Author | Golem, Odaily Planet Daily
As 2024 is about to end, people in the crypto circle have their own year-end summaries: first, to see if the investment returns this year have outperformed the market (just a reminder, BTC has risen more than 130% this year), and second, to summarize the development of the sectors/ecosystems they are focused on this year.
The Solana ecosystem, Base ecosystem, TON ecosystem, and AI Agent track all had their shining moments this year. As for the Bitcoin ecosystem, although many things happened this year and infrastructure and application innovations are developing, it has not yet reached the expectations people had at the beginning of 2024.
Therefore, some have summarized this year of silence in the Bitcoin ecosystem as a 'failure,' but there are also steadfast ecosystem OGs who continue to 'believe.' As an ordinary player in the Bitcoin ecosystem from start to finish, I choose to end this year with the term 'regret.'
2024 actually has a good start.
2024 has a good start for the Bitcoin ecosystem. At the beginning of the year, people were optimistic about the Bitcoin ecosystem, believing that 2024 would be the year when the Bitcoin ecosystem would completely explode and enter the mainstream, similar to the current belief that 2025 will be the year of the explosion for the AI Agent ecosystem.
Why did we have such high expectations for the development of the Bitcoin ecosystem in 2024? Perhaps it is because since the Ordinals protocol was born in December 2022, the Bitcoin ecosystem has undergone a year of growth and consensus building, transitioning from the 'barbaric era' to the 'industrial era.' Project parties, VCs, and mainstream exchanges have all entered the game, forming three main tracks: layer 1 asset issuance protocols, L2, and Bitcoin staking.
From the perspective of layer 1 asset issuance protocols, influenced by Binance's launch of the BRC 20 token ORDI and SATS spot trading at the end of 2023, the inscription concept became popular again at the beginning of 2024. Not only did this enthusiasm affect other chains to follow suit and initiate inscription modes, but it also led to the rise of other layer 1 asset protocols like ARC 20, SRC 20, PIPE, etc. Meanwhile, the Rune pre-mining and airdrop play initiated by RSIC and Runestone in January 2024 filled people with anticipation for the upcoming Runes protocol.
From the perspective of L2 development, Bitcoin L2 experienced explosive growth at the beginning of 2024. With the popularity of layer 1 asset issuance and trading, the congestion issues of the Bitcoin mainnet and the players' demand for enhancing the playability of mainnet assets made Bitcoin L2 a hot startup direction. By early 2024, it was reported that there were over 100 Bitcoin L2 projects emerging in a short period. Although many of these projects were of low quality and simply aimed at making a quick profit, overall, domestic and foreign VCs began to invest heavily in Bitcoin L2, as everyone anticipated that Bitcoin L2 would replicate the glory of Ethereum's L2 ecosystem in 2024.
In March 2024, @Bitvmclub summarized 69 Bitcoin L2 projects.
Looking at Bitcoin staking, the Bitcoin staking protocol Babylon announced the completion of a $18 million financing in December 2023, officially launching the narrative of Bitcoin staking and re-staking. With the legendary Ethereum ecosystem re-staking narrative project EigenLayer as a model, people believe that with Bitcoin's stronger consensus foundation and security compared to Ethereum, the prospects for Bitcoin staking and re-staking in 2024 will be very broad. Not only will it awaken dormant Bitcoin whales to participate in the Bitcoin ecosystem, but it will also form a re-staking ecosystem that rivals Ethereum.
In addition to the overall positive trends exhibited by the three main tracks at the beginning of 2024, the general infrastructure of the Bitcoin ecosystem (such as wallets, cross-chain bridges, and trading markets) has also gradually improved during this time. Unisat and OKX Wallet have technically supported multiple asset protocols, becoming major wallets and trading markets in the Bitcoin ecosystem.
The Bitcoin spot ETF was approved and listed on January 11, 2024, marking Bitcoin's official integration into traditional finance. At the same time, this further strengthened people's expectations for the Bitcoin ecosystem, as a network worth trillions of dollars will naturally develop an ecosystem worth hundreds of billions of dollars.
However...
Unfortunately, the Bitcoin ecosystem in 2024 did not receive attention and development that surpassed the previous bull market's heat, leading to a long period of silence.
The performance of mainnet assets has been declining.
On April 20, 2024, Bitcoin will undergo its fourth halving, and the token protocol Runes, developed by Ordinals founder Casey, will also announce its launch. To compete for inscription numbers, project parties have raised on-chain transaction fees to over 2000 satoshis/byte. People believe this marks the beginning of the Runes relay BRC 20, leading to the continued prosperity of the Bitcoin ecosystem, but unexpectedly, Runes peaked at the start, and speculative enthusiasm faded within just two weeks. Although the market value of Runes briefly surpassed $2 billion in June and November, the vitality and liquidity of new launches within the ecosystem have remained sluggish.
At the same time, the performance of other asset protocols this year has been similar. ORDI saw a drop of 70% from its peak during the year, and when new assets were born, they triggered FOMO among market participants, but later, due to the lack of new funds and traffic participation, they began to decline. For example, the airdropped PIZZA from Unisat and CAT 20 from the Fractal network.
The reasons for this may be twofold: first, after experiencing previous Bitcoin bull markets, the narrative of fair asset issuance in Bitcoin after Runes no longer excites the outside world and fails to generate wealth effects again; second, there is no mutual support between domestic and foreign players, and the ecosystem has not formed a cohesive force. The larger communities of Runes are mainly led by overseas users, while the main funds in the Chinese-speaking region remain in BRC 20, such as the currently popular inscription 'ground-pushing coin' 𝛑, 𐊶, etc.
The survival rate of Bitcoin L2 is less than 20%.
