A summary of the bullish factors and potential targets in the ETH ecosystem.

Author: BlockBeats

On January 11th, the U.S. SEC announced the approval of 11 Bitcoin ETFs, marking the beginning of a new chapter in the cryptocurrency industry. The crypto market will see more capital inflows, and with the "biggest boot" of the Bitcoin ecosystem landing, the market will shift its focus to the ETH ecosystem. Today, ETH has seen a 7% increase. BlockBeats has compiled the bullish factors and key targets for the ETH ecosystem in the coming months.

Bullish Factors for the ETH Ecosystem in the Coming Months

Cancun Upgrade

In order to achieve the positioning of the "world computer," Vitalik planned an upgrade roadmap for Ethereum at the beginning of its birth, which includes four stages: Frontier, Homestead, Metropolis, and Serenity. Currently, Ethereum is in the Metropolis stage, facing limitations in performance and high gas fees.

The Cancun upgrade, also known as the Cancun-Deneb upgrade, is another upgrade to the Ethereum mainnet after the Shanghai upgrade, which will effectively enhance the scalability, security, and usability of the Ethereum network, increase the mainnet's TPS, and reduce gas fees to achieve capacity expansion of the Ethereum mainnet.

After the Cancun upgrade is completed, the utility of the Ethereum network will be significantly improved, its infrastructure will be more complete, and its position as the "king of public chains" will be consolidated. In addition to Ethereum itself, the Layer2 sector will also see unprecedented development and prosperity.

On January 5th, the Geth team's developer lightclients announced that the 178th Ethereum Core Developers' Meeting (ACDE) had concluded, and the Cancun upgrade on the Goerli testnet is scheduled for January 17th, with the Sepolia testnet upgrade on January 30th and the Holesky testnet upgrade on February 7th. If all goes well, developers will release the Goerli client next week, and the Sepolia/Holesky client will be released in the week of January 22nd.

A comprehensive review of bullish factors and potential targets in the ETH ecosystem Related reading: "How will the market landscape of Layer2 evolve after the Cancun upgrade?"

Ethereum ETF

With the approval of Bitcoin ETFs, the community's attention has now turned to the Ethereum ETF, which has been postponed by the SEC several times.

On December 19th, the U.S. SEC postponed the decision on the Ethereum spot ETF applications from ARK/21Shares and VanEck, with a new decision deadline set for late May 2024. According to a report by The Block on the same day, the SEC also postponed the decision on the Hashdex Nasdaq Ethereum ETF and the conversion application for the Grayscale Ethereum Trust.

Bloomberg analyst James Seyffart hinted on the Unchained podcast that the U.S. SEC may be undergoing a shift in its stance on Ethereum. Seyffart pointed out that the recent approval of Ethereum futures ETFs by the SEC indicates that the SEC may subtly acknowledge Ethereum as a commodity rather than a security.

On January 11th, Cointelegraph reported that Bloomberg ETF analyst Eric Balchunas stated that there is a 70% chance of approval for a spot Ethereum ETF in May, while hinting that "there are whispers behind the scenes that a spot Ethereum ETF would be great."

However, digital asset lawyer Joe Carlasare believes that the approval time for a spot Ethereum ETF may be longer than expected, and the U.S. Securities and Exchange Commission is also working to carefully set a precedent, allowing them to retain a certain degree of discretion in deciding which digital asset ETFs to allow into the market.

Layer2 Scalability Narrative

On one hand, the Ethereum Cancun upgrade EIP4844 Proto-Danksharding proposal will bring more possibilities to Layer2 Rollup projects. On the other hand, in the exploration of Ethereum's scalability, Layer2 solutions have already developed a thriving market. In addition to the Cancun upgrade, the "scaling war" that began in the summer of 2023 has also seen various Layer2 solutions.

Up to now, leading Layer2 solutions such as Optimistic, Arbitrum, and the emerging popular Layer2 solution Metis have demonstrated various possibilities for the Layer2 ecosystem. It can be foreseen that in 2024, Layer2 will continue to bring more imagination to the Ethereum ecosystem.

Optimistic: OP Stack opens the "Superchain Universe"

Currently, Optimistic and Arbitrum occupy the majority of the market share in the Layer2 market.

In October 2022, Optimism introduced the OP Stack, which is a "highly scalable, highly interoperable modular open-source blueprint." In February 2023, Optimistic proposed the Superchain strategy, which uses the L2 solutions of the OP stack. Due to the technical consistency of the architecture, secure, efficient, atomic-level communication and interaction of information and assets can be achieved between them, similar to Cosmos' "Interchain," known as the Superchain.

After the launch of the OP stack, it has gained a lot of adoption, with endorsements from many public chains such as Coinbase, opBNB, Zora, and Worldcoin. In June 2023, Optimism blockchain announced a rebranding to OP Mainnet, to distinguish between OP Mainnet and the Optimism ecosystem built on the OP Stack. It can be foreseen that the multi-chain universe of the OP stack will be more prosperous in 2024.

