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 public attention. This period typically lasts for more than a year and is driven by basic 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 an appreciation of the Bitcoin-dominated market, 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 area. However, the core advantages of blockchain—immutability, data transparency, and user asset sovereignty achieved through private key encryption—continue to attract innovators. These features have been creatively applied in 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, and agricultural subsidy 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 Past Halving Cycles

A period following the 2012 halving highlighted the potential of a mediator-free, borderless payment system. Before Bitcoin emerged, intermediary payments and slow cross-border transactions were the norm—international transfers took days, and check clearing was equally 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 a fee structure that obstructed growth. This cycle ended with security vulnerabilities, particularly 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 supported only by white papers. The lack of investor protection and accountability has led to the rapid collapse of many ICOs. Most projects from that era are now outdated, and even the largest ICOs no longer rank among the top 100 blockchain projects.

**In 2020, three major trends dominated: DeFi initiatives, NFTs, and play-to-earn (P2E) games. DeFi projects promise unsustainable yields – sometimes more than 100% – by minting more tokens to provide yields without any economic activity support. Similarly, NFTs are highly valued, and some are just pixel art that doesn't hold their value. As expectations of mass virtual adoption have failed to materialize, the metaverse hype has faded. The P2E game relies on inflationary tokenomics, which collapses when growth stagnates, exposing the fragility of these models.

The 2024 halving cycle is based on the approval of the Bitcoin ETF in the United States, officially integrating cryptocurrencies into traditional financial markets. This move, coupled with the increasing influence of the blockchain community on democratic processes, 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 instead of a wholesale antagonism towards the technology. People have fundamentally seen its practicality and have discussed it. The United States is ready to take a leading role in the adoption of 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 from this cycle ready for review.

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

Blockchain-AI synergy

The combination of AI and blockchain is becoming a powerful force. Decentralized management of AI models and secure data processing provide new solutions, especially regarding privacy. AI can surpass 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 operating costs, traditional financial systems cannot support microtransactions. With its low-cost transaction model, blockchain is naturally suitable 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 practical 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 bridge 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 drive stablecoins toward mainstream adoption.

What did the early data reveal ###

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

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

The data shows that memecoin, AI-related tokens, and RWA tokens are the leaders of early growth. Other observations include an increase in transaction volume across all categories, which is common in periods when interest and engagement in blockchain projects seem to increase every four years. DePIN projects may not experience much growth at the beginning of the cycle, although one or more innovative projects may make some breakthroughs. The growth of Tier 2 projects has outpaced the growth of Tier 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, with similar findings in the top three. Another observation from the Toronet Research report is that, as we've seen in past cycles, application areas that sparked a frenzy in the previous cycle, such as ICOs in 2017 and NFTs in 2021, tend to be negated in the next cycle. Developers and industry leaders should strive to steer new adopters toward sustainable, utility-driven projects that reduce market volatility and minimize investor disillusionment. This will reduce the intensity of the quadrennial boom-bust cycle and the magnitude and number of disillusionments, with many already lining up to chase memecoin and ultimately turning 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 is steadily increasing, and the potential for upcoming thoughtful regulatory frameworks may yield better results in this cycle than ever before.