Original | Odaily Planet Daily (@OdailyChina)
Author | Golem (@web3_golem)
As 2024 comes to a close, the cryptocurrency community has its own year-end summary: first, to see if this year's investment return rate outperformed the market (reminder: BTC has increased by over 130% this year), and second, to summarize the development of the sectors/ecosystems they are interested in this year.
The Solana ecosystem, Base ecosystem, TON ecosystem, and AI Agent track have all had shining moments this year. For the Bitcoin ecosystem, although many things have also happened this year, such as ecosystem infrastructure and application innovations, it has not yet reached the expectations people had at the beginning of 2024.
Therefore, some have summarized this year's Bitcoin ecosystem's silence as a 'failure', but there are also steadfast ecosystem OGs who continue to choose to 'believe'. As an ordinary player within the Bitcoin ecosystem from start to finish, I choose to use the word 'regret' to conclude this year.
2024 actually had a good start.
For the Bitcoin ecosystem, 2024 actually had a good start, as people began the year with high expectations for the Bitcoin ecosystem, believing that 2024 would be the year of explosive growth and entry into the mainstream for the Bitcoin ecosystem, just as they now believe that 2025 will be the year of explosive growth 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 birth of the Ordinals protocol 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 fray, forming a layer of asset issuance protocols, L2, and Bitcoin staking as the three main sectors.
From the perspective of layer 1 asset issuance protocols, influenced by Binance's launch of 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 heat influence other chains to follow suit, but it also drove up the tokens of other layer 1 asset protocols such as ARC 20, SRC 20, PIPE, etc. At the same time, the rune pre-mining and airdrop play initiated by RSIC and Runestone in January 2024 also made people excited about the upcoming Runes protocol.
From the perspective of L2 development, Bitcoin L2 has seen explosive growth at the beginning of 2024. With the booming issuance and trading of layer 1 assets, the congestion issues of the Bitcoin mainnet and players' demand to enhance the playability of mainnet assets have made Bitcoin L2 a hot entrepreneurial direction. At the beginning of 2024, it was reported that over 100 Bitcoin L2 projects appeared in a short period. Although many of these were hastily assembled and 'cut and run' projects, overall, domestic and foreign VCs began to invest heavily in Bitcoin L2, with expectations that Bitcoin L2 could replicate the glory of the Ethereum L2 ecosystem in 2024.
In March 2024, @Bitvmclub summarized 69 Bitcoin L2s.
From the perspective of Bitcoin staking, the Bitcoin staking protocol Babylon announced the completion of an 18 million USD financing in December 2023, officially starting the narrative of Bitcoin staking and re-staking. With the Ethereum ecosystem's top project, the 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 bright, not only waking up dormant Bitcoin whales to participate in the Bitcoin ecosystem but also forming a re-staking ecosystem comparable to Ethereum.
In addition to the overall positive trends shown by the three main sectors at the beginning of 2024, the general infrastructure of the Bitcoin ecosystem (such as wallets, cross-chain bridges, and trading markets) has 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 has once again strengthened people's expectations for the Bitcoin ecosystem, as a network worth trillions of dollars will naturally develop into a market size of hundreds of billions of dollars.
However...
Regrettably, the Bitcoin ecosystem in 2024 did not welcome attention and development surpassing previous bull market levels, instead entering a long period of silence.
The performance of mainnet assets has been declining.
On April 20, 2024, Bitcoin experienced its fourth halving, and the token protocol Runes, developed by Ordinals founder Casey, also announced its launch. To compete for inscription numbers, project parties raised on-chain transaction fees to over 2000 Satoshis/byte, leading people to believe this was the beginning of a prosperous Bitcoin ecosystem thanks to the Runes relay of BRC 20. However, they did not expect that the Runes would peak right from the start, and speculative enthusiasm faded within just two weeks. Although the market cap of Runes briefly surpassed 2 billion USD in June and November, the vitality and liquidity for new listings within the ecosystem have remained sluggish.
At the same time, the performance of other asset protocols this year has been similar. The peak drop of ORDI during the year reached 70%, while the birth of new assets initially caused FOMO among market participants, but afterwards, due to the lack of new capital and flow participation, the situation worsened, such as the airdropped PIZZA from Unisat and the CAT 20 from the Fractal network.
The reasons for this are twofold: firstly, perhaps due to experiencing previous Bitcoin bull markets, the narrative of fair asset issuance after Runes no longer excites the outside world, failing to generate wealth effects again; secondly, there is a lack of synergy between the domestic and international markets, with the larger communities for Runes mainly led by overseas users, while the main funds in the Chinese-speaking region are still on BRC 20, such as the currently popular 'ground-push coin' inscription, etc.
The survival rate of Bitcoin L2s is less than 20%.
Unfortunately, the Bitcoin L2 ecosystem in 2024 did not experience the expected prosperity. 'Besides the Lightning Network, all other Bitcoin L2s are castles in the air,' criticized Casey, the founder of the Ordinals protocol, in an interview when discussing Bitcoin L2.
