By Vaish Puri & Joey Campbell
Compiled by: TechFlow
When historians look back on 2024, they may see it as a year that marked the mainstreaming of Bitcoin. It was a year that saw Bitcoin hit all-time highs, became a hot topic in the U.S. presidential election, 11 Bitcoin ETFs were approved, and the halving event took place. And the global economy struggled with inflationary pressures.
This year, Bitcoin has shown its unique multifaceted charm. In economically troubled countries (such as Argentina and Turkey), it is seen as a safe haven against high inflation; in the eyes of Wall Street elites, it has become an investment tool recognized by financial giants such as BlackRock; for cypherpunks and developers, it is a new canvas for innovation; and in the eyes of governments, it has changed from a threat that needs to be controlled to an opportunity that can be exploited.
Bitcoin's technology is also continuously evolving. Once centered around 'simplicity,' the Bitcoin network is beginning to experiment with more new features. Re-enabled opcodes (like OP_CAT) and revolutionary research (like BitVM) inject programmability and self-custody into Bitcoin's base layer. The rapid development of second-layer networks (Layer 2) provides solutions for transaction scalability; at the same time, the emergence of liquid staking derivatives also brings the potential for yield generation for Bitcoin.
BlackRock's iShares Bitcoin Trust (IBIT) set a record, achieving $10 billion in assets under management within just a few weeks, a pace far surpassing its gold ETF's development history. With a massive influx of institutional funds, Bitcoin is gradually entering retirement portfolios. This phenomenon excites Wall Street while concerning Bitcoin's purists. The popularity of ETFs has made Bitcoin unprecedentedly accessible—today, 62% of Americans can easily purchase Bitcoin through brokerage accounts like buying Apple stock. However, this convenience also brings problems. The Bitcoin spirit of 'Not your keys, not your coins' is gradually overshadowed by the clamor of institutional trading.
However, Bitcoin always finds vitality in contradictions. In the United States, Trump's crypto-friendly policies have made Bitcoin a legitimate institutional asset; in India, despite regulatory pressures, 75 million users have adopted Bitcoin as a tool for financial empowerment; in Turkey, with a 50% inflation rate, Bitcoin has become the savings choice for millions; and in Argentina, as the currency rapidly depreciates due to a 140% inflation rate, citizens have no time to hesitate over custodial methods and instead use Bitcoin to protect their savings. In Latin America and Africa, Bitcoin is not merely an investment tool but a means of survival.
This adaptability permeated Bitcoin's development in 2024. Each region has attributed different meanings to Bitcoin based on its own needs. This flexibility has not weakened Bitcoin's core objectives but rather proven its strong vitality. Bitcoin acts like a mirror, reflecting the needs of different users while maintaining its core characteristics.
As 2024 draws to a close, Bitcoin is facing significant choices. It has gained the legitimacy that early supporters expected, but this legitimacy may not be realized in the way they initially envisioned. The rise of ETFs has brought immense changes but also introduced risks that Bitcoin was initially designed to avoid. Meanwhile, the network's scalability issues are finally being seriously addressed, and the future of 2025 is filled with hope and possibilities.
Are Bitcoin ETFs bridges to mass adoption or hazards of centralization? Can Bitcoin staking enhance the network's functionality, or will it further divide its core philosophy? With the emergence of Layer 2 solutions and tokenized Bitcoin, can Bitcoin truly achieve scalability, or are we just repeating past debates? Does Trump's victory and the end of the Gensler era mark a new chapter for cryptocurrency in the U.S.? From the revival of OP_CAT to record ETF inflows, from MEV on Bitcoin to explorations of recursive contracts, the story of Bitcoin in 2024 is still being written.
Institutional Adoption: ETFs and Microstrategy
Bitcoin ETFs: Institutional Demand
Bitcoin ETFs (such as BlackRock's IBIT) achieved $20 billion in assets under management (AUM) in 137 days, setting a historical record. In contrast, the previously fastest-growing ETF (JEPI) took 985 days to reach the same scale.
Currently, the total amount of Bitcoin held by ETF custodians has surpassed 1 million, accounting for over 5% of the current total Bitcoin supply.
Hedge funds and financial advisors are significant players among the investors in these ETFs, indicating strong institutional interest in Bitcoin.
Decline of Grayscale
Due to a management fee of up to 1.5% and inefficiencies in the redemption mechanism, Grayscale's GBTC is no longer the market leader. A large number of users have turned to lower-cost ETFs, resulting in a substantial reduction in GBTC's managed assets, with a decrease of 152,000 Bitcoins in just one month.
MicroStrategy's Strategy
Under Michael Saylor's leadership, MicroStrategy has accumulated 402,100 Bitcoins, worth approximately $39.8 billion. They have raised funds through convertible bonds and stock issuance to continuously increase their Bitcoin holdings.
