Crypto, DeFi & AI in 2024

The year 2024 has thus far been marred with the same geopolitical conflicts and challenges as its predecessor, 2023. 

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However, there is a lot to be excited about in the cryptocurrency, decentralized finance and artificial intelligence spaces, some of which we’ll give an overview of below.

Crypto in 2024

Based on the current landscape and ongoing developments, several factors could make 2024 a significant year for crypto:

Bitcoin

Spot Bitcoin ETFs: The potential approval of spot Bitcoin ETFs in the US could drive institutional adoption and increase capital inflow.

Bitcoin halving: Scheduled for May, the halving event could impact supply and potentially boost Bitcoin's price.

Technological advancements: Scalability solutions like Layer 2s could address issues hindering wider adoption.

Regulatory clarity: Ongoing dialogue between regulators and industry players could lead to clearer regulations, fostering trust and growth.

Increased public interest: Growing awareness and adoption, particularly in developing economies, could fuel further innovation and demand.

Macroeconomic headwinds: Rising inflation and interest rates could impact riskier assets like crypto.

Geopolitical instability: Global conflicts and uncertainties could afffect investor sentiment and risk appetite.

Ethereum

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Ethereum Dencun, also known as the "Cancun-Deneb" upgrade, is a significant upcoming update to the Ethereum blockchain set for March 13th, 2024. It aims to address key challenges like scalability and data availability, potentially solidifying Ethereum's position as a leading blockchain platform.

Here's a breakdown of Dencun's key features:

Proto-Danksharding:

• This is the most anticipated feature, aiming to significantly increase transaction throughput and scalability.
• It achieves this by introducing "data blobs," a new transaction type specifically designed for storing data related to Layer 2 rollups.
• Rollups are separate blockchains built on top of Ethereum, processing transactions off-chain for lower costs and higher speeds. However, data from these transactions still needs to be stored on the main chain, hindering performance.
• Proto-danksharding allows rollups to store their data in these blobs, freeing up space on the main chain for essential smart contract transactions.

Other improvements:

• State trie optimizations: Enhance efficiency by reducing the size of the Ethereum state, which essentially stores all historical data.
• EIP-4844: Enables more flexible transaction fee structures, potentially lowering costs for specific types of transactions.
• EIP-6780: Implements "EVM object format improvements," streamlining storage and reducing gas costs for certain operations.

Potential impacts:

• Reduced transaction fees: Lower costs for both on-chain and rollup transactions could attract more users and developers.
• Increased scalability: Improved data handling could increase network capacity and enable processing more transactions.
• Enhanced developer experience: New features and optimizations could make developing on Ethereum easier and more efficient.

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Ethereum Spot ETFs:

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Just like with Bitcoin, Ethereum Spot ETFs have been applied for by some major players, with expected approval dates due in May this year. 

DeFi in 2024

DeFi, the world of decentralized finance, is experiencing a dynamic 2024, marked by both exciting advancements and persistent challenges. Here's an overview and outlook to navigate this evolving landscape:

Positive Trends:

• Diversification beyond core services: DeFi is moving beyond lending and borrowing, offering innovative solutions like:

• Fractionalized real-world assets: Tokenizing traditional assets like stocks, bonds, and real estate, opening doors for broader investment opportunities.
• Decentralized insurance (DeFi): Providing alternatives to traditional insurance with improved transparency and efficiency.
• Prediction markets: Enabling users to speculate on real-world events in a decentralized manner.

• Bridging the gap with traditional finance: Collaboration between DeFi and institutions like banks and central banks is increasing, promoting mainstream adoption and expanding the reach of DeFi.
• Technological advancements: Layer 2 scaling solutions are tackling scalability issues and reducing transaction fees, making DeFi more accessible and user-friendly.
• Regulatory clarity: Dialogue between regulators and the industry is fostering clearer guidelines, building trust and encouraging responsible innovation.
• Institutional adoption: Traditional financial institutions are exploring DeFi products and services, potentially bringing more capital and stability to the ecosystem.

Challenges and Concerns:

• Security vulnerabilities: Hacks and exploits remain a constant threat, highlighting the need for robust security measures and user education.
• Regulatory uncertainty: While progress is made, unclear regulations in some regions can still hamper innovation and adoption.
• Complexity and user experience: Navigating the DeFi landscape can be daunting for newcomers, requiring improved user interfaces and educational resources.
• Sustainability and economic impact: The long-term impact of DeFi on financial systems and the potential risks of systemic vulnerabilities need careful consideration.

