Insights from Industry Leaders: Anticipated Blockchain Technology Trends in 2024

Many blockchain developers find themselves at the forefront of innovation, constructing the financial and business infrastructure that promises to shape the future. The rapid pace of innovation and continuous developments in the blockchain space are nothing short of revolutionary. Despite the crypto-market’s subdued activity this year, there has been no shortage of announcements, product launches, integrations, partnerships, collaborations, fundraisings, deployments, migrations, and transitions. The landscape is undergoing significant transformation, and the influx of technical and complex information can be overwhelming, akin to navigating a spaceship through a dense asteroid field while simultaneously playing a challenging game of Concentration with each individual asteroid—where pattern recognition becomes the key to survival.

While some 2023 trends were anticipated by experts, many unfolded unexpectedly, emphasizing the unpredictable nature of this ever-evolving industry. As we move into the new year, we have gathered 10 predictions from blockchain tech experts for 2024. These prognostications, although quite technical, stand as valuable insights into the potential trajectories of blockchain technology. In this era of uncertainty, where the destination of blockchain development remains uncertain, these predictions offer a glimpse into what the future may hold. This post is part of CoinDesk’s “Crypto 2024” predictions package and is featured in the latest issue of The Protocol, a weekly newsletter delving into the technological aspects of crypto. For more exclusive content, sign up to receive The Protocol in your inbox every Wednesday. Additionally, explore our weekly podcast, The Protocol podcast, and stay updated with our indispensable column of blockchain tech updates, Protocol Village.

Interoperability:

In the years ahead, we anticipate a significant shift driven by the evolution of blockchain interoperability protocols. These protocols will play a pivotal role in dismantling existing silos among diverse blockchains, fostering seamless interaction through shared data and value transfer. This transformative development will contribute to the establishment of a unified and more efficient blockchain ecosystem. The importance of interoperability protocols cannot be overstated, as they are poised to stimulate innovation and cultivate new applications and use cases, particularly within the realm of decentralized finance (DeFi).” – David Schwartz, CTO, Ripple Labs.

Bitcoin Fees:

As the fixed block rewards for miners decrease, we believe catalysts for increasing variable block rewards from transaction fees will become increasingly crucial. The core Bitcoin protocol has maintained relative stability, with the Taproot upgrade in November 2021 being the lone major protocol enhancement in the past five years. We anticipate that catalysts for increased usage will emerge from technological innovations, primarily within the existing network protocol. This includes heightened utilization of blob data like Ordinals and Atomicals, increased activity on secondary layer 2s like the Lightning Network (LN), and the growth of smart-contract environments built on the Bitcoin network, such as Rootstock, Stacks, RGB, or future BitVM implementations.” – David Duong, Head of Institutional Research, Coinbase.

Modularity:

The modular thesis is consolidating, and we are witnessing exciting developments with the emergence of more hybrid solutions. Examples include Ethereum roll-ups utilizing Celestia as the data availability layer. Simultaneously, blockchains like Solana are adhering to a monolithic direction, rejecting layer 2s due to concerns about liquidity and user experience. The dynamics between these two narratives will be intriguing to observe in 2024, particularly as some Ethereum roll-ups explore the utilization of the Solana virtual machine.” – Abdelhamid Bakhta, Lead and Core Ethereum Developer, Starknet Ecosystem.

Zero-Knowledge Proofs:

SNARKs (Succinct Non-Interactive Arguments of Knowledge) enable the computation of a ‘cryptographic receipt’ for a compute workload by an untrusted ‘prover,’ making it impossible to forge. Historically, generating such a receipt incurred a 10^9 work overhead compared to the original compute, but recent advances have reduced this number to approximately 10^6. This makes SNARKs viable in scenarios where the initial compute provider can handle a 10^6 overhead, and clients are unable to re-execute or store the initial data. The applications of SNARKs are diverse, including scenarios where edge devices in the Internet of Things can verify upgrades, media editing software can embed content authenticity and transformation data, and LLM inferences can include authenticity information. SNARKs could enable self-verifying IRS forms, unforgeable bank audits, and numerous other consumer-centric benefits.

Key Management/User Interfaces:

The advent of account abstraction signals a breakthrough in overcoming the technical challenges of self-custody. In 2024, we anticipate a departure from the historical practice of relying on seed phrases for asset security. The outdated notion that asset safety necessitates memorizing 12 words, which must never be lost but remain inaccessible to others, is giving way to progress in actual user adoption. Blockchain is poised to deliver on the longstanding promise of inclusive finance, marking a significant shift in our values.”

Censorship:

“The concerns surrounding centralization can be distilled into two primary issues: firstly, does a particular vector of centralization lead to network performance problems that jeopardize applications with the risk of outages? And secondly, does centralization give rise to challenges in terms of censorship? The disentanglement of block building, relaying, and validation in Ethereum has intriguingly separated censorship challenges across three layers of the Ethereum transaction processing stack. Notably, after the U.S. Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash addresses last summer, major Ethereum relays started censoring transactions. This issue was mitigated when Flashbots open-sourced its dominant relay, enabling permissionless relays like Ultra Sound, Agnostic, and bloXroute to become more competitive. Presently, it is block builders who are increasingly involved in censoring transactions. I anticipate that some of the most significant breakthroughs in development in 2024 will occur in areas such as mempool encryption, which can protect transactions from potential censorious parties before they are included in a block.” – Ryan Selkis, Founder and CEO, Messari.

Security/Privacy:

In 2023, the crypto space witnessed numerous hacks and fraud, including incidents involving Euler Finance and Angle Protocol. Consequently, blockchain protocols are expected to intensify efforts in creating more robust security solutions and placing greater emphasis on privacy considerations in 2024.

Corporate Crypto:

As corporate and startup builders, along with independent developers, join the ecosystem, networks and developer platforms need to be ready for this influx. Network protocol teams should ensure user experiences that can scale to millions of end users within their native digital environments. Larger companies are transitioning from viewing crypto solely as an asset class to embracing it as a product and tool for user engagement. The crypto space must broaden its reach and usher in the next wave of on-chain activity.

Layer-2 Flows:

While the influx of activity on layer-2 chains has tapered off in the middle of the year, with most liquidity remaining on the Ethereum mainnet, DeFi protocols native to layer-2 chains have experienced a significant outflow of liquidity. However, with gas fees on the Ethereum mainnet rising in tandem with increased activity, a portion of the new capital is expected to flow toward Layer-2 chains as their new home in the coming year.