Overview of Development in Various Fields of Web3 in the First Half of 2024

Ethereum

Zero Knowledge

ZKVM & ZKEVM

In the first half of 2024, more and more ZKEVM projects are beginning to shift towards the ZKVM architecture, with the PSE team under the Ethereum Foundation being the most prominent. Taiko has collaborated with Risc0 on ZKVM, and Scroll is also actively preparing in this field.

The launch of Plonky3 has become the main driving force behind this transformation, with performance superior to Halo2(, although stability is slightly worse ), and it has improved the user experience.

The main virtual machines in this field currently include: ZKWASM, Succinct's SP1, a16z's JOLT, and Risc0. In addition, Polyhedra's ZK Prover performs excellently and plans to develop a virtual machine in the future. Aztec and Mina are also developing their respective virtual machines, but performance benchmark results have not yet been announced.

The key factors widely adopted in this field will depend on various aspects such as proof cost, proof efficiency, and development time. It is currently widely believed that zkVM is well-suited for building and deploying verifiable applications, which deserves further attention.

ZK Middleware

In terms of middleware, proof verification systems remain active, with Brevis, Alignlayer, and Nebra collaborating with Eigenlayer for security. Due to the relatively high cost of zk proofs, the market is gradually shifting toward adopting hybrid solutions of OP and ZK to improve proof efficiency. In terms of applications, catalysts such as verifiable AI and verifiable off-chain data will generate more application demand, and attention should be maintained on these innovative fields.

MEV, chain abstraction/account abstraction, intent

MEV Development Trends

• Flashbots has been experimenting and developing products utilizing Intel Software Guard Extensions, recently trying to use Trusted Execution Environments (TEEs) for privacy computing on the Ethereum Virtual Machine. These use cases include storing and processing sensitive data, ensuring that auction bids are protected from tampering and data leaks.

• Fully homomorphic encryption ( FHE ) is also considered a potential solution against MEV, as it always keeps data encrypted, eliminating the possibility of selective reordering.

Block Builder

According to data from relayscan, the block construction market has become highly concentrated among a few builders, including some high-frequency trading firms known for meeting their own trading needs. Currently, beaverbuild, titan builder, and rsync builder are the most dominant and profitable builders in the market. This phenomenon of centralization has prompted further research into the design of block auction mechanisms, aimed at maintaining Ethereum's resistance to censorship.

Relay

Relay still plays a crucial role in block supply, with over 90% of blocks transmitted through relays. The Titan builder launched Titan Relay this year, and it has grown rapidly since its launch.

When evaluating Relay, several factors usually need to be considered:

• Performance and reliability can be analyzed through metrics such as uptime, latency, and bidding failures.
• The scalability of Relay, which is the ability to serve a large number of validators.

In the MEV track, how to achieve value capture for MEV-related projects in the next stage and how to successfully design tokens are critical issues.

Chain abstraction and account abstraction

Chain abstraction is a persistent and crucial concept for achieving mass user adoption, aimed at enhancing the user experience so that users are unaware of the existence of the blockchain and don't even need to know which chain they are using. As one of the early pioneers in this field, NEAR has launched a multi-chain signing feature that allows a single account to operate across different chains. Supported chains include: Bitcoin, Ethereum, Cosmos ecosystem chains, Dogecoin, XRP Ledger, TON network, Polkadot, and more.

Refer to the CAKE framework proposed by Frontier.tech, which includes the permission layer, solver layer, settlement layer, etc. The account abstraction (AA) can also be included in the permission layer. The AA domain is mainly divided into two categories: smart contract wallets and modular services.

Significant progress in this field includes:

• The number of AA accounts has exceeded 12 million, and the number of UserOps calls has surpassed 49 million.
• The number of active smart wallet accounts per week is also on the rise, with Polygon remaining the network with the most smart accounts. Another popular platform is Base, which may benefit from the launch of the Coinbase smart wallet that is compatible.

With the inclusion of EIP-7702 in Ethereum's Pectra upgrade, this will bring a more seamless and user/developer-friendly experience, as it aims to improve upon the previous account abstraction (AA) design, such as ERC-4337, which has higher costs and lacks native support for converting externally owned accounts ( to smart accounts ). Therefore, the focus can be on whether infrastructure-level improvements can lead to new applications.

In addition to AA, other tracks worth paying attention to in the field include strategy engines, intention frameworks, preconfirmation, and so on. Relevant projects in the intention domain are still under active development, and their specific performance and PMF are yet to be observed.

Bitcoin

Bitcoin Rollup has garnered significant attention earlier. However, over time, interest seems to have waned, and we have observed this at the Bitcoin Asia event. The number of emerging projects has decreased, and fundraising in the current environment appears to be challenging. Nevertheless, we have witnessed some notable technological breakthroughs, such as BitVM. Some Rollup projects are exploring integration with BitVM. BitVM has rapidly innovated recently, for example, creating the BitVM cross-chain bridge. This bridge can be used for large cross-chain transactions, while smaller transactions are expected to continue relying on multi-signature or HTLC swaps to enhance economic efficiency.

Overall, although Rollups face challenges, technological developments like BitVM may still provide opportunities for Rollups, such as interoperability.

Income-Oriented Bitcoin Strategy

Yield-oriented strategies are also gaining attention, with more and more projects offering wrapped BTC to holders, providing users with returns while also making it easier to achieve TVL. For example, projects like Mezo integrate various products, with Rollup being just one of many components, along with other products like tBTC and Acre's stBTC( liquidity staking ).

