2024: The Revenge of Bitcoin

Andreessen Horowitz’s (a16z) predictions for next year’s top crypto trends don’t mention Bitcoin at all. They’re not alone; with all the hype around burgeoning ecosystems on Ethereum and Solana, it’s easy to write Bitcoin off as old, obsolete and boring.

This post is part of CoinDesk’s “Crypto 2024” predictions package. Matt Luongo is the CEO of Thesis, a venture studio and auditing firm which has built a family of projects across fintech, DeFi, infrastructure, and zero-knowledge cryptography such as Fold, tBTC, and Embody.

But that would be a mistake. In 2024, the world is going to be reminded of this in a big way. Next year will see the revenge of Bitcoin, for better or for worse.

My ambivalence may surprise you. I haven’t changed my mind about the transformative power of Bitcoin. But 2024 is looking like the year this asset finally breaks into the mainstream in an irreversible way. And the nature of that transition will determine whether the dream of decentralization and self-custody of assets moves closer to reality, or if the Bitcoin “brand” is co-opted as just another product from the likes of Vanguard and Amazon.

The catalyst for this is the impending approval of the first spot bitcoin exchange-traded fund (ETF) in the United States, which is poised to unleash a tidal wave of investment in the world’s oldest cryptocurrency.

Here’s the problem: the inflow of new investors will be people who think they’ve invested in BTC, but never touch anything that actually lives on-chain. These ETFs will be “paper Bitcoin:” a representation, not the real thing, just like a dollar bill isn’t the same thing as gold.

And there will be no obvious reason for anyone to hold the underlying asset directly. There will be a whole universe of consumer apps letting people buy, sell, trade, lend, borrow — all using synthetic assets that never touch the blockchain.

“Bitcoin” will thrive, but the whole idea behind it, true self-custody, will be dead. How do we avoid a pyrrhic victory of this magnitude? By giving first-time HODLers something to do.

Bitcoin has always been the largest digital asset in terms of market cap. But it has not been the epicenter of innovation for years when it comes to use cases. In that sphere, Ethereum has dominated, recently joined by other popular chains such as Solana. This has led many, implicitly or explicitly, to think of Bitcoin as “done” — a finished product with enduring value but little room for growth or evolution.

We must shatter this myth. For Bitcoin to succeed on its own terms, it must evolve as a technology, not just a store of value. The stage for this has already been set by the rapid development of layer 2 solutions like the Lightning Network, which have seen broad adoption over the past year.

Yet just as Lightning shows what is possible, it is also a reminder of how much still needs to be done. In its current form, it has real limitations. For instance, when fees are high, performance suffers dramatically, seen recently when Lightning transaction facilitator Nostr Assets was recently forced to pause deposits due to overwhelming demand.

The fact is Bitcoin’s current L2s do not yet have the capacity to onboard the next billion users. The primary thing a Bitcoin L2 should do is bring Bitcoin holders into “multiplayer mode.” A user shouldn’t need Cash App to send or receive BTC, they should be able to quickly and easily send value via email or through BTC-native apps like Nostr.

The launch of ETFs will vastly expand Bitcoin’s adoption funnel. But to truly succeed, the underlying blockchain needs to be an arena of activity — a decentralized financial ecosystem where people can trade and build. More than anything, Bitcoin as a network should be an ecosystem where like-minded people can gather, trade, conduct business, and build.

This is already true for Ethereum, where it’s possible to make millions as a “degen,” but not yet for BTC. If the only thing you can do is to run a Lightning node, most people will never move beyond a brokerage account. Bitcoin must catch up with the DeFi ecosystems that have proliferated on other chains; the summer of 2024 needs to be BTC DeFi summer.

Fortunately, 2023 has already shown that BTC isn’t done innovating. As a project, as an idea and as a community, Bitcoin isn’t finished. Developer talent, which many assumed had moved on to other pursuits, is coming back.

Bitcoin is facing its greatest opportunity – and its greatest danger. The approval of ETFs will be the onboarding opportunity of our lifetimes. But if the infrastructure is not ready, the underlying promise of the technology will lose out to easy, convenient “paper” assets. The challenge for the community will be to build the infrastructure that can harness all this new activity to advance a future of decentralized, sound money for everyone.

All of this is likely to blindside VCs and influencers like Marc Andreessen, but the story of Bitcoin is a story of surprising the naysayers.