Pantera Partner's 2024 Market Outlook: Bullish on Bitcoin's DeFi Summer and Social Tokenization
TechFlow Selected TechFlow Selected
Pantera Partner's 2024 Market Outlook: Bullish on Bitcoin's DeFi Summer and Social Tokenization
Web2 has shifted from social to finance, while Web3 is shifting from finance to social.
Navigating Web3 tides with focused insightsAuthor: Paul Veradittakit, Pantera Capital
Compiled by: TechFlow
Pantera Capital recently published a comprehensive article providing an in-depth analysis of its outlook for the 2024 crypto market, including investment strategies, key focus areas, and trend predictions.
Due to the length of the original piece, we have divided and translated it into separate sections based on thematic content.
This is the second part of the full series. Paul Veradittakit, Managing Partner at Pantera Capital, shares his predictions for the 2024 cryptocurrency landscape, highlighting areas such as Bitcoin DeFi, tokenized social experiences, modular blockchains, and on-chain applications.
1. The Revival of Bitcoin and "DeFi Summer 2.0"
In 2023, Bitcoin made a strong comeback. Its dominance—measured by its share of total crypto market capitalization—rose from 38% in January to around 52% in December, making it one of the most watched ecosystems heading into 2024. At least three major catalysts are driving this resurgence:
-
The fourth Bitcoin halving, expected in April 2024
-
Approvals for multiple spot Bitcoin ETFs
-
Enhanced programmability, both via base-layer protocols (e.g., Ordinals) and Layer 2 or other scalable layers (e.g., Stacks and Rootstock)
At the infrastructure level, we expect increased adoption of Bitcoin Layer 2 and other scalable layers supporting smart contracts. The Bitcoin ecosystem should coalesce around one or two Turing-complete smart contract languages, with leading contenders including Rust, Solidity, or native Bitcoin language extensions like Clarity. This language will become the standard for Bitcoin development, similar to how Solidity is considered the standard for Ethereum development.
We also see fundamental signs pointing toward a potential “DeFi Summer 2.0” on Bitcoin. Currently, Wrapped BTC (WBTC) has a market cap and total value locked (TVL) of about $6 billion, clearly indicating strong demand for Bitcoin within DeFi. Today, Ethereum has approximately 10% ($28 billion) of its $273 billion market cap locked in TVL. As Bitcoin’s DeFi infrastructure matures, we could see Bitcoin DeFi TVL grow from its current $300 million (less than 0.05% of market cap) to $10–15 billion (about 1–2% of Bitcoin’s market cap). In this process, many Ethereum DeFi practices may be adapted and “localized” onto Bitcoin, such as the recent rise of BRC-20 inscriptions and staking concepts like Babylon L2.
Bitcoin NFTs, such as those inscribed via Ordinals, may also gain increasing popularity in 2024. Given Bitcoin’s higher cultural recognition, Web2 brands (such as luxury retailers) might choose to launch NFTs on Bitcoin, similar to how Tiffany & Co. collaborated with Cryptopunks in 2022 to release the “NFTiff” pendant collection.
2. Tokenized Social Experiences through New Consumer Use Cases
Web2 shifted from social to finance; Web3 is shifting from finance back to social. In August 2023, friend.tech pioneered a new form of tokenized social experience on Base L2, allowing users to buy and sell fractional “shares” of others’ X (formerly Twitter) accounts. It peaked at 30,000 ETH in TVL (around $50 million at the time) in October and inspired several clones, such as post.tech on Arbitrum. By financializing Twitter profiles, friend.tech successfully introduced a novel token economic model to the SocialFi space.
Over the next year, we expect further experimentation in the social domain, where tokenization—whether fungible or non-fungible tokens—will play a pivotal role in redefining social interactions. Fungible tokens are more likely to serve as innovative points and loyalty systems, while non-fungible tokens (NFTs) could function as digital identities and social assets (like trading cards). These can be traded on-chain and integrated into DeFi ecosystems.
Lens and Farcaster are two leading Web3-native platforms that combine DeFi with social networking. Projects like Blackbird will also help popularize tokenized point systems for loyalty programs in specific verticals (e.g., restaurants), combining stablecoin payments with tokenized rewards to offer an on-chain alternative to credit cards, thereby reshaping consumer experiences.
3. Growth of Bridges Between Traditional Finance and Decentralized Finance, Such as Stablecoins and Mirrored Assets
In 2023, the crypto industry saw numerous legal developments, including significant wins such as the XRP ruling and Grayscale’s successful ETF lawsuit, alongside judicial penalties for financial fraud at Binance and FTX. Meanwhile, institutional interest in potential ETF approvals for Bitcoin and Ethereum surged.
In 2024, we anticipate a significant increase in institutional adoption. These institutions are not only seeking ETFs but also tokenized real-world assets (RWA) and traditional financial products. In other words, traditional financial assets will be “mirrored” into decentralized finance (DeFi), while crypto assets gain greater exposure in traditional financial markets, creating bridges between TradFi and DeFi and enhancing investor liquidity and diversification.
