Brevan Howard Digital team stated that more Web2 companies will embrace Web3, and stablecoin transaction volume will exceed Visa.
Written by: Brevan Howard Digital
Compiled by: Vernacular Blockchain
1. Review of 2023
By the end of 2022, we have made 12 predictions, covering areas such as games, NFTs and digital commodities, as well as Ethereum and blockchain infrastructure.
By our assessment, our predictions were (mostly) accurate - seven were accurate, two were wrong, and three were partially true/partly wrong. Our predictions about OpenSea’s market share, Polygon’s NFTs, OTC custody, deflationary ETH, reduced hacking attacks, continued regulatory uncertainty, and Apple’s annoying 30% tax were correct (especially since Epic Games After a major victory over Google on December 11, 2023, this tax policy of Apple looks increasingly unstable).
Our biggest mistake was the transaction volume and revenue from branded NFTs. While optional royalties and bearish volumes mean revenue will almost certainly not meet our expectations, we see brands continuing to move toward Web3 in 2023 and expect this trend to continue in 2024. We haven’t been able to predict stablecoin trading volume surpassing Visa trading volume (although that hasn’t happened yet, we expect it to be in 2024), and Uniswap surpassing Coinbase in full-year trading volume (although Uniswap was in one month in March Trading volume champion), and the share of ETH liquid pledge.
2. Forecast for 2024
As we enter 2024, we are more excited than ever about the future of our industry. 2023 has been a rollercoaster of ups and downs – with market sentiment, as well as demand and regulatory dynamics in specific regions, fluctuating throughout the year.
Along the way, excitement and activity among builders continues, with dedicated founders and teams continuing to build amid the hustle and bustle. Those who have remained committed to the industry have been rewarded with massive price increases for Bitcoin, Ethereum, and other assets. We now believe that we are on the cusp of several significant developments in Web3, including several of the categories predicted below.
1) Games and brands
A. Web3 game publishing increased by 2x to 3x+
As of December 19, 2023, according to Jon Jordan’s “List of Large Blockchain Games”, the overall number of Web3 games has increased by at least 2 times (the current total is 1037).
As of December 19, 2023, the number of fully on-chain-based games has increased by at least 3x (the current total is 54, according to Jon Jordan’s “List of Large Blockchain Games”).
B. More of the world’s largest Web2 game companies will adopt Web3 in 2024
We’ve seen companies like Nexon, Netmarble, Krafton, Come2uS, Square Enix, Konami, Ubisoft, CCP Games, Scopely, EA, and Zynga, among others, enter this space.
With more Web3-enhanced games appearing in the Apple App Store, Google Play Store, and Epic Games Store, we now have a clear understanding of their respective policies for implementing Web3 technologies.
We also expect to see some mobile games add stablecoins as native in-app payment options in the Apple App Store and Google Play Store (affected by the EU Digital Markets Act, and possibly also by Epic’s victory over Google, benefiting the Apple App Store and Google Play Store). European players on the Google Play Store, and maybe US players on the Google Play Store).
C. We predict that the market value of game tokens will grow to US$40 billion
Currently, the market value of gaming tokens is approximately US$18 billion. Based on the recent growth rate of the gaming industry, we predict that this number may reach or exceed $40 billion in 2024.
D. “Classic Brands” continue to develop in Web3
We expect to see continued adoption of “classic brands” in the Web3 space in 2024. After the events of 2022, “classic brands” such as Nike, Starbucks, Gucci, Adidas, Dior, Louis Vuitton, Balmain and Prada have all launched or stepped up their initiatives for Web3. We predict that there will be at least twice the number of “classic brands” launched in 2024 as before.
2) Stablecoin
E. Stablecoin transaction volume will exceed Visa in 2024
Last year, we predicted that stablecoin transfer volume would surpass Visa (approximately $12.3 trillion in fiscal 2023). While that didn’t quite happen, the annualized rate in November was about $10 trillion. We believe we are only a year early and are very confident that on-chain stablecoin transaction volume will exceed Visa’s transaction volume in 2024.
Stablecoin trading volume percentage doubled on F. Solana
As of November 2023, Solana accounted for approximately 3% of stablecoin transfer volume. We predict that this will at least double to over 6% in 2024 as the Solana ecosystem revives and Solana begins to take some share from Tron as the blockchain of choice for fast, cheap stablecoin payments .
