Original author | Alana Levin
Compiled by Odaily Planet Daily Golem
Every six months or so, I write an internal reflection on the current state and future development of cryptocurrency.
This article is divided into three parts: what has happened in the crypto industry, what is happening, and what I am looking forward to. I try to base most of my analysis on data, but inevitably my personal opinions are incorporated in some places. I hope this article will interest other readers, and if the response is positive, I will consider sharing more such internal reflections.
Current achievements
The good news is that there are a lot of things that work and are working in a decent way, and there is a growth of these things - many of which I call big ideas because they can significantly change the status quo and should create new opportunities for the crypto industry if they succeed.
For clarity, I use the term “working” to refer to projects or trends that are demonstrating sustainable product-market fit, are scaling the crypto market , or both.
So what is working in crypto today? The 10 things I think are showing significant “work” are: stablecoins, Bitcoin as an alternative asset, Farcaster (an early but growing social network), new asset issuance, community-created and trained AI models, Solana and Ethereum, Zora, Coinbase, on-chain exchanges, and a dark horse (Blackbird) .
Stablecoins
Year to date, on-chain stablecoin supply has seen net inflows of approximately $25 billion . Overall, inflows have been positive since November 2023. Stablecoins’ permissionless, global access to USD continues to demonstrate strong product-market fit.
Bitcoin becomes an alternative asset
In January, nearly ten Bitcoin spot ETFs were approved. As of early June, the value of Bitcoin spot ETFs has exceeded $80 billion . (According to data from Blockworks and The Block )
The price of gold seems to be a powerful analogy for understanding institutional investment in Bitcoin: whether or not Bitcoin is considered to represent a tool to fight inflation, it is an alternative to traditional stocks and its value enjoys a certain consensus in society. It can be said that Bitcoin is much better than gold because it is easier to transfer, has a clear supply cap, and the asset has appeared on the balance sheets of some companies and countries, so it may exceed the market value of gold in the future.
In the private market, the first quarter was characterized by a large influx of projects trying to expand the use of Bitcoin. These projects include Bitcoin smart contract layers, on-chain lending protocols, and exploring how to use Bitcoins economic security model to help protect other chains. The results of these project developments may become apparent in the second half of the year.
Farcaster
Farcaster is a social network built on open protocols that has seen significant growth, with a turning point coming at the end of January with the release of frames (mini-app components), which allow users to share and interact with content directly in the social information stream of the Farcaster client.
New Asset Issuance
It can be observed on DEX (decentralized exchanges) that the number of newly created tokens is increasing, mainly on the Base and Solana chains.
On Solana specifically, over 10,000 new tokens have been created every day over the past few weeks.
Source: SolScan
Many of these new assets are memecoins, and while I am not active in the memecoin space, I do recognize that there is a very real and engaged user base that demonstrates enthusiasm for memecoin.
It’s worth noting that the emergence of these new assets has led to some unexpected and productive effects on the ecosystem. For example, experimentation with new tools like Solana’s token scaling. One token called BERN innovates on token economics using Solana’s new token scaling feature: if someone sells their tokens, 5% of that transaction is destroyed (as a redistribution mechanism to remaining holders). BERN’s popularity has spurred wallets to adopt new token scaling standards — the value of these standards is that they enable complex payment splitting, confidential transfers, and more. Without BERN, who knows how long token scaling adoption would have taken.
In general, I think the issuance of new assets is chasing the trend. Regardless of how users view these assets, controlling the issuance and trading rights are still two important positions in the flow of value.
Community-created and trained AI models
Clearly, we are heading towards a world where there are a lot of LLMs, which are cheap to create and users have a lot of choice. So where does the value come from in such a world?
Scarce resources always have value, so in a world of abundant computing resources, content, and tools, the question becomes “what is scarce”, and one answer is differentiation and attention. The difficulty is that they are intangible resources, and even if we can quantify them (such as “screen time” as a measure of attention), it is difficult to measure the value of this metric in monetary terms.
Some projects are leveraging cryptocurrencies to closely integrate finance with differentiation and attention-based activities. Specifically, AI models created and trained by the community produce some kind of production output, such as goods or services that can be sold or licensed (such as artwork, movies, intellectual property, etc.), which provides an opportunity to reward participants. For models with subjective outputs, community participants achieve differentiation by training models based on their cultural preferences , and the model chooses differentiated incentives: the more unique and high-quality the output content, the higher the selling price should be.
