Top 12 Crypto Narratives for 2024

Crypto narratives represent trending ideas or beliefs that shape how we view and value crypto. Investors use those stories to pick up on market trends and potential impacts.

For example, Musk's tweets can move DOGE prices, and many agree that the halving for Bitcoin drives bull runs every four years.

Narratives are born from technological advancement, social and economic events, and industry beliefs. The mainstream media, social media, forums, influencers, and market trends all feed the narratives. The innovative applications of blockchain have given rise to new narratives in 2024, including Decentralized Physical Infrastructure Networks (DePIN) and the story of Decentralized Science—DeSci.

1.      Memecoins

Memecoins dominated Q1 2024 with mouthwatering returns above 1,000% for top tokens. These coins live off memes and trends, positioning themselves as light-hearted assets primarily relying on viral growth from community engagement. They offer an accessible entry point to popular blockchain hype, usually launching at fractions of a cent per token. In contrast to other narratives, they require minimal knowledge of cryptocurrency, as there's limited utility—especially at launch.

There was revived interest in Solana in Q1 2024 due to a wave of memecoins. The launch of EIP-4844 and the decreased transaction fees on Layer 2 solutions seemed to fuel the growing interest in Base, especially from its Coinbase users, which would have probably driven another surge in memecoins. For now, TON appears to be a favorite blockchain for memecoins.

2.      Blockchain Modularity

Older blockchains, like Bitcoin and Ethereum, are monolithic, handling all tasks internally. However, moving into an era of competition toward cost efficiency and flexibility, modularity is overtaking the former. Modularization breaks blockchain into singular components that enable scalability beyond current limits.

Execution occurs on Layer 2 solutions like Optimism and Arbitrum, which process and then send batched transactions to the main chain. Layer 2 solutions even adopt modularity; this is where the OP Stack standardizes into open-source modules all the components needed for a Layer 2 chain, making it easier for developers to create new chains.

EigenDA, a decentralized data-availability layer of Ethereum, underpins Mantle – a layer 2 chain offering robust data availability solutions.

Celestia, a layer-1 blockchain, has pursued modularity in design by focusing on consensus and data availability and optimizing storage. This way, Layer-2 solutions building on top of Celestia can focus on engineering optimal execution environments for their applications.

3.      Layer 1s

Layer 1 blockchains act as the base architecture for blockchain applications, even for smart contracts, through a public source of truth. Traditional Layer 1s—like Ethereum—usually have low transaction speed scalability and high gas fees. Layer 2 blockchains resolve these problems by executing the transaction so that Layer 1 only has to handle transaction issuance and verification. However, the new generation of Layer 1s changes this with fast transaction times, lower costs, and enriched interoperability.

Here are key Layer 1 projects to watch:

Celestia:

Celestia is the "first modular blockchain network powering scalable, secure web3 apps." Much like Polkadot and Cosmos, it separates consensus from the execution layer, with the former managed by Celestia to order and guarantee transaction availability, while the latter is for execution and validation on the client nodes. This will allow projects to deploy networks without starting from scratch in consensus, led by a team including Mustafa Al-Bassam, who has a Ph.D. in blockchain scaling.

Sui:

Sui is a permissionless Layer 1 platform developed to support on-chain assets as wide-ranging as gaming to finance. Developed by former engineers at Meta in Mysten Labs, Sui will offer creators and developers an enablement framework for building experiences for the subsequent billion users in web3. It scales horizontally to meet application demand, ensuring cost-effective transactions. Sui uses a DAG-based mempool powered by Narwhal and Bullshark and Byzantine Fault Tolerant (BFT) consensus to enable resilient, ultra-high scalability execution for more complex transactions, such as asset management or DeFi applications.

4.      Liquid Restaking Tokens

Restaking is an emerging trend emphasizing capital efficiency for users who stake one token in multiple protocols to secure several networks simultaneously. In other words, it enables protocols to skip the complexity of setting up validator sets and ensures scalable security tailored to individual protocol needs. With this strategy, restakers will receive extra rewards simultaneously.