Arbitrum: Orbit drives the Layer3 ecosystem explosion

On January 3rd, the launch of the Binance Launchpool project Xai (XAI) attracted community attention. After several days of continuous decline following the launch, XAI saw a surge of over 25% on January 11th. As a network customized and developed by Arbitrum to meet the needs of large-scale Web3 games, Orbit network, represented by Xai (XAI), has significant strategic importance for Arbitrum.

A comprehensive review of bullish factors and potential targets in the ETH ecosystem

Arbitrum Orbit ecosystem

In June 2023, the Arbitrum development team Offchain Labs released the Arbitrum Orbit development tool, aimed at helping developers to develop and manage their Arbitrum Rollup and AnyTrust chains more easily on the L3 blockchain Arbitrum Orbit.

Arbitrum Orbit has the same compatibility as the EVM+ launched by Stylus. This means that developers do not need to abandon the languages and toolchains they are using and can directly deploy EVM-compatible smart contracts using Solidity, C, C++, and Rust. In addition, the Arbitrum Orbit platform has added support for custom Gas tokens, which are used to pay transaction fees. This development allows the Orbit blockchain to use specific ERC-20 tokens that comply with technical standards to handle Gas or transaction fees on its network. Previously, the Orbit chain could only use Ethereum as the Gas token.

The community believes that Orbit will drive more breakthroughs in the Arbitrum ecosystem. In December 2023, TreasureDAO in the Arbitrum ecosystem announced plans to build a gaming chain and intends to use MAGIC as the Gas token. In the future, the measures taken by Layer2 solutions to attract developer resources will also bring more liquidity to the Ethereum ecosystem.

Metis: Decentralized Sorter

In addition to "veteran projects" like Optimistic and Arbitrum, the potential of Layer2 can also be seen in Metis, which saw a two-week surge of over 350% in 2023. In December 2023, the TVL of MetisO exceeded $700 million, surpassing Base and zkSync to rank third.

Metis is a Layer 2 scaling and general infrastructure project based on Optimistic Rollup, co-founded by Elena Sinelnikova, Kevin Liu, and Yuan Su in 2018.

Layer2 solutions are often criticized for their centralized sorting issues, with most projects initially leaning towards centralized operations to ensure security and stability. After the Metis Foundation announced the establishment of an ecological development fund consisting of 4.6 million METIS tokens, Metis is expected to become the first decentralized sorter of Optimistic Rollup early next year. The growth of Metis also adds positive factors to the narrative of sorter technology. Decentralized sorter is just the beginning of unleashing the potential of Rollup Layer2, and the community's vision of Layer2 native DeFi, ecosystem explosion, and other aspirations all depend on this premise.

Various ZK Rollups: Starknet Airdrop Imminent, Ecosystem Gearing Up

On December 1, 2023, the Starknet Foundation announced that it had conducted an airdrop snapshot and would distribute STRK tokens to certain past active users and contributors in the first quarter of 2024, while unlocking previously distributed tokens.

RabbitX is a derivatives platform built on Starknet. Its token RBX saw a surge of over 400% from October to November 2023, but has since declined. In addition to DEX, the chain game ecosystem Loot Realm on Starknet has gained market attention with the concept of "full-chain games." Loot Realm, driven by the Loot NFT community DAO, includes multiple sub-games, and its token LORDS saw a nearly 90% increase in the past month.

In addition to Starknet, the airdrop expectations for zkSync are also growing stronger. Currently, notable DEX on zkSync include SyncSwap and Mute.io. Syncswap's daily trading volume exceeds $9 million, with a total supply of 100 million SYNC tokens, of which the airdrop will account for 15%. Mute.io is the first native DEX on zkSync Era, which not only provides trading but also various yield amplifiers. Users can purchase MUTE tokens with a discount through bond mechanisms similar to (3,3) with a 7-day lock-up period. At the time of writing, MUTE saw a surge of over 15% in the past 24 hours.

Furthermore, Linea, a Layer2 network under ConsenSys, is also worth paying attention to. According to Dune Analytics data, as of December 24, 2023, the Linea mainnet has crossed over 290,000 ETH and has over 390,000 interacting addresses. Currently, there are over 40 protocols on Linea, with Mendi Finance being the native lending project on Linea, ranking second in TVL within the ecosystem, and its token MENDI saw a surge of over 48% in the past 24 hours.

Mantle Network is a unified ecosystem and EVM-compatible Layer2 network created after the merger of Mantle and BitDAO, using a modular architecture with EigenLayer as the DA solution, providing new scalability possibilities for Ethereum. Recently, Trader Joe launched the DEX Merchant Moe dedicated to the Mantle ecosystem. JOE holders received a 2.5% airdrop of the total project tokens during the new token MOE TGE and will receive an additional 5% allocation over the next 12 months.

