Three underrated crypto product trends for 2024
Happy 2024! I’ve been doing these predictions every year since 2020 (see 2021, 2022, 2023) so let’s first recap to see how I did last year before making my three predictions for the new year.
1. ENS
Verdict: ❌
ENS hasn’t had the breakout volume I expected but that’s more due to the macro environment downturn for NFTs.
2. MEV as a new business model
Verdict: 🤷
In 2023 there were a handful of apps like UniswapX and CoW Swap that switched from pure on-chain AMMs to an AMMs/intents hybrid as a way to minimize MEV, but there is still more work to be done on MEV internalization with projects like Sorella Labs.
I think the best places to be in the MEV supply chain are either furthest upstream (wallets/apps) or furthest downstream (block proposers), and not in between. Wallets and apps control the user order flow, so they have huge negotiation leverage power against all the MEV projects competing with each other to get scraps of retail flow. Block proposers earn more fees when MEV searchers, block builders, etc. loss lead and undercut fees to 0.
3. Generative art
Verdict: ✅
Store of value is a feature not a bug. In 2023 we saw the vast majority of PFP projects that tried to do anything else other than be a store of value fail at execution which nukes the IP value of the project. Two notable examples were the launch of Azuki Elementals diluting the brand of Azukis, and the frustration of the Bored Apes community at Yuga Labs for their delayed launch of the Otherside metaverse game. The notable exception is Pudgy Penguins as Luca Netz has done a good job bridging crypto-native IP with consumer retail products with the Walmart partnership and more in the pipeline.
While the rest of the NFT market is down from all-time highs, the generative art market posted record sales in 2023. Most notably, the Goose Ringer from the 3AC bankruptcy auction sold for a record $6.2M at Sotheby’s in June.
In the traditional art world, each niche subgenre of art (Andy Warhol, post WWII African art, etc.) ends up being cornered by a handful of collectors. That is also happening to the digital art market right now. In 2023 there were around six institutional buyers who spent at least seven figures buying all the grail digital art pieces.
With that, here are my three underrated product trends for 2024.
1. Prediction markets
I first made this prediction back in 2021, but I have to make this same prediction again in 2024 as we are now in an election year. The main difference between 2021 and 2024 is that today there is much more consumer awareness for what prediction markets are, and this makes the product timing a lot better for mainstream adoption. There were two prediction markets that went viral last year: the room temperature superconductor and the missing submarine.
Today Trump is regularly posting Polymarket odds on Truth Social. The mainstream media is even more polarizing than before, and prediction markets have done a much better job than the mainstream media reporting on geopolitical events such as the Israel vs. Gaza conflict. Soon we’ll all be looking at prediction market odds for the truth instead of the lies propagated on mainstream and social media.
2. On-chain messaging
Whenever you make an on-chain transaction, chances are it was because a friend told you to try this new DeFi protocol, mint this new NFT, etc. The impetus for all on-chain usage stems from social interactions. With that in mind, the main interface we use today for web3 is wallets, but what if it were a messaging-first app with an embedded wallet so the wallet becomes a feature not the product?
The great thing about on-chain messaging is addresses are on-chain identities so messages can persist across different apps and wallets using a protocol like XMTP. Furthermore, one of the biggest pain points projects have is communicating with their top users. Current ways to do it are clunky such as sending a 0 value transaction to an address with the data field as the message body. A good messaging app can solve customer acquisition problems for apps and help them build better products.
3. Account abstraction
Account abstraction (AA) is the concept of improving the wallet user experience by replacing private keys with smart contract wallets. Account abstraction has been an important proposal discussed since Ethereum was first created but didn’t gain momentum for years until ERC-4337, which finally launched during ETHDenver 2023. ERC-4337 avoids the need for an Ethereum hard fork, which is a massive unlock for account abstraction to work.
The wallet experience hasn’t changed much since 2017. New wallets over the past few years have mainly focused on improving private key management, using techniques such as multi-party computation (MPC). Account abstraction is strictly a superset of the benefits of MPC. With account abstraction you also get gas fee sponsorships, gas payments with ERC-20 tokens, social recovery, batched transactions, spending limits, different account access levels, and much more.
Account abstraction adoption in the past year has been mostly spiky growth driven by a handful of apps doing airdrop farms. But that is becoming less true over time as organically growing apps like Daimo are being built. I also highly recommend checking out Kofi’s dashboard on account abstraction data.