Author: Josiah Makori
Compiled by: Blockchain in Plain Language
What are crypto narratives?
Crypto narratives refer to popular ideas, stories, or beliefs in the cryptocurrency space that influence people's perceptions and value judgments of cryptocurrency. They can sway investor sentiment, market trends, and the adoption of new technologies.
Key Points
Crypto narratives refer to popular ideas, stories, or beliefs in the cryptocurrency field that influence people's perceptions and value judgments of cryptocurrencies, swaying investor sentiment, market trends, and the adoption of new technologies.
One of the most important trends in 2024 is the focus on inclusivity, meaning anyone can participate without needing in-depth cryptocurrency and blockchain knowledge. This is reflected in the popularity of memecoins and prediction markets.
Narratives worth watching in 2024 include: Memecoins, Liquid Restaking Tokens, Liquid Staking Derivatives, Blockchain Modularity, Layer 1, Layer 2 (Optimistic Rollup and Zero-Knowledge Rollup), BRC-20, Decentralized Physical Infrastructure Networks (DePIN), Telegram Crypto Trading Bots, Prediction Markets, and Real-World Asset Tokenization (RWAs).
Crypto narratives can also be misleading or even harmful, especially when built 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 searching for trends to better understand what is happening in the current market, why it is happening, and its potential impacts. Historically, they would often leverage the dynamics of market cycles to proactively act in future market environments. From Elon Musk's tweets driving DOGE price fluctuations to the belief that Bitcoin halving brings a bull market every four years, many investors predict price movements through crypto narratives.
For example, the narrative of cryptocurrency as a 'store of value' has attracted many investors who view it as a hedge against economic uncertainty. Similarly, the narrative of blockchain as a 'disruptive technology' has drawn numerous entrepreneurs and developers committed to developing new applications on the blockchain.
1. What are crypto narratives?
This article was updated by the CoinGecko team in January 2024, reflecting new and upcoming crypto narratives.
Market participants are always looking for trends to better understand what is happening in the current market, why it's happening, and its potential impacts. Historically, people have often acted more proactively in future market environments based on dynamics of market cycles. From Elon Musk's tweets driving DOGE price fluctuations to the belief that Bitcoin halving brings a bull market every four years, many investors predict price movements through crypto narratives.
For example, the narrative of cryptocurrency as a 'store of value' has attracted many investors who see cryptocurrency as a tool to 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 crypto narratives important?
The emergence of crypto narratives stems from various factors, including the technological capabilities of crypto and blockchain, social and economic events, as well as the beliefs and motivations of individuals in 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 Physical Infrastructure Networks (DePIN). However, narratives like memecoins and prediction markets have also rapidly emerged. These narratives make the crypto market more participatory for everyone, as they do not require in-depth knowledge of the crypto space.
Narratives are important because they play a crucial role in shaping public perception and subsequently market movements. 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, crypto narratives can also be misleading or even harmful due to false assumptions or excessive hype. Therefore, it is very important to critically assess these narratives and make investment decisions based on solid analysis and research.
Today, multiple emerging trends and themes are attempting to define 2024. In this guide, we will introduce the top crypto narratives to watch in 2024:
2. Memecoins
Memecoins remain one of the most lucrative narratives in 2024, with rising expectations for a memecoin supercycle. CoinGecko data shows that SPX6900 and Gigachad topped the growth charts in Q3. Additionally, other memecoins have reached new heights, such as GOAT becoming the first token from Pump.fun to surpass a market cap of $1 billion. As of this writing, the total market cap of memecoins has reached $107.5 billion.
As the name suggests, meme coins are based on internet memes and popular trends, supported by enthusiastic communities. They are often positioned as entertainment-focused tokens, relying on a growing community for viral spread and growth. Meme coins also provide traders with an easy way to engage in popular blockchain speculation, as these tokens typically sell for just a few cents at launch. Unlike other narratives, potential buyers do not need in-depth knowledge of the cryptocurrency world to join the speculation, as most meme coins have little practical use at launch.
2024 also saw the emergence of meme coin generators, simplifying the token creation process, allowing anyone without a technical background to issue their own meme coins. The biggest player in this space is Pump.fun based on Solana. To date, over 3 million tokens have been issued on Pump.fun, with total revenue exceeding $187 million.
As of this 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 cryptocurrency, where users can buy shares for 'yes' or 'no' outcomes. Once the event concludes, users who selected the correct option will earn based on the number of shares they 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 on different protocols simultaneously to provide security for multiple networks. This mechanism helps protocols address the challenge of building their own validator clusters while providing scalable security based on their respective protocol needs. In return, restakers can earn additional rewards through their restaking strategies (but also face additional forfeiture risks).