At the same time, it is unfortunate that the Bitcoin L2 ecosystem in 2024 did not achieve the expected prosperity. 'Except for the Lightning Network, all other Bitcoin L2s are castles in the air,' said Casey, the founder of the Ordinals protocol, criticizing Bitcoin L2 in an interview.
In the past 12 months, the market has seen over 100 Bitcoin L2 projects, but according to DefiLlama data, only 19 L2 projects remain today, with a total value locked (TVL) of approximately $2.8 billion. On the other hand, the Ethereum ecosystem's L2, specifically Arbitrum, has a TVL of $3 billion.
Then, similarly for scaling, the L2 ecosystem on Ethereum has been validated as feasible. Why is it not going as well when moved to the Bitcoin ecosystem?
Most early Bitcoin L2s lacked innovation. In the early days of Bitcoin L2, to attract investment and rapidly build the ecosystem, many L2s adopted an EVM-like architecture plus cross-chain bridge method to expand the Bitcoin mainnet. Although this method borrowed from Ethereum's experience, making it convenient and quick to build chains while reducing user education costs, it lacked innovation and was generally met with skepticism, such as 'if this is called Bitcoin L2, then Ethereum is the best Bitcoin L2.' This has proven to be the case, but as the craze faded, these quickly patched-together L2s also rapidly disappeared.
Bitcoin L2 began its TVL competition too early. Perhaps influenced by Ethereum L2 Blast, Bitcoin L2s learned from the beginning to stimulate TVL growth using points and team incentives. Merlin is a popular chain among Bitcoin L2s, and on February 9, 2024, it fired the first shot in the Bitcoin TVL competition, reaching a TVL of $543 million within just 24 hours. At the same time, B² Network, BEVM, and Bitlayer also joined the TVL competition.
Ultimately, Merlin won this competition with a TVL of over $3 billion within a month and launched its official token MERL on April 19 on OKX. After launch, the price of MERL peaked at 1.78 USDT but quickly collapsed, with a drop of up to 85%. Since then, the focus on prices has shifted from anticipation to disappointment and criticism regarding the Bitcoin L2 ecosystem.
Whose recognition has the Bitcoin staking narrative received?
With a luxurious financing lineup and 'narrative appeal,' Babylon and its Bitcoin re-staking ecosystem are another expected track in the Bitcoin ecosystem for 2024. When Babylon's mainnet launched its first staking phase in August, it attracted the attention of the entire network, reaching the limit of 1,000 BTC in just 3 hours. Currently, Babylon's TVL stands at 57,051.72 BTC, approximately $5.64 billion. However, compared to EigenLayer's TVL of $15.718 billion, Babylon's TVL is only one-third of that. At the same time, despite Bitcoin continuously breaking new highs, the market's attention on Babylon has not increased. Whose recognition has the Bitcoin staking narrative really received?
There is a mismatch between the market and the product; real big players are reluctant to part with their Bitcoin. Babylon's narrative slogan is to unlock the liquidity of 21 million BTC through staking, but the market may not be convinced. The market recognizes Ethereum as a native financial asset on-chain while still viewing Bitcoin as 'digital gold.' This also partly explains why the fund size for Bitcoin spot ETFs is much larger than that for Ethereum spot ETFs.
For Bitcoin holders, as Bitcoin continues to rise, they are even less willing to part with their Bitcoin. For traditional finance, Bitcoin spot ETFs and MSTR are what they truly favor as BTCFi. This is completely inconsistent with the situation in the Ethereum ecosystem, which encourages staking by design.
Babylon sets the stage, but others are performing. According to data from Babylon's official website, re-staking protocols such as Lombard, Solv Protocol, PumpBTC, Bedrock, and Chakra account for over 60% of Babylon's total staking volume. The operation of these platforms can be summarized as users exchanging their BTC for the platform's packaged BTC, which the platform deposits into Babylon, allowing users to enjoy dual benefits from Babylon and the platform's points. However, the problem is that the BTC deposited by users and the platform's packaged BTC may not be in a 1:1 ratio, and the circulating packaged BTC may exceed the locked BTC value, potentially leading to liquidity risks.
At the same time, the security of re-staking protocols is also worth considering. Previously, Bedrock suffered an attack that caused losses of about $2 million on DEX. Although Babylon claims to use a self-custody solution to protect user funds, most re-staking protocols behind it use custodial solutions, which is inconsistent with Babylon's initial promotional concept. Therefore, not only are large holders unwilling to stake BTC, but under unclear returns and insufficient security guarantees, retail investors will also hesitate to participate in staking.
In summary, although the Bitcoin ecosystem had a good start in 2024, the launch of the Runes protocol was merely a peak performance, various asset protocols rapidly cooled down, the dramatic developments of Merlin and other Bitcoin L2 projects, and the Babylon ecosystem did not bring about the expected BTCFi bull market, leaving us feeling regretful about the development of the Bitcoin ecosystem this year.
In 2025, will everything get better?
It is important to emphasize that what I have said above is not to pessimistically predict the Bitcoin ecosystem or to reach a final verdict on it—there is always a gap between people's beautiful 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 for this year.
To this day, the Bitcoin ecosystem still has steadfast holders and builders. Communities around ORDI, Rune DOG, PUPS, etc., continue to build, while OKX Wallet and Unisat are still working hard on infrastructure development. Although the Bitcoin L2 bubble has burst, the surviving teams have not given up. Innovations like OP_CAT are on the way, and Babylon may launch its token generation event (TGE) in January-February 2025...
In 2025, will everything be fine? Although we did not witness a larger-scale explosion of the Bitcoin ecosystem this year, I still believe that the Bitcoin ecosystem will become the protagonist of this cycle, confidently welcoming 2025.
If it were you, what keyword would you give to this year's Bitcoin ecosystem?
