Overview of the Development of Various Fields in Web3 in the First Half of 2024

Ethereum

Zero Knowledge

ZKVM & ZKEVM

In the first half of 2024, more and more ZKEVM projects are shifting to the ZKVM architecture, represented by the Ethereum Foundation's PSE team. Taiko is collaborating with Risc0 on ZKVM, and Scroll is also preparing. Plonky3 has become a catalyst, outperforming Halo2 in performance but slightly lacking in stability, enhancing user experience.

The currently available virtual machines include ZKWASM, Succinct's SP1, a16z's JOLT, and Risc0. Polyhedra's ZK Prover performs excellently and plans to develop a virtual machine. Aztec and Mina are also in development, with performance benchmarks yet to be announced.

Key factors for broader adoption include proof costs, efficiency, and development time. ZKVM is suitable for building and deploying verifiable applications, which is worth noting.

ZK Middleware

In terms of middleware, the proof verification system is highly active, with Brevis, Alignlayer, and Nebra collaborating with Eigenlayer to enhance security. The market is shifting towards OP and ZK hybrid solutions to improve efficiency. Verifiable AI, off-chain data, and other catalysts are bringing more application demands, making these innovative areas worth paying attention to.

MEV, chain abstraction/account abstraction, intent

MEV Development Trends

Flashbots is developing products that leverage Intel's Software Guard Extensions, utilizing a trusted execution environment for privacy computing on the Ethereum Virtual Machine. Use cases include storing and processing sensitive data, ensuring auction bidding is protected from tampering and data leaks.

Fully homomorphic encryption has become a potential solution, maintaining data encryption at all times and eliminating the possibility of selective reordering.

Block Builder

The block construction market is highly concentrated among a few builders, including high-frequency trading firms that satisfy their own trading needs. Beaverbuild, Titan Builder, and Rsync Builder are the most dominant and profitable. This phenomenon of centralization has sparked research into the design of block auction mechanisms to maintain Ethereum's censorship resistance.

Relay

Relay remains critical in block supply, with over 90% of blocks transmitted via relays. Titan builder launched Titan Relay and it has rapidly grown.

Evaluation Factors for Relay:

• Performance and reliability, analyzed through metrics such as uptime, latency, and bidding failures.
• Scalability, the ability to serve a large number of validators

MEV track investments include Primev, Titan, FastLane, etc. The key issues for the next stage are value capture and token design.

Chain Abstraction and Account Abstraction

Chain abstraction is a persistent key concept for achieving large-scale user adoption and enhancing user experience. NEAR has launched a multi-chain signature feature, allowing one account to be used across chains, supporting Bitcoin, Ethereum, Cosmos ecosystem chains, Dogecoin, XRP Ledger, TON network, Polkadot, and more.

Refer to the CAKE framework of Frontier.tech, which includes the permission layer, solver layer, settlement layer, etc. The account abstraction (AA) can be included in the permission layer. The AA field is mainly divided into smart contract wallets and modular services.

Significant progress:

• The number of AA accounts exceeds 12 million, and the number of UserOps calls exceeds 49 million.
• The number of active smart wallet accounts has increased weekly, with Polygon having the most smart accounts, and Base also being popular.

EIP-7702 is incorporated into the Ethereum Pectra upgrade, bringing a more seamless experience and improving the ERC-4337 design. Pay attention to whether improvements at the infrastructure level will lead to new applications.

Other tracks include strategy engines, intent frameworks, preconfirmation, and more. Projects in the intent domain are actively being developed, with specific performance and PMF to be observed.

Bitcoin

Interest in Bitcoin Rollups has waned, with fewer projects and difficulties in fundraising. However, there are technical breakthroughs like BitVM, and some Rollup projects are exploring integration. BitVM is innovating rapidly, such as creating cross-chain bridges that can be used for large cross-chain transactions.

Overall, technologies like BitVM provide opportunities for Rollup, such as interoperability.

Income-oriented Bitcoin strategy

Yield-oriented strategies are gaining attention, with more projects offering packaged BTC for user returns. For instance, Mezo integrates various products, with Rollup being just one component, along with tBTC and Acre's stBTC.

The field continues to remain cautious, investing in teams with clear technological advantages, clear market strategies, or proven successful experiences.

