Top 8 Polkadot Ecosystem Trends to Follow in 2024
Introduction
With an increasing influx of traditional funds into the crypto industry, the crypto market has become closely intertwined with traditional finance. In early 2024, the approval of the Bitcoin ETF by the U.S. Securities and Exchange Commission (SEC) brought a major wave of growth in the crypto market. At the same time, the next Bitcoin halving is coming soon, which has positively impacted the market and brought about a strong recovery across the Web3 industry.
Whether it’s the ever-popular DeFi and GameFi sectors or the currently hot AI and DePIN narratives, various sectors are flourishing. According to CoinMarketCap data, the total market capitalization of crypto assets has grown by over 50%, in just three months from January this year to now.
As an important member of the industry, Polkadot has played an important role in promoting the development of the industry with its “Layer 0 + Layer 1” multi-chain ecosystem, which has various parachains and applications.
By combining Layer 0 and Layer 1, Polkadot has built a flexible and efficient multi-chain ecosystem. Layer 0 provides cross-chain communication and security guarantees, while Layer 1 supports the deployment of various parachains and application development. This combination enables Polkadot to achieve high scalability and interoperability, providing users with broader application scenarios.
In addition to its distinctive multi-chain architecture, the upcoming Agile coretime will focus on providing more bottom-layer resources required by blockchains — core resources. This will offer projects a more flexible, short-term, and market-oriented resource allocation method, potentially further promoting the flourishing development of the Polkadot ecosystem and the entire Web3 industry.
Key Directions to Expect for Polkadot
1. DeFi
Currently, the DeFi sector in the Polkadot ecosystem is still in its early stages, with total value locked (TVL) not yet fully developed. However, Polkadot naturally possesses billions of dollars in staking assets, and unlocking the liquidity of these assets will further drive the development of DeFi. From this point of view, Polkadot’s DeFi has huge growth potential and is well worth exploring.
A prime example is the DeFi project Bifrost, which aims to provide liquidity for staking assets.
According to its latest annual report, Bifrost’s TVL saw significant growth in 2023, increasing from $43.5 million to $110 million, an increase of more than 150%. Recent data from DeFillama shows that Bifrost’s TVL has experienced explosive growth this year, and hit a new high on March 14th.
Another DeFi project on Polkadot, HydraDX, originally focused on providing decentralized financial services, has recently undergone major developments and rebranding efforts.
First, the HydraDX team is developing HOLLAR, a new decentralized stablecoin that aims to maintain exchange rate stability through an innovative clearing and liquidity framework. Second, HydraDX is set to launch a digital asset lending platform, planned to seamlessly integrate with AAVE v3 forked on HydraDX EVM. Finally, with future development in mind, HydraDX has rebranded as the Hydration network.
These changes signify HydraDX’s transformation from a liquidity solution provider to a more diversified and comprehensive participant in the DeFi ecosystem. This rebranding not only updates the external image but also enhances the project’s intrinsic value and development philosophy. With the implementation of these changes, HydraDX is expected to play a more important role in the Polkadot ecosystem.
Despite the early-stage development of DeFi in the Polkadot ecosystem, the underlying technology and asset scale suggest that Polkadot DeFi has the potential to shine as the ecosystem matures and more projects emerge.
2. DePIN
DePIN, a decentralized physical infrastructure network, is another trending track.
Arweave, a well-established decentralized storage project, recently introduced a new narrative with Arweave Oracle (AO). AO is described as a hyper-parallel computer capable of running any number of processes in parallel, similar to Ethereum’s concept of a “supercomputer.” Arweave’s founder claims that Arweave AO is confident in competing with Ethereum and positions itself as a “competitor to Ethereum”.
SSV (Secret Shared Validators) has also expanded the narrative of DePIN. SSV is an essential part of the Ethereum staking protocol, achieving decentralized validation through Distributed Validation Technology (DVT). Recently, SSV has pushed for a new narrative of “DePIN + Restaking”.
“DePIN + Restaking” combines the concepts of decentralized physical infrastructure networks and restaking mechanisms, aiming to encourage users to share resources such as storage space, network bandwidth, cloud computing capabilities, and energy through token incentives to collectively build and maintain network infrastructure. This new narrative may become a new focus for the SSV ecosystem in the future.
Helium, a blockchain-based wireless communication network, recently launched a new sub-project called Helium Mobile. Dubbed as the “Web3 AT&T “ by users, Helium Mobile combines decentralized “mini base stations” with a nationwide 5G network, offering unlimited data, texts, and calls for only $20 per month, considered a significant breakthrough in the U.S. mobile communication field and it also plans to expand to more parts of the world.
