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Bankless's key crypto topics this year: LRT, DA war, parallel EVM

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6 Meta-Themes That Could Dominate Crypto in 2024

Original title: "2024 Crypto Metas"

Original author: David Hoffman

Original translation: Lucy, BlockBeats

Editor's note:

David Hoffman, co-owner of Bankless, wrote an article on six meta themes worth paying attention to in the 2024 bull market, including Liquidity Re-collateralization Tokens (LRT), Solana development, the gaming ecosystem Immutable and its IMX token, DA wars, Monad dedicated to parallelizing EVM, and retroactive airdrops. BlockBeats translated the original text as follows:

At the beginning of 2023, our industry ushered in some of the most pessimistic sentiments ever, and ended with one of the most optimistic patterns we have ever seen.

As we head into the 2024 bull run with renewed vigor, it’s time to focus on some of the key investment themes that are set to shape the new year. Stay ahead of the curve by understanding these six narrative meta-themes that will dominate in the coming months!

Re-mortgage and Liquidity Re-mortgage Tokens (LRT)

The re-mortgage meta-theme is already gaining momentum, and EigenLayer isn’t even live yet. With over $1 billion deposited into EigenLayer contracts today, the race to become a significant player in the EigenLayer ecosystem is already intense.

As a result, the Liquidity Staking Token (LST) war is about to restart once again, but this time, it will be the LRT war. Liquidity re-mortgage tokens will have all the benefits of native ETH staking plus additional benefits generated by the addition of a re-mortgage network. Why would people settle for 5% LST yields when they can earn more with LRT yields?

What are LRTs, you ask? They are just like LSTs, but with embedded returns from EigenLayer. EigenLayer supports AVS (Active Validation Services, the EigenLayer network), which all generate some returns or fees for those who re-stake ETH. Those who re-stake may re-stake to multiple AVS to maximize the productivity of their staked ETH and increase returns.

That said, for less technical users like me who know that others can do it better, it would be valuable to develop a service that does this safely and efficiently. This is where LRT comes into play. LRT aggregates user deposits, re-collateralizes them through the EigenLayer network, captures all the yield, and passes it on to the depositors.

This is great, however, beyond the basic utility here, one of the reasons I think the 2024 LRT boom will begin is because the latest airdrop wave meta-theme has kicked off. In this torrent of huge interest and activity, LRT projects have become "double whammy", two-for-one airdrop hunting opportunities. For example, Swell is currently offering their "Pearls", which I think is a placeholder spot for the final Swell token, on top of the EigenLayer spot, which I think is also a placeholder.

Frankly, I think EigenLayer is shaping up to be one of the largest airdrops ever, and the race to become the dominant LRT token in Ethereum will be just as fierce as the race to become the dominant LST token.

Admittedly, I am not familiar with all of the current LRT strategies from all of the LRT teams. I will leave it to you to do your own due diligence here. However, there are two projects I am keeping an eye on because of my close relationship with the teams that I have invested in either as an angel or through Bankless Ventures, and those two projects are the aforementioned Puffer and Swell.

It is worth noting that Puffer has a unique advantage in its partnership with SGX, namely additional slashing protection, which serves as an additional layer of defense against capital loss. This mechanism, along with Puffer’s work with Justin Drake on Smooth Commitments and Andrew Miller of Flashbots on Remote Authentication, has enabled the project to unlock efficiencies and opportunities that other LRTs may have to play catch-up with.

As for Swell, it was an LST project that turned to Liquidity Restake when they saw the writing on the wall. When EigenLayer opened the gates to deposits, Swell was already ahead of the competition. Now, Swell ranks first among LRT projects for EigenLayer deposits and second in LST deposits, behind only Lido.

However, there are a few projects worth watching in the scene right now, including Rio Network, EtherFi, Renzo Protocol, Kelp DAO.

Solana

Is the meta theme right now "Bitcoin, Ethereum... and Solana"?

Solana is currently on a hype roll. That's what happens when a coin goes up 900% in a year. It's re-attracting capital and attention from venture capitalists, and emboldening the community that believed in it before.

To be sure, the launch of Jito has just sparked a version of Ethereum's 2020 DeFi summer on Solana, and it's now clear that the network's application layer has risen from the ashes of the 2022-2023 bear market.

With Solana’s SOL having just entered the top 5 crypto assets, all eyes are on whether Solana can achieve what all of its biggest supporters believe it can: become the place most likely to host breakthrough consumer crypto applications in the coming bull run.

Assuming Solana will live up to its potential here. In that case, it will need to attract more novel founders who build more novel applications that are not just shinier versions of the same thing Ethereum already has. Solana will need to develop new types of applications that crypto has never seen before, applications that are uniquely enabled by the properties provided by the network.

DePIN appears to be a standout early contender here. However, I think the jury is still out on whether there is anything of substance here. We shall see, though, and the sector is worth tracking closely in the meantime, either way.

Meanwhile, the massively tokenless Solana protocol still has to airdrop its token in 2024, which means that at least until they do, the hype and attention on Solana will continue. It remains to be seen whether Solana’s version of DeFi Summer can continue to hold the spotlight once it ends.

Internally, Solana’s attention has turned to its economics. With some of Solana’s thorniest issues in the past, it’s time to turn to the next low-hanging fruit in the project, which is its native fee market and overall economic structure. Can Solana solve its economic problems? Only time will tell, but its community likes its chances more than ever.

Games

Games seem to be the most reliable category for breaking out crypto applications in the near future. Mainly because we know that many highly anticipated games are currently in development, with some of them set to hit the market in 2024.

