The next major breakthrough in Blockchain: What should we follow

Author: Ken Alabi, CoinTelegraph; Translated by: Tao Zhu, Jinse Finance

Every four years, specifically a few months after the Bitcoin halving, the blockchain ecosystem receives close attention from the public. This period typically lasts over a year and is driven by fundamental economic principles: when the supply of an asset decreases while demand remains stable or increases, its value usually rises. Historically, this supply shock has triggered appreciation in Bitcoin-dominated markets, leading to increased interest and participation from users, developers, investors, and policymakers.

In the periods following the halving, the blockchain industry has showcased its projects, technological innovations, and potential utilities. No previous cycle has produced a blockchain application that clearly surpasses existing technologies in any specific field. However, the core advantages of blockchain—immutability, data transparency, and user asset sovereignty enabled by private key encryption—continue to attract innovators. These features have been creatively applied across numerous fields, including borderless payment systems, DeFi, NFTs, gaming systems that record in-game assets, fan and loyalty tokens, transparent grant and charitable spending systems, as well as agricultural subsidies and loan tracking.

Although past cycles have highlighted the potential of blockchain, the next period is expected to trial new use cases as described below.

Lessons from Previous Halving Cycles

The period following the 2012 halving highlighted the potential of a mediator-free, borderless payment system. Before the advent of Bitcoin, intermediary payments and slow cross-border transactions were the norm—international transfers took days, and check clearances were similarly slow. Bitcoin hinted at a future of seamless payments, with early adopters tracking the number of businesses accepting Bitcoin. However, scalability issues and rising transaction costs limited this utility. Ironically, many blockchain networks hindered their success through fee structures that obstructed growth. This cycle ended with security vulnerabilities, particularly marked by the Mt. Gox hack that occurred 20 months after the halving.

The 2016 cycle triggered explosive growth in the first token issuance (ICO), democratizing access to venture capital. Ordinary individuals can now invest in early-stage projects—an opportunity that was once reserved for large financial institutions. However, the market is flooded with tokens that are only supported by white papers. The lack of investor protection and accountability has led to many ICOs collapsing rapidly. Most projects from that era have become obsolete, and even the largest ICOs no longer rank among the top 100 blockchain projects.

In 2020, three major trends dominated: DeFi projects, NFTs, and play-to-earn (P2E) games. DeFi projects promise unsustainable returns—sometimes exceeding 100%—by minting more tokens to provide yields without any economic activity backing them. Similarly, the valuations of NFTs are also very high, with some being merely pixel art that cannot retain value. As expectations for mass virtual adoption have failed to materialize, the hype around the metaverse has gradually faded. P2E games rely on inflationary token economics, and when growth stagnates, they collapse, exposing the fragility of these models.

The 2024 halving cycle begins based on the approval of the Bitcoin ETF in the United States, officially integrating cryptocurrency into traditional financial markets. This initiative, along with the increasing influence of the blockchain community on the democratic process, marks a significant shift.

This is the first time that crypto assets are within the financial system rather than outside of it, which could lead to balanced regulation rather than outright hostility towards the technology. People are recognizing its utility and discussing it. The United States is poised to take a leading role in adopting blockchain technology, which is a good sign, especially considering the role the U.S. has played in other previous technological innovations and advancements. The next question is: how far will this integration go? Will we see more countries adding crypto assets to their national reserves, rather than just one or two countries that already have crypto assets? In addition to regulatory progress, there are several blockchain applications in this cycle that are ready for review.

Tokenizing real-world assets and decentralizing their financing has gained attention. RWA enables asset owners to benefit directly from blockchain-based financing. Key areas include real estate and housing finance, stocks, bonds, treasury bills, agricultural financing, DePIN, and DePUT.

Blockchain-AI Synergy

The integration of AI and blockchain is becoming a powerful force. The decentralized management of AI models and secure data processing provide new solutions, especially in terms of privacy. AI can go beyond solutions like ZK-SNARK by managing encrypted data and disclosing it only to its owners (based on their instructions) or to authorized law enforcement agencies under specific conditions (depending on the composition of the blockchain).

micro trading

Due to high operational costs, traditional financial systems cannot support microtransactions. With a low-cost trading model, blockchain is naturally suited for micropayments, especially in content consumption. This could eliminate outdated bundling practices in media and usher in a new era of seamless payments.

Memecoins and celebrity tokens

Memecoins have surged, with nearly 10 tokens among the top 100 by market capitalization, but they have almost no actual utility. Low-cost blockchains and user-friendly token creation tools have fueled this trend. Meme tokens launched by or around well-known public figures are also becoming increasingly popular, but most similarly lack practicality.

stablecoin

Stablecoins continue to connect traditional finance and blockchain. As faster and cheaper blockchains dominate this cycle, stablecoins are being widely used for payments, challenging traditional systems such as slow check settlements and expensive cross-border transfers. Regulatory clarity may push stablecoins towards mainstream adoption.

What did early data reveal ###

Toronet Research tracked the performance of various types of tokens from January to May 2024 and predicted the trends for December. Research findings:

The data is sorted by the price growth rate as of January 2025. Source: Toronet Research, January 2025.

Data shows that memecoins, AI-related tokens, and RWA tokens are the frontrunners in early growth. Other observations include that all categories have experienced an increase in trading volume, which is common during periods when interest and participation in blockchain projects seem to increase every four years. DePIN projects may not have experienced much growth at the beginning of the cycle, although one or more innovative projects may achieve some breakthroughs. The growth of Layer 2 projects has outpaced the growth of Layer 1 projects, or absorbed most of the growth that the latter will experience. The results for January 2025 are presented in chart form below.

Price growth trend bar chart for January 2025. Source: Toronet Research.

CoinGecko's Q3 2024 crypto industry report reviews popular categories by network traffic, finding similarities among the top three categories. Another observation from Toronet Research is that, as seen in previous cycles, the areas of application that triggered a frenzy in the previous cycle, such as ICOs in 2017 and NFTs in 2021, are often dismissed in the next cycle. Developers and industry leaders should strive to guide new adopters towards sustainable, utility-driven projects to reduce market volatility and minimize investor disenchantment. This will lessen the intensity of the four-year boom and bust cycle and the degree and number of disillusioned investors, many of whom are already lining up to chase memecoins and will ultimately turn worthless airdrops into futility.

Will we break this cycle?

The current cycle presents the most significant opportunity for blockchain to create a lasting impact to date. With the increasing consolidation of institutions, more thoughtful regulatory commitments, and a shift towards real-world utility, the industry is poised for meaningful growth. The acceptance and integration of blockchain solutions in the broader economy are continuously improving, and the potential for upcoming thoughtful regulatory frameworks may yield better outcomes in this cycle than ever before.