Author of the original text: Vaish Puri, Joey Campbell
Original text translated by: TechFlow
When historians look back on 2024, they may see it as a pivotal year in Bitcoin's march towards mainstream adoption. This year, Bitcoin hit new all-time highs, became a hot topic in the US presidential election, saw 11 Bitcoin ETFs get approved for listing, and experienced a halving event, all while the global economy struggled under the weight of inflation.
This year, Bitcoin displayed the unique versatility of its appeal. In economically troubled countries like Argentina and Turkey, it was seen as a hedge against high inflation; in the eyes of Wall Street elites, it became an investment vehicle recognized by financial giants like BlackRock; for cypherpunks and developers, it was a blank canvas for new innovation; and for governments around the world, it transformed from a threat to be controlled into an opportunity to be leveraged.
Bitcoin's technology also continued to evolve. The Bitcoin network, once centered on "simplicity," began experimenting with more new features. The reactivation of opcodes (like OP_CAT) and revolutionary research (like BitVM) injected programmability and self-custody into the base layer. Layer 2 networks rapidly developed, providing solutions for transaction scaling; meanwhile, the emergence of liquid staking derivatives also brought the potential for yield generation to Bitcoin.
BlackRock's iShares Bitcoin Trust (IBIT) set a record, reaching $10 billion in assets under management (AUM) in just a matter of weeks, far outpacing the growth trajectory of its gold ETF. With a flood of institutional capital, Bitcoin gradually entered retirement investment portfolios. This phenomenon excited Wall Street but concerned Bitcoin's purists. The popularity of ETFs made Bitcoin more accessible than ever - now, 62% of Americans can easily purchase Bitcoin through their brokerage accounts, just like buying Apple stock. However, this convenience also brought issues, as the "not your keys, not your coins" ethos of Bitcoin was increasingly overshadowed by the noise of institutional trading.
Yet, Bitcoin always finds vitality in its contradictions. In the US, Trump's crypto-friendly policies made Bitcoin a legitimate institutional asset; in India, despite regulatory pressures, 75 million users have embraced Bitcoin as a tool of financial empowerment; in Turkey, with 50% inflation, Bitcoin became the savings choice for millions; and in Argentina, when the currency rapidly devalued due to 140% inflation, citizens had no time to ponder custody methods, instead using Bitcoin to protect their savings. In Latin America and Africa, Bitcoin is not an investment tool, but a means of survival.
This adaptability defined Bitcoin's development in 2024. Each region imbued Bitcoin with different meanings based on their own needs. This flexibility not only did not weaken Bitcoin's core objectives, but also proved its remarkable vitality. Bitcoin is like a mirror, reflecting the diverse needs of its users while maintaining its core characteristics.
As 2024 draws to a close, Bitcoin faces important choices. It has gained the legitimacy that early supporters hoped for, but this legitimacy may not have been achieved in the way they initially envisioned. The rise of ETFs, while transformative, has also introduced risks that Bitcoin's design initially sought to avoid. Meanwhile, the scalability issues of the network are finally being seriously addressed, and the future of 2025 is filled with hope and possibility.
Are Bitcoin ETFs a bridge to mass adoption, or a centralized vulnerability? Can Bitcoin staking enhance the functionality of the network, or further fracture its core ethos? As Layer 2 solutions and tokenized Bitcoin emerge, can Bitcoin truly achieve scalability, or are we just repeating past debates? Does Trump's victory and the end of the Gensler era mark a new chapter for US crypto? From the revival of OP_CAT to record-breaking ETF inflows, from MEV on Bitcoin to explorations of recursive contracts, the Bitcoin story of 2024 is still being written.
Institutional Adoption: ETFs and Microstrategy
1. Bitcoin ETFs: Institutional Demand
Bitcoin ETFs (such as BlackRock's IBIT) reached $20 billion in assets under management (AUM) in just 137 days, setting a new record. In comparison, the previous fastest-growing ETF (JEPI) took 985 days to reach the same scale.
Currently, ETF custodians hold over 1 million Bitcoin, accounting for more than 5% of the total Bitcoin supply.
Hedge funds and financial advisors make up a significant portion of these ETF investors, indicating strong institutional interest in Bitcoin.
2. The Decline of Grayscale
Due to its high 1.5% management fee and inefficient redemption mechanism, Grayscale's GBTC is no longer the market leader. A large number of users have shifted to the lower-cost ETFs, causing GBTC's AUM to shrink significantly, decreasing by 152,000 Bitcoin in just one month.
3. MicroStrategy's Strategy
Under the leadership of Michael Saylor, MicroStrategy has accumulated 402,100 Bitcoin, worth approximately $39.8 billion. They have continued to increase their Bitcoin holdings by issuing convertible bonds and raising equity.