Key Areas to Watch:

Tokenization of real-world assets: The potential of transforming traditional assets into tokens could unlock new investment opportunities and increase access.

Layer 2 scaling solutions: Continued development and adoption of these solutions are crucial for DeFi's scalability and broader adoption.

Regulatory landscape: The evolution of regulations and their impact on DeFi will be a key factor in its future development and accessibility.

Overall Outlook:

2024 is a pivotal year for DeFi. While challenges exist, the potential for growth and innovation is significant. The industry is actively addressing security concerns, advocating for regulatory clarity, and improving user experience. Key areas like asset tokenization, CBDC integration, and scaling solutions hold immense promise. However, navigating the regulatory landscape and ensuring sustainable, responsible development remain critical for DeFi's long-term success.

AI in 2024 

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While 2024 is still unfolding, the potential for collaboration between crypto and AI is already generating excitement. Here's a glimpse into some areas where they might work together:

1. Decentralized Finance (DeFi):

• AI-powered credit scoring: Analyzing vast datasets with AI could enable more accurate and inclusive credit assessments for DeFi lending protocols.
• Fraud detection and risk management: AI algorithms can analyze transactions and identify anomalies, improving security and stability in DeFi platforms.
• Algorithmic trading and portfolio management: AI-powered bots can automate trading strategies and optimize investment portfolios within DeFi ecosystems.

2. Smart Contract Development and Auditing:

• Automated smart contract generation: AI can assist in writing and reviewing smart contracts, reducing errors and vulnerabilities.
• Formal verification and security analysis: AI-powered tools can analyze smart contracts to identify potential security risks before deployment.
• Optimization and efficiency improvement: AI can help optimize smart contract execution for faster and more efficient transactions.

3. Data Ownership and Privacy:

• Decentralized AI models: Utilizing blockchain technology can create distributed AI models, protecting data privacy and promoting transparency.
• Secure data marketplaces: Integrating AI with blockchain can enable secure and transparent data sharing and monetization, giving users control over their data.
• Privacy-preserving computation: AI techniques can be employed to develop cryptographic methods for secure computation without compromising data privacy.

4. Web3 and the Metaverse:

• AI-powered search and discovery: AI algorithms can personalize user experiences and assist in navigating the vast data landscape in Web3 and the Metaverse.
• Interactive and adaptive virtual environments: AI can create dynamic and personalized experiences within metaverse environments, catering to individual user preferences.
• Content creation and moderation: AI tools can help generate content and moderate interactions within Web3 platforms, ensuring inclusivity and security.

Challenges and Considerations:

• Bias and fairness: Ensuring AI algorithms are unbiased and promote fair access to financial services and opportunities in the crypto space is crucial.
• Centralization: Balancing the decentralized nature of blockchain with the potential for AI centralization needs careful consideration.
• Regulation and ethics: Regulatory frameworks and ethical guidelines need to be developed to govern the responsible development and application of AI in crypto.

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Other core narratives for 2024

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DePIN

DePIN stands for Decentralized Physical Infrastructure Network. It refers to a network that uses cryptocurrency tokens to incentivize individuals to build and maintain real-world physical infrastructure in a decentralized manner.

Here's a breakdown of its key concepts:

Decentralization: Unlike traditional infrastructure projects managed by centralized authorities, DePINs rely on a distributed network of participants. This can include individuals, communities, or even businesses, who contribute resources and collaborate to build and maintain infrastructure.

Physical Infrastructure: This can encompass a wide range of aspects, including:

• Data centers
• Wireless networks
• Energy grids
• Transportation systems
• Storage facilities

Cryptocurrency tokens: These tokens serve as the incentive for participation in the network. Individuals or entities contribute resources and earn tokens as rewards. These tokens can be used for various purposes, such as:

• Staking to participate in governance decisions
• Paying for access to the infrastructure
• Trading on exchanges

Benefits of DePINs:

• Faster infrastructure development: The decentralized approach can potentially accelerate infrastructure development compared to traditional methods.
• Increased access and affordability: DePINs can provide infrastructure access to remote or underserved regions where traditional options are limited.
• Improved efficiency and transparency: The blockchain technology underlying DePINs can ensure transparent and efficient resource allocation.
• Community ownership and governance: Users have a say in how the infrastructure is built and maintained, fostering a sense of ownership and responsibility.

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Web3 Gaming 

Major web3 games like Illuvium and Shrapnel are expected to launch in 2024, growing both the web3 gaming ecosystem and their respective blockchains. 2024 could be the year that takes on-chain gaming mainstream

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