EigenLayer is a pioneer in the restaking space, with its total locked value (TVL) exceeding 3.5 million ETH as of this writing. Users can restake their liquid staking tokens like stETH, rETH, and cbETH to provide security for Active Validator Services (AVS).
You can check 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 gain additional yields. In standard staking, stakers provide security for proof-of-stake (PoS) blockchains by depositing assets in the protocol. However, this method leads to capital inefficiency, as stakers' assets are locked and cannot generate additional returns.
Liquid staking emerged in this context. The value of derivative assets is tied to the underlying asset (locked when staked on proof-of-stake blockchains) and accumulates rewards over time, increasing in value. Meanwhile, derivative tokens can be used for other DeFi activities such as borrowing and providing liquidity. In return, most liquid staking providers take a 5-10% share from staking rewards as income.
Liquid Staking Derivatives address the issue of capital inefficiency, lowering the entry barrier for staking and enhancing the security and stability of networks.
You can check the top liquid staking tokens on CoinGecko.
6. Blockchain Modularity
Early blockchains, like Bitcoin and Ethereum, were monolithic structures, meaning that the blockchain had to execute all tasks. However, as competition shifted its focus from performance to cost and flexibility, the era of modular blockchains has gradually arrived. Modularity breaks down the blockchain into independent components, allowing it to surpass current scaling limitations.
Modular components include:
Execution Layer: Responsible for transaction execution
Settlement Layer: Responsible for settlement, fraud proof, and connecting other execution layers
Consensus Layer: Responsible for reaching consensus on transaction order
Data Availability Layer: Provides accessible data to all network participants
Transaction 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 also gradually modularizing, such as OPStack, which modularizes all elements of Layer 2 chains into standardized open-source modules that developers can leverage 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 modular architectures. In Celestia's case, the emphasis is on consensus and data availability, optimizing storage. This allows Layer 2 chains built on Celestia to focus on creating the optimal execution environment for their applications.
6. Layer 1 Blockchains (Layer 1s)
Layer 1 (L1) blockchains serve as the infrastructure for building other blockchain applications (such as smart contracts). They execute most on-chain transactions and serve as the 'trusted source' of public blockchains. Traditional L1 blockchains, like Ethereum, often face issues of slow transaction speeds, low scalability, and high fees. This is where Layer 2 blockchains (Layer 2s) emerge, responsible for executing transactions so L1 can focus on publishing and validating these transactions. However, new L1 networks are changing the landscape in terms of transaction speed, cost, and interoperability.
Here are some L1 projects worth watching as the L1 narrative heats up:
1) Solana
Despite launching in 2020, Solana's ecosystem has become the most popular blockchain ecosystem by 2024, accounting for 38.8% of on-chain narrative interest among crypto investors. A major reason for the Solana ecosystem's popularity is the current memecoin craze, with Solana's high speed and low fees, coupled with the viral spread of the Pump.fun meme coin generator, making it one of the main chains for memecoin speculation.
2) Sui
Sui is an 'infinite platform' for building rich and dynamic on-chain assets from gaming to finance. It is the first permissionless L1 network designed with creators and developers in mind, aimed at serving the upcoming billion Web3 users. Sui was created by the Mysten Labs team, former Meta engineers.
Sui meets application demands through horizontal scaling, infinitely improving scalability while ensuring cost-effectiveness of transactions. Moreover, it significantly enhances scalability by supporting parallel consensus for simple transactions (such as 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 mechanism.
7. Layer 2: Rollups
The narrative of vertical scaling focuses on Layer 2s, which are protocols built on top of L1 to further extend and enhance them. L2s significantly increase transaction throughput by moving transactions off-chain to execute, greatly reducing the computational burden on L1. The total locked value (TVL) of L2s has been steadily growing, maintaining strong performance even in the face of negative sentiment in the DeFi market and the overall crypto market.
A. Optimistic Rollups
Optimistic Rollups are L2 scaling solutions designed to improve transaction throughput and reduce costs while maintaining the security guarantees of the underlying blockchain. They utilize a trust-based model to confirm transactions off-chain, which are then added to the underlying blockchain after confirmation by a small group of 'witnesses'.
Source: Beat
Here are some L2 Optimistic Rollup projects to continue watching 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 large 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 steadily 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's market cap exceeding $1 billion.
2) Arbitrum
Arbitrum is an L2 scaling solution utilizing Optimistic Rollups, aimed at achieving high throughput and reducing user trading costs. Even after Ethereum's Merge, Ethereum's speed and gas fees remain higher compared to networks like Arbitrum. This has led many Web3 users and creators to shift to the Arbitrum network, driving its total locked value (TVL) to a peak 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 to various decentralized exchanges and protocols on the Arbitrum network. This airdrop also helped boost the visibility 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 is 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 Optimism fully complies with the formal specifications of the Ethereum blockchain and runs in sync with Ethereum. Optimism has also launched OPStack, standardizing the various modular elements of L2 chains for developers to build new chains interoperable with Optimism. According to Defillama data, Optimism's TVL peaked at $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 large numbers of transactions and publish summary data on-chain. The core of ZK Rollups is the ability to prove knowledge of something without revealing information. Therefore, they are highly attractive for applications requiring privacy, such as digital identity verification and confidential transactions.
