Many blockchain developers may feel like they are working on cutting-edge work on the financial and business infrastructure of the future. This is undoubtedly a revolution. Based on what we have seen and reported, they are not wrong. Or to say the least, the speed of innovation and new developments in the blockchain space is rarely nothing but amazing, except in those moments, when everything seems similar.
This year's crypto market downturn hasn't given a break to announcements, product launches, integrations, partnerships, collaborations, fundraising, launches, deployments, migrations, transitions, and more. There's a lot of change and information, all of which are quite technical and complex, and while it can be hard to catch up, it's just as daunting to keep up.
Some of the key trends for 2023 are widely foreseen by experts. Truth be told, no one really knows where it's all going. We've compiled 10 predictions for 2024 from blockchain technology experts, and their predictions are just as technical as any other.
1. Interoperability
"By 2024 and beyond, advances in blockchain interoperability protocols will mark a major shift that will break down existing barriers between different blockchains. This change will enable various blockchain platforms to interact seamlessly by sharing data and value transfer, creating a unified and more efficient blockchain ecosystem. The role of interoperability protocols will be crucial in this shift, as they will foster innovation and drive the emergence of new applications and use cases, especially in the DeFi space. - David Schwartz, Chief Technology Officer (CTO), Ripple Labs.
2. Bitcoin fees
"Given the gradual reduction of the fixed block reward for miners, we believe that the catalyst for increasing the variable block reward associated with transaction fees will become increasingly important. The Bitcoin Core protocol has remained largely stable, with the Taproot upgrade being the only major protocol upgrade in the last five years since 2016, at least in terms of changes that require a soft fork. Therefore, we believe that the use of catalysts will come from technological innovations, primarily within the framework of existing network protocols, such as increased use of blob data (such as Ordinals and Atomicals), increased activity on secondary Layer 2s like the Lightning Network (LN), or future implementations of smart contract environments built on top of the Bitcoin network, such as Rootstock, Stacks, RGB, or BitVM. - David Duong, Head of Institutional Research at Coinbase.
3. Modularity
"We're also seeing the consolidation of the modular proposition and the increasing number of hybrid solutions coming to market in this space, such as Ethereum Rollups, which use Celestia as a data availability layer. At the same time, we're also seeing blockchains like Solana continue to move in the direction of their monolithic and reject Layer 2 because they see it as bad for liquidity and user experience. It will be interesting to watch the development of both narratives in 2024, especially as some Ethereum Rollups explore the use of the Solana Virtual Machine. — Abdelhamid Bakhta, Lead Ethereum Developer for the Starknet Ecosystem.
4. Zero-knowledge proofs
"SNARKs allow the 'cryptographic receipt' of a computing workload to be computed in an unforgeable way, by an untrusted 'prover': in the past, it was 10^9 times more expensive to compute such a receipt than the original calculation, and recent advances have narrowed this number to around 10^6. As a result, SNARKs become feasible in cases where the initial computation provider can afford 10^6 times the overhead and the client is unable to re-execute or store the initial data. The resulting use cases are numerous: Edge devices in the Internet of Things can validate upgrades. Media editing software can embed content authenticity and conversion data, while mash-up memes can pay homage to the original source. LLM inferences can contain truthfulness information. We can have self-validating IRS forms, unforgeable bank audits, and many more consumer-friendly uses. - Sam Ragsdale, Investment Engineer, a16z.
5. Key Management/User Interface
"The advent of account abstraction means that we can quickly overcome the technical challenges of self-custody. 2024 will be the year when seed phrases finally become a historical practice for most people. The notion that asset security means there are 12 words that you can never lose, but that no one else can ever access, is outdated and has largely hindered progress in actual user adoption. As a result, blockchain promises to deliver on the promise of inclusive finance that has been central to our values since the beginning of their lives. - Friederike Ernst, co-founder of Gnosis and Gnosis Pay.
6. Censorship
"Centralization essentially boils down to two core questions: (1) does some form of centralization cause network performance issues that put applications at risk of disruption?(2) does centralization pose challenges to censorship? The decoupling of block construction, relay, and validation in Ethereum is an interesting thing that clearly distributes the challenges of censorship across three different layers of Ethereum's transaction processing stack. After the U.S. Office of Foreign Assets Control (OFAC) imposed sanctions on Tornado Cash addresses last summer, major Ethereum relays began censoring transactions. This problem was only alleviated when Flashbots open-sourced its market-dominant relays and allowed permissionless relays such as Ultra Sound, Agnostic, and bloXroute to become more competitive. Nowadays, more and more block builders have begun to review transactions. I expect some of the most significant development breakthroughs in 2024 to come in areas like mempool encryption, thus shielding transactions from potential censors before they are included in a block. Ryan Selkis, Founder and CEO, Messari.
7. Security/Privacy
"In 2023, there will be a lot of hacking and fraud in the crypto space, including Euler Finance and Angle Protocol. We will see blockchain protocols create more security solutions and place greater emphasis on privacy. - Ramani Ramachandran, CEO of Router Protocols.
8. Corporate Cryptocurrency
"Networks and development platforms should be ready to appeal to enterprise and startup builders, as well as indie developers. Network protocol teams should be ready to deliver a user experience that engages millions of end users in their on-premises digital experiences. Larger companies are moving beyond viewing crypto as an asset class as a product and tool for user engagement. Crypto needs to expand its reach and introduce the next wave of on-chain activity. Vanessa Pestritto, Director of Partner Programs, Agoric OpCo, a JavaScript-based smart contract platform and proof-of-stake blockchain.
9.Layer 2 wave
"In the middle of the year, activity on Layer-2 chains weakened considerably, and most of the liquidity remained confined to the Ethereum mainnet. As a result, DeFi protocols that are native to Layer-2 chains have seen a loss of liquidity for most of the time. However, as gas fees on the Ethereum mainnet rise in line with increased activity, a portion of the new funds will flow to Layer-2 chains next year, becoming their new home. —— Outlook report from digital asset data and analytics firm CCData (formerly known as CryptoCompare).
10.Layer2 alignment
"Ethereum will implement EIP-4844 (proto-danksharding), which will reduce transaction fees and improve the scalability of Layer 2 chains such as Polygon, Arbitrum, Optimism, and others. Within a year of the upgrade, Ethereum L2 will be consolidated into two – measured by value and usage, compared to the three main players. —Mathew Sigel, Head of Digital Asset Research, VanEck.
Disclaimer: The above content does not constitute any investment advice, investment is risky, and participation should be cautious.