Bankless: Six major investment themes worth paying attention to in 2024

Author: David Hoffman, Bankless; Compiled by: Songxue, Golden Finance

2023 started with some of the most pessimistic sentiments and ended with the most optimistic expectations we have ever seen.

As we enter the 2024 bull market with renewed expectations, it's time to focus on some of the key investment themes that will shape the new year. Stay on top of the investment landscape by understanding these six narratives that will dominate the coming months!

1. Re-staking and Liquidity Re-staking Tokens (LRT)

The meta message of re-staking has been getting louder and louder, and EigenLayer hasn’t even entered the mainnet yet. Today, with over $1 billion in funds deposited in the EigenLayer contract, competition to become a significant player in the EigenLayer ecosystem is already fierce.

So, the Liquid Stake Token (LST) war is about to restart again, but this time, it will be the LRT war. Liquid re-staking tokens will have all the benefits of native ETH staking plus the additional benefits generated by adding the re-staking network. Why would anyone settle for 5% LST yield when they can earn much more with LRT yield?

What are LRTs, you ask? They are like LSTs, but internally contain the revenue generated by EigenLayer. EigenLayer makes possible AVS (Active Verification Services, the EigenLayer network), all of which generate some yield or fees for people who re-stake their ETH. Re-stakers may re-stake their ETH to multiple AVS to maximize the productivity of their staked ETH and increase their returns.

That being said, providing a service that can perform this task safely and efficiently will be of value to non-technical users like me because we know others can do it better. And this is where LRTs come in. LRTs aggregate user deposits, re-stake them onto the EigenLayer network, capture all earnings, and pass them on to depositors.

Quite eye-catching! However, beyond basic practicality, one of the reasons I think there will be a craze for LRT in 2024 is that the latest wave of airdrops has already begun. In this trend, the LRT project is the “best of both worlds” and a double opportunity for airdrop hunting. For example, Swell is currently offering their "Pearls", which I guess are placeholder points for the eventual Swell token, and beyond that there are EigenLayer points, which I assume are also placeholders.

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

Admittedly, I am not familiar with all LRT strategies of all current LRT teams. However, two projects caught my eye because I have close ties to both teams, either as angel investors or through Bankless Ventures, and they are the previously mentioned Puffer and Swell.

Notably, Puffer has a unique advantage in partnering with SGX - additional penalty protection - as an additional layer of defense against capital loss. This mechanism, coupled with Puffer's work with Justin Drake on Smoothing Commitments and Flashbots' Andrew Miller on Remote Attestations, allows the project to unlock efficiencies and opportunities that other LRTs may need to catch up.

As for Swell, it used to be an LST project but switched to liquidity staking when it saw the trend changing. When EigenLayer opened deposit channels, Swell’s ETH TVL was already near the top of its system. Swell now ranks first in EigenLayer’s LRT projects and second in LST deposits, behind Lido.

However, there are some projects worthy of attention right now, including:

• David Hoffman Rio Network

• EtherFi

• Renzo Protocol

• < p>Kelp DAO 

Use this excellent EigenLayer Dune dashboard to keep track of the dynamics of their LRT battlefield.

2. Solana

The current meta information includes "Bitcoin, Ethereum...and Solana" ?

Solana is currently suffering from the hype. This is what happens when a coin rises 900% in one year. This attracted capital and attention from venture capital firms, while also making the community that believed in it before it became hot again more confident.

To be sure, the launch of Jito has just sparked a DeFi summer on Solana akin to Ethereum’s in 2020, and it’s now clear that the network’s application layer has emerged from the ashes of the 2022-23 bear market rise.

With Solana’s SOL just entering the top 5 crypto assets, all eyes are on whether Solana can achieve what all of its biggest backers think it can do: become the biggest player in the upcoming bull run. Where it is possible to host groundbreaking consumer crypto applications.

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

DePIN appears to be the standout contender here early on. However, I think the jury is still out as to whether there is any substance here. As we'll see, though, either way, the industry is worth tracking closely in the meantime.

Meanwhile, the large number of tokenless Solana protocols still have to airdrop tokens in 2024, which means that the hype and attention around Solana will continue at least until they do. It remains to be seen whether Solana’s version of DeFi Summer can keep people’s attention after it ends.

Internally, Solana's attention has turned to its economics. With some of Solana's toughest issues behind it, it's time to move on to the next most achievable goals in the project, which is its local fee market and overall economic structure. Can Solana solve its economic problems? Only time will tell, but its community is more excited than ever about the opportunities it brings.

3. Games

In the near future,games seem to be the most breakthrough category in crypto applications. Mainly because we know that many highly anticipated games are currently in development, some of which will be available in 2024.

If the game is fun, players will play it. If game developers knew what they were doing, they would introduce cryptographic elements subtly as needed rather than making them an overwhelming element of the game. Game content itself is a huge industry, and through the game field, encryption will be able to gain huge distribution channels.

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.

