Research Roundup Newsletter [November 2023]

We present to you our latest issue of Research Roundup, featuring trending market insights in November, charts of the month, and our exploration of new developments within the Bitcoin ecosystem.

Welcome to the Crypto.com Monthly Research Roundup Newsletter!

1. Market Index

The monthly market cap and volume indices were positive at +12.13% and +60.46%, respectively, while the volatility index was negative at -27.99%.

2. 2023 Year Review & 2024 Year Ahead

In this special year-end report, we selected the top events and developments of 2023, followed by our outlook for the key trends in 2024.

Looking back at 2023, the cryptocurrency industry witnessed both impressive milestones and recovery from the tumultuous times of 2022. We applauded Ethereum’s successful Shapella upgrade and celebrated the milestone of 575 million in crypto retail adoption. Against the challenging global macroeconomic conditions, we saw the hit from the banking crisis in the first half of the year, and the rejuvenation in activities in the second half. 

Despite the uncertainty of the cryptocurrency market and global economy, innovations and developments continued in the crypto industry. In 2023, the builders have been hard at work as usual, growing Layer-1 and Layer-2 ecosystems, introducing new use cases to Bitcoin, brainstorming creative ways to build Web3 social, and much more.

Looking ahead to 2024, we are optimistic that crypto adoption — both in retail and institutional — will continue growing at a steady pace. We are excited about Bitcoin’s upcoming fourth halving event and Ethereum’s next major upgrade, while also watching out for more development on artificial intelligence (AI) and the synergy by working together with Web3. We remain bullish on Web3 and look forward to seeing more innovations around various ecosystems. Finally, we also expect to see massive institutional adoption if the US Securities and Exchange Commission (SEC) approves the filing of BTC and ETH spot exchange-traded funds (ETFs).

Last but not least: We are very grateful to our community for reading our publications and sharing valuable feedback, and look forward to bringing more quality research and insights in the coming year. 

Check out 2023 Year Review & 2024 Year Ahead.

3. Charts of the Month

Bitcoin has broken past US$44K for the first time in 19 months. Meanwhile, after briefly testing US$2K back in April, Ether has now managed to top US$2.3K. Spot ETF developments continue to make headlines. Additionally, BTC’s move higher comes as  gold futures also surge to a record high of US$2,151 on 4 December 2023, after US Federal Reserve Chairman Jerome Powell said interest rates are now ‘well into restrictive territory’.

The total value locked (TVL) in decentralised finance (DeFi) has surged to US$50 billion, marking a $15 billion increase in six weeks. Growth was fueled by a rise in asset prices and the expansion of various ecosystems. Notably, the newly announced Layer-2 platform Blast saw over $700 million in deposits.

The NFT market is on an upward trend, following the overall bullish price action of the cryptocurrency. The daily global sales volume of NFTs surpassed US$50 million for the first time since June.

4. Monthly Feature Articles

Monthly Feature Article | Issuing Tokens on Bitcoin 

Bitcoin’s aim is to be a simple, robust cryptocurrency system focused on digital cash, with a design philosophy emphasising security and decentralisation. Compared to Ethereum, Bitcoin has several technical features that make it less suitable for issuing new tokens. These features — which include its scripting language, lack of a native token standard, low transaction throughput, and usage of the Unspent Transaction Output (UTXO) model, amongst others — are primarily rooted in the design choices and priorities of the Bitcoin network. While Bitcoin was originally developed as a digital currency for payment, ongoing developments within the Bitcoin ecosystem seek to expand its functionality. 

In this report, we elaborate on the designs of projects that have been enabling the issuance and transfer of new assets on the Bitcoin network, including BRC-20, Atomicals Protocol, and Taproot Assets. 

