Author: Golem
Editor: Hao Fangzhou
As 2024 is about to end, people in the crypto circle have their own year-end summaries: first, to see whether this year's investment return rate beats the market (just a reminder, BTC has risen over 130% this year), and second, to summarize the development of the tracks/ecosystems they are interested in over the year.
The Solana ecosystem, Base ecosystem, TON ecosystem, and AI Agent track have all had their highlights this year. For the Bitcoin ecosystem, although many things also happened this year, including ecosystem infrastructure and application innovations, it has not yet reached the expectations people had in early 2024.
Therefore, some people summarize this year’s Bitcoin ecosystem’s silence with the word 'failure', but there are also steadfast ecosystem OGs who continue to choose to 'believe'. As an ordinary player in the Bitcoin ecosystem, I choose to conclude this year with the word 'regret'.
2024 actually has a good start
2024 actually has a good start for the Bitcoin ecosystem. People held expectations for the Bitcoin ecosystem at the beginning of the year, believing that 2024 would be the year of a complete explosion and entrance into the mainstream view, much like how people now believe that 2025 will be the year of the AI Agent ecosystem explosion.
Why did we have such great 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', with project parties, VCs, and mainstream exchanges all entering the scene, forming three main tracks: layer 1 asset issuance agreements, L2, and Bitcoin staking.
From the perspective of layer 1 asset issuance agreements, influenced by Binance's launch of BRC 20 tokens ORDI and SATS spot trading at the end of 2023, the inscription concept became popular again in early 2024. Not only did this heat inspire other chains to follow suit and initiate inscription modes, but it also drove up the tokens of other layer 1 asset agreements such as ARC 20, SRC 20, PIPE, etc. At the same time, the rune pre-mining and airdrop gameplay launched by RSIC and Runestone in January 2024 also made people full of expectations for the upcoming Runes protocol.
From the development of L2, Bitcoin L2 experienced explosive growth in early 2024. With the hot issuance and trading of layer 1 assets, the congestion issues of the Bitcoin mainnet and players' demand to enhance the playability of mainnet assets made Bitcoin L2 a popular entrepreneurial direction. Statistics show that over 100 Bitcoin L2 projects emerged in a short time, although many of these were poorly made and 'quick exit' projects. However, overall, domestic and foreign VCs began to invest heavily in Bitcoin L2, with high hopes that 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, officially launching the Bitcoin staking and re-staking narrative. With Ethereum's top-level project EigenLayer as a model, people believe that with a stronger consensus foundation and security than Ethereum, the prospects for Bitcoin staking and re-staking in 2024 will be very promising. This will not only awaken sleeping Bitcoin whales to participate in the Bitcoin ecosystem but will also form a re-staking ecosystem comparable to Ethereum.
In addition to the overall positive trend shown by the three main tracks mentioned above in early 2024, the construction of general infrastructure for 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 for 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 further strengthens people's expectations for the Bitcoin ecosystem because a network worth trillions of dollars will likely grow into a market scale of hundreds of billions of dollars.
However...
Unfortunately, the Bitcoin ecosystem did not welcome attention and development surpassing previous bull market heat in 2024, instead entering a long period of silence.
Mainnet asset performance has been declining
On April 20, 2024, Bitcoin will welcome its fourth halving, and the token protocol Runes, developed by Ordinals founder Casey, will also be announced. To compete for inscription numbers, project parties are raising on-chain fees to over 2000 satoshis/byte. People believe this marks the beginning of the rune relay for BRC 20 to sustain the prosperity of the Bitcoin ecosystem. However, it was unexpected that the runes peaked right at the start, with speculative enthusiasm fading within just two weeks. Although in June and November the market cap of runes briefly surpassed $2 billion, the vitality and liquidity of the ecosystem's new projects remained sluggish for the long term.
At the same time, the performance of other asset protocols this year has been similar, with ORDI experiencing a peak decline of 70% within the year. The emergence of new assets initially triggered FOMO among investors, but later, due to a lack of new funds and participant flow, they began to decline, such as the PIZZA airdropped by Unisat, CAT 20 born from the Fractal network, etc.
The reasons may be twofold: first, perhaps due to the experience of previous Bitcoin bull markets, the narrative of fair asset issuance after runes no longer excites the public; second, there is a lack of synergy between domestic and foreign markets, with large communities of runes primarily led by overseas users, while major funds in the Chinese-speaking region remain focused on BRC 20, like the currently popular inscribed 'ground-pushing coin'.
The survival rate of Bitcoin L2 is less than 20%
Additionally, it is unfortunate that the Bitcoin L2 ecosystem did not achieve the expected prosperity in 2024. 'Except for the Lightning Network, all other Bitcoin L2s are castles in the air,' said Casey, the founder of the Ordinals protocol, during an interview regarding Bitcoin L2.
