From the emergence of “AI x blockchain” use-cases to an increasing role of stablecoins in financial markets, to the maturation of zero-knowledge proofs, I believe the overall space remains resilient despite volatile market conditions.

Within this article, I will explore some of the spaces which we at Pantera are keeping an eye on.

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1. Social and Consumer Use Cases

Whereas Web2 has progressed from social to finance, Web3 is moving from finance to social. From Friend.tech to on-chain loyalty, recently there has been more attention on the social element of Web3, seeking to use tokenization to transform social behavior. As consumer transactions may become more frequent on-chain, we believe stablecoins playing an increasingly important role as an on-ramp and off-ramp settlement solution between DeFi and TradFi use-cases.

Moreover, recent advancements in generative AI potentially promise a far more abstracted, personalized, and simplified user experience. With increased AI-enabled abstraction, we hope that this can reduce the onboarding and educational barrier to Web3, making blockchain data more accessible to those with non-technical backgrounds.

2. ZK-Enabled Modularity and Composability

We believe zero-knowledge proofs (ZKPs) will continue to mature, both with new theoretical advancements in recursive proving and the gradual specialization of companies within the vertical to specific roles, such as co-processing, prove executions, zkDevOps, privacy layers, and so on. With this we are beginning to use ZKPs as a way of establishing a common interface between different layers of a modular tech stack.

Modularity is where different layers of the blockchain stack (consensus, execution, data availability etc.) are operated by different providers. This idea allows for increased composability in the form of lego-like “plug-and-play” blockchain architectures. This means that projects can customize their blockchain tech stack according to the specific demands of a consumer-facing application. Furthermore, increased smart-contract composability using general-purpose languages such as Rust allows for increased developer familiarity, reducing the barriers to entry for Web3 developers.

We believe a third space to potentially look out for within the next year or so is the overall Bitcoin ecosystem, which has seen a flurry of renewed interest ahead of the anticipated 2024 halving. This includes possible SEC approval of ETFs from major TradFi funds, as well as a modularized Bitcoin blockchain that allows for more composable smart contracts.

Rise of Ordinals Inscriptions. Source: Dune Analytics. Retrieved Oct 6.

Perhaps one of the most interesting innovations is the rise of Bitcoin digital assets powered by Ordinals-like tech. With this, we may see a bifurcation in the use of NFTs, where Ethereum NFTs may become focused on transaction utility, whereas Bitcoin NFTs, due to the chain’s cultural significance, may evolve into a form of “digital jewelry” and collectibles for art, fashion and media.