G. The TVL of decentralized synthetic USD stablecoins (ETH LST and short-term perpetual contracts) will exceed US$1 billion in 2024
The industry has long been looking for suitable alternatives to today’s popular centralized stablecoins. We think 2024 could be one of those years with the right mechanisms in place.
3. Ethereum and transaction process
1) The proportion of pledged liquidity in ETH exceeds 50%
Last year, we predicted that this number would be 60%, and while that number is optimistic (currently 37.5%), we still think this number will increase significantly to 50% in 2024. We believe a large portion of the growth will come from institutions that continue to adapt to staking and liquidity staking.
2) The total circulation of ETH reaches 119.6 million
The current total amount of ETH in circulation is 120.21 million. This number has decreased by approximately 318,000 ETH since the beginning of 2023, when the outstanding supply was approximately 120.52 million. We predict that with a significant increase in activity across the ETH ecosystem, the amount burned will be equivalent to approximately 600,000 ETH by 2024.
We predict that the number of private transactions included in blocks will double (currently around 11%). The verticalization of the transaction supply chain will continue as we predict that MEV-focused block builders (i.e., searcher builders) will lose market share to neutral builders (of the current largest builders, searcher builders have ~ Accounting for 54% of built blocks, neutral builders account for approximately 24% of built blocks).
Gas-free transactions becoming more common in cryptocurrencies
When consumers engage in different verticals (such as gaming), they will use products that abstract complexity as much as possible. Whether through EIP-4337 or other means, transactions from smart accounts and wallets will grow significantly in 2024.
3) Rollups accelerates development
We predict that the sum of ETH Layer 2 and Rollup will reach 10 times the number of Layer 1 transactions, and by the end of 2024, the total TVL of Layer 2 and Rollup will be greater than ETH Layer 1.
4. Market
1) Token issuance window continues to be open
After a relatively slow year for new token listings on major centralized trading platforms, new listings increased significantly at the end of 2023. We expect this activity to continue to be strong in 2024 as backlogged projects take advantage of the market momentum to launch their tokens and list them on major exchanges. As this new capital market continues to mature, we expect to see various types of Tokens (Layer-1/Layer-2, DeFi, games, etc.), as well as innovative new Token value accumulation mechanisms. Unfortunately, in our view, this capital markets evolution will largely occur outside the regulatory reach of U.S. investors, as we believe projects will be increasingly reluctant to list tokens on U.S. exchanges or to list tokens on U.S. exchanges. Services provided to U.S. investors.
Abu Dhabi (the capital of the United Arab Emirates) increases its efforts on cryptocurrency, and the founders are more inclined to Abu Dhabi
Last year, we predicted that Saudi Arabia’s Savvy Games would make some moves in the Web3 gaming space. This was achieved when Savvy indirectly acquired Scopely, which was an investor in Polygon.
While we expect to see more action from Savvy in web-related areas in 2024, we are also keeping a close eye on broader Web3 activity in the UAE. Earlier this year, our own Brevan Howard - one of the world’s largest hedge funds with over $35 billion in assets under management as of October 20, 2023 - opened a flagship office in the UAE capital, Abu Dhabi. The move by traditional financial institutions into Abu Dhabi in 2023 has been nothing short of explosive, and we expect this to continue into 2024. We believe this is also true in the Web3 space, and we expect Abu Dhabi to become the destination of choice for Web3 founders.
Abu Dhabi Global Market is an international financial center and free trade zone established in 2013. Its legal system is based on English common law. Abu Dhabi Global Market has had a forward-looking approach to digital assets since 2017, when ADGM first announced it would establish a virtual asset framework. In 2018, ADGM followed suit, with its financial services regulator introducing and implementing a comprehensive and unique framework for regulating trading platforms, custodians, brokers and other intermediaries engaged in virtual asset activities.
Coinbase recently announced “Project Diamond,” a smart contract-based platform for institutions to create, buy, and sell digitally native assets. Given that the jurisdiction where Coinbase is located does not have a regulatory framework specifically for Web3, nor a formal regulatory sandbox to test Web3 innovations, there is no doubt that Coinbase’s “Project Diamond” will enter ADGM’s RegLab sandbox, where key technologies can be created and tested. The Web3 infrastructure is not threatened by the “Sword of Damocles” hanging overhead. Fortunately for ADGM, we expect more Web3 founders to follow Coinbase’s lead and take advantage of the clear rules ADGM provides, including its RegLab. Unfortunately for the United States, this means that Web3 talent will continue to flee to a jurisdiction that created the framework for Web3 builders before anyone else and is reaping the benefits of that proactive regulatory approach.