Asset Protocol: BRC20, Runes, Atomicals, RGB, Taproot Assets

BRC-20 has shown weak performance, with ORDI performing poorly compared to the beginning of the year, and no overall highlights have been found yet. Interest in Runes has faded after initial attention, consistent with the trend of declining network activity and fees. The integration of Taproot assets with the Lightning Network may reignite interest and momentum.

Overall, under the premise of sustainable adoption of Bitcoin assets, infrastructure providers serving such assets may become attractive investment opportunities.

Bitcoin Staking

Staking(restake) is a feature modified from Bitcoin that addresses the funding side's demand for BTC interest and the product side's need to be bound to the main chain.

Staking can be divided into three categories:

1. Principal slash: like Babylon
2. Lose the opportunity to earn interest slash(: For example, CoreDAO
3. No slash: such as financial projects like Layer 2 networks and BounceBit.

Babylon has formed its own ecosystem, and many Bitcoin-related applications leverage Babylon to connect with the main chain. The Babylon ecosystem's staking projects mainly focus on auxiliary functions.

This track may be similar to EigenLayer, creating applications and infrastructure, with market performance and ecological development to be observed after the mainnet launch. Babylon quickly reached its limit after the mainnet went live, and future development looks optimistic.

) Bitcoin DeFi, MEV

BTCFi: The Bitcoin financial application focuses on lending and stablecoins. It employs various methods, such as locking assets on Bitcoin, issuing assets through L2 processing logic, or choosing different asset issuance methods, resulting in different trade-offs.

Wrapped BTC: WBTC, tBTC, FBTC, and SolvBTC have attracted attention, with expectations of increased competition. The Solv Protocol has secured over 13,500 Bitcoin staked through partnerships, DeFi integrations, and cross-chain composability.

Bitcoin DEX and related applications: On-chain DEX primarily uses PSBT, and some projects like Satflow use pre-confirmation strategies in the mempool, but there is a risk of being replaced.

MEV: The activation of RBF and the introduction of new assets have led to an active Bitcoin MEV scenario. Rebar aims to establish MEV infrastructure similar to Flashbot, while Alkimiya focuses on the fee/block space market. MEV activities mainly come from transaction acceleration services.

Bitcoin technology development

OP_CAT

OP_CAT is easy to implement but introduces multifunctionality, ranging from simple Merkle tree verification to complex transaction proof verification. Concerns about flexibility may introduce unknown risks. It is scheduled to be enabled in May 2024 on the Bitcoin trial client, but the soft fork method is controversial and may not be enabled in the short term. Other soft fork upgrades like OP_CTV, APO, etc., are similar.

BitVM

BitVM enhances the expressiveness of Bitcoin, while BitVM2 improves the design, strengthens the ability to verify complex computations, and reduces trust assumptions. Recent progress has focused on the development of the BitVM bridge, which may achieve testnet/mainnet launch by the end of 2024. The BitVM bridge primarily handles large assets, and there is still room for other cross-chain bridges. Multi-signature bridges or atomic swap alternatives remain practical, providing faster and lower-cost options. In the future, a new validator network may be established on BitVM2.

channel, Joinpool class solution

The progress of solutions related to channels and Joinpool is significant. It allows multiple users to share UTXO on the main chain, executing allocations off-chain based on business logic. Users can unilaterally exit and return to the main chain for settlement.

Apart from Hedgehog, attention is focused on Ark. Burak launched Ark v2, offering higher capital efficiency and introducing the concept of Brollups.

Statechain is another interesting solution, similar to the UTXO Mercury Layer based on Joinpool. The Mercury Layer has made significant progress, with new projects like Mach developing the underlying infrastructure.

As the largest asset, Bitcoin has always been regarded as digital gold. With innovations like BitVM2, OP_CAT, and Bitcoin staking, we are witnessing more applications of Bitcoin. Although the Bitcoin DeFi ecosystem is relatively emerging, we believe these catalysts will lead to similar success in the future.

Solana

Institutional Interest

Paypal has launched PYUSD on Solana, and its market capitalization has rapidly increased after integrating with major DeFi protocols. Stripe has re-entered Solana, allowing users to accept and make USDC payments.

Solana Labs launches Bond to enhance brand and customer interaction, potentially accelerating institutional adoption.

