In the perspective of crypto history, the Web3 storm of 2023 is nothing out of the ordinary. Following the bear market bottom in 2022, the crypto world has steadily navigated through the foundational phase of a bull market in 2023. However, the significant progress in AI and the resulting threat discourse have entwined Web3 into an epic narrative. Ever since the beginning of Bitcoin, people have been envisioning blockchain as a means to establish order in smart networks. As awareness grew about the convergence of AI and blockchain/Web3 in the metaverse, it remained a mere vision. It wasn’t until 2023, when the AI threat discourse sparked by the popularity of ChatGPT and the issue of computational governance, that people were compelled to begin the practical integration of AI and Web3.
It can be inferred that the construction of the metaverse in 2023 has just begun, and the singularity of the metaverse has occurred. In this context, we are now entering a year that will be recorded in history as the foundational year for metaverse construction and the crypto bull market cycle. Despite the changing dynamics of the physical world in 2024, opportunities for human progress in the digital society are on the rise.
01 Integration: TradeFi and DeFi Asset Market
The year 2023 was referred to as the year of RWA, so why did the RWA market remain lukewarm? The answer lies in the fact that the early medium of the RWA market primarily consisted of national debt, gold, and the US dollar. These assets offered relatively stable investment returns with limited fluctuations, and even the introduction of the US dollar in the form of stablecoins limited the operational space for the RWA transformation of TradeFi assets into the DeFi market in the crypto economy. With the success of Bitcoin ETF on Wall Street, more TradeFi assets with investment returns, such as stocks and derivatives from traditional financial markets, will enter the crypto market through RWA. For instance, BlackRock is researching how to transform a large amount of TradeFi assets into RWA for integration into the crypto market. To put things into perspective, BlackRock’s assets under management in Q3 2023 amounted to $9.1 trillion, while the familiar large-scale Bitcoin holder Grayscale’s assets under management were in the range of several hundred billion dollars, with the Bitcoin trust accounting for over $200 billion.
Therefore, the current crypto market, centered solely around Bitcoin, is insufficient for BlackRock. After the introduction of Bitcoin ETF into traditional financial markets, it becomes worthwhile for BlackRock to bring more TradeFi assets into the crypto market. Thus, it can be predicted that the RWA market in 2024 will experience a massive release of assets.
Bitcoin ETF brings Bitcoin into traditional financial markets, providing funds for the crypto market. RWA brings assets from traditional financial markets into the crypto market, providing high-quality assets for the crypto market. Therefore, it is optimistic to expect that the total volume of the crypto market will exceed $10 trillion in 2024, and the price of Bitcoin will reach $100,000 in the same year (friendly reminder to investors, this article does not constitute investment advice, please make decisions based on your own judgment).
But this is just the beginning. Skipping the narrative of this bull market cycle and aligning with the theme of the entire article, we directly look forward to the integration of over half of the high-quality assets from the physical world into the crypto world during the construction of the metaverse in the next decade. Similarly, native crypto assets represented by Bitcoin ETF will also integrate with the traditional world’s financial system, providing early residents of the metaverse with a more diverse path for wealth rights and asset management.
It is worth mentioning that some people are worried that the crypto market will enter a 14-year bear market cycle similar to the one experienced during the development of the Internet. Setting aside whether these two events are comparable and referenceable, even if market cycles have their intrinsic regularities, we believe that they will be resolved by the above narrative. The industrial and economic capabilities brought about by the tremendous social changes of the Internet are incomparable to the social changes and economic power brought about by the blockchain/Web3 that we are currently experiencing today.
02 Return: Public Chain Performance, Cross-Chain Interoperability, and Storage Ecosystem
After the baptism of the inscription at the end of 2023, people in the crypto world have realized that the current infrastructure of public chains and other basic facilities is still inadequate. For example, even Layer2, which received hundreds of millions in funding, could not withstand the baptism of the inscription, let alone support its corresponding application ecosystem. 2024 will undoubtedly be a year of the return of the basic ecosystem such as public chain performance, cross-chain interoperability, and storage (these efforts will be the foundation of the intersection of AI and Web3/blockchain in the metaverse).
For example, Layer2 is already considering upgrades and breakthroughs. If the substantial investment in storage and expansion is not enough to attract application developers, then perhaps they should reconsider and take a step forward to develop an application ecosystem that allows good applications to thrive and users to have a better application experience.
Intent, modularization, and chain abstraction, under the aforementioned background, will undergo a qualitative change in 2024 based on the initial practice in early 2023. It is worth mentioning that we have previously analyzed examples of intent transactions, and the space for intent-centric new narratives is enormous and even has no starting point. Rational developers and builders of the crypto ecosystem have shifted their focus to large-scale application projects and adoption paths.
NFT evolving into ERC404 has brought high-quality basic elements for the crypto economy and metaverse construction. Its first role is to empower financial liquidity, not only in the avatar-based NFT/PFT market but also in the RWA market. Additionally, it can be combined with DID, and after establishing the relationship between NFT and empowering DID with identity, contributions, honors, and assets, ERC404 can help to break them down, allowing DID contributions to be detached from corresponding status, honors, rights, and assets.