Although this strategy has sparked some controversies, MicroStrategy remains one of the world's largest Bitcoin holders and is viewed as an indirect way to invest in Bitcoin, with its stock trading price significantly higher than pure Bitcoin exposure.
Broader Impacts
With the entry of institutional investors, Bitcoin's price volatility is gradually decreasing. Options trading on ETFs has further solidified Bitcoin's position as a long-term store of value, becoming an important component in many portfolios.
ETFs provide convenient investment channels for retail investors and financial advisors but have also been criticized for being overly reliant on custodial models, contradicting the 'self-custody' spirit advocated by Bitcoin.
BRC-20, Ordinals, and Runes
Through the Taproot and SegWit upgrades, the Bitcoin network has introduced Ordinals and Runes, making NFTs and fungible tokens possible. These innovations have driven growth in network activity but have also sparked controversy. Critics argue that they increase the network's burden, while supporters claim they help improve the sustainability of transaction fees and showcase Bitcoin's permissionless innovative capabilities.
Trends and Network Impact
Due to the popularity of Ordinals collectibles, Bitcoin trading activity surged, leading to increased network transaction fees. In May 2024, at the peak of the Ordinals craze, transaction fees accounted for over 75% of miner revenue, setting a historical high.
The size of the memory pool (mempool) gradually returned to normal after reaching a peak of 350 million bytes at the end of 2023, while the introduction of Runes improved UTXO management efficiency.
Throughout the year, Ordinals, Runes, and BRC-20 have alternately become the main force in trading activities, with Runes having the highest trading share.
Market and Adoption
Platforms like Magic Eden and OKX dominate the trading market, accounting for over 95% of trading volume. With improved user experience and cross-chain bridging with Solana, the adoption rate of Bitcoin NFTs has significantly increased.
Although Ordinals collectibles performed well at the beginning of the year, their prices have fallen more than 50% from their peak after the halving.
Protocols like Liquidium allow users to use Ordinals and Runes as collateral for loans, further expanding the application scenarios of Bitcoin-native DeFi. Meanwhile, stablecoins (such as USDh launched by Hermetica) attempt to use Bitcoin as collateral, although they still face technical limitations.
Cultural and Economic Shifts
Memecoins, digital art, and decentralized markets are redefining how Bitcoin is used. Although these trends carry speculative elements, they also demonstrate Bitcoin's core values of censorship resistance and permissionless innovation.
Tokenized Bitcoin: BTC on EVM chains
Currently, using tokenized Bitcoin through EVM chains (Ethereum Virtual Machine chains) is the most popular way to unlock Bitcoin's utility, rather than relying on second-layer networks (Layer 2). Due to changes in the WBTC custodial model, the market landscape for tokenized Bitcoin has undergone significant changes this year.
Tokenized Bitcoin and DeFi applications
Tokenized Bitcoin (e.g., WBTC, tBTC, and emerging cbBTC) accounts for over 25% of the total locked amount (TVL) in decentralized finance (DeFi).
While Ethereum is the main testing ground for DeFi innovations, some Bitcoin-centric solutions (such as Bitcoin's second-layer network) are attempting to reduce dependency on custodians and better align with Bitcoin's decentralization philosophy. However, these second-layer networks still have a long way to go before their official launch.
Failures and Lessons Learned
Early tokenized Bitcoin projects (such as renBTC, imBTC, and HBTC) failed due to low adoption, hacking incidents, or centralization risks. We summarize these failure cases as the 'Bitcoin Wrapper Graveyard' to analyze their key vulnerabilities.
With changes in BitGo's custodial model, WBTC's dominance has been challenged, and user trust has declined. Meanwhile, Coinbase's cbBTC has rapidly risen, with a total locked amount (TVL) exceeding 20,000 BTC.
tBTC and Decentralized Alternatives
tBTC offers a decentralized model for tokenized Bitcoin, avoiding the risks of centralized custodianship. With widespread applications in protocols like Aave and GMX, the supply of tBTC quadrupled in 2024, demonstrating strong market demand for decentralized solutions.
Stablecoins Backed by Bitcoin
Stablecoins backed by Bitcoin (such as USDe and crvUSD) are gradually gaining popularity, with 30-60% of the collateral being Bitcoin. However, these stablecoins may introduce risks that Bitcoin users are unwilling to accept.
Fully Bitcoin-backed stablecoins remain an important development direction as they better align with Bitcoin's spirit of decentralization and openness.
Dominance of the EVM
Despite the attention on Bitcoin's second layer network, the EVM ecosystem and its mature applications still dominate Bitcoin's applications in the DeFi space.