Similarly, the Polkadot ecosystem also boasts outstanding DePIN projects. CESS (Cumulus Encrypted Storage System) is a decentralized cloud storage network developed on the Substrate framework. It not only comes with an EVM for running smart contracts but also integrates CDN (Content Delivery Network) functionality, which was demonstrated multiple advantages over established projects like Arweave from the outset.
Compared to Arweave’s introduction of AO, CESS leverages the scalability and flexibility of the Substrate framework to provide users with richer functionality. The use of the Substrate enables CESS to easily interact and be compatible with other projects in the Polkadot ecosystem, providing it with strong competitiveness in the decentralized storage field of the Web3 era. Particularly in supporting commercial-grade applications and meeting enterprise-level storage needs, CESS demonstrates its unique value and potential.
From storage solutions to communication networks and the emergence of various new narratives, the application scope of DePIN continues to expand, and its influence continues to grow, bringing positive impacts to the entire blockchain ecosystem.
3.AI
Ever since ChatGPT hit the scene, the global AI development has been on the fast track. The trio of data, computing power, and algorithms has been the driving force propelling progress in AI field. Data forms the bedrock for AI learning and evolution, computing power provides the necessary processing resources, and algorithms are the keys to intelligent decision-making. These elements not only advance AI technology but also open up new opportunities for the crypto industry.
When it comes to network infrastructure, AI’s demands align perfectly with the DePIN concept. Activities like AI model training and distributed machine learning require robust computing power and abundant data, which DePIN can effectively support.
In the field of Web2, major tech giants like Microsoft and Google are actively promoting the benefits of AI technology. These efforts not only propel the application and development of AI in traditional internet but also positively impact the AI sector in Web3. There is no doubt that the AI direction has become the top priority in the Web3.
As an open and diverse multi-chain ecosystem, Polkadot hosts projects related to AI. One of the noteworthy projects is Bittensor.
Bittensor is an open-source protocol based on Substrate that aims to create a decentralized AI market. Through blockchain networks and incentive mechanisms, Bittensor allows for the scheduling and filtering of different algorithms, thereby fostering free competition and knowledge sharing in the AI field. Its innovative subnet mechanism has earned it the title of “the Ethereum of the AI world” within the community.
Since the beginning of the year, projects with AI concepts have only gained popularity, with the emergence of the Sora video model causing a stir. By the end of February, Bittensor’s market capitalization had nearly reached $4 billion, making it the highest-valued project in the AI sector of Web3.
Another project worth mentioning in the AI sector is Phala Network.
Phala Network is a decentralized off-chain computing infrastructure that utilizes Trusted Execution Environment (TEE) technology to achieve data confidentiality and secure transmission. Last year, Phala launched the Phat Contract on its mainnet, which is a off-chain programming model running on the Phala Network, allowing developers to easily write and deploy DApps with full-chain compatibility, internet access, and verifiable computation.
Among the numerous applications of Phat Contract, Web3 AI is one of the most crucial directions. By leveraging TEE technology, Phala runs AI algorithms in a secure execution environment, ensuring that data is protected from external attacks and leaks during computation. Furthermore, it enables participants in AI model training to share and utilize idle computing resources on the network without the need to purchase and maintain expensive hardware and software.
In the recent update, the Phala team referred to the AI narrative as “a leap towards an open, fair digital world.” The convergence of AI and blockchain is creating a decentralized future, where AI agents execute tasks and manage assets. Serving as the core of the AI Agent Economy, Phala Network acts as an AI coprocessor, paving the way for a future where AI and blockchain jointly empower digital agents in the decentralized world.
4.GameFi
At the recent Sub0 conference, Dr. Gavin Wood introduced a new protocol framework called JAM. As the foundation of Polkadot 2.0, JAM will handle tasks only from parachains, smart contracts, etc. It lowers the entry barrier for the Polkadot network, making it more flexible, while allowing more EVM abstractions to connect to parachain services, paving the way for a decentralized future.
With the introduction of the JAM protocol, Polkadot is poised to embrace more new technologies and faster processing speeds, which will nurture a wider variety of project types compared to existing blockchain applications. The launch of JAM protocol and Polkadot 2.0 undoubtedly provides more possibilities for GameFi projects. This means game developers can design more complex game economies, while players can enjoy smoother and more economical gaming experiences.
Last April, the developer of the hit game NFL Rivals, Mythical Games, announced their migration from Ethereum to the Polkadot ecosystem and unveiled the “Game Superchain” on the Polkadot network, which greatly enriched Polkadot’s GameFi sector.
Mythical Games is a cutting-edge game technology company led by industry veterans. Their product line includes NFL Rivals, developed in collaboration with the National Football League (NFL) and the NFL Players Association (NFLPA), as well as the multiplayer online role-playing game Blankos Block Party. CEO John Linden once tweeted, “I really don’t understand why you wouldn’t build on Polkadot. The more I learn, the more I love what they’re offering.”
