From the rise of “AI x blockchain” use cases, to an increasing role of stablecoins in financial markets, to the maturation of “zero-knowledge proofs,” I believe the overall space remains resilient despite volatile market conditions.
In this article, I’ll explore some of the spaces we’re keeping an eye on at Pantera.
While Web2 has evolved from social to financial, Web3 is moving from financial to social. From Friend.tech to on-chain loyalty, lately there has been more focus on the social element of Web3, seeking to use tokenization to transform social behavior. As consumer transactions can more often take place on-chain, we believe that stablecoins will play an increasingly important role as an on-ramp and off-ramp settlement solution between DeFi and TradFi use cases.
Furthermore, recent developments in generative AI may promise a much more abstracted, personalized and simplified user experience. With increased AI-based abstraction, we hope this can reduce the introductory and educational barrier to Web3, making blockchain data more accessible to those with non-technical backgrounds.
2. ZK-enabled modularity and composability
We believe that zero-knowledge proofs (ZKPs) will continue to mature, both with new theoretical advances in recursive proofing and with the gradual specialization of companies within the vertical towards specific roles, such as co-processing, proof executions, zkDevOps, privacy layers and soon. With this, we begin to use ZKPs as a way to establish a common interface between different layers of a modular tech stack.
Modularity means that different layers of the blockchain stack (consensus, execution, data availability, etc.) are managed by different providers. This idea allows for greater composability in the form of Lego-like “plug-and-play” blockchain architectures. This means that projects can adapt their blockchain technology to the specific requirements of a consumer-facing application. Additionally, the increased ability to construct smart contracts using general-purpose languages such as Rust brings greater developer awareness, reducing barriers to entry for Web3 developers.
3. Bitcoin ecosystem
We believe a third space we may need to pay attention to in a year or so is the overall Bitcoin ecosystem, which has seen a wave of renewed interest ahead of the expected halving in 2024. This includes possible SEC approval of ETFs from major TradFi funds, as well as a modularized Bitcoin blockchain that allows for more composable smart contracts.
Rise of ordinal inscriptions. Source: Dune Analytics. Retrieved October 6.
Perhaps one of the most interesting innovations is the rise of Bitcoin digital assets, powered by Ordinals-like technology. With this, we may see a division in the use of NFTs, with Ethereum NFTs potentially focusing on the utility of transactions, while Bitcoin NFTs, due to the cultural significance of the chain, may evolve into a form of ‘digital jewelry’ and collectibles for art. fashion and media.