Here are some ZK Rollups projects worth watching in 2024:
1) zkSync Era
zkSync Era is an L2 rollup solution that utilizes Zero-Knowledge Proofs to scale the Ethereum network while not sacrificing its security and decentralization features. zkSync Era keeps most computations and data storage off-chain, allowing users to enjoy Ethereum's security while gaining higher transaction speeds and lower costs.
2) Polygon zkEVM
Polygon zkEVM launched on Mainnet Beta on March 27, 2023, marking an important step for Ethereum scaling and achieving mainstream Web3 adoption. Similar to Optimism, Polygon zkEVM is EVM-equivalent, meaning most Ethereum native applications can run directly on zkEVM without requiring modifications or re-implementations of code.
3) Scroll
Scroll is an L2 solution aimed at achieving infinite scalability, high throughput, full decentralization, and trust-minimized privacy. It achieves this by combining ZK Rollups with high-performance off-chain decentralized systems.
4) Taiko
Taiko is an L2 aiming to be the closest to Ethereum equivalence, providing dApps with a scalable and efficient platform without requiring any changes to existing protocols. Unlike many other ZK Layer 2s, Taiko focuses on achieving full compatibility with Ethereum rather than prioritizing the speed of 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 tests on the Taiko testnet.
8. Bitcoin Layer 2
Like other Layer 2s, Bitcoin Layer 2 projects aim to scale the Bitcoin blockchain by developing an execution layer to provide higher throughput and more operations than the mainnet. Layer 2s on the Bitcoin network provide an execution layer different from the mainnet, supporting operations such as virtual machines (like EVM) and smart contracts. However, Bitcoin Layer 2 networks face challenges like ensuring secure cross-chain bridging between Bitcoin and its Layer 2 network, while 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 like Merlin.
Bitcoin: Ordinals, BRC-20 Tokens, and Runes
Ordinals are one of the latest popular 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 excitedly 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 was made possible by the Taproot upgrade introduced to the Bitcoin blockchain in November 2021.
The number and order of BTC Ordinals are closely watched, and some well-known series and high-price sales have emerged, 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 have also garnered 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 BRC-20 Tokens are deployed, Ordinal wallets can freely mint these tokens. Although still in early stages, several platforms support 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 simpler and more efficient for users to create tokens on Bitcoin. Runes may benefit from the popularity of meme coins. Rodarmor even stated, "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 incentives, covering various fields such as wireless connectivity, geospatial mapping, transportation, 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 offers these resources to users seeking relatively low service costs, generating revenue through fees paid by users.
Check popular DePIN Tokens on CoinGecko.
10. Real World Assets (RWA)
Real World Assets (RWAs) refer to assets that exist in the real world or off-chain that are tokenized and transferred on-chain to serve as sources of yield in DeFi. Such assets include real estate, precious metals, commodities, and artwork. RWAs are a core component of the global financial system; for instance, global real estate valuation reached $326.5 trillion in 2020, while the gold market's total market cap was $12.39 trillion. An increasing number of RWA projects are eyeing U.S. Treasury bonds and high interest rates to provide lower-risk yields for investors, including companies like Ondo Finance.
MakerDAO has also entered the RWA space, allocating idle assets into short-term bonds and utilizing the yields to drive MKR buyback programs and increase DAI savings rates, serving as 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 the growth of MakerDAO.
RWAs have a significant potential impact on DeFi:
They can provide sustainable and reliable sources of income for DeFi, as they are backed by traditional assets.
They can help make DeFi more compatible with traditional financial markets, ensuring higher liquidity, capital efficiency, and investment opportunities.
They are able to bridge the gap between DeFi and traditional finance (TradFi).
Maple Finance (MPL), Goldfinch (GFI), and Centrifuge (CFG) are other projects focusing on RWA borrowing that are worth a look.
Check popular RWA Tokens on CoinGecko.
11. Telegram Trading Bots
In 2023, the use of Telegram crypto trading bots surged, providing users with convenient and efficient execution of trades. Users can buy tokens by simply copying and pasting the contract address into the chat without needing a computer to connect their wallets and approve transactions. This also speeds up the selling process, as trades 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 for tokens; and liquidity sniping capabilities, which execute buy orders immediately upon detecting liquidity additions to maximize returns on new tokens.
Check out our article on 'Top 5 Telegram Trading Bots' to learn more about 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 like 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 only and should not be considered financial advice. Always conduct your own research (DYOR) before investing in any asset.