The TVL of the native DEX FusionX on the Mantle network tripled in the past two months, reaching $25 million at the time of writing. FusionX is the first community-driven AMM on the Mantle network and has a special feature that allows users to qualify for discounted purchases of new tokens by staking specific tokens.

On January 10, EigenLayer announced the launch of three new liquidity staking tokens and will provide Restaking services for them, including the receipt token mETH for Mantle LSP, with an annual interest rate of 7.2%.

A comprehensive review of bullish factors and potential targets in the ETH ecosystem

Star-studded VC and Vitalik-approved Type 1 zkEVM network Taiko is worth paying attention to. In June 2023, Taiko announced that it had raised $22 million in two rounds of seed funding, with $10 million led by Sequoia China in the first round and $12 million led by Generative Ventures in the second round. Taiko is considered one of the most promising projects in the zkEVM field, aiming to become a fully decentralized zkEVM equivalent to Ethereum, allowing developers and users to experience Ethereum safely, with lower transaction fees, and without making any changes to Ethereum.

Currently, Taiko is still in the testnet phase. In December 2023, Taiko launched a $30 million developer incentive program and introduced community education activities, where users completing tasks can earn loyalty points.

Low Market Cap L2 Targets

Compared to the $3 billion circulating market cap of Arbtrum and Optimism, some relatively new and low market cap Layer2 solutions often have more novel narratives and their value discovery is still in the early stages, showing potential for greater investment opportunities in the next bull market.

On December 7, 2023, the ZK L2 community network ZKFair officially announced the launch of its testnet and opened it to all community users. ZKFair is the first L2 network based on Polygon CDK, Celestia DA & Lumoz ZK-RaaS. Upon its launch, it attracted high attention from the community with its innovative 100% community Fair Launch model, and on the day of the testnet launch, over 30,000 users interacted with the network. Three days after the launch, ZKFair's TVL exceeded $12 million.

On January 10, ZKFair announced the launch of the ZKF staking mechanism, allowing users to stake ZKF and receive a 75% dividend of Gas Fees on the ZKFair chain. The calculation and distribution of earnings will begin on January 15. Additionally, from January 14 to January 20, users staking ZKF will also receive airdrop rewards from the first Fair launch ecosystem project on ZKFair, Sideswap (SIDE).

In the crypto space, there is still room for blockchain gaming. Hypr Network is a Layer 2 blockchain built on Ethereum, aimed at enhancing its functionality and addressing its limitations. Hypr is specifically dedicated to providing a fast and cost-effective platform for zero-knowledge chain games. By leveraging zero-knowledge proofs, Hypr ensures enhanced data privacy and security for gaming applications, allowing players to transact and interact without revealing sensitive data. According to Coingecko data, its token HYPR saw a 25% increase in the past week.

EigenLayer Activates Restaking Economy

The introduction of the concept of restaking on Ethereum by EigenLayer in June 2023 has become a hot topic of discussion. Restaking allows users to restake already staked Ethereum or Liquidity Staking Tokens (LST) to provide additional security for various decentralized services on Ethereum and earn additional rewards.

However, the Restaking model to some extent limits the liquidity of capital, leading to the emergence of LST tokens. BlockBeats has compiled a list of noteworthy LST sector projects.

Restake Finance is the first protocol to introduce modular liquidity restaking for EigenLayer. Users can deposit LST generated from liquidity staking into Restake Finance, allowing them to deposit into EigenLayer and generate reaked ETH (rstETH) as a restaking certificate. Users can participate in various DeFi protocols and earn rewards through rstETH, while also receiving loyalty points from EigenLayer.

Restake Finance recently experienced a highlight moment, with its token RSTK seeing a surge of over 200% in the past two weeks. Additionally, as one of the entry points into the EigenLayer ecosystem, EigenLayer's LRT and strategy management platform Renzo Protocol officially launched on the Ethereum mainnet on December 19 and announced the launch of the points program Renzo ezPoints on January 4, aiming to reward users contributing to the protocol. Users can earn points by minting ezETH.

In the restaking race, many projects have transitioned from LSD business to enter. KelpDAO is an organization supported by the LSD protocol Stader Labs, focusing on the liquidity restaking field. It has a similar business model to Restake Finance. It is worth noting that Kelp DAO currently does not have a token, while Stader Labs' token SD has already achieved a surge of over 100% in the past month.

On October 18, DeFi protocol ether.fi announced the launch of the liquidity staking token (LST) eETH, allowing users to generate rewards by staking Ethereum (ETH). At the time of writing, ether.fi's TVL has exceeded $150 million, and according to the team's roadmap, ether.fi will issue tokens in April.