Check out Issuing Tokens on Bitcoin

Key takeaways:

• Innovation in the Bitcoin ecosystem aims to build upon its base layer by introducing increased programmability to expand functionality and use cases. 
• A key area of focus is the issuance and transfer of tokenised assets on the Bitcoin network. Current notable protocols include BRC-20, Atomicals Protocol (ARC-20), Taproot Assets, and the Nostr Assets Protocol.
  • BRC-20 adopts a similar way to inscribe data based on the Ordinals protocol. While Ordinals NFTs inscribe multimedia data (like images) onto Satoshis, the BRC-20 token standard inscribes a JSON text (a text structure) to Satoshis. The JSON contains pieces of operation instructions that can be deployed on the Bitcoin network.
  • Atomicals protocol introduces the ARC-20 fungible token standard, which uses each Satoshi to represent ownership units of deployed tokens. This means that every unit of the token is backed by 1 Satoshi forever. A key difference compared to BRC-20 is that Atomicals are minted and propagated based on Bitcoin’s UTXO, therefore aligning more closely with Bitcoin’s model. 
  • Assets issued with the Taproot Assets protocol are held in Bitcoin UTXOs and are transferred as part of regular Bitcoin transactions. Assets issued through this protocol are interoperable on both Bitcoin and Lightning Network.
• The latest developments like RGB and BitVM progress towards introducing more robust smart contract functionality and Turing completeness for Bitcoin through off-chain computations.
• Continued experimentation redefines the perceptions of Bitcoin’s capabilities. However, challenges also arise, given the potential adverse effects of introducing more complexity to Bitcoin’s original design philosophy of emphasising security and decentralisation.

Monthly Feature Article | Bitcoin: Beyond Store of Value

Intended as an electronic payment system, Bitcoin was designed with features like the UTXO model and limited script programming — properties that make it distinct from Ethereum in terms of flexibility and programmability required to be a ‘Turing-complete’ smart contract platform. To extend Bitcoin beyond a digital cash system, discussions on solutions for supporting complex smart contracts without changing Bitcoin’s basic infrastructure are trending.

In this report, we discussed Turing completeness in blockchains and examined Bitcoin’s design and limitations. We then explored two emerging projects that represent the paradigm shift around turning Bitcoin into a Turing-complete network — specifically, RGB and BitVM — and how off-chain computations are enabling new functionalities that make Bitcoin more than just a store of value. Read our insights on new developments within the Bitcoin ecosystem, exclusive to our Private members.

Check out Bitcoin: Beyond Store of Value

Key takeaways:

• Intended as an electronic payment system, Bitcoin was designed with features like Unspent Transaction Output (UTXO) and limited script programming. These properties make it distinct from Ethereum in terms of flexibility and programmability required to be a Turing-complete smart contract platform.
• Bitcoin is popular and has a unique position in the community. Lately, there has been growing discussions to support complex smart contracts without altering Bitcoin’s fundamental infrastructure, in order to expand its potential beyond being just an electronic payment system.
• RGB is a smart contract platform explicitly crafted for Bitcoin and its Layer-2 (L2) solution, the Lightning Network. In RGB, there is no global network where all transactions are broadcast.
  • RGB adopts a client-side validation paradigm, in which transaction commitments are stored on-chain while detailed transaction information stays off-chain, validated solely on the client side.
  • Unlike Ethereum, contract business logic in RGB is defined through schemas, and a specific smart contract must instantiate one schema. A smart contract is conceptualised as a directed acyclic graph (DAG) representing the sequence of state changes.
  • RGB security is guaranteed by single-use seals, which affirm that every state of each contract is attached to a certain Bitcoin UTXO.
• BitVM is a computational framework that introduces Turing-complete off-chain smart contracts to Bitcoin without requiring any soft forks or implementing changes to the consensus rules:
  • A complex computation in BitVM can be represented by a series of NAND logic gates with bit value commitments as the basic inputs and outputs.
  • BitVM is based on fraud-proof and the challenge-response protocol for validation. The state verification is achieved by fraud proofs and a challenge-response protocol between a prover and a verifier.
• Turing completeness is relative in the blockchain space. To facilitate arbitrary programme development on a blockchain, Turing-complete programming language is often required and has now become a desirable blockchain feature. However, there are ongoing debates around the concept of Turing completeness in blockchains because of limitations imposed by gas.

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5. Alpha Navigator

This institutional-focused report dives into macro trends, market-neutral pairs, style-factor screens, and events. Read the full Alpha Navigator report here.

• Asset classes mostly rose in November, led by ETH.

• BTC’s 1-month correlations with other assets were mostly positive.

6. Crypto Conference & Economic Calendar from Market Pulse

Crypto Conferences Calendar

Economic Calendar

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Research & Insights Team