Coinbase 2024 Crypto Market Outlook: Bitcoin's Dominance Strengthens Further, Optimistic About DePIN and Decentralized Computing

Original Title: "2024 Crypto Market Outlook" Original Source: Coinbase research Original Translation: Shenchao TechFlow

The total market capitalization of cryptocurrencies doubled in 2023, indicating that cryptocurrencies have survived the bear market and are now in a transition from bear to bull. Coinbase has written a lengthy article primarily discussing its expectations for the narratives that will dominate the cryptocurrency space in 2024, along with an in-depth exploration of Bitcoin, Ethereum, stablecoins, and more.

Key Points

• Coinbase believes that, at least in the first half of 2024, institutional investment will continue to focus primarily on Bitcoin, partly due to strong demand from traditional investors to enter this market.

• 2024 will provide a favorable macro environment for risk assets; more critically, cryptocurrency regulations will continue to advance, promoting the long-term adoption of cryptocurrencies.

• Web3 developers will continue to work on building real-world use cases, with the technological foundation already becoming evident.

• A better user experience for cryptocurrency is being established, which will help the industry bridge the gap from early adopters to mainstream users.

Author's Note

The total market capitalization of the crypto market doubled in 2023, indicating that this asset class has emerged from the "harsh winter" and is now undergoing a transformation. Nevertheless, we believe it is still too early to label this point, or that the market's positive outlook serves as favorable evidence against those who are bearish on cryptocurrencies. It is evident that, despite the challenges faced by the crypto space, the developments we have witnessed over the past year have exceeded expectations. This proves that cryptocurrencies will continue to exist, and the current challenge is to seize the opportunity to build a better future.

The catalysts for the recovery of cryptocurrencies in 2023 are unrelated to innovations that characterize their value. The crisis in U.S. regional banks and the increase in geopolitical conflicts, among other factors, have reinforced Bitcoin's status as a safe haven. Additionally, the applications for spot Bitcoin ETFs by some of the top financial institutions in the U.S. have implicitly acknowledged the disruptive potential of cryptocurrencies, which may signal clearer regulations that help eliminate friction preventing capital inflow.

Progress is rarely smooth; to create a more resilient market, Web3 developers need to continue building real-world use cases that help us bridge the gap from early adopters to mainstream users.

The foundational potential of this shift is already evident—from web2 products like payments, gaming, and social media to cryptocurrency-specific advancements like decentralized identity and decentralized physical infrastructure networks. The former is easier for investors to understand, but these projects face tough competition from established web2 giants. The latter could change the technological landscape but requires longer development times, with large-scale user adoption still distant. However, blockchain infrastructure has made significant strides over the past two years, creating the necessary conditions for these application experiments and innovations, and we are nearing a turning point.

Asset tokenization is another important use case currently attracting traditional financial participants into this space. Full implementation may still take 1-2 years, but the resurgence of the tokenization theme reflects economic realities: the opportunity cost today is higher than when the pandemic restrictions were lifted. This makes the capital efficiency of instant settlement for repurchases, bonds, and other capital market instruments even more critical.

In this context, we believe the long-term trend of institutional adoption of cryptocurrencies will accelerate. In fact, rumors suggest that the Bitcoin rebound at the end of 2023 has begun attracting a broader range of institutional clients into the cryptocurrency space, whether they are traditional macro funds or ultra-high-net-worth individuals. We expect the launch of a U.S. spot Bitcoin ETF to accelerate this trend, potentially leading to the creation of more complex derivative products that rely on compliance-friendly spot ETFs as a foundation. Ultimately, this will improve liquidity and price discovery for all market participants.

We believe the topics mentioned above represent some fundamental themes for the cryptocurrency market in 2024, which we will discuss in this article.

Theme 1: The Next Cycle

Bitcoin Dominance

The market conditions of 2023