Although this strategy has been controversial, MicroStrategy remains one of the largest Bitcoin holders globally and is seen as an indirect way to invest in Bitcoin, with its stock trading at a three-fold premium over a pure Bitcoin exposure.
4. Broader Implications
With the entry of institutional investors, Bitcoin's price volatility has gradually decreased. The options trading of ETFs has further cemented Bitcoin's position as a long-term store of value, making it an important component of many investment portfolios.
ETFs provide a convenient investment channel for retail investors and financial advisors, but have also been criticized for their over-reliance on custodial models, which goes against Bitcoin's "self-custody" ethos.
BRC-20, Ordinals, and Runes
Through the Taproot and SegWit upgrades, the Bitcoin network introduced Ordinals and Runes, enabling Non-Fungible Tokens (NFTs) and fungible tokens. These innovations have driven an increase in network activity, but have also sparked controversy. Critics argue that they add to the network's burden, while supporters believe they help improve the sustainability of transaction fees and demonstrate Bitcoin's permissionless innovation capabilities.
1. Trends and Network Impact
Due to the popularity of Ordinals collections, Bitcoin transaction activity surged at times, leading to a spike in network fees. In May 2024, at the peak of the Ordinals craze, transaction fees accounted for over 75% of miner revenue, a new high.
The mempool size reached a peak of 350 million bytes at the end of 2023 but has since returned to normal, while the introduction of Runes has improved the efficiency of UTXO management.
Throughout the year, Ordinals, Runes, and BRC-20 tokens have taken turns as the dominant drivers of transaction activity, with Runes accounting for the highest share.
2. Market and Adoption
Platforms like Magic Eden and OKX have dominated the trading market, accounting for over 95% of the volume. With improved user experience and cross-chain bridges to Solana, the adoption of Bitcoin NFTs has significantly increased.
Although Ordinals collections performed well early in the year, their prices have dropped more than 50% from their highs after the halving.
Protocols like Liquidium allow users to use Ordinals and Runes as collateral for loans, further expanding the use cases of native Bitcoin DeFi. Meanwhile, stablecoins (such as Hermetica's USDh) have attempted to use Bitcoin as collateral, although they still face technical limitations.
3. Cultural and Economic Transformation
Memecoins, digital art, and decentralized markets are redefining the use cases of Bitcoin. While these trends have a speculative nature, they also showcase Bitcoin's core values of censorship resistance and permissionless innovation.
Tokenized Bitcoin: BTC on EVM Chains
Currently, the use of tokenized Bitcoin through EVM (Ethereum Virtual Machine) chains is the most popular way to unlock Bitcoin's utility, rather than relying on Layer 2 networks. Due to changes in the WBTC custodial model, the market landscape for tokenized Bitcoin has undergone significant changes this year.
1. Tokenized Bitcoin and DeFi Applications
Tokenized Bitcoin (such as WBTC, tBTC, and the emerging cbBTC) accounts for over 25% of the total value locked (TVL) in the decentralized finance (DeFi) space.
While Ethereum is the primary testbed for DeFi innovation, some Bitcoin-centric solutions (such as Bitcoin Layer 2 networks) are trying to reduce reliance on custodians and better align with Bitcoin's decentralized ethos. However, these Layer 2 networks still have a long way to go before their official launch.
2. Failures and Lessons Learned
Early tokenized Bitcoin projects (such as renBTC, imBTC, and HBTC) failed due to low adoption, hacking incidents, or centralization risks. We have summarized these failed cases as the "Bitcoin Wrapper Graveyard" to analyze their critical vulnerabilities.
With the changes in the BitGo custodial model, WBTC's dominant position has been challenged, and user trust has declined. Meanwhile, Coinbase's cbBTC has quickly risen, with a TVL of over 20,000 BTC.
3. tBTC and Decentralized Alternatives
tBTC offers a decentralized tokenized Bitcoin model, avoiding the risks of centralized custodianship. Leveraging its widespread adoption in protocols like Aave and GMX, the supply of tBTC has grown 4-fold in 2024, demonstrating strong market demand for decentralized solutions.
4. Bitcoin-Backed Stablecoins
Bitcoin-collateralized stablecoins (such as USDe and crvUSD) are gradually gaining popularity, with 30-60% of their collateral assets being Bitcoin. However, these stablecoins may introduce risks that Bitcoin users are unwilling to accept.
Fully Bitcoin-backed stablecoins remain an important development direction, as they better align with Bitcoin's decentralized and open ethos.
5. The Dominance of EVM
Although Bitcoin Layer 2 networks have garnered attention, the EVM ecosystem and its mature applications currently dominate Bitcoin's use cases in DeFi.