If the game is fun, players will play it. If the game developers know what they are doing, they will subtly introduce crypto elements as needed, rather than making them an overwhelming element of the game. Gaming content is a huge industry in itself, and the distribution that cryptocurrencies are able to gain through the gaming space is also huge.

The best thing about the contemporary crypto gaming industry is that it is moving away from an explicit focus on crypto-native players. Many new games are being developed for those who are crypto-agnostic.

This shift puts our space far away from one of the most populous countries on Earth, as there are currently approximately 3.2 billion gamers worldwide. If we can build a game that appeals to crypto-agnostics, it will be the first breakout example of crypto offering something for those who don’t care about crypto.

In the meantime, look to gaming ecosystems like Immutable and their IMX token as exciting representations. Immutable is developing a gaming-specific zkEVM chain built on Polygon and is currently valued higher than Arbitrum!

DA Wars

The data availability war has also begun, and the beginning of this war can be traced back to the TIA airdrop, which started at a valuation of $20 billion, and then the charts rose, with FDV climbing all the way to $14 billion.

So why is everyone obsessed with data availability now?

That said, it’s fair to assume that DAs are like the bandwidth layer for Web3, and a cheap DA layer will transform crypto from slow and expensive to fast, cheap, and abundant, without sacrificing decentralization in the process. In fact, DA is the main bottleneck that prevents chains from braking in terms of resource costs and throughput levels. Therefore, whichever DA chain can meet these needs can see long-term sustainable value flow in the crypto economy.

I am focusing on the upcoming EigenDA, which is the first AVS to be launched on EigenLayer, which will be the first additional source of income for the LRT token I mentioned earlier.

EigenDA is built differently than Celestia, and has some unique network properties. Since EigenDA is secured by staked ETH rather than an alternative L1, this brings EigenDA’s DA properties closer to Ethereum, reduces some security assumptions, and may make it an easier choice for Rollups that still need more DA than Ethereum’s L1 can provide.

Celestia and EigenDA are the two main contenders right now, but others have joined the DA war. For example, NEAR added DA functionality on its chain, which also has some unique properties due to the sharding research NEAR has done over the past few years. I’m sure there are more that I haven’t heard of yet, or are secretive, that will come to market in 2024 because the bounties for the DA competition are now so large.

Parallel EVM

Solana sparked the urgency of building an optimized virtual machine for Web3. I asked Solana founder Anatoly Yakovenko in a recent episode, “What is the most critical component of Solana?” He responded, “Parallelization of the SVM.” This unique property that Solana brings to market is the ability to process multiple transactions simultaneously, as long as those transactions do not touch the same state as each other.

This is a big strength of the SVM, and a big weakness of the EVM. Right now, the parallel VM war is going on on Ethereum L2 and the new L1. For example, the Eclipse project is taking the SVM and building a rollup on top of Ethereum (using Celestia for DA), and it’s not the only project doing so.

Monad is another project that has been working on parallelizing the EVM for a while. Rebuilding the EVM from single-threaded to multi-threaded is not an easy task, but the rewards for executing it successfully are huge. Imagine the scale, speed, and cheapness of Solana, but with the Ethereum ecosystem. Monad is committed to achieving bytecode equivalence for the EVM, meaning that any code written in the EVM environment can be immediately ported to Monad at no cost.

The “Solana for speed and Ethereum for distribution” strategy isn’t just shared by Monad and Eclipse. Sei has embraced this strategy as well, as evidenced by their recent announcement of becoming a parallel EVM chain.

Note that when I started writing this post back in December, SEI’s price has exploded since then as people are catching on to this narrative faster than I expected. Since Monad isn’t live yet, SEI is the only way to easily gain exposure to the parallel EVM narrative, and so its token has appreciated accordingly.

While Monad seems intent on remaining a standalone L1, I predict that the Monad EVM will be targeted as a replacement for the EVM on Ethereum L2. If Monad open-sources its EVM, it will become a very hot piece of software for Web3. It may also be a viable strategy for Monad to do both ETH L2 and a standalone L1 simultaneously to ensure it fills the competitive landscape as closely as possible.

Last November, I had a conversation with Ansgar in which he expressed interest in finding a new VM specification for designing L2 that would optimize execution more than simply copying the L1 EVM as L2. Our thought process was that if we could find a better execution-optimized VM for L2, we could rally L2 to use that as the standard instead of the legacy (and slow) EVM. This shift would require coordination, but it would greatly improve the Ethereum L2 space.

AIRDROP

My very safe prediction for 2024 is that $2 billion will be airdropped into the hands of users. EigenLayer may even be able to achieve this on its own.

Airdrops are not new in 2021, but the retroactive Uniswap airdrop did spark a new paradigm for what they mean and how applications can leverage them. Fast forward to today, and some of the largest projects in the space have been fine-tuning their token issuance plans for years.

The time to act, then, is now. For example, both StarkNet and LayerZero recently confirmed upcoming token launches, both of which I expect to occur in Q1 2024.

These airdrops will also force others to step up the pace of their tokens. Once the full momentum of a new airdrop season begins, it will be hard to stop. After all the giants give up their tokens and put billions of dollars into the hands of users, you will have the successors quickly develop their "applications" and release their "tokens" to catch the wave.

Once this happens, you will know that we are approaching the top of the bubble and it is time to start selling instead of buying. Be careful when going out, the trap of airdrop mining may attract most of your funds to maximize the benefits, but this will happen when you have a reason to withdraw funds.

For example, Alameda started out doing risk-free Bitcoin arbitrage on exchanges and ended up fully exploiting illiquid shitcoins as the bull run progressed. You want to do the opposite. You want to start fully exploiting illiquid shitcoins and then sell USD, BTC, ETH and other safe-haven positions as the bull run progresses.