Several such models are being built, one of which is Botto, an autonomous artist where BOTTO token holders have the ability to help train the model every week. The quality of Botto’s artwork is good and getting better, as evidenced by the rising prices of Botto’s artworks at weekly auctions. In the process, the network of owners and participants is also growing:
I think as the number of known and successful projects like Botto continues to grow, more and more community created and trained AI models will emerge.
Some companies are working to address content attribution from the top down, through litigation , data licensing agreements , or a combination of both. If we assume that the current model is based on <1% of content produced, there is clearly room for other attempts to address attribution and assign contribution value in the future. Cryptocurrency offers a unique and valuable solution. Cryptocurrency strengthens economic and creative attribution rights, and importantly, it also allows anyone, anywhere to participate.
In a blog post, Chris Dixon said : Theres a famous quote: The future is already here - its just not evenly distributed. The obvious question is: if the future is already here, where can I find it?
Community created and trained models are an area with small but growing projects that very clearly point to a much larger future.
Solana
The number of daily active addresses interacting with Solana is 2-3x higher than the same period last year, roughly coinciding with the highest activity period in the 2021 cycle. The number of monthly active addresses has increased 3-4x over the same time frame, reaching a new all-time high in May 2024:
The network’s fee revenue has also begun to grow significantly, proving that while the Solana network is cheaper, the fee revenue will be made up through higher user activity/transaction volume.
Conclusion: Solana’s trajectory shows that it works and is relevant. Solana will continue to exist in the future.
Ethereum
The Ethereum ecosystem has also seen significant growth. This growth can be seen in two ways: the Ethereum chain itself, and looking at the Ethereum ecosystem as a whole (including the Ethereum roadmap).
Ethereum itself has seen significant growth in the number of monthly active addresses. The 30-day average is up about 30% so far this year and is only about 10% away from its 2021 peak.
The Ethereum ecosystem as a whole has also grown significantly. Below is a summary of the daily active addresses of the five top Ethereum chains (Ethereum, Arbitrum, Base, Optimism, and Polygon). These five chains were chosen because they have rich ecosystems and developers.
Conclusion: Ethereum has been and remains one of the most important ecosystems in cryptocurrency.
Zora
Zora Chain (also known as Zora Network ) has been online for about a year. During this time, the network has continued to grow steadily, with the number of weekly active users growing by about 60% this year, recently reaching a new high of over 250,000. The chain has a profit margin of about 34% , which means that nearly 1/3 of the ETH spent by users for transactions is collected by Zora.
Zora Chain demonstrates that applications with sufficient distribution capabilities can be vertically integrated with other parts of the stack (such as blockspace) to unlock more attractive economic benefits.
Coinbase
Coinbase also had a strong start to the year. It is the custodian of 8 of the 11 Bitcoin spot ETFs. The exchange business also continued to make progress - trading volume reached $157 billion, a new high since November 2021.
Trading fees still make up a large portion of Coinbase’s revenue. In the first quarter, the platform generated more than $1 billion in trading fee revenue (roughly two-thirds of its quarterly revenue).
But it’s also worth noting that Coinbase continues to diversify its revenue streams beyond just transaction-based fees. Blockchain rewards revenue and custody fee revenue doubled year-over-year. Stablecoin revenue approached $200 million, with growth in USDC circulating supply (slightly) offsetting interest rates. Coinbase’s membership system , Coinbase One, has over 400,000 subscribers. Coinbase’s L2 protocol, Base, generates millions in on-chain fees every month.
Coinbase’s success proves the hypothesis that many meaningful new business models can be built around crypto-nativeness.
On-chain exchanges
Among the major Ethereum ecosystem chains, Uniswap has about doubled the number of unique users (traders) compared to six months ago.
One of the definitions of a successful protocol is that a successful business can be built on top of it. This can be seen in on-chain exchanges, such as the growth of Uniswap Labs’ interface revenue:
The 7-day average liquid volume facilitated by Uniswap (the protocol) also recently surpassed Coinbase:
Importantly, the growth of on-chain exchanges is not limited to Ethereum. In Solana, the top two DEXs (Orca and Raydium) have also seen significant growth:
On-chain protocols facilitate billions (even tens of billions) of transactions per month, and these protocols and interfaces are very real, revenue-generating projects. In cases where centralized institutions exist (such as interface businesses), we hope to see them reinvest some of their profits into improving security, robustness, and user experience.
