Article reprinted from: Odaily Planet Daily
Author: Golem
Editor: Hao Fangzhou
As 2024 is about to end, people in the currency circle also have their own year-end summaries: first, whether the investment return rate this year outperformed the market (reminding you that BTC's increase this year exceeded 130%); second, summarizing the development of the track/ecosystem they are concerned about this year.
The Solana ecosystem, Base ecosystem, TON ecosystem, and AI Agent track all had shining moments this year. For the Bitcoin ecosystem, although many things have also happened this year, such as ecological infrastructure and application innovation, it has not reached the expectations people had at the beginning of 2024.
Therefore, some summarize this year's silence of the Bitcoin ecosystem as a 'failure,' while some steadfast ecological OGs continue to choose to 'believe.' As an ordinary player in the Bitcoin ecosystem from beginning to end, I choose the word 'regret' to conclude this year.
2024 actually had a good start.
2024 actually had a good start for the Bitcoin ecosystem. People started the year with expectations for the Bitcoin ecosystem, believing that 2024 would be the year of a complete explosion and mainstream visibility for the Bitcoin ecosystem, just as many believe 2025 will be the year of the AI Agent ecosystem explosion.
Why did we have such high expectations for the development of the Bitcoin ecosystem in 2024? Perhaps because since the birth of the Ordinals protocol in December 2022, the Bitcoin ecosystem has gone through 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 market, forming three main tracks: first-layer asset issuance protocols, L2, and Bitcoin staking.
From the perspective of first-layer asset issuance protocols, influenced by Binance's launch of BRC 20 tokens ORDI and SATS spot trading at the end of 2023, the inscription concept exploded again at the beginning of 2024. Not only did the heat influence other chains to imitate and start the inscription mode, but it also drove the rise of other first-layer asset protocols such as ARC 20, SRC 20, PIPE, etc. Meanwhile, the pre-mining and airdrop gameplay of Runes initiated by RSIC and Runestone in January 2024 also made people full of expectations for the Runes protocol to be launched in the future.
From the development of L2, Bitcoin L2 saw explosive growth at the beginning of 2024. With the hot issuance and trading of first-layer assets, the congestion problems of the Bitcoin mainnet and players' demand to increase the playability of mainnet assets made Bitcoin L2 a popular startup direction. At the beginning of 2024, there were reports that over 100 Bitcoin L2 projects appeared in a short period. Although there were many poorly made and 'cut and run' projects among them, overall, domestic and foreign VCs began to invest heavily in Bitcoin L2, all hoping Bitcoin L2 can 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 in December 2023 that it had completed $18 million in financing and officially kicked off 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 basis and security than Ethereum, the prospects for Bitcoin staking and re-staking in 2024 will be very broad, not only awakening sleeping Bitcoin whales to participate in the Bitcoin ecosystem but also forming a re-staking ecosystem comparable to Ethereum.
In addition to these three main tracks showing an overall positive trend 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 period. Unisat and OKX Wallet have technically supported multiple asset protocols, becoming the main wallets and trading markets in the Bitcoin ecosystem.
The Bitcoin spot ETF was approved and listed on January 11, 2024, marking the official integration of Bitcoin into traditional finance. This has further strengthened people's expectations for the Bitcoin ecosystem, as a network valued at trillions of dollars is bound to develop into a market scale of hundreds of billions of dollars.
However...
Unfortunately, the Bitcoin ecosystem did not receive the attention and development that surpassed previous bull market enthusiasm in 2024, marking the start of a long period of silence.
The performance of mainnet assets has been declining.
On April 20, 2024, Bitcoin will experience its fourth halving, and the token protocol Runes, developed by Ordinals founder Casey, will also be launched. To compete for inscription numbers, the project team raised on-chain transaction fees to over 2000 satoshis/byte. People believe this marks the beginning of the BRC 20 relay that will keep the Bitcoin ecosystem thriving, but unexpectedly, Runes peaked at the start, and speculative enthusiasm faded in just two weeks. Although in June and November, the market value of Runes briefly exceeded $2 billion, the vitality and liquidity of new projects within the ecosystem have remained sluggish for a long time.
Similarly, other asset protocols performed similarly this year, with ORDI dropping 70% from its peak, while new assets initially sparked FOMO among market participants but later declined due to a lack of new funds and participation, such as the PIZZA airdrop from Unisat and the CAT 20 born from the Fractal network.
The reasons are twofold: first, after experiencing previous Bitcoin bull markets, the narrative of fair asset issuance for Bitcoin after Runes no longer excites the outside world, failing to create a wealth effect again; second, the lack of cooperation between domestic and foreign communities means the ecosystem has not formed a collective force. Larger communities of Runes are mainly led by overseas users, while the main funds in the Chinese-speaking area remain on BRC 20, with this year's popular inscriptions like 'Ground Promotion Coin' and others.
