Pantera's Six Predictions: DeFi Will Resurge with Bitcoin, and Cross-Chain Integration with Traditional Finance Will Become More Common

Crypto venture capitalist Paul Veradettakit, a partner at Pantera, has published his six major predictions for 2024 on CoinDesk. He believes that the DeFi craze will experience a revival on Bitcoin, ushering in DeFi 2.0. Additionally, with the support of a Bitcoin spot ETF, traditional finance will interact more frequently with DeFi, giving rise to projects that bridge the gap between "TradFi" and DeFi.

1. Bitcoin Resurgence and the Arrival of DeFi 2.0

The market share of BTC has increased from 38% at the beginning of the year to 50% at the end of the year, and its popularity has brought Bitcoin back into the spotlight for investors.

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Pantera believes that BTC will have at least three major catalysts to drive its resurgence next year:

1. The fourth halving in April 2024

2. Institutional investors are expected to approve multiple Bitcoin spot ETFs

3. Enhanced programmability, including Ordinals protocol and L2 and scaling solutions such as Stacks and Rootstock

Regarding the third point, Pantera predicts that more Ethereum DeFi protocols will be ported to Bitcoin, ushering in DeFi 2.0.

2. On-chain New Applications: Tokenized Social Services

Social applications like friend.tech have successfully derived a new token economic model in the field of SocialFi by integrating with Twitter accounts.

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Pantera expects that there will be more experiments in the social field in the future, and tokenization will play a key role. Fungible tokens can become a new form of loyalty points, while NFTs are more likely to be used for personal social data and resources.

3. Increased Interaction between Traditional Finance and DeFi

In addition to predicting that the approval of Bitcoin spot ETFs will significantly increase institutional adoption, Pantera believes that institutions will further seek tokenization of RWA (Real World Assets) and traditional finance TradFi products.

Similar to how BTC has been mapped and cross-chained to Ethereum through WBTC, TradFi assets will also interact more frequently with DeFi, giving rise to projects like "TradFi-DeFi cross-chain bridges".

4. Cross-pollination of Modular Blockchains and Zero-Knowledge Proofs

Modular blockchains and zero-knowledge proofs have made significant progress in the past year, such as the recent Celestia mainnet and Espresso's collaboration on Arbitrum.

Pantera believes that the combination of these two technologies will be an interesting trend in the future. In consumer-related applications, zero-knowledge proofs may find more applications in identity protection and privacy projects, such as decentralized digital identities based on ZK.

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5. More Compute-Intensive Applications on the Blockchain, such as AI and DePIN

Pantera points out that the high cost of on-chain operations has been addressed, with Ethereum L2 gas fees below $0.02 and Solana even lower. Therefore, it can be expected that within the next year, compute-intensive applications requiring significant computational resources will become more economically feasible to run on the blockchain.

Pantera mentioned several projects:

• Hivemapper: Decentralized Google Maps

• Bittensor: Decentralized Machine Learning Platform

• Modulus Labs: AI-generated NFT Artwork

• The Graph: On-chain Knowledge Graph Project

• Realmsverse: Chain-based Game on Starknet

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6. Small-sized Public Chains Need to Focus on Specific Applications

Finally, Pantera mentions the competition among public chains. In fact, there is not much difference for users between L1 and L2. Solana and Avalanche can even directly compete with L2.

Due to their similar nature, Ethereum, BNB Chain, and other major public chains already account for 80% of the total TVL (Total Value Locked).

Pantera believes that smaller ecosystems of public chains must focus their efforts on specific verticals such as social, gaming, and DeFi to maintain their advantages and effectively become "application chains".

In fact, among the top 10 ranked L2s by TVL, dydx, Loopring, and Ronin are all application chains focused on specific verticals.