EigenLayer is a leader in restaking and has close to over 3.5 million ETH TVL. Their users can restake stETH, rETH, cbETH, and other tokens to secure AVSs within the EigenLayer platform.

5.      Liquid Staking Derivatives

These liquid staking derivatives are tokens on the liquid staking platform issued to the stakers to help them unlock their locked, illiquidity-staked assets for better yields. In traditional staking, one locks assets in a protocol designed to secure proof-of-stake blockchains; this results in capital inefficiency due to illiquid, locked assets.

Liquid staking does this by pegging any derivative asset to the underlying assets staked in proof-of-stake blockchains and accruing rewards over time. Through these derivatives, it is possible to have second-layer liquidity in DeFi applications, including participation in lending and liquidity provision activities. Generally, providers retain 5%-10% of the staking rewards as revenue, making entry into staking easier and securing and stabilizing a network.

6.      Layer 2s: Optimistic Rollups

The story of vertical scaling is all about Layer 2 protocols built on top of Layer 1s to scale them further. This lightens the computational burden on Layer 1 by processing transactions off-chain, multiplying the throughput many-fold. TVL has seen considerable growth in Layer 2s, diverging from general DeFi market sentiments and total crypto market capitalization trends.

Optimistic rollups are equally essential Layer 2 scaling solutions, which raise transaction throughput while reducing fees, dutifully maintaining the state security model of the underlying blockchains. They execute their mandate on a trust model under which the validation of the transaction happens off-chain before commitment to the blockchain by a subset of 'witnesses.

Arbitrum

Arbitrum is an L2 scaling solution that utilizes optimistic rollups to drive higher throughput and lower user transaction costs. Under the circumstances of abnormally high speed and gas fees within Ethereum since The Merge, throughputs that networks like Arbitrum present are much more competitive. Thousands of web3 users and creators began shifting to these, peaking Arbitrum's TVL at $3.2B in November 2021.

In this regard, the ARB airdrop recently brought much-needed liquidity to Arbitrum. There was a reward for trading, staking, or providing liquidity for ARB token takers across DEXs and protocols in this network. It would raise awareness of the role of Arbitrum in L2 scaling solutions for Ethereum.

Optimism

Optimism is an L2 protocol Ethereum devs developed with ultra-high speed, stability, and scalability. It extends the Ethereum blockchain, providing scaling for Ethereum apps that are fully compliant with the formal specs of Ethereum and as an EVM-equivalent solution for Ethereum apps. Optimism delivered the OP Stack, which modularizes Layer 2 chain elements to reach better interoperability and ease new chain development. According to Defillama, during the height of Optimism's TVL in August 2022, it had reached $1.15 billion.

7.      Layer 2s: ZK Rollups

ZK rollups provide a layer-2 scaling solution by shifting computation and state storage off-chain, enhancing Layer 1 throughput. Bundling transactions enable such independent processing, and only summary data can be published on-chain. ZK Rollups is favored in private applications like digital identity verification and confidential transactions.

Examples of notable ZK rollups in 2024 include:

zkSync Era is an L2 rollup that empowers Ethereum's scalability without diminishing its security and decentralization, handling off-chain computations at the level of Ethereum security with increased speed and reduced transaction costs.

Polygon zkEVM: Polygon announced its zero-knowledge Ethereum Virtual Machine [zkEVM] Mainnet Beta in March 2023. On the other hand, polygons zkEVM equate to EVM, which means, just like Optimism's, it can run Ethereum-native applications without any code changes.

Scroll envisions unrestricted scalability, high throughput, full decentralization, and minimal-trust privacy. It does so by using ZK rollup and off-chain decentralized systems.

Taiko: Designed to be the most Ethereum-compatible ZK rollup, Taiko scales without changes in existing dApp protocols. It is highly focused on compatibility with Ethereum and hence reuses execution clients. Any interested customer can get first-hand experience by participating in usability tests of Taiko's testnet.

