Author: Josiah Makori
Compiled by: Baihua Blockchain
What are cryptocurrency narratives?
Cryptocurrency narratives refer to the popular ideas, stories, or beliefs in the cryptocurrency space that influence people's perceptions and value judgments about cryptocurrencies. They can sway investor sentiment, market trends, and the adoption of new technologies.
Key Points
Cryptocurrency narratives refer to the popular ideas, stories, or beliefs in the cryptocurrency space that influence people's perceptions and value judgments about cryptocurrencies, and can sway investor sentiment, market trends, and the adoption of new technologies.
One of the most significant trends in 2024 is the focus on accessibility, meaning anyone can participate without needing in-depth knowledge of cryptocurrency and blockchain. This is reflected in the popularity of memecoins and prediction markets.
Narratives to watch in 2024 include: Memecoins, Liquid Restaking Tokens, Liquid Staking Derivatives, Blockchain Modularity, Layer 1, Layer 2 (Optimistic Rollups and Zero-Knowledge Rollups), BRC-20, Decentralized Physical Infrastructure Networks (DePIN), Telegram crypto trading bots, Prediction Markets, and Tokenization of Real-World Assets (RWAs).
Cryptocurrency narratives can also be misleading or even harmful, especially when based on false assumptions or excessive hype. Therefore, it is crucial to critically assess narratives and make investment decisions based on solid analysis and research.
Market participants are always looking for trends to better understand what is happening in the current market, why it is happening, and its potential impacts. Historically, they have often anticipated future market environments by observing the dynamics of market cycles. From Elon Musk's tweets causing DOGE price fluctuations to the belief that Bitcoin halvings bring a bull market every four years, many investors use cryptocurrency market narratives to predict price movements.
For example, the narrative of cryptocurrency as a 'store of value' has attracted many investors who view it as a tool against economic uncertainty. Similarly, the narrative of blockchain as a 'disruptive technology' has drawn many entrepreneurs and developers committed to developing new applications on the blockchain.
1. What is cryptocurrency narrative?
This article was updated in January 2024 by the CoinGecko team to reflect new and emerging cryptocurrency narratives.
Market participants are always seeking trends to better understand what is happening in the current market, why it is happening, and its potential impacts. Historically, they have utilized the dynamics of market cycles to take more proactive actions in future market environments. From Elon Musk's tweets causing DOGE price fluctuations to the belief that Bitcoin halvings bring a bull market every four years, many investors predict price movements through cryptocurrency narratives.
For example, the narrative of 'cryptocurrency as a store of value' has attracted many investors who believe cryptocurrencies can hedge against economic uncertainty. Similarly, the narrative of 'blockchain as a disruptive technology' has attracted many entrepreneurs and developers committed to developing new applications on the blockchain.
Why are cryptocurrency narratives important?
The emergence of cryptocurrency narratives comes from various factors, including the technological capabilities of cryptocurrencies and blockchain, social and economic events, and the beliefs and motivations of individuals within the cryptocurrency industry. Mainstream media, social media, online forums, influencers, and market trends can all drive the formation of narratives. In 2024, we see an increasing number of narratives exploring the capabilities and applications of blockchain, such as Decentralized Internet of Things Infrastructure Networks (DePIN). However, narratives like memecoins and prediction markets are also rising rapidly. These narratives make the crypto market more accessible to anyone, as they do not require in-depth knowledge of the crypto space.
Narratives are important because they play a significant role in shaping public perception and subsequently market trends. They provide a framework for understanding the potential risks and rewards of different types of cryptocurrencies and can influence the trajectory of the entire cryptocurrency industry.
However, cryptocurrency narratives can also be misleading or even harmful due to false assumptions or excessive hype. Thus, critically evaluating these narratives and making investment decisions based on solid analysis and research is very important.
Today, multiple emerging trends and themes are trying to define 2024. In this guide, we will introduce the top cryptocurrency narratives to watch in 2024:
2. Memecoins
Memecoins remain one of the most profitable narratives of 2024, with increasing expectations for a memecoin supercycle. CoinGecko data shows that SPX6900 and Gigachad topped the gainers list in the third quarter. Additionally, other memecoins have reached new heights, such as GOAT becoming the first token to surpass a market cap of $1 billion on Pump.fun. As of the time of writing, the total market cap of memecoins has reached $107.5 billion.