Moreover, the concept of DePin is gaining momentum. For example, the AI+DePin project Peaq, which is focused on the European and American markets, has already launched its mainnet and is onboarding a new Fortune 500 company as a partner every week. It has also been included as a key layer1 in the Messari Depin report. DePin will be an important breakthrough and infrastructure for the integration of AI and Web3. Furthermore, whether more basic network bandwidth and other infrastructure can be combined with blockchain will also be witnessed in this cycle.
Regarding the public chain race itself, we expect that new public chain ecosystems will gradually prosper in this cycle. However, from the narrative perspective of 2024, the most mainstream ecosystems will still be the Ethereum and Bitcoin ecosystems:
Ethereum ecosystem: In addition to the potential for incremental market development of Layer2 and applications, we have greater expectations for the influx of TradeFi (traditional finance). Probably, the path for the RWA transformation of TradeFi (traditional finance) assets into the crypto market, as discussed earlier, will choose Ethereum. For example, BlackRock, which wants to bring assets onto the chain, will most likely choose Ethereum to develop its own Layer2.
Bitcoin ecosystem: Since the DeFi period of the Ethereum ecosystem, people have been imagining the enormous market space for “BTC+DeFi.” This will become a reality in 2024. Our expectations for the Bitcoin ecosystem should not be to replicate what has been done in the Ethereum ecosystem, but to explore the pioneering market space brought about by the combination of the largest crypto market volume, BTC, and DeFi. There are already existing practices in the market that attempt to improve asset circulation, issuance, and leverage on the second layer.
The advancement of the basic ecosystem of the crypto world will provide possibilities for the intersection of AI and Web3.
03 Iteration: Application Market Led by AI and Web3
As mentioned earlier, Web3 has not yet entered the application era, largely due to the barriers of public chains. Some excellent practices that iterate Web2 application scenarios into Web3 have been stranded due to the performance of public chains and protocol barriers. However, the practice of “AI+Web3” is opening up the constraints of the Web3 application market.
Of course, “AI+Web3” is still constrained by the infrastructure ecosystem, and AI on-chain is a cutting-edge proposition. However, the progress of this event depends on the development team’s understanding of AI on-chain. Compared to the development teams in the Web3 social and blockchain gaming fields, we have reason to believe that AI development teams have a deeper understanding of and more cutting-edge driving force for AI on-chain.
Furthermore, it is conceivable that the practice of the AI ecosystem based on large models and the Web3 ecosystem based on public chains in this era will likely serve as the foundation for their intersection in the metaverse in the future. Therefore, it is optimistic to expect that in 2024, there will be several “AI+Web3” projects with a market value of over 1 billion U, which will drive the crypto world into the era of Web3 applications. The application market of Web3 social, blockchain gaming, and the Web3 media we are in will also be active in this cycle, and there may even be specific functions serving “AI+Web3,” such as MugglePay, which is dedicated to helping businesses accept cryptocurrency payments and has shifted its focus from e-commerce to AI and gaming in 2024, and has launched an innovative subscription-based payment (Web3 subscription) feature for AI service providers. Additionally, StreamAi, which provides data storage and precise distribution for AI, is committed to becoming the largest cloud service provider for the “Web3 network and space interstellar network,” as well as for “programs and robots” like ChatGPT.
However, we need to distinguish the active “AI+Web3” in this cycle from the “AI+Web3/blockchain=Civilization to Stop” that we proposed. In this cycle, “AI+Web3” is just a collection of application scenarios and can be understood within the inertia of “Internet +”. However, in the next decade or even several decades, the continuous improvement of productivity by AI and the Turing-complete production relations, and even the social relations change brought about by Web3, will lead to a new era of digital advancement for humanity in the intersection of the metaverse.
Of course, all of this will depend on the practice of these active “AI+Web3” projects in 2024.
Conclusion
This is likely to be the last round of the bull-bear iteration led by Bitcoin, and it will probably also be a round of bull market cycles that will be recorded in history. From now on, the order established by Web3/blockchain for AI/smart networks will begin to take root, driving the expansion of the native asset market in the crypto world. At the same time, the digitization of physical world assets (RWA) will also enter the fast lane, and crypto market assets will gradually surpass the financial assets market of traditional physical markets.
Based on this, people’s imagination of the metaverse is beginning to take shape, with the two major threads of the construction of the metaverse (AI and Web3) gradually unfolding and ultimately converging in the metaverse. The latest news is that Sora’s generative capacity is amazing, and OPENAI has taken a big step in the construction of the metaverse. However, the Web3 world of the crypto market has not fallen behind. The current limiting factors are more fundamental hardware and network facilities, especially network facilities. A fatal issue is, can users in the Chinese-speaking world trust China Mobile? While human elites are laying the groundwork for the future technological high ground, China Mobile is busy consuming user traffic in exchange for more user talk time. We hope that these issues will be resolved using the methods of the Web3 world.
There is much to look forward to in 2024. Let’s work together!