The potential of Bitcoin's second layer network is enormous, but it is currently mainly used for speculative activities (such as airdrop arbitrage). Future solutions need to align more closely with Bitcoin's core protocol to achieve more meaningful application scenarios.
Bitcoin Staking
In 2024, Bitcoin staking has experienced rapid development. Many new protocols leverage Bitcoin as the 'hardest currency' to support Proof of Stake (PoS) systems. Staking platforms are innovating through native staking, liquid staking derivatives, and re-staking, unlocking Bitcoin's liquidity, with a total locked amount (TVL) exceeding $10 billion.
Native Staking
The Babylon protocol allows Bitcoin holders to stake Bitcoin on PoS chains while retaining custodianship on the Bitcoin network.
Currently, 34,938 Bitcoins have been staked, with a total value of approximately $3.53 billion, and the number of active stakers has reached 82,440.
Through contracts and penalty mechanisms, the protocol can effectively ensure the security of PoS chains.
Liquid Staking Derivatives (LSDs)
Lombard: Users can receive LBTC after staking Bitcoin, earning Babylon's staking rewards while using it in DeFi applications (such as Curve and Uniswap). The platform currently has a locked amount of $1.68 billion.
Solv Protocol: Unifying Bitcoin's staking operations through Staking Abstraction Layer (SAL). Its liquid staking derivatives (LSDs) like solvBTC can aggregate Bitcoin liquidity across chains, with a total locked amount exceeding $3 billion.
Example tokens include solvBTC.BBN (Babylon), solvBTC.CORE (CoreDAO), and solvBTC.ENA (Ethena).
Re-staking
Platforms like Lombard and Solv utilize re-staking to generate additional DeFi yields (such as liquidity provision and lending) with staked Bitcoin. Lombard's re-staking locked amount alone exceeds $1.04 billion.
Bitcoin staking is still in its early development stage, primarily relying on reward mechanisms and high yields to attract users. In the long run, its sustainability depends on the growth of real demand. However, major players like Lombard and Solv dominate the market, which may trigger centralization risks. The total locked amount of these two platforms in Babylon has reached $1.32 billion.
Although liquid staking provides users with greater flexibility, it also introduces more trust assumptions. The future direction of Bitcoin staking still needs further observation.
Scalability: Sidechains, Rollups, and Second Layer Networks
New Developments
Taproot and Opcode Revival: Taproot (launched in 2021) and proposals like OP_CAT enhance Bitcoin's programmability and privacy, supporting contract functionality.
BitVM: Introduced Turing-complete contract functions without altering Bitcoin's consensus mechanism, supporting more complex off-chain computations.
Second Layer Solutions (Layer-2 Solutions)
Sidechains:
Examples include Rootstock (RSK), Liquid Network, and Mezo.
Sidechain technology introduces smart contract functionality to the Bitcoin network and enhances transaction throughput. However, these projects often rely on joint security models or merged mining to ensure the security of the blockchain.
Rollups:
ZK-Rollups: Provide fast transaction confirmations through Zero-Knowledge Proofs while possessing strong cryptographic security.
Optimistic Rollups: Assume transactions are valid by default and verify their authenticity through fraud-proof mechanisms. This method can significantly enhance network scalability, but transaction confirmation times may experience delays. Example: The Citrea project utilizes zk-STARKs technology and the Clementine bridging solution to build a trustless Bitcoin cross-chain bridge.
State Channels (like Lightning Network):
State channel technologies like the Lightning Network allow users to make almost instant payments off-chain with very low fees.
The current total capacity of the Lightning Network has reached 5,380 BTC, achieving an 11% annual growth.
Trends show a decrease in the number of channels in the network, but an increase in the capacity of individual channels, raising concerns about network centralization.
In developed countries (such as the United States and Germany), the Lightning Network is mainly used for large payments, while in emerging markets, it is more commonly used for small payments and microtransactions.
Build on Bitcoin (BOB):
Although the BOB project uses Ethereum as the settlement layer, its core objective is to build a Bitcoin-centric economic system, utilizing tokens like WBTC and tBTC to achieve this vision.
In 2024, the total locked amount (TVL) of BOB grew from $1.5 million to $238.27 million, primarily due to deep integration with Uniswap V3 and Avalon Finance.
CoreDAO and Ecosystem Growth
CoreDAO combines Bitcoin's security with DPoW (Delegated Proof of Work) and DPoS (Delegated Proof of Stake) technologies through the Satoshi Plus mechanism.
The ecosystem has launched a core token coreBTC supported by Bitcoin for DeFi applications, further expanding Bitcoin's functionality.
In 2024, CoreDAO achieved significant growth: the network growth rate reached 95%, with an additional 13.3 million addresses created and daily transaction peaks exceeding 500,000.