8.      Bitcoin: Ordinals, BRC-20 Tokens, and Runes

In January 2023, software engineer Casey Rodarmor launched the Ordinals protocol on the Bitcoin blockchain, which enabled the minting of NFTs natively on the mainnet. The reaction was varied within the Bitcoin community—while some viewed it as a threat, others started to work on the idea, creating Inscriptions, which are Bitcoin's version of NFTs.

The Ordinal Inscriptions are, just like NFTs, digital assets inscribed on Satoshis that are stored directly on-chain as a result of the Taproot upgrade, which went live in November 2021. Ordinal Punks, Taproot Wizards, and Bitcoin Rocks are collections that have maximally hit visibility once again, leaving nearly 55.8 million Ordinal inscriptions on the cryptocurrency BTC blockchain.

Beyond Ordinals, interest in BRC-20 tokens has risen—it uses ordinal inscriptions to empower the minting and transfer of fungible tokens on Bitcoin. Similar to Ethereum's ERC-20 standard, BRC-20 tokens have been minted by the community to be traded on decentralized platforms; even with the relatively high fees, recorded prices for transactions as high as more than $27 on average in December 2023 have not stifled this progress.

Rodarmor aims to release a new fungible token protocol—to fasten token creation on Bitcoin—before the fourth halving event in 2024. He does not mask his reservation: "Fungible tokens are 99.9% scams and memes." However, his new protocol wants to make things efficient and have an effect that will increase transaction fee revenue, developers, and users of Bitcoin.

9.      Decentralized Physical Infrastructure Networks (DePIN)

DePIN means Decentralized Physical Infrastructure Networks—an infrastructure development system that spans many industries, from wireless connectivity and geospatial mapping to mobility, health, and energy. Targeting efficient infrastructure by incentivizing providers to add physical resources in relevant sectors, DePIN has lower service costs for users than any centralized facilities. At the same time, the network makes money off users' fees.

10. Decentralized Science (DeSci)

DeSci is decentralized, using blockchain technology to liquidize openness, incentivization, and community-driven collaboration in scientific research. This means it enables faster translation of scientific discoveries into practical innovation by targeting another one of the traditional "valleys of death" in research and development.

DeSci essentially focuses on the advancement of mechanisms of data sharing, funding, and research publication. It creates incentives through tokens, utilizing NFTs as asset access keys and DAOs for fund distribution and governance.

11. GambleFi

GambleFi represents the applications that decentralize crypto-based betting services, focusing on bringing transparency and fairness to online gambling activities. Users can contribute more directly by holding the protocol's tokens against probable revenue generation. The trend of GambleFi arose in the bear market; how this space will take shape in the upcoming bull run would be a development one would eye.

12. Real World Assets

RWAs are tokenized or physical or off-chain assets traded on the blockchain that offer yield opportunities in DeFi. They include real estate, precious metals, commodities, and art—integral components of the world financial system. In 2020, global real estate was $326.5 trillion, while the gold market cap stood at $12.39 trillion. Companies like Ondo Finance tap into US Treasury Bills and high interest rates to give investors low-risk yields.

MakerDAO has targeted the RWA space with its idle assets in short-term bonds, financed a buyback program of the MKR token, and enhanced the rate on DAI Savings, all attesting to how protocols stand to enjoy returns from RWA investments. It shows, if you will, just how value trickles down to token holders, thereby fueling the growth of MakerDAO.

RWAs offer significant potential for DeFi:

They provide reliable yields that are fully sustained and backed by real assets.

They enhance the interoperability of DeFi with traditional financial markets, making them more liquid and efficient in terms of capital use and increasing investment opportunities.

In some sense, they become connectors between DeFi and traditional finance (TradFi).

Other significant examples are Maple Finance, Goldfinch, and Centrifuge, which all focused on RWA lending in DeFi.

Final Thoughts

In 2023, narratives such as Artificial Intelligence, Chinese tokens, and decentralized social media gained traction alongside Layer 1s, Layer 2s, liquid staking derivatives, real-world assets, Bitcoin Ordinals, and BRC-20 tokens. In 2024, emerging themes include restaking, DePIN, decentralized science (DeSci), GambleFi, and a growing focus on blockchain modularity.