2024: Seven Predictions and Directional Forecasts for Web3 / Crypto

Let me start off by wishing you all a very happy 2024. Cheers to a fresh start, limitless happiness and new opportunities. May this New Year bring you everything you desire and more.

2023 ended up being a great year for crypto. Prices recovered from their 2022 lows, with major crypto assets like Bitcoin and Solana rising 128% and 495% respectively year to date. Some of the largest financial institutions in the world, including BlackRock, Fidelity, and Franklin Templeton, made massive commitments to the market but the best is yet to come and I expect 2024 to be another big year for Web3. 

The world of crypto is at the cusp of entering mainstream era and crossing the chasm from a speculative phase to a utility phase where more users will come to web3 for the use cases and real world value it offers than mere token price speculation reasons.

Below are some of my predictions and point of views for what 2024 will look like for Web3 and Crypto.  Note: Nothing that follows is investment advice.

So here we go.. 7 predictions for Web3 or you may call them directional forecasts -

1. Bitcoin will hit an all time high in 2024 and BTC halving will happen without much fanfare.
2. Ethereum, L2s and Other L1s and many more L1s and L2s will emerge but the 80%+ of the developer activity will be dedicated to top 20% chains.
3. Stablecoins will settle more money than Visa. 
4. NFTs will make a come back driven by value driven use cases and BTC Ordinals will support more of this come back.
5. User experience will continue to evolve to make it look and feel more like Web2 abstracting out the Web3 jargon.
6. Real World Assets (RWAs) will continue to get tokenized on chain at an accelerated pace.
7. There will be more clarity on Compliance and Regulatory front and more companies will start to adopt a compliance first mindset.

1. Bitcoin will hit an all time high in 2024 and BTC halving will happen without much fanfare.

BTC spot ETF will get approved in 2024 (this one is less of a prediction at this time but more of a done deal now: SEC tells companies to make any final changes) and 13 major institutions have already submitted applications.

BTC halving (a process designed to slow the release of bitcoin, whose supply is capped at 21 million - of which 19 million have already been mined) will happen sometime in April (BTC halving countdown) and the price from these two future events is already baked into the price.

But at the same time, these two events could lead to a dip in BTC price as more people take the profits on the BTC ETF announcement (buy the rumor, sell the news). And with halving, some large scale miners may be forced out of business, given the reduced reward for mining new blocks directly impacts the profitability of Bitcoin mining and some miners with higher energy costs and less efficient hardware may face challenges, leading to a shift in the market. More details about the last 4 BTC halving events and the impact they had.

2. Developer Activity - Ethereum, L2s and other EVM and non-EVM L1s will emerge but the 80%+ of the developer activity will continue to be dedicated to top 20% chains

For any chain out there, the most important leading indicator for the long term success is developer activity, developer UX and developer friendliness, number of developers out there who are familiar with the programming language, and grassroots level developer activity and size of the community etc. The chains that will prioritize developer UX, community building and nurturing, developer advocacy and relations, while creating enough incentives will take more of the developer mindshare.

Ethereum-based smart contracts and dApps still rule and attract the highest developer activity and TVL statistics but at the same time, Solana’s (SOL) explosive growth towards the end of 2023, alongside the expansion of the Cosmos (ATOM) ecosystem through chains like Injective Protocol (INJ), suggests that the developer activity will continue to be fragmented across several L1s. Additionally, with BTC Halving, and Spot ETFs coming, BTC will attract more developers and unlock Bitcoin-Fi, and Ordinals and BRC-20 tokens might have just be the beginning.

Nonetheless, Ethereum will continue to be the most popular and valuable blockchain platform given the series of updates and improvements to the Ethereum protocol, including the Merge and the Shanghai upgrade. These updates will make it easier for users to use Ethereum and will also improve its performance. Another important development for Ethereum will be a feature called proto-danksharding, which will help the platform scale and handle more transactions. 

The chains that will get more developer love in 2024 will be Ethereum L1 and L2s, Solana, Cosmos, NEAR, Bitcoin, Polkadot, BNB,. Source: Electric Capital Developer Report

3. Stablecoins: More money will settle in 2024 using stablecoins than Visa.

Stablecoins are a type of cryptocurrency whose value is tied to another asset class to keep a stable, steady value e.g. USDC, a fiat (US dollar) backed stablecoin is always $1 in value and can be used for several use cases involving any kid of payments between two parties or as a store of value, or hedge against inflation, participating in decentralized finance, unlocking trade finance.  

Stablecoins are one of crypto’s “killer apps,” growing from effectively zero to a $137 billion market in the past four years and 2024 will be another major year of growth. The brokerage firm Bernstein recently projected that the stablecoin market will hit $3 trillion by 2028. That's a massive number, particularly considering it's a $130 billion market at the end of December 2023.

Stablecoins for the payments use case, saw a remarkable rise reaching an impressive $7 trillion. This challenges traditional giants like Visa and Mastercard, settling at $14 trillion, highlighting the quick rise of blockchain-based financial solutions in the global economy.

4. NFTs will make a come back driven by value driven use cases and BTC Ordinals will support more of this come back.

After a significant drop >95% in NFT volume between early 2022 and 2023, we will start to see an uptick in the volume and transactions in NFTs again. This will mainly be driven by the use of NFTs for Gaming, Loyalty, Tokenization (of Real World Assets - see below), Music, Event ticketing, Fashion, Web3 Identification etc. while simultaneously, NFTs as a tech hag gotten more matured over the last cycle.

