Aave and GMX, the supply of tBTC quadrupled in 2024, showing strong market demand for decentralized solutions.
Stablecoins backed by Bitcoin
Stablecoins backed by Bitcoin (such as USDe and crvUSD) are gradually becoming popular, with 30-60% of their collateral being Bitcoin. However, these stablecoins may bring risks that Bitcoin users are unwilling to accept.
Stablecoins fully backed by Bitcoin remain an important development direction, as they are more aligned with Bitcoin's spirit of decentralization and openness.
The dominance of EVM
Despite the attention on Bitcoin's second-layer networks, the current EVM ecosystem and its mature applications still dominate Bitcoin's use in the DeFi space.
While Bitcoin's second-layer networks hold great potential, they are currently primarily used for speculative activities (such as airdrop arbitrage). Future solutions need to align better with Bitcoin's core protocol to achieve more meaningful application scenarios.
Bitcoin staking
In 2024, Bitcoin staking experienced rapid development. Numerous new protocols are leveraging Bitcoin, the "hardest currency," to support Proof of Stake (PoS) systems. Staking platforms have released Bitcoin's liquidity through innovations in native staking, liquid staking derivatives, and re-staking, with total value locked (TVL) exceeding $10 billion.
Native staking
The Babylon protocol allows Bitcoin holders to stake Bitcoin on PoS chains while maintaining custody on the Bitcoin network.
Currently, 34,938 Bitcoins have been staked, with a total value of approximately $3.53 billion, and the number of active stakers has reached 82,440.
Through contracts and penalty mechanisms, the protocol effectively ensures the security of PoS chains.
Liquid Staking Derivatives (LSDs)
Lombard: Users can obtain LBTC after staking Bitcoin, earning Babylon's staking rewards while also using it in DeFi applications (like Curve and Uniswap). Currently, the platform's total value locked is $1.68 billion.
Solv Protocol: Unifies Bitcoin staking operations through Staking Abstraction Layer (SAL). Its liquid staking tokens (LSDs) like solvBTC can aggregate Bitcoin liquidity across chains, with total value locked exceeding $3 billion.
Example tokens include solvBTC.BBN (Babylon), solvBTC.CORE (CoreDAO), and solvBTC.ENA (Ethena).
Re-staking
Platforms like Lombard and Solv are using staked Bitcoin for additional DeFi yields (such as liquidity provision and lending) through re-staking. The re-staking TVL on Lombard alone has exceeded $1.04 billion.
Bitcoin staking is still in its early development stage, primarily relying on reward mechanisms and high yields to attract users. In the long run, its sustainability depends on the growth of genuine demand. However, major players like Lombard and Solv dominate the market, which may trigger centralization risks. The total value locked on these two platforms in Babylon has reached $1.32 billion.
Although liquid staking provides users with greater flexibility, it also introduces more trust assumptions. The future direction of Bitcoin staking remains to be further observed.
Scalability: Sidechains, Rollups, and second-layer networks
New developments
Taproot and opcode revival: Taproot (launched in 2021) and proposals like OP_CAT enhance Bitcoin's programmability and privacy, supporting contract functionalities.
BitVM: Introduced Turing-complete contract functionality without changing the Bitcoin consensus mechanism, supporting more complex off-chain computations.
Layer-2 Solutions
Sidechains:
For example, Rootstock (RSK), Liquid Network, and Mezo.
Sidechain technology introduced smart contract functionality to the Bitcoin network and improved transaction throughput. However, these projects often rely on joint security models or merged mining to ensure the security of the blockchain.
Rollups:
ZK-Rollups: Provide fast transaction confirmations through zero-knowledge proofs while maintaining strong cryptographic security.
Optimistic Rollups: Assume transactions are valid by default and verify their authenticity through fraud-proof mechanisms. This approach can significantly enhance network scalability, but there may be some delay in transaction confirmation time. Example: The Citrea project utilizes zk-STARKs technology and the Clementine bridging solution to build a trustless Bitcoin cross-chain bridge.
State Channels (like the Lightning Network):
State channel technologies like the Lightning Network allow users to make almost instant payments off-chain with very low fees.
The total capacity of the Lightning Network has reached 5,380 BTC, achieving an annual growth rate of 11%.
Trends show a decrease in the number of channels in the network, but an increase in the capacity of individual channels, raising concerns about network centralization.
In developed countries (such as the U.S. and Germany), the Lightning Network is primarily used for large payments, while in emerging markets, it is more often used for small payments and microtransactions.
Build on Bitcoin (BOB):
The BOB project, while using Ethereum as its settlement layer, aims to build a Bitcoin-centered economic system, utilizing tokens like WBTC and tBTC to achieve this vision.
In 2024, the total value locked (TVL) of BOB grew from $1.5 million to $238.27 million, mainly due to deep integration with Uniswap V3 and Avalon Finance.
CoreDAO and ecosystem growth
CoreDAO combines the security of Bitcoin with DPoW (Delegated Proof of Work) and DPoS (Delegated Proof of Stake) technologies through the Satoshi Plus mechanism.
The ecosystem launched a core token coreBTC supported by Bitcoin for DeFi applications, further expanding Bitcoin's functionality.
In 2024, CoreDAO achieved significant growth: the network growth rate reached 95%, adding 13.3 million addresses, and daily transaction volume peaked at over 500,000.