Ether staking infrastructure SSV Network announced the start of its restaking business on January 4, allowing the responsibilities of EigenLayer's validators to be distributed to SSV, using SSV's distributed and non-custodial features to enhance the performance and security of its validators. It is worth mentioning that SSV's restaking nodes are highly distributed, and currently, they can collaborate with ANKR/Forbole/Dragon Stake/Shard Labs to provide restaking services. In the past week, SSV saw a surge of over 30%.

Originally positioned as an Ethereum staking protocol, Swell's current business is gradually moving towards Restaking. By combining token distribution with Restaking, its derivative LST token swETH is the third largest TVL token on EigenLayer, following stETH (Lido) and ETH, with a stake of over 110,000 tokens. The Restake version of swETH is called rswETH, focusing on strengthening its position in the Restaking race. Its Liquid Restaking Committee, has already seen projects like AltLayer and InfStones join.

On January 11, Pendle, a profit strategy protocol positioned as LSD+RWA, announced that it will list ether.fi's liquidity staking token (LST) eETH, officially entering the Restaking/LRTfi field, allowing users to earn more rewards through its Liquid Restaking Tokens (LRT). On the same day, PENDLE saw a surge of over 30%.

After EigenLayer ignited the Ethereum restaking race, other EVM and non-EVM ecosystems have also begun to have their own restaking concept projects. Picasso is a network that supports cross-ecosystem IBC, and its native token PICA is designed and deployed to support a unified network token for multiple L1 blockchains such as Polkadot, Kusama, and Cosmos. Recently, Picasso has brought the restaking concept to the Solana network, allowing users to stake SOL, mSOL, jitoSOL, and other LP tokens to support Solana's cross-chain IBC validators.

The Omnichain Liquid Restake protocol Layerless, supported by EigenLayer and LayerZero, is also creating Omnichain Restaked Tokens (ORT). When users deposit LST (such as stETH, cbETH, or rETH) into EigenLayer, they receive an ORT (Omnichain Restaked Token), representing the user's EigenLayer share, providing liquidity, composability, and usability in DeFi protocols. Currently, Layerless plans to launch the testnet in the first quarter.

LSDFi, RWA, DEX, and Other Concepts

The upgrade of Shanghai in 2023 has brought unprecedented prosperity to the LSD track and brought a lot of liquidity to the Ethereum ecosystem. According to DefiLlama's data, a total of $32 billion is staked, with Lido staking over $24 billion worth of ETH, accounting for 75% of the market share, far higher than its competitors. With more funds flowing into Ethereum, it is foreseeable that the LSD market will continue to heat up. On January 10, LDO briefly broke $3.8, with a 24-hour increase of over 18%.

In addition to releasing liquidity around EigenLayer, the low market cap and well-endorsed Prisma is also worth paying attention to. Prisma has received joint endorsements from several projects, including Curve Finance, Convex Finance, Swell Network, and CoingeckoFinance, as well as participation from first-tier well-known projects such as Frax Finance, Conic Finance, Tetranode, OK Venture, Llama Airforce, GBV, Agnostic Fund, Ankr Founders, MCEG, and Eric Chen.

Currently, driven by RWA, the potential market value of RWA may reach tens of trillions of dollars in the next five years. MakerDAO, which provides stablecoins for Ethereum, has already made layouts in the RWA direction.

The first official RWA project of MakerDAO, New Silver, was established in 2021, with a debt ceiling of $20 million, backed by mortgage loan assets initiated by New Silver, financed through the Centrifuge tokenization platform by the issuer SPV under New Silver. In addition, the US Treasury RWA project BlockTower Andromeda, initiated by BlockTower Capital, is one of the largest RWA projects in MakerDAO, with a debt ceiling of $1.28 billion and current assets exceeding $1 billion.

In addition, Uniswap v4, Uniswap X, and other intent-based DEX are also becoming the theme of 2024.

In June 2023, Uniswap released the Uniswap v4 code draft, with the vision of allowing anyone to make trade-offs by introducing "hooks." According to Uniswap Labs, Uniswap V4 will be launched after the Dencun upgrade. A month later, Uniswap announced the launch of the non-custodial, Dutch auction-based protocol UniswapX. According to the team, Uniswap v4 optimizes the customizability of pools to maximize expressiveness, while Uniswap X optimizes routing to maximize token output. Together, these two protocols provide traders with the best trading experience while maintaining their commitment to a decentralized, uncensored, and permissionless market.

Similarly, projects following the intent narrative include CowSwap, a DEX aggregator that combines batch trading, intent, and MEV protection features. Using batch auctions as its core price discovery mechanism, CowSwap determines a unified settlement price for all trades in a batch, eliminating common issues such as frontrunning in immediate execution mode. Batch auctions can also settle many trades simultaneously, optimizing gas fees.

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