There are currently approximately 3.2 billion players in the global gaming industry. If we can build a game that appeals to people who don't care about crypto, it will be one of the first groundbreaking examples of crypto serving people who aren't interested in crypto.

At the same time, gaming ecosystems like Immutable and its IMX token can be seen as representative of the excitement in this space. Immutable is building a Polygon-based zkEVM chain designed for games, and its current valuation is higher than Arbitrum!

IV. DA War

The war on data availability has also begun, starting with TIA’s two consecutive airdrops at a valuation of $2 billion, followed by a chart that will only rise, directly reaching an FDV of $14 billion.

So why is everyone obsessed with data availability these days?  

Suffice it to say, it can be assumed that DA (Data Availability) is the bandwidth layer of Web3, and a cheap DA layer will transform encryption from slow and expensive to fast, cheap and abundant without Decentralization is sacrificed in the process. Indeed, DA is the main bottleneck that prevents the chain from releasing the brakes on both resource cost and throughput levels. Therefore, any DA chain that can meet these needs has the potential to see a long-term sustainable value stream in the crypto economy.

I am paying attention to the upcoming launch of EigenDA, which is EigenLayer’s first online AVS and will also become the first additional source of income for the aforementioned LRT tokens.

EigenDA is built differently than Celestia and has some unique network properties. Since EigenDA is secured by staked ETH rather than alternative L1, this brings EigenDA's DA properties closer to those of Ethereum, reducing some of the security assumptions, and potentially making it a platform that still requires more DA than Ethereum's L1 can provide. Rollups are the easier option.

Celestia and EigenDA are the two main contenders at the moment, but others have also joined the DA wars. For example, NEAR added a DA feature to 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 many more that I haven't heard of yet, or are secret, that will be available in 2024 since the DA competition bounties are so large right now.

5. Parallel EVM

Solana has triggered the urgency of building optimized virtual machines for Web3. I recently asked Solana founder Anatoly Yakovenko, “What is the most critical component of Solana?” and he replied: “Parallelization of SVM.” This unique feature that Solana has introduced in the market is the ability to process multiple transactions simultaneously, as long as These transactions do not involve the same state as each other.

This is one of the strengths of SVM and one of the weaknesses of EVM. Now, the parallel virtual machine war is going on on Ethereum L2 and the new L1. For example, the Eclipse project is adopting SVM and building an Ethereum-based Rollup (using Celestia for DA), and it's not the only one doing this.

Monad is another project that has been working on parallelizing the EVM for some time. Rebuilding the EVM from single-threaded to multi-threaded is not an easy task, but the rewards in terms of successful execution are huge. Imagine the scale, speed, and low cost of Solana, but with the ecosystem of Ethereum. The goal of Monad is to achieve bytecode equivalency to the EVM, meaning that any piece of code written in an EVM environment can be immediately and cost-free migrated to Monad.

The "Solana speed but Ethereum distribution" strategy is not just shared by Monad and Eclipse. This strategy is also adopted by Sei, as demonstrated by their recent announcement of a shift to a parallelized EVM chain.

With Monad not yet online, SEI has been the only way to gain exposure to the parallelized EVM narrative, and its token has appreciated accordingly.

Although Monad seems to intend Keeping L1 separate, I predict that Monad EVM will be the target of an EVM alternative on Ethereum L2. If Monad open source its EVM, it will become a very hot software in Web3. It may also be a viable strategy for Monad to simultaneously build an Ethereum L2 outside of its standalone L1 to ensure that it fills as much of the competitive landscape as possible.

I had a conversation with Ansgar last November and he expressed interest in finding a new VM specification for L2 to design that would be better than simply copying the L1 EVM into L2 More optimized execution. The thought process is that if we can find a more execution-optimized L2 VM, we can encourage L2s to make it the standard instead of the traditional (and slower) EVM. This shift will require coordination, but it will greatly improve the Ethereum L2 space.

6. Airdrops

My very conservative prediction for 2024 is that $2 billion will be airdropped to users. EigenLayer can even implement this itself.

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

Then, now is the time to take action. For example, both StarkNet and LayerZero have recently confirmed upcoming token launches, both of which I expect will happen in the first quarter of 2024.

These airdrops will force others to launch their tokens faster. Once a new round of airdrop season begins, its overall momentum will be unstoppable. After all the major projects launch their tokens and put billions of dollars into the hands of users, subsequent projects will quickly develop their “apps” and release their “tokens” to ride the wave.

Once this happens, you will know that we are approaching a market price peak and it is time to start selling rather than buying. Be careful here. The trap of airdrops may attract most of your capital to maximize returns, but this is likely to happen when you rationally withdraw your capital.

For example, Alameda initially started operating through zero-risk Bitcoin arbitrage between exchanges, and eventually became fully leveraged on illiquid junk coins as the bull market progressed. What you want to do is the opposite. You want to be fully leveraged in illiquid shitcoins from scratch and then sell them into USD, Bitcoin, Ethereum, and other less risky positions as the bull market progresses.