As the name suggests, memecoins are based on internet memes and trends, supported by enthusiastic communities. They are often positioned as entertainment tokens, relying on a growing community for viral spread and growth. Memecoins also provide traders with an easy way to participate in the hype surrounding popular blockchains, as these tokens typically sell for only a few cents at launch. Unlike other narratives, potential buyers do not need an in-depth understanding of the cryptocurrency world to join the hype since most memecoins have little to no actual utility at launch.
2024 also saw the emergence of meme coin generators, simplifying the token creation process and allowing anyone to issue their own meme coins without a technical background. The largest player in this field is the Solana-based Pump.fun. As of now, over 3 million tokens have been issued on Pump.fun, generating total revenue exceeding $187 million.
As of the time of writing, Solana and Base are among the most popular blockchains for memecoins.
3. Prediction Markets
Prediction markets allow users to bet on ongoing and future events using cryptocurrencies, enabling users to buy shares of 'yes' or 'no'. Once the event concludes, users who chose the correct option will earn returns based on the number of shares purchased.
Among these prediction markets, Polymarket is the largest, with its recent '2024 Presidential Election Winner' prediction trading volume exceeding $732 million. Other popular categories of prediction markets include sports, business, and pop culture.
4. Liquid Restaking Tokens
Restaking is an increasingly popular narrative focused on improving capital efficiency, allowing users to stake the same token across different protocols simultaneously, providing security for multiple networks. This mechanism helps protocols address the challenge of building their own validator clusters while offering scalable security based on the respective protocol's needs. In return, restakers can earn additional rewards through their restaking strategies (but also face additional risks of slashing).
EigenLayer is a pioneer in the restaking field, with its total value locked (TVL) exceeding 3.5 million ETH as of the time of writing. Users can restake their liquid staking tokens, such as stETH, rETH, and cbETH, to provide security for Active Validation Services (AVS).
Check out the top liquid restaking tokens on CoinGecko.
5. Liquid Staking Derivatives (LSDs)
Liquid staking derivatives are cryptocurrencies issued by liquid staking platforms that allow stakers to unlock their liquidity-restricted staked assets and earn additional returns. In standard staking, stakers provide security for proof-of-stake (PoS) blockchains by depositing assets into a protocol. However, this approach leads to capital inefficiency as the stakers' assets are locked and unable to generate additional returns.
Liquid staking emerged in this context. The value of derivative assets is linked to the underlying assets (the assets locked when staking on proof-of-stake blockchains) and accumulates rewards over time, continuously appreciating. At the same time, derivative tokens can be used for other DeFi activities, such as borrowing and providing liquidity. In return, most liquid staking providers take a share of 5-10% from the staking rewards as income.
Liquid staking derivatives address issues of capital inefficiency, lowering the entry barrier for staking, and enhancing network security and stability.
Check out the top liquid staking tokens on CoinGecko.
6. Blockchain Modularity
Early blockchains like Bitcoin and Ethereum were monolithic in structure, meaning blockchains needed to perform all tasks. However, as the focus of competition has shifted from performance to cost and flexibility, we are gradually entering the modular era of blockchains. Modularity breaks blockchains into independent components, allowing them to overcome current scaling limitations.
Modular components include:
Execution Layer: Responsible for executing transactions
Settlement Layer: Responsible for settlement, fraud proofs, and connecting other execution layers
Consensus Layer: Responsible for achieving consensus on the order of transactions
Data Availability Layer: Provides accessible data to all network participants
Trade execution typically occurs on Layer 2 chains, such as Optimism and Arbitrum, which are responsible for executing transactions and sending packaged transactions to the main chain. Additionally, Layer 2 chains themselves are gradually becoming modular, such as OPStack, which modularizes all elements of Layer 2 chains into standardized open-source modules that developers can use to create new blockchains.
Meanwhile, EigenDA is a decentralized data availability layer built on Ethereum, currently used by Layer 2 chain Mantle to provide data availability support.