We have seen, several large scale experiments (Nike, Reddit, Starbucks) with mass-market with NFTs as digital collectibles, while major players like Ticketmaster and newcomers like tokenproof and YellowHeart have been testing out NFTs for event tickets, memberships etc. Metasky on the other hand is enabling brands and communities to design gamified loyalty programs (e.g. Nayaab.World NFTs) through utilities charged NFTs and have crossed 280K+ active users in less than a year. 

On top of these traditional uses, the rise of "phygital" experiences, where physical products are accompanied by a digital version, will also drive the growth of NFTs.

The NFT landscape is transitioning from small quantity, high-value assets to a broader market, large quantities, characterized by mass production, lower price points, and a focus on utility rather than speculation targeting the consumer market.

Additionally, with Bitcoin-based NFTs taking the space by storm in 2023, Web3 professionals expect the niche to grow further next year. Ordinals hit 52M inscriptions till date. Ethereum based NFTs will continue leading while Bitcoin will gain traction via the Ordinals protocol, shifting the ETH-to-BTC NFT issuance ratio.

5. User Experience Innovations will continue to accelerate as chains and protocols continue to meet the Web2 users where they are.

Web 3 is redefining how we communicate and share information. Despite there being over 4.66 billion people on the internet, many have not heard of the possibilities of dApps or the blockchains that power them. And the ones who have, are constantly challenged by the tech-rooted language and complex to use experiences. Understanding the jargon, dynamics, and visual design of Web 3 presents a unique challenge and huge opportunity.

Users are constantly challenged with crypto jargon, decrypting words like gas fees or network fees, consensus mechanism, or swap, choosing between custodial vs. self, securing private wallet keys, signing transactions, slow transaction speeds, constant risk of losing assets, not easily understanding who is on the other side of a transaction etc.

All in all, dApps require too much onboarding to get to a simple task and every interaction on Ethereum is a transaction involving gas fees, which requires knowledge of blockchain transactions to convert fiat to crypto, buy/swap assets for ETH, pay for gas fees, and sign off on transactions properly as they onboard dApps.

Most chains still require gas fees can only be paid in native assets and users have to execute a transaction for every on-chain interaction and there is such limited on-chain, cross-chain interoperability between dApps.

Given all these challenges, Web3 UX is an area of huge opportunity, and there will be more innovation at an accelerated pace in 2024 around UX to enable more Web2 users to come on board. Some of the below concepts will start to become a common place - 1) social recovery to secure wallets or using passkeys, 2) paying for gas fees in USDC or in any ERC-20 token or no gas fees or the gas fees paid by the dApp, 3/ meta transactions to move transactions behind the scenes away from the users, 4/ global address book to make sure transactions don't land in thin air.

6. Real World Assets (RWAs) will continue to get tokenized on chain at an accelerated pace

RWAs are a transformation of tangible assets (e.g real estate, stocks, art, commodities (gold), machinery and intellectual property) into digital tokens stored on a blockchain. Stablecoins (digital dollars e.g. USDC) pegged to the U.S. dollar, represent the "first successful tokenization use case of real world tangible assets. 

Amid the depressed crypto-asset prices in 2022-23, the world saw a new interest in Tokenization of these tangible assets and bringing off-chain yields in the real world on-chain. Tokenization enables greater liquidity,  transparency and accessibility of physical assets and is a way to modernize conventional financial markets. Tokenization further enables fractional ownership, 24/7 trading, and makes high-value assets more accessible to a wider variety of investors by facilitating the division of assets into smaller, more affordable units. 

In 2023 a number of regulators from Singapore, the United Kingdom, Japan, Abu Dhabi, Hong Kong, Luxembourg, and others, provided guidance on tokenization. This trend will continue in 2024 and regulation will follow as tokenized asset markets become more popular and tokens start to represent a more diverse set of tangible asset rights.

Boston Consulting Group projected the the on-chain RWA market to reach up to $16 trillion by 2030. And based on the recent survey, receptiveness from institutional investors remains high, with about 91% of respondents interested in investing in tokenized assets. The TVL of RWA protocols reached $2.8 billion at the end of November. Thanks to protocols like Ondo Finance, Polymesh, Maple, Zoth.io, Metawealth.co, Pendle, Polytrade and Tangible etc. who are all doing real work to support this interest in RWAs.

7. Regulatory Clarity and Compliance: There will be more regulatory clarity and more companies will start to become compliance first

More jurisdictions across the board will try to bring regulatory clarity making it easier for businesses to understand what they need to comply to. It has already been happening and will continue to accelerate. We witnessed the stablecoins related clarity that regulators across regions have been putting forth such as the Monetary Authority of Singapore (finalized), UK's Financial Conduct Authority (proposal), Hong Kong Monetary Authority (consultation stage), EU's Markets in Crypto Assets (going into effect in June 2024), Dubai's Virtual Assets Regulatory Authority, Japan's Financial Services Authority released clear rules for stablecoins in June 2023. Further, in the United States, the Stablecoin Bill is out of the Committee and could be taken up by the House early next year. Recap: Stablecoin regulations around the globe.

Similarly, on the Travel Rule side, The Financial Action Task Force (FATF), an independent inter-governmental body is working with 150+ countries to develop and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognized as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard.

Simultaneously, as we have seen with all the enforcement actions in 2023, it has become more and more obvious that Compliance first mindset can help companies go a long way and I have personally met a number of young companies who are taking all the right steps to do KYC/KYB and put in place controls for transaction monitoring (to satisfy BSA/AML requirements) and Travel Rule. Some of these companies include - Zoth.io (disrupting trade finance), Binamite.com (cross-border remittance), Metawealth.co (real world assets), obvious.money (USD account for everyone), Dexponent (liquid staking for institutions) and many more who are trying to make compliance a competitive advantage.

Thanks for reading. I would love to hear which of these predictions do you agree with and if you have other predictions community should know about.

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