In the past 12 months, the market has seen over 100 Bitcoin L2 projects, but according to DefiLlama data, only 19 L2s remain today, with a TVL of about 2.8 billion USD. Meanwhile, the TVL of Ethereum's L2, just Arbitrum alone, has reached 3 billion USD.
So, while it comes to expansion, why has the L2 ecosystem on Ethereum been verified as feasible, yet the efforts to develop it within the Bitcoin ecosystem have not gone smoothly?
In the early days, most Bitcoin L2s lacked innovation. In the initial stages of the Bitcoin L2 sector, to attract investment and quickly build the ecosystem, many L2s adopted an EVM-like architecture + cross-chain bridge approach to expand the Bitcoin mainnet. Although this method borrowed from Ethereum's experience, being convenient and quick to set up and requiring low user education costs, it lacked innovation and was commonly met with skepticism like 'if this is called Bitcoin L2, then Ethereum is the best Bitcoin L2'. This has proven to be the case, and as the hype faded, these hastily assembled L2s quickly disappeared.
Bitcoin L2 started the TVL competition too early. Perhaps influenced by the Ethereum L2 Blast, Bitcoin L2s learned from the beginning to stimulate the growth of TVL through 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 battle, with its TVL reaching 543 million USD within just 24 hours, while B² Network, BEVM, and Bitlayer also began their TVL competition.
In the end, Merlin won the competition within a month with a TVL of over 3 billion USD and officially launched its token MERL on OKX on April 19. After its launch, the price of MERL peaked at 1.78 USDT but quickly collapsed, with a decline of up to 85% from its high. Since then, the focus on price has shifted from expectation to disappointment and criticism in the Bitcoin L2 ecosystem.
Who recognizes the narrative of Bitcoin staking?
With a luxurious financing lineup and a 'sexy narrative', Babylon and its Bitcoin re-staking ecosystem are another sector expected in the Bitcoin ecosystem in 2024. When the first phase of staking on Babylon's mainnet opened in August, it attracted widespread attention, reaching a limit of 1,000 BTC within just 3 hours. Currently, Babylon's TVL has reached 57,051.72 BTC, approximately 5.64 billion USD. However, compared to EigenLayer's TVL of 15.718 billion USD, Babylon's TVL is only 1/3 of that, and amidst Bitcoin's continual breakthroughs, the market's attention on Babylon has not increased. Who exactly recognizes the narrative of Bitcoin staking?
There is a mismatch between the market and products; true large holders are unwilling to part with their Bitcoin. The narrative slogan of Babylon is to unlock the liquidity of 21 million BTC through staking, but the market may not buy it. The market recognizes Ethereum as a native financial asset on-chain, while Bitcoin is still regarded as 'digital gold', which partially explains why the scale of Bitcoin spot ETF funds is much larger than that of Ethereum spot ETFs.
For large Bitcoin holders, as Bitcoin continues to rise, they are even less willing to part with their Bitcoin. For traditional finance, the Bitcoin spot ETF and MSTR are what they truly like about BTCFi. This is completely inconsistent with the Ethereum ecosystem, which inherently encourages staking.
Babylon sets the stage, but others are taking the spotlight. 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 wrapped BTC, which is then deposited 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 wrapped BTC may not be on a 1:1 basis, and the circulating wrapped BTC may exceed the locked BTC value, which could imply liquidity risks.
At the same time, the security of re-staking protocols is also worth considering. Previously, Bedrock suffered an attack that resulted in a loss of about 2 million USD on a 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 circumstances of unclear returns and insufficient security guarantees, retail investors may also hesitate to participate in staking.
In summary, although the Bitcoin ecosystem has had a good start in 2024, the peak performance of the Runes protocol upon launch, the rapid cooling of various asset protocols, the dramatic developments of Merlin and other Bitcoin L2s, as well as the Babylon ecosystem not bringing the expected BTCFi bull market, have left us disappointed with the development of the Bitcoin ecosystem this year.
Will everything be alright in 2025?
It should be emphasized that what I have said above is not to be taken as bearish on the Bitcoin ecosystem or to reach a final conclusion about it — the gap between people's beautiful expectations for the future and the actual situation in reality always exists, and I refer to this gap as 'regret', which is also my summary of the Bitcoin ecosystem this year.
To this day, the Bitcoin ecosystem still has steadfast holders and builders. Communities such as ORDI, Rune DOG, and PUPS are continuously being built, while OKX Wallet and Unisat are still working on infrastructure development. Although the Bitcoin L2 bubble has burst, the surviving teams have not given up. Innovations such as OP_CAT are on the way, and Babylon may launch its TGE in January or February 2025...
In 2025, everything will be fine, right? Although we did not witness a larger-scale explosion of the Bitcoin ecosystem this year, I still believe that the Bitcoin ecosystem will remain the protagonist of this cycle, and I confidently look forward to 2025.
If it were you, what keyword would you give to this year's Bitcoin ecosystem?
Related reading
When will the winds of a bull market blow into the Bitcoin ecosystem?
A brief history of the Bitcoin ecosystem: Written on the eve of the Bitcoin ecosystem's explosive growth.
Bitcoin has broken through 100,000 USD, yet the ecosystem remains lukewarm. What do seasoned players think?