Layer 1 blockchains like Celestia are also adopting a modular architecture. In the case of Celestia, the focus is on consensus and data availability, optimizing storage. This allows Layer 2 chains built on Celestia to concentrate on creating the optimal execution environment for their applications.
6. Layer 1 blockchains
Layer 1 (L1) blockchains provide the infrastructure for building other blockchain applications (such as smart contracts). They execute most on-chain transactions and serve as a 'trusted source' for public blockchains. Traditional L1 blockchains, such as Ethereum, often face issues like slow transaction speeds, low scalability, and high fees. This is where Layer 2 blockchains (Layer 2s) come in, responsible for executing transactions so that L1 can focus on publishing and validating those transactions. However, new L1 networks are changing the landscape in terms of transaction speed, cost, and interoperability.
Here are some L1 projects to watch, as the L1 narrative heats up, these projects are gaining attention:
1) Solana
Although Solana was launched in 2020, its ecosystem has become one of the most popular blockchain ecosystems in 2024, accounting for 38.8% of the on-chain narrative interests of crypto investors. One major reason for Solana's popularity is the current memecoin craze, combined with Solana's high speed and low fees, along with the viral spread of Pump.fun, making it one of the primary chains for memecoin speculation.
2) Sui
Sui is an 'infinite platform' for building rich and dynamic on-chain assets, from games to finance. It is the first permissionless L1 network designed from the ground up for creators and developers, aimed at serving the forthcoming billion Web3 users. Sui was created by the former Meta engineering team, Mysten Labs.
Sui meets application demands through horizontal scaling, enhancing scalability without limits, while ensuring cost-effective transaction costs. Additionally, it significantly improves scalability by supporting parallel consensus for simple transactions (like NFT minting and transfers). Complex transactions (such as asset management and DeFi applications) are handled by the DAG-based Narwhal and Bullshark memory pools and Byzantine Fault Tolerance (BFT) consensus mechanisms.
7. Layer 2: Rollups
Vertical scaling narratives focus on Layer 2 (L2), which are protocols built on top of L1 to further expand and enhance them. L2 significantly reduces the computational burden on L1 by moving transactions off-chain, leading to a remarkable increase in transaction throughput. The total value locked (TVL) in L2 has steadily grown, maintaining strong performance even in the face of negative sentiment in the DeFi market and the overall cryptocurrency market.
A. Optimistic Rollups
Optimistic Rollups are an L2 scaling solution aimed at increasing transaction throughput and reducing costs while maintaining the security guarantees of the underlying blockchain. They utilize a trust-based model, confirming transactions off-chain, which are then added to the underlying blockchain after being verified by a small group of 'witnesses.'
Source: Beat
Here are some Optimistic Rollups projects worth keeping an eye on in 2024:
1) Base
In February 2023, Coinbase launched Base, an L2 blockchain built using Optimism's OP Stack, aimed at serving the upcoming millions of Web3 users, leveraging Coinbase's vast user base. The Base network provides creators with a secure, low-cost, and developer-friendly solution to build Web3 applications. Since its launch, Base's popularity has been rising, with increased investor interest in 2024, making it the second hottest chain after Solana. Base is also popular among memecoin traders, with its top memecoin BRETT having a market capitalization exceeding $1 billion.
2) Arbitrum
Arbitrum is an L2 scaling solution that uses Optimistic Rollups, aiming for high throughput and reduced user transaction costs. Even after Ethereum's merge, Ethereum's speed and gas fees remain high compared to other networks like Arbitrum. This has led many Web3 users and creators to turn to the Arbitrum network, pushing its total value locked (TVL) to a high of $3.2 billion in November 2021.
The recent ARB airdrop injected significant liquidity into the Arbitrum network. Many users who received ARB tokens were incentivized to use these tokens for trading, staking, or providing liquidity for various decentralized trading platforms and protocols on the Arbitrum network. This airdrop also helped increase awareness of the Arbitrum network, showcasing its potential as an Ethereum L2 scaling solution.