Now, nearly a year later, and Mythical Games just completed the migration these days. John stated that Mythical Games is working closely with the Parity team and many other teams, with the goal of launching in the first half of this year.
In addition to Mythical Games, Polkadot recently partnered with the well-known game engine Unity. This collaboration connects Polkadot blockchain with Unity game development technology, marking a significant step forward for Polkadot and Unity in the Web3 gaming field.
Unity, as a major provider of game engines, holds a massive 60% share in the mobile gaming market. This partnership enables its existing 1.5 million developers to directly enter the Web3 industry through Polkadot, planting hopeful seeds for GameFi on Polkadot.
5.RWA
At the beginning of this year, the approval of the BTC ETF marked a significant victory for the crypto industry. It signifies the first legitimate listing of BTC spot on multiple leading financial exchanges worldwide. Crypto assets have undergone a remarkable transformation, evolving from a subject of intense skepticism to attaining a compliant and stable identity. This shift has paved the way for crypto to gradually align itself with traditional investment institutions. The past two months have witnessed a substantial influx of funds and liquidity in the crypto market from traditional finance.
Another hot narrative in the crypto industry — tokenization of real-world assets (RWA) — is becoming a bridge between traditional mainstream financial institutions and crypto builders. RWA is considered one of the most promising use cases by traditional institutions, as it enables the decentralization and tokenization of ownership of real-world assets such as real estate and natural resources.
The Polkadot ecosystem currently boasts several high-quality RWA projects in development. For example, Phyken Network, a Layer 1 application chain announced to be built on Polkadot, aims to achieve decentralized ownership of green and renewable energy assets.
Furthermore, Centrifuge, a financial RWA project established in 2017, has achieved significant milestones. It is an on-chain credit protocol that enables users to provide financing for real-world businesses. Users can obtain various assets, including asset-backed securities, real estate, and invoice financing.
According to data from RWA.xyz, Centrifuge currently has over $260 million in active loan value, ranking first in the industry. It has also established partnerships with early DeFi protocols such as MakerDAO and Aave.
Centrifuge is dedicated to driving external capital into the crypto space. In September last year, it organized the first Real World Asset Summit in New York, bringing together 250 innovators from decentralized finance (DeFi) and traditional finance (TradeFi) sectors for discussions.
In November, the Web3 Foundation announced a $1 million RWA pilot investment program in collaboration with Centrifuge, which will be used for the upcoming launch of the Centrifuge US Treasury Pool. This partnership demonstrates the Web3 Foundation’s commitment to bringing real-world assets onto the blockchain.
Centrifuge recently announced the launch of its on-chain fund management platform, which enables fund managers to collect on-chain and off-chain investment positions, trade, and operational data in a secure environment, providing a smoother way of fund management.
6.MEME
With the upcoming BTC “halving” event looming, the market sentiment remains bullish, and widespread capital continues to flow into the crypto space. During this time, meme coins have garnered significant attention.
But this wave of meme frenzy has primarily landed in the Solana ecosystem. Over the past weeks, a new method called “token presale” has emerged to launch new meme tokens, where project teams allow investors to send SOL tokens to their wallets in exchange for the new tokens allocated at the project’s launch. Recently hyped projects like BOOK OF MEME (BOME), Slerf (SLERF), and Snap (SNAP) have raised millions of dollars in investments in just a few days through presale, quickly appreciating to billions of dollars in value. Although the price carnival of these projects has slowed down for now, this meme party has indeed brought huge popularity to Solana.
Compared to other chain ecosystems, many users wonder why the Polkadot ecosystem has yet to introduce meme projects, missing out on such an explosive opportunity. Meme coins, as a unique presence in the crypto space, may be difficult to understand and assess their value, but they have the power to rally community members and drive “emotion” and “virality.” Therefore, Polkadot can also leverage the power of memes to amplify its presence.
It’s worth noting that Polkadot’s two major meme coins, DED and PINK, have just finished their airdrops.
As for “DED,” what is it? Well, DED stands for “Polkadot(DOT) is Dead,” is a community’s self-deprecating joke about Polkadot, especially during times when Polkadot’s development seems slow in bear markets. There are often sarcastic remarks like “Polkadot is dead,” so the community hopes to create a humorous vibe through this approach.
However, the market is highly volatile, and we cannot predict how DED or PINK tokens will perform. But looking at other blockchain ecosystems, if the Polkadot ecosystem develops successfully, there will likely be a leading “memecoin” project that dominates its niche segment.
7.Inscriptions
Another concept with great community attributes is undoubtedly Inscription, which has been very popular since its launch in early 2023. Although it started slowly, it was not until the emergence of the BRC-20 protocol that it triggered an explosion of major ecological inscriptions.