In the past 12 months, there have been over 100 Bitcoin L2 projects in the market, but according to DefiLlama data, only 19 L2s are left today, with a TVL of approximately $2.8 billion. On the other hand, Ethereum's L2 ecosystem, Arbitrum alone has a TVL of $3 billion.
Then, with the same intent of scaling, why has the L2 ecosystem on Ethereum been successfully validated while its adaptation to the Bitcoin ecosystem has not met expectations?
Most early Bitcoin L2 projects lacked innovation. In the initial stage of Bitcoin L2, many L2s adopted an EVM-like architecture and cross-chain bridges to expand the Bitcoin mainnet quickly and attract investment. Although this method borrowed from Ethereum's experience—making it easy and quick to build and low user education costs—it lacked innovation, and there were widespread criticisms such as 'if this is called Bitcoin L2, then Ethereum is the best Bitcoin L2'. It has been proven to be true, but as the hype faded, these hastily assembled L2s quickly vanished.
Bitcoin L2 started the TVL competition too early. Perhaps influenced by Ethereum L2 Blast, Bitcoin L2s learned from the beginning to use points and team incentives to stimulate TVL growth. Merlin became a popular chain in Bitcoin L2, launching the first shot in the Bitcoin TVL competition on February 9, 2024, with its TVL reaching $543 million in just 24 hours. Meanwhile, B² Network, BEVM, and Bitlayer also began their TVL battles.
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 quickly crashed, with a decline of up to 85%. Since then, those focused on the price have turned from anticipation to disappointment and criticism regarding the Bitcoin L2 ecosystem.
Whose recognition does the Bitcoin staking narrative receive?
With a luxurious financing lineup and 'narrative appeal', Babylon and its underlying Bitcoin re-staking ecosystem is another expected track in the 2024 Bitcoin ecosystem. When Babylon's mainnet opened the first phase of staking in August, it drew attention from the entire network, reaching the limit of 1000 BTC in just three hours. Currently, Babylon's TVL stands at 57,051.72 BTC, approximately $5.64 billion. However, compared to EigenLayer's staggering TVL of $15.718 billion, Babylon's TVL is only one-third of that. At the same time, against the backdrop of Bitcoin continuously breaking new highs, the market attention on Babylon has not increased. Whose recognition has the Bitcoin staking narrative gained?
There is a mismatch between the market and products; true large holders are unwilling to part with their Bitcoins. Babylon's narrative slogan is to unlock the liquidity of 21 million BTC through staking, but the market may not buy it. The market is more inclined to regard Ethereum as the on-chain native financial asset while still viewing Bitcoin as 'digital gold'. This also partly explains why the scale of funds for Bitcoin spot ETFs is much larger than that for Ethereum spot ETFs.
For large Bitcoin holders, as Bitcoin continues to rise, they are even less willing to part with their holdings. For traditional finance, Bitcoin spot ETFs and MSTR are what they truly favor in BTCFi. This is completely inconsistent with the Ethereum ecosystem, which encourages staking by design.
Babylon sets the stage, but the performers are someone else. According to Babylon's official data, 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 version of BTC, which the platform then deposits into Babylon, allowing users to enjoy dual rewards from Babylon and the platform's points. However, the issue is that the BTC deposited by users and the platform's wrapped BTC may not be a 1:1 correspondence, and the circulating wrapped BTC may exceed the locked BTC value, which may carry liquidity risks.
At the same time, the security of re-staking protocols is also worth considering. Previously, Bedrock suffered an attack resulting in about $2 million in losses on DEX. Although Babylon claims to use a self-custody solution to protect users' funds, most of the re-staking protocols behind it use custodial solutions, which contradicts Babylon's initial promotional concept. Therefore, not only are large holders unwilling to stake BTC; in situations where the returns are unclear and security guarantees are insufficient, retail investors will also hesitate to participate in staking.
In summary, although the Bitcoin ecosystem in 2024 had a good start, the peak performance of the Runes protocol upon launch, the rapid cooling of various asset protocols, the dramatic developments of Merlin and many Bitcoin L2s, as well as Babylon's ecosystem not bringing the anticipated BTCFi bull market, all lead us to feel regret about the development of the Bitcoin ecosystem this year.
Will everything be better in 2025?
It is important to emphasize that what I have said above does not mean to sing the blues for the Bitcoin ecosystem or to draw a conclusion about it. 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 over the past year.
As of today, the Bitcoin ecosystem still has steadfast holders and builders. Communities around ORDI, the rune DOG, PUPS, etc. are continuously building, and OKX Wallet and Unisat are still working on improving infrastructure. Although the Bitcoin L2 bubble has burst, the surviving teams have not given up, with a series of innovations like OP_CAT on the way. Babylon may have its TGE in January-February 2025...
Will everything be okay in 2025? Although we did not witness a larger-scale explosion in the Bitcoin ecosystem this year, I still believe that the Bitcoin ecosystem will remain the protagonist of this cycle, confidently welcoming 2025.
If it were you, what keyword would you give to this year's Bitcoin ecosystem?