3) Optimism
Optimism positions itself as a "fast, stable, and scalable L2 protocol designed by Ethereum developers for Ethereum developers." It was built as a minimal extension of the current Ethereum blockchain to seamlessly scale Ethereum applications. Unlike common EVM-compatible chains, Optimism is EVM-equivalent, meaning it fully complies with the formal specifications of the Ethereum blockchain and runs in sync with Ethereum. Optimism also launched OPStack, standardizing the modular elements of the L2 chain to enable developers to build interoperable new chains with Optimism. According to Defillama data, Optimism's TVL reached an all-time high of $1.15 billion in August 2022.
B. Layer 2: ZK Rollups
Zero-Knowledge Rollups (ZKRollups) are a Layer 2 scaling solution that enhances Layer 1 throughput by moving computations and state storage off-chain. They can batch process a large number of transactions and publish summary data on-chain. The core of ZK Rollups lies in their ability to prove knowledge of something without revealing the information. Thus, they are highly attractive in privacy-sensitive application scenarios, such as digital identity verification and confidential transactions.
Here are some ZK Rollups projects worth monitoring in 2024:
1) zkSync Era
zkSync Era is an L2 rollup solution utilizing Zero-Knowledge Proofs, aiming to scale the Ethereum network without sacrificing its security and decentralization features. zkSync Era keeps most computations and data storage off-chain, allowing users to enjoy Ethereum's security while achieving higher transaction speeds and lower transaction costs.
2) Polygon zkEVM
Polygon zkEVM went live on Mainnet Beta on March 27, 2023, marking an important step towards Ethereum scaling and mainstream Web3 adoption. Similar to Optimism, Polygon zkEVM is EVM-equivalent, meaning most Ethereum-native applications can run directly on zkEVM without requiring developers to modify or reimplement their code.
3) Scroll
Scroll is an L2 solution aiming for infinite scalability, high throughput, complete decentralization, and trust-minimized privacy. It achieves this by combining ZK Rollup and high-performance off-chain decentralized systems.
4) Taiko
Taiko is aimed at becoming the closest to Ethereum equivalence ZK Rollup Layer 2, providing dApps with a scalable and efficient platform without requiring changes to existing protocols. Unlike many other ZK Layer 2s, Taiko focuses on achieving full compatibility with Ethereum rather than pursuing fast ZK proof generation, allowing developers to reuse execution clients without significant adjustments. Users can experience Taiko's functionality by participating in the protocol's availability testing on the Taiko testnet.
8. Bitcoin Layer 2
Similar to other Layer 2s, Bitcoin Layer 2 projects attempt to scale the Bitcoin blockchain by developing an execution layer that offers higher throughput and more operations than the mainnet. Layer 2s on the Bitcoin network provide an execution layer different from the mainnet, supporting operations like virtual machines (such as EVM) and smart contracts. However, Bitcoin Layer 2 networks face challenges such as ensuring secure cross-chain bridging between Bitcoin and its Layer 2 networks and maintaining high speed and low costs when settling proofs on the Bitcoin network.
Layer 2s on the Bitcoin network include state channels (like the Bitcoin Lightning Network), sidechains (like Stacks and Rootstock), and even rollups similar to Merlin.
Bitcoin: Ordinals, BRC-20 Tokens, and Runes
Ordinals are one of the latest hot trends on Bitcoin. In January 2023, software engineer Casey Rodarmor deployed the Ordinals protocol on the Bitcoin blockchain, enabling NFT minting on the mainnet. This move elicited mixed reactions from the Bitcoin community, with some believing it poses a threat to the Bitcoin blockchain, while others were excited and began creating works known as "Inscriptions" — the Bitcoin version of NFTs.
Similar to NFTs, Ordinal Inscriptions are digital assets recorded on a Satoshi (the smallest unit of Bitcoin). However, unlike NFTs that use decentralized file storage systems, Ordinals are stored directly on-chain. The implementation of these inscriptions is made possible by the Taproot upgrade introduced to the Bitcoin blockchain in November 2021.
The number and sequence of BTC Ordinals are closely monitored, with some well-known series and high-price sales, including Ordinal Punks, Taproot Wizards, Bitcoin Rocks, Timechain Collectibles, Ordinal Loops, Ripcashe's Power Source, Bitcoin Shrooms, The Shadow Hats, The Dan Files, and Toruses.