Stablecoins will remain one of the most critical links connecting traditional finance and DeFi. Stablecoins like USDC and PYUSD will be more widely accepted as portfolio options and payment tools. With Circle considering an IPO in 2024, we may also see increased issuance and use of non-dollar stablecoins—particularly euro-backed stablecoins (such as Circle’s EURC), as well as those backed by the British pound, Singapore dollar, and Japanese yen. Some of these may even be launched by state-affiliated actors. This could also drive growth in on-chain fiat foreign exchange markets. Tokenized government bonds have already gained traction, with platforms like Ondo tokenizing $800 million in U.S. Treasuries.
4. Convergence of Modular Blockchains and Zero-Knowledge Proofs
Over the past year, both modular blockchains and zero-knowledge proofs (ZKP) have matured significantly—for example, the mainnet launch of Celestia, Espresso’s integration with Arbitrum, RiscZero open-sourcing its Zeth prover, and Succinct launching a ZK marketplace. How are these narratives converging? Primarily, ZK-focused companies are adopting a “modular” approach by specializing in specific verticals such as coprocessors, privacy layers, proof markets, and zkDevOps.
In the coming year, I expect this trend to continue, with zero-knowledge proofs becoming the interface between different components of modular blockchain stacks. For instance, Axiom’s ZK coprocessor uses ZKPs to provide historical state proofs that developers can leverage for computations within dApps. As ZKPs become a common interface across these different providers, we will enter a new era of smart contract composability. This offers developers building dApps greater flexibility and lowers the barrier to entry into the blockchain stack. On the consumer side, ZKPs may see broader adoption as tools for identity protection and privacy, such as ZK-based decentralized IDs.
5. More Compute-Intensive Applications Moving On-Chain, Such as AI and DePIN
Significant time, effort, and capital have been invested in solving scalability challenges for decentralized applications. Today, most scalability issues have been addressed: gas fees on Ethereum L2s are below $0.02 (compared to $11.50 on Ethereum mainnet), while fees on Solana are 3–4 orders of magnitude lower still.
As this trend continues, we believe compute-intensive applications will soon become economically viable on-chain. This includes on-chain AI systems, decentralized physical infrastructure networks (DePIN), on-chain knowledge graphs, and fully on-chain games and social networks. All of these could fundamentally reshape the on-chain data economy and greatly improve user and developer experiences by removing the constraints of high gas fees and limited computational capacity.
Examples of compute-intensive projects leveraging cheaper on-chain computation include Hivemapper building a decentralized Google Maps on Solana, Bittensor creating a decentralized machine learning platform, Modulus Labs working on ZKML and AI-generated NFT art, The Graph’s on-chain knowledge graph initiative, and Realmsverse developing an on-chain gaming world on Starknet.
6. Consolidation of Public Blockchain Ecosystems and the “Hub-and-Spoke” Model of App Chains
In recent years, infrastructure projects have proliferated rapidly. Although technical distinctions between L1s and L2s are common, they make little difference from a user experience perspective. This is especially true for general-purpose public blockchains; today, L1s like Solana or Avalanche are direct competitors to L2s like Arbitrum or zkSync in terms of users, projects, and volume.
Due to this homogenization, liquidity has become the primary force centralizing activity among general-purpose public blockchains, benefiting larger existing players like Arbitrum, Optimism, and Solana. Currently, the top four ecosystems account for about 90% of total value locked (TVL). Smaller ecosystems must focus on specific verticals (such as social, gaming, or DeFi) to maintain competitiveness, effectively becoming “app chains” or “industry-specific chains.” Already, three of the top ten L2s by TVL (dydx, Loopring, Ronin) are app chains focused on single verticals. Smaller, newer L2s like Base and Blast have also achieved TVL breakthroughs almost entirely dependent on single killer apps (e.g., friend.tech and Blur).
Moreover, most leading general-purpose public blockchains have released app chain toolkits (such as OP Stack, Arbitrum Nitro, StarkEx, etc.), enabling app chains to tap into their liquidity and integrate into their ecosystems. As a result, we are beginning to see a “hub-and-spoke” model emerge, where a few general-purpose public blockchains act as central hubs, surrounded by numerous specialized app chains. In 2024, watch major rollup-as-a-service providers like Caldera, Conduit, and Eclipse, which are leveraging this hub-and-spoke architecture.
Conclusion
Entering 2024, we may have passed the worst of the bear market and are now poised to explore new use cases. Today, we stand at an inflection point where cryptocurrency is no longer just about financialization, but about a broader vision of how blockchain can redefine consumer, social, and developer experiences. I am excited to see what unfolds in this emerging industry this year—and how we will use decentralized technologies to reimagine our digital culture.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
Pantera Capital