Asset Protocol: BRC20, Runes, Atomicals, RGB, Taproot Assets

The performance of BRC-20 tokens remains weak, with ORDI performing poorly compared to the beginning of the year. Overall, there are currently not many highlights or improvements for BRC-20. Although Runes had sparked strong interest after the Bitcoin halving, this interest has gradually faded. This is consistent with the trend of declining network activity and fees. The integration of Taproot assets with the Lightning Network may reignite market interest and momentum.

Overall, under the premise of sustainable adoption of Bitcoin assets, infrastructure providers serving this growing asset class may become attractive investment opportunities.

Bitcoin Staking

Staking(restake) is a feature that did not originally exist in Bitcoin but was later modified. The emergence of this sector is also due to its ability to address both the need for BTC interest generation on the capital side and the requirement for products to be tied to the Bitcoin main chain.

Staking can be roughly divided into three categories according to the reduction mechanism:

1. The principal will be affected; slash: Babylon is an example of this method.
2. Lost earning opportunity on interest slash(: CoreDAO primarily focuses on reducing potential earnings rather than reducing principal.
3. Non-slash: This category includes self-hosted Layer 2 networks ) that aim to increase TVL and promise returns, such as Rollups (, as well as financial projects like BounceBit, where users' bitcoins are managed by an asset management team to generate returns.

Staking)restake(The earliest track of Babylon has already formed its own ecosystem, and basically, many applications related to Bitcoin will consider leveraging Babylon to achieve relevance with the main chain. The projects related to staking in the Babylon ecosystem will mainly focus on implementing auxiliary functions.

This track is expected to be similar to EigenLayer, creating some applications and infrastructure by imitation, with market performance and ecological development awaiting further observation after the mainnet launch. For example, the Babylon mainnet reached its limit shortly after going live. We remain optimistic about the future development of Babylon.

) Bitcoin DeFi, MEV

BTCFi: Recently, there have been quite a few projects related to Bitcoin financial applications like ###BitcoinFi and BTCFi(. Currently, what can be seen is still focused on lending and stablecoin applications. Using various methods, such as locking assets on Bitcoin, while processing the logic of issuing assets on L2, or choosing different asset issuance methods, will lead to different trade-offs.

Wrapped BTC: WBTC, tBTC, FBTC, and SolvBTC have recently garnered significant attention. Competition in this space is expected to intensify. For example, Solv Protocol has witnessed tremendous demand through extensive partnerships, DeFi integrations, and cross-chain composability, prompting the protocol to secure over 13,500 Bitcoin staked. As more projects look to leverage Bitcoin in DeFi applications, we anticipate that competition in this field will further escalate.

Bitcoin DEX and related applications: On-chain DEX still mainly use PSBT, while some projects like Satflow use pre-confirmation strategies in the mempool, although this method carries the risk of being replaced.

MEV: The activation of RBF and the introduction of new asset types have led to a more active MEV scene on Bitcoin. Projects like Rebar aim to establish MEV infrastructure similar to what Flashbots has done on Ethereum, while projects like Alkimiya focus on the fees/block space market. Currently, MEV-related activities mainly come from transaction acceleration services. We will continue to monitor the ongoing developments in this field and observe new projects continually launching various services to mitigate the negative impact of MEV on users.

) Bitcoin technology development

OP_CAT

Although OP_CAT is an easy-to-implement opcode, its activation introduces many functions, such as relatively simple Merkle tree verification of the hashes of two elements ### to more complex operations like utilizing aggregated Schnorr signatures for transaction validity verification. However, concerns about its flexibility may introduce some unpredictable risks. In May 2024, OP_CAT was enabled as a soft fork in the Bitcoin trial client ( on a client in the signet network ). The method of soft fork has also been subject to various discussions and uncertainties during the last Taproot upgrade. It is not only about the content of the upgrade itself but also about the process of how the soft fork upgrade occurs, which has led to considerable discussions. Therefore, OP_CAT may not be enabled in the short term; if enabled, it will certainly be accompanied by various debates. The same applies to other soft fork upgrades, including OP_CTV ( which has already been widely debated in 2022 ), APO, and so on.

(# BitVM

BitVM has made significant breakthroughs in enhancing Bitcoin's expressiveness. BitVM2 has made improvements on the previous design, enhancing the verification capabilities for complex computations and reducing trust assumptions. Recent key developments have focused on the development of the BitVM bridge, which has reached a certain level of maturity and security, potentially allowing for the launch of a testnet/mainnet by the end of 2024. The BitVM bridge may primarily handle large assets, leaving room for the continued existence of other cross-chain bridges. Alternative cross-chain solutions to the BitVM bridge, such as multi-signature bridges or atomic swaps, still hold practicality for end users, offering faster and lower-cost alternatives. Additionally, we may see the establishment of new validator networks built on BitVM2 in the future.

) Channel, Joinpool class solution

Significant progress has been made on solutions related to channels and Joinpool. These solutions allow two or more users to share a UTXO on the main chain, while off-chain allocation can be executed based on business logic ###vTXO###. When users want to exit, they can settle back to the main chain through a unilateral exit.

Apart from Hedgehog, the recent focus has mainly been on Ark. Burak launched Ark v2, providing higher capital efficiency and introduced a related concept called Brollups.

Statechain is another interesting solution, similar to the UTXO Mercury Layer based on Joinpool. The Mercury Layer has made significant progress in this area, and new projects like Mach are developing the underlying infrastructure.

Bitcoin, as the largest asset, has historically been regarded as digital gold. However, with the emergence of innovations like BitVM2, OP_CAT, and Bitcoin staking, we are witnessing more applications of Bitcoin. Although the Bitcoin DeFi ecosystem is still relatively nascent compared to Ethereum's DeFi ecosystem, we believe these catalysts will propel Bitcoin DeFi.