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 flourish as initially expected. 'Except for the Lightning Network, all other Bitcoin L2s are castles in the air,' Casey, the founder of the Ordinals protocol, criticized when mentioning Bitcoin L2 in an interview.
In the past 12 months, there have been over 100 Bitcoin L2 projects in the market, but according to DefiLlama data, only 19 L2s remain, with a total TVL of about $2.8 billion. On the other hand, Ethereum's L2 ecosystem has a total TVL of $3 billion just for Arbitrum.
So why has the expansion of the L2 ecosystem on Ethereum been proven feasible, while its development in the Bitcoin ecosystem has not been satisfactory?
Most early Bitcoin L2s lacked innovation. At the beginning of the Bitcoin L2 race, many L2s adopted a similar EVM architecture + cross-chain bridge method to expand the Bitcoin mainnet to attract investment and quickly build the ecosystem. Although this method borrowed from Ethereum's experience, making it convenient and quick to build chains and lowering 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 true, and as the hype faded, these hastily assembled L2s quickly disappeared.
Bitcoin L2 started the TVL competition too early. Perhaps influenced by Ethereum L2 Blast, Bitcoin L2s learned from the start to stimulate TVL growth using points and team incentives. Merlin is a popular chain among Bitcoin L2s. On February 9, 2024, Merlin fired the first shot in the Bitcoin TVL competition, and within just 24 hours, its TVL reached $543 million. At the same time, B² Network, BEVM, and Bitlayer also initiated the TVL competition.
Ultimately, Merlin won this competition with over $3 billion in TVL within a month and launched its official token MERL on OKX on April 19. After its launch, the price of MERL peaked at 1.78 USDT, but then quickly collapsed, with a peak decline of 85%. Since then, the focus on prices shifted from anticipation to disappointment and criticism regarding the Bitcoin L2 ecosystem.
Who has recognized the Bitcoin staking narrative?
With a luxurious financing lineup and 'narrative attractiveness,' Babylon and its Bitcoin re-staking ecosystem behind it are another track that people expect in the Bitcoin ecosystem in 2024. When Babylon's mainnet staking opened its first phase in August, it attracted nationwide attention, reaching the limit of 1000 BTC in just three hours. Currently, Babylon's TVL is 57,051.72 BTC, approximately $5.64 billion. However, compared to EigenLayer's staggering TVL of $15.718 billion, Babylon's TVL is only 1/3 of that. Furthermore, despite Bitcoin continuously reaching new highs, Babylon's market attention has not increased. Who exactly has recognized the Bitcoin staking narrative?
There is a mismatch between the market and products, and truly large holders are unwilling 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 buy this narrative. The market more recognizes Ethereum as an on-chain native financial asset while still viewing Bitcoin as 'digital gold,' which partly explains why the fund size of Bitcoin spot ETFs is much larger than that of 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 their true favorites in the BTCFi space. This is in stark contrast to the Ethereum ecosystem, which encourages staking mechanisms.
Babylon set the stage, but others took the lead. 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 converting their BTC into the platform's wrapped BTC, which the platform deposits into Babylon, allowing users to enjoy dual benefits from both 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 in a 1:1 ratio, leading to liquidity risks as the circulating wrapped BTC may exceed the locked BTC value.
The security of re-staking protocols is also worth considering. Previously, Bedrock suffered attacks, causing losses of about $2 million on DEX. Although Babylon claims to use a self-custody solution to protect user funds, most of the re-staking protocols behind it use custodial solutions, which contradicts the concept Babylon initially promoted. Therefore, not only are large holders unwilling to stake BTC, but retail investors may also hesitate to participate in staking due to unclear returns and insufficient safety guarantees.
In summary, while the Bitcoin ecosystem in 2024 had a good start, the performance of the Runes protocol being at its peak 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 about the expected BTCFi bull market, all made us feel regret about the development of the Bitcoin ecosystem this year.
Will everything get better in 2025?
It should be emphasized that what I said above is not to sing empty praises for the Bitcoin ecosystem or to conclude its fate—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 this year.
To this day, the Bitcoin ecosystem still has steadfast holders and builders. Communities for ORDI, Runes DOG, PUPS, etc., are still actively building, and OKX Wallet and Unisat continue to improve infrastructure. Although the Bitcoin L2 bubble has burst, the surviving teams have not given up, and innovations like OP_CAT are on the way. Babylon may have its TGE in January-February 2025...
In 2025, will everything be fine? Although we did not witness a larger-scale eruption of the Bitcoin ecosystem this year, I still believe that the Bitcoin ecosystem will remain the main character of this cycle, and I confidently welcome 2025.
If it were you, what keyword would you give to this year's Bitcoin ecosystem?
