2024 Will Be a Pivotal Year for Bitcoin’s Financial Dominance

There’s been no escaping Bitcoin this year. It’s on the news, it’s in your 401k, and it’s probably in your wallet. From Vietnamese rice farmers to Wall Street hedge funds, entities great and small have been stacking sats and holding on tightly to the best-performing asset of the last decade.

Bitcoin’s meteoric rise — albeit with plenty of false starts and big dips along the way — has been enthralling to witness. Even those with no skin in the game, content to watch from the sidelines, have begrudgingly conceded that Bitcoin has surpassed all expectations.

Renowned crypto skeptic Senator Elizabeth Warren recently went so far as to praise Bitcoin as “the first truly inclusive financial system.” When even the officials start recognizing digital assets, it’s a sure sign you’re winning. This year, Bitcoin’s achievements will owe less to testing its former $69,000 ATH and more to spreading its tentacles into all facets of the financial system.

Both in TradFi and DeFi — as well as gaming, NFTs, and countless other sectors – Bitcoin is rapidly making inroads. A blockchain once thought good for nothing more than moving BTC is providing itself to be a jack of all trades and a master of many. 2024 will provide the first evidence of what a Bitcoin-powered financial system might resemble.

Move over Ethereum

Bitcoin and Ethereum, two blockchain ecosystems that once ran in parallel, have been emulating each other of late. The approval of the first Bitcoin ETF, propelled by BlackRock, is on the verge of being followed by the first Ethereum ETF — also with more than a little nudging from BlackRock. Anything that Bitcoin can do for institutions, Ethereum is determined to do too.

In return, Bitcoin has been borrowing from the Ethereum playbook as a multi-token ecosystem for hosting decentralized finance takes place on Bitcoin and its fleet of swiftly spawning Layer 2 (L2) solutions. The rise of Ordinals has ballooned into a $1.1 billion market and facilitated the creation of protocols that allow satoshis — the smallest unit of Bitcoin – to be tagged and traded through various marketplaces.

In addition to supporting a thriving market for Bitcoin NFTs, this innovation has enabled a diverse range of DeFi primitives for trading, lending, bridging, and issuing assets on Bitcoin, with BTC serving as the underlying collateral and the Bitcoin network as the security layer. New token standards in the form of BRC20 and Atomicals have emerged, taking their cues from Ethereum’s ERC20, even if the underlying architecture is uniquely Bitcoin-based.

Bitcoin L2 Stacks is about to push its Nakamoto upgrade, introducing five-second block times, enabling the creation of Ethereum-esque DApps and smart contracts for DeFi, NFTs, and much more. It’s the best-established L2 but by no means the only one taking shape upon Bitcoin’s main chain.

Bitcoin branches out

The promise of Bitcoin DeFi isn’t new. Bitcoin scaling projects such as RSK and Lightning Network have been working towards this goal for years with limited success. But this time around, it feels different. These early movers no longer have to go it alone, with the momentum now underpinning Bitcoin DeFi driven by hundreds of projects developing protocols and primitives to solve specific use cases.

One narrative that’s likely to see significant attention in 2024 is RWAs on Bitcoin infrastructure. The tokenization of real-world assets (RWAs) swelled last year as bonds, commodities, and equities were placed onchain. The ability for institutions to trade these assets on Bitcoin L2s opens up new possibilities for yield generation, and for hundreds of billions of dollars in idle BTC to be utilized.

Despite TVL increasing by multiples last year, tokenized RWAs still represent only a fraction of their global market value. The ability to fractionalize illiquid assets such as fine art and real estate, making them tradable around the clock on blockchain rails, is a breakthrough that could serve as a flywheel for serious TradFi adoption. If Bitcoin L2s win the race to become the preeminent layer for RWAs, it will be a win for decentralized BTC and centralized real-world assets alike.

The bear case is still bullish

It’s possible that the adoption of multi-layer Bitcoin architecture will not be fully realized until 2025. Development of infrastructure, particularly that which interacts with tightly regulated traditional finance, as is the case with RWAs, is complex and time-consuming. If this proves to be the case, the promise of a sprawling Bitcoin-based financial system will be deferred, but in the interim, don’t expect BTC to keep quiet.

The halving, when the block reward reduces to 3.125 BTC, is less than two months away, prompting intense speculation, debate, and trading leading into the four-yearly event. Add in Cursed Inscriptions and the development of eagerly anticipated protocols such as open-source indexer Trac and there’s a lot to look forward to this year. Ordinals’ creator Casey Rodarmor is also working on a fungible Bitcoin token standard based on Ordinals, known as Rune Protocol. It won’t be reliant on off-chain infrastructure, improving on some of the drawbacks inherent to the BRC20 standard.

While the minutiae of Bitcoin architecture will escape all but the builders and most ardent of users, upon zooming out, the picture is very clear. Bitcoin is now a large tent that welcomes users and use cases of all kinds: the suits and the suitless; centralized and decentralized; enterprise and entertainment. While the underlying blockchain remains faithful to the vision Satoshi Nakamoto conceived 15 years ago, the range of products and services now being built on Bitcoin would surely astonish its creator.

Those who placed their faith in Bitcoin while others doubted, or were early to Ordinals while the rest of the industry simply shrugged are now being rewarded. The beauty of Bitcoin is that it’s never too late: even those who thought they’d missed the party have since discovered that they were in fact early. Crypto is rife with competing narratives, ecosystems, and assets. But in 2024, all roads lead back to Bitcoin, the alpha and omega of blockchain.