Dark Horse: Blackbird
Blackbird is a loyalty and rewards program built for the restaurant industry that uses cryptocurrency as its underlying technology. When a user checks in at a restaurant associated with Blackbird, the app mints an NFT for them, which is also a data point for restaurants in the network to understand their customers dining habits. Currently, Blackbirds business mainly serves New York City.
Blackbirds daily user check-ins continue to grow.
Personally, Blackbird has changed my dining habits: before I would let my friends choose where we would eat, now I’m more active in recommending places, and mainly use the Blackbird app to get an idea of where might be interesting places to eat.
Other things that happened
There have also been some notable trends over the past two quarters, including the rise of SocialFi and the proliferation of new chains (mostly L2 and L3 in the Ethereum ecosystem). While I don’t think it’s clear that they are actually effective, these trends are clearly significantly influencing on-chain user behavior and the evolution of business models.
SocialFi App Growth
A number of financialized social (“SocialFi”) applications are emerging, some of which have generated millions of dollars in fees, with the two most popular being Friendtech and FantasyTop. Clearly, there are users who find these applications interesting and willing to participate, and it’s a good thing to provide users with new things on the chain.
But I am skeptical about the sustainability of some of these business models, and speculation alone does not seem to be enough to support their long-term value, although some apps only need some fine-tuning to achieve more sustainable business models. For example, attracting attention through speculation - providing multiple ways to monetize attention. However, the critical second step is of course the hardest part.
New chains surge
We also see many new chains launching, especially L2 and L3. For these chains within the Ethereum ecosystem, the underlying technology is not an important differentiator. Instead, brand and community trump everything. The launch of L2 Base by Coinbase is an example of a strong brand, and even without the airdrop incentives that other chains use to attract traffic, the chain has a growing developer ecosystem.
So far, there are three ways to distinguish chains:
Underlying technology: for example, integrated chains and modular chains, or Rollups.
Chain Economics: Canto is the first chain in recent years to experiment with redistributing transaction fees to developers within the ecosystem. Blast and Berachain are experimenting with various other types of revenue generation and economic distribution models, but it is unclear whether these models are sustainable, either from a general economic perspective or from the perspective of providing long-term competitive advantage.
Brand and community: The culture and reputation of a chain can serve as a powerful halo to attract developers: it may give developers the impression that they will get more help (from the community or other developers) when building an ecosystem within it, it may provide reputational cover in the eyes of some consumers (“no one will get hurt by choosing a MacBook” or something like that), or the values promoted by the chain community may just happen to be consistent with the developer’s own philosophy.
A mature blockchain has all three of these elements. Take the two “working” chains I cited above as examples: Ethereum and Solana. Ethereum pioneered the EVM, implemented EIP-1559 (burning a portion of transaction fees as a redistribution mechanism to ETH holders), and built a strong developer community and philosophy around its technology. Solana popularized integrated blockchains, was the first blockchain to make low fees commercially viable, and formed a real community during the 2022-2023 downturn.
The next wave of blockchain differentiation will come from external integrations. For example, seamlessly accessing other funding sources (like a Coinbase account), doing KYC for a wallet, or verifying that someone is a real person is a very broad design space.
Looking ahead
Looking back over the past six months, we are still talking about the same things we were talking about 6-12 months ago, but with more maturity in terms of “what works.” As they continue to grow, many platforms will succeed and that will bring other opportunities. Growth always brings problems, and these problems also create space for third parties to provide solutions.
Forecasting the growth of these major platforms can also lay the foundation for us to think about future development directions, among which new forms of distribution and new areas of construction are worthy of attention.
New distribution forms and better building blocks
On the distribution side, there are some new factors to be excited about, including: a larger Farcaster, a Telegram app with more powerful wallet features, and ways for the World App to continue to attract more people (it has already reached 10 million ).