In addition to Ordinals, BRC-20 Tokens are also gaining attention. BRC-20 Tokens utilize Ordinals minting technology to enable the minting and transfer of fungible tokens on the Bitcoin blockchain. BRC-20 Tokens are similar to the ERC-20 standard on Ethereum and EVM networks, minted by the community, and once deployed, Ordinal wallets can freely mint these tokens. Although still in the early stages, some platforms support the decentralized minting and trading of BRC-20 Tokens.
In 2024, with the fourth Bitcoin halving, Rodarmor will launch a new fungible token protocol for the Bitcoin ecosystem, making it easier and more efficient for users to create tokens on Bitcoin. Runes may benefit from the trend of meme coins. Rodarmor even stated that "99.9% of fungible tokens are scams and jokes." However, this more efficient protocol is expected to bring significant transaction fee revenue, developer attention, and user growth to Bitcoin.
9. Decentralized Physical Infrastructure Networks (DePIN)
DePIN refers to Decentralized Physical Infrastructure Networks, which develop real-world infrastructure through blockchain and token rewards, covering multiple areas such as wireless connectivity, geospatial mapping, mobility, health, and energy.
DePIN aims to create resource-efficient physical infrastructure by incentivizing providers to contribute their physical resources to a decentralized network. DePIN then provides these resources to users seeking relatively low service fees, generating revenue through the fees paid by users.
Check out popular DePIN tokens on CoinGecko.
10. Real-World Assets (RWAs)
Real-World Assets (RWAs) refer to assets that exist in the real world or off-chain, which are transferred on-chain through tokenization to serve as a source of yield in DeFi. Such assets include real estate, precious metals, commodities, and artworks. RWAs are a core component of the global financial system; for instance, global real estate valuation reached $326.5 trillion in 2020, while the total market cap of gold was $12.39 trillion. Increasingly, RWA projects are looking towards U.S. Treasury bonds and high-interest rates to provide investors with lower-risk yields, including companies like Ondo Finance.
MakerDAO has also entered the RWA space by investing idle assets into short-term bonds and using the returns to drive the MKR buyback program and increase DAI savings rates, which is a typical case of how the protocol benefits from RWA investments. MakerDAO demonstrates how value can flow back to token holders, with its buyback program driving MakerDAO's growth.
RWAs have a significant potential impact on DeFi:
They can provide sustainable and reliable sources of yield for DeFi, as they are backed by traditional assets.
They can help align DeFi more closely with traditional financial markets, ensuring higher liquidity, capital efficiency, and investment opportunities.
They can bridge the gap between DeFi and traditional finance (TradFi).
Maple Finance (MPL), Goldfinch (GFI), and Centrifuge (CFG) are other projects focused on RWA collateralization that are worth a look.
Check out popular RWA tokens on CoinGecko.
11. Telegram Trading Bots
In 2023, the usage of Telegram cryptocurrency trading bots surged, providing users with convenience and efficiency in executing trades. Users do not need to connect wallets to computers and approve transactions; they simply need to copy and paste the contract address of the token and send it in the chat to purchase the token. This also speeds up the selling process as transactions can be pre-approved and signed.
Some Telegram trading bots also have additional features, such as multi-wallet sniping, which can bypass the single wallet limit of tokens; and liquidity sniping features, which instantly execute buy orders upon detecting liquidity addition to maximize profits for new tokens.
Check out our article on 'Top 5 Telegram Trading Bots' for more information on the features of different Telegram crypto trading bots.
12. Summary
In 2023, we saw narratives around artificial intelligence, China concept tokens, and decentralized social media, as well as narratives around Layer 1, Layer 2, liquid staking derivatives, real-world assets, Bitcoin Ordinals, and BRC-20. Looking ahead to 2024, emerging narratives include Restaking, DePIN, DeSci, GambleFi, and a focus on blockchain modularity.
Please remember that this article is for educational purposes and should not be considered financial advice. Do your own research (DYOR) before investing in any assets.