In the BTC ecosystem, Ordinals (ORDI) can be considered the leader of the inscription track, along with the rising star SATS. These two mainstream inscriptions were later listed on Binance, with an astonishing increase. Catalyzed by the initial BTC inscription, the technology expanded to Ethereum and became a pioneering method in EVM blockchains (Ethscriptions), which was subsequently widely adopted in various EVM-compatible blockchains.
Around November to December last year, multi-chain inscriptions experienced a full-blown explosion. The activity of inscriptions on almost all ecosystems saw a continuous surge, including Solana’s SOLS, which saw 21,000 SOLS tokens inscribed within hours of its launch on November 23rd, as well as inscriptions like AVAV launched on Avalanche.
Of course, Polkadot also launched DOTA inscriptions in December last year, bringing significant trading volume to the ecosystem. Within three days of DOTA’s minting, 26,500 addresses participated, of which 21,363 are new Polkadot users. This demonstrates the strong aggregating power of inscriptions. Additionally, within five days after DOTA inscriptions, the price of DOT rose from $6.9 to $9, which was just the first attempt at Polkadot inscription. Furthermore, DOAT inscriptions have recently opened a trading market and are currently in testing.
Overall, the launch of inscriptions on the Polkadot relay chain can have a positive impact on the Polkadot ecosystem, whether it’s treasury revenue, more use cases for DOT, or community-based marketing interactions.
8.BTC Ecosystem
Behind the inscription frenzy, the BTC community has witnessed a diverse range of ecosystem applications, but questions about its sustainability have also arisen. The rapid growth of on-chain transaction volume during the inscription boom led to issues such as network congestion and increased transaction fees on the BTC network, prompting many people to think about the path forward for BTC Layer 2 solutions.
At the time, many believed that BTC Layer 2 and cross-chain solutions would be the next “hot narrative.” To achieve cross-chain interoperability from Layer 1 BTC to Layer 2 while gaining consensus from Layer 1 mainnet users, a new wave of Layer 2 basic protocols and cross-chain protocols emerged, including the advent of BEVM.
BEVM is a decentralized BTC Layer2 protocol with BTC as gas and EVM compatibility. The team behind BEVM previously built ChainX, a cross-chain project in the Polkadot ecosystem. Now, ChainX is running as a canary network to BEVM. BEVM has launched a testnet and is conducting DApp deployment testing, with plans to launch the mainnet by the end of the first quarter of 2024.
Considering cross-chain and Layer 2 technology support, Polkadot itself has advantages in scalability and interoperability.
Among them, Interlay, as a decentralized BTC infrastructure provider on Polkadot, is committed to providing tools for developers to leverage existing BTC frameworks to drive innovation.
Interlay launched its BTC innovation platform BOB (Build on Bitcoin) in August last year, introducing Rust smart contracts compatible with BTC libraries such as the Lightning Network and Ordinals. So, BOB is essentially a Layer 2 technology stack, and developers can use these technologies to innovate and bring their DeFi or NFT products to the huge BTC users.
Afterwords
Since the Federal Reserve’s decision not to raise interest rates at its October meeting last year, the entire market liquidity has reached a turning point. In line with market expectations, the industry has also ushered in an opportunity to turn from bearish to bullish.
Moreover, the approval of BTC spot ETF in the United States at the beginning of the year brought very clear news to the industry. It could be said that ETF has changed the game for BTC. Since the birth of BTC, anyone wanting to own digital currency had to learn and use crypto wallets or open accounts on centralized or decentralized exchanges. Now, investors don’t need to directly hold or learn heavy operations to access the world’s largest crypto assets. This has greatly lowered the financial threshold for ordinary people to participate in BTC, and shows that the Crypto industry has gained huge recognition in traditional financial fields such as the United States.
The market has been instantly enthusiastic over the past few weeks, and BTC has been on a rise once exceeding $73,000 and hitting new highs. On this occasion, Gavin Wood, the founder of Polkadot, unveiled the core technology JAM of Polkadot 2.0 at the Sub0 conference and disclosed the roadmap for Polkadot 2.0. This has also brought considerable expectations for Polkadot at the moment.
Furthermore, Polkadot recently collaborated with the well-known game engine Unity, joining Unity’s Verified Solutions Program. This will open up new channels for Polkadot to develop the Web3 game field, including new user resources and partnerships.
The Polkadot ecosystem also has many exciting directions and numerous high-quality ecosystem projects, certainly more than what we’ve mentioned in this article. All in all, we believe that we can learn more about projects in different directions in Polkadot. The development of new ecosystems often requires learning from and emulating the growth paths of successful projects, as this is the key to unlocking new opportunities.