There are many new areas of construction. Coinbase launched a smart wallet that allows users to pay directly from their Coinbase accounts. Reservoirs Relay protocol improves the user experience of bridging funds across chains, making one-click checkout on the chain finally possible. World ID continues to grow and is expected to provide a way to authenticate between humans and agents, and many more...
This may sound abstract, so here is a concrete example of what these construction areas and new distribution methods can achieve.
Take modern advertising, a multi-billion dollar market that touches nearly every business. Despite decades of improvements in attribution and targeting, it’s still riddled with inefficiencies. Now imagine what an “ad” on Farcaster would look like:
A company can send coupons directly to the wallets of targeted customers (since every account has an associated wallet ).
The coupon might be based on a similar product mentioned in a post created by the consumer, or a post liked by the consumer.
The business can operate with confidence that data will always remain open and accessible (i.e. no need to worry about APIs being shut down or prices being jacked up), which allows it to invest confidently in improving the efficiency of this channel.
Budget is spent only when a consumer is converted (i.e. uses the coupon).
Overall, this appears to be a win-win for businesses and consumers thanks to open social graphs, embedded payment channels, and verifiable digital identities.
A chain ecosystem for future development
Another takeaway from the “What Works” section is that there are now several solid and growing ecosystems (Ethereum, Solana, Bitcoin). Each of these three ecosystems has various unique characteristics, and the strengths of each ecosystem creates positive pressure on the others to continue to improve. For example, Solana’s success with low fees and high throughput has driven Ethereum’s continued innovation in both base layer and L2. Similarly, Ethereum has multiple clients, potentially creating a goal for Solana to achieve client diversification (such as its upcoming Firedancer client). Bitcoin was the first currency to achieve true institutional adoption, but has begun experimenting with implementing new programmable elements (such as Ordinals , Runes , and potential OP_CAT upgrades). Overall, each ecosystem is constantly trying to achieve roughly the same functionality as the others. Looking at where each ecosystem is today, and the positive relative characteristics exhibited by its peers, can serve as a guide for each ecosystem to try to improve.
This is a very positive effect, just like if tennis players Federer, Nadal, and Djokovic didnt compete with each other, they might not reach the same level of athleticism, each pushing the others to improve their game, and the result is that they all become very good tennis players. The same may be true between different blockchains, each chain is accelerating to make greater progress because there is positive competitive pressure, and the result is that the entire industry will become better.
Some new ideas
There is still a lot of infrastructure and applications worth building, and here are some areas with great potential that are underexplored:
Different forms of authentication. Credentials (certificates, proofs, etc.) are resources worth putting on-chain: putting credentials on a public ledger is useful both for marking the time of issuance and for verifying the issuer. For example, a work verification, proving that someone has worked at a company for a certain period of time. Within the cryptocurrency industry, there are many attempts at effective proofs. I think the key is to identify certifications that have real economic value (such as employment verification) and focus on those markets.
Price Differentiated Assets (PDAs). These are goods that have real economic value but for which market participants’ willingness to pay for them varies widely. Restaurant reservations are a great example, with a recent article about an underground reservation market in New York making headlines: popular reservations are being grabbed by bots and resold on secondary markets for thousands of dollars. If this financialization is inevitable, then making these “assets” as transparent and accessible as possible is good for both restaurants and consumers. Restaurants can more easily check the transfer history of a reservation, and more potential consumers can participate. Tokenizing reservations could even enable some kind of programmatic price cap, or revenue sharing with restaurants. This is just one example, there are many more markets, and many real assets with fundamental economic value are mispriced or inefficiently priced due to opaque or limited market access.
New forms of token distribution. There are many opportunities to nudge existing behaviors with token rewards. Blackbird is the first and most classic example, where eating out is a common activity, but the presence of Blackbird rewards may have changed how often and how some users choose where to eat. This can be widely used in areas where people already spend time and money but lack consistency or loyalty in their spending activities. And merchants can also benefit from alliance or cooperation effects (such as getting more data on consumer behavior) to increase customer loyalty through incentives .
But whether these ideas are unique enough to be built now is an open question.
in conclusion
This kind of article represents a lot of what I think has been happening in the crypto space recently, but not everything. Some areas it doesn’t cover but could (or should) include the growth of permanent storage solutions like Arweave , the growth of DeFi protocols into true financial platforms like Morpho , and Telegram’s push for the TON ecosystem .