In addition to institutional interest, we noticed a high level of attention to themes such as Blinks and memecoins, mainly targeting retail consumers.

Solana Action and Blockchain Links ###Blinks(

At the end of June, Solana launched Solana Actions and Blockchain Links)Blinks( to create a seamless experience for retail users. With the Solana Action API, users can convert transactions into blockchain links and share them on any interface.

Blinks Impact: Application developers can more easily embed on-chain operations. A dedicated browser can intuitively display links, QR codes, push notifications, buttons, and other elements.

The Blink ecosystem has approximately 155 projects, 25 registered Blink domain names, and other registered Blink compatibility. The community has shown interest in blnk.fun and BlinkEditor. The process is similar to Pump.fun, where users can issue tokens by setting parameters. After sharing on social platforms, users can purchase without leaving the platform. Well-known projects like Jupiter Exchange and Pump.fun have also integrated Blinks.

) Solana's Meme Culture

Memecoins remain an important component of the ecosystem, as evidenced by pump.fun. Pump.fun allows anyone to issue memecoins at zero cost, leading to a massive influx. Since its launch in January, it has generated nearly $50 million in revenue. Despite the lowered barriers to issuance, the number of projects and trading volume have increased, but the probability of successful projects remains low.

Solana has launched the token extension feature, which provides more customization options for tokens. The Firedancer client is set to go live soon, bringing a diversified validation client that enhances network throughput and reduces costs, reinforcing its appeal to developers and users.

TON

Ton performed exceptionally well in the first half of 2024, with an increase of over 200%, attributed to the mini-programs developed on TON attracting Telegram users. We focus on the reasons for TON:

1. Active ecosystem on Telegram: Approximately 900 million monthly active users, attractive to developers. In-app wallet and fiat deposit channels are expected to bring Web2 users into Web3.

2. Copy the successful monetization potential of WeChat: WeChat has 1.3 billion monthly active users, with 400 million active in gaming. Gaming is the most popular mini program category, followed by e-commerce and daily services. The top 100 mini games generate $1.3 million in revenue each quarter, and popular games can reach monthly revenues of $15 million.

Notcoin is a tap-to-earn game on TON that gained widespread attention in the first half of 2024. Over 40 million users set a positive example and provided momentum for the ecosystem. However, it also led to traffic inflation and excessive hype.

Ecological Development: TON will launch an advertising revenue sharing mechanism in February, with channel owners receiving 50% of advertising revenue, settled in TON. A $90 million ecological fund and a $220 million community incentive program have been established. The TON Star Coin model will be launched, linked with the Apple Store, allowing users to purchase in-game virtual items through Apple Pay, with Telegram settling in TON. The application includes a third-party recharge bot.

The arrest of the Telegram CEO and the network interruption caused by DOGS have become unfavorable factors. Nevertheless, the TON team reiterated that the project will continue to operate. We will wait for further development of the TON infrastructure to enhance the maturity of the ecosystem.

Restaking ###Restaking(

) Eigenlayer

In the first half of 2024, liquid staking has become a hot topic, with Eigenlayer as the main driving force.

Eigenlayer successfully manifested:

1. TVL reached a maximum of 20 billion USD.
2. Stimulate the creation of at least 5 LRTs and over 20 AVS, bringing new life to the Ethereum DeFi space.
3. The narrative shifts from providing shared security to a crucial role in supplementing the Ethereum governance system.

The core of Eigenlayer lies in AVS. Among the 16 active AVS, only EigenDA supports the re-staking of Eigen tokens, involving 3.7 million ETH. Omni and Eoracle hold between 800,000 to 2 million ETH respectively, totaling at least 2 billion dollars in assets to ensure security. ZK projects are highly compatible with AVS, transferring some verification tasks off-chain to reduce costs and improve efficiency.

In terms of LRT, different projects adopt different designs and strategies, resulting in varying performances. Overall performance depends on the market and the future performance of EigenLayer. The excessive financialization of LRTs may impact the stability of the Ethereum on-chain ecosystem. Competition is expected to intensify, and there are limited opportunities for new entrants.

Babylon

Babylon allows Bitcoin holders to stake their Bitcoin without trust to ensure the security of PoS chains.

The official website lists 91 ecological projects, covering 7 categories: Layer 2, DeFi, liquid staking, wallets and custodians, Cosmos, finality providers, and