While Bitcoin Layer 2 networks have great potential, they are currently primarily used for speculative activities (such as airdrop arbitrage). Future solutions need to better align with Bitcoin's core protocol to enable more meaningful use cases.
Bitcoin Staking
In 2024, Bitcoin staking experienced rapid growth. Numerous new protocols are leveraging Bitcoin, the "hardest money," to support Proof of Stake (PoS) systems. Staking platforms, through native staking, liquid staking derivatives, and restaking innovations, have unlocked Bitcoin's liquidity, with a total value locked (TVL) exceeding $10 billion.
1. Native Staking
The Babylon protocol allows Bitcoin holders to stake their Bitcoin on PoS chains while maintaining custody on the Bitcoin network.
Currently, 34,938 Bitcoin, valued at approximately $3.53 billion, have been staked, with 82,440 active stakers.
Through smart contracts and slashing mechanisms, the protocol effectively secures the PoS chain.
2. Liquid Staking Derivatives (LSDs)
Lombard: Users who stake their Bitcoin can receive LBTC, allowing them to earn Babylon's staking rewards while also using the tokens in DeFi applications (such as Curve and Uniswap). The platform currently has a TVL of $1.68 billion.
Solv Protocol: Through the Staking Abstraction Layer (SAL), it unifies Bitcoin staking operations. Its liquid staking tokens (LSDs) like solvBTC can aggregate Bitcoin liquidity across chains, with a TVL exceeding $3 billion.
Example tokens include solvBTC.BBN (Babylon), solvBTC.CORE (CoreDAO), and solvBTC.ENA (Ethena).
3. Restaking
Platforms like Lombard and Solv, through restaking, utilize the staked Bitcoin for additional DeFi yields (such as liquidity provision and lending). Lombard's restaking TVL alone has exceeded $1.04 billion.
Bitcoin staking is still in its early development stage, primarily relying on reward mechanisms and high yields to attract users. In the long run, its sustainability depends on the growth of real demand. However, leading players like Lombard and Solv have captured a dominant market position, potentially introducing centralization risks. These two platforms account for a combined TVL of $1.32 billion in Babylon.
While liquid staking provides users with greater flexibility, it also introduces more trust assumptions. The future direction of Bitcoin staking requires further observation.
Scalability: Sidechains, Rollups, and Layer 2 Solutions
1. New Developments
Taproot and Opcode Revival: Taproot (launched in 2021) and proposals like OP_CAT have enhanced Bitcoin's programmability and privacy, supporting contract functionality.
BitVM: By not altering the Bitcoin consensus mechanism, it introduces Turing-complete contract functionality, enabling more complex off-chain computations.
2. Layer 2 Solutions
Sidechains:
Examples include Rootstock (RSK), Liquid Network, and Mezo.
Sidechain technology introduces smart contract functionality to the Bitcoin network and increases transaction throughput. However, these projects often rely on federated security models or merged mining to secure the blockchain.
Rollups:
ZK-Rollups: Leveraging zero-knowledge proofs to provide fast transaction confirmations while maintaining strong cryptographic security.
Optimistic Rollups: Assuming transactions are valid by default and verifying them through fraud proofs. This approach can significantly improve scalability, but with some delay in transaction confirmation. Example: The Citrea project uses zk-STARKs and the Clementine bridge to build a trustless Bitcoin cross-chain bridge.
State Channels (e.g., Lightning Network):
State channel technologies like the Lightning Network allow users to complete near-instant, low-fee payments off-chain.
The current Lightning Network capacity has reached 5,380 BTC, with an 11% annual growth rate.
Trends show a decrease in the number of channels but an increase in individual channel capacity, raising concerns about network centralization.
In developed countries (such as the US and Germany), the Lightning Network is primarily used for large-value payments, while in emerging markets, it is more commonly used for micro-payments and microtransactions.
3. Build on Bitcoin (BOB):
While BOB uses Ethereum as the settlement layer, its core goal is to build a Bitcoin-centric economic ecosystem, leveraging tokens like WBTC and tBTC to achieve this vision.
In 2024, BOB's total value locked (TVL) grew from $1.5 million to $238.27 million, primarily driven by deep integrations with Uniswap V3 and Avalon Finance.
4. CoreDAO and Ecosystem Growth
CoreDAO combines Bitcoin's security with DPoW (Delegated Proof of Work) and DPoS (Delegated Proof of Stake) technologies through the Satoshi Plus mechanism.
The ecosystem has launched the coreBTC token, which is backed by Bitcoin and used in DeFi applications, further expanding Bitcoin's functionality.
In 2024, CoreDAO achieved significant growth: a 95% network growth rate, 13.3 million new addresses, and a daily transaction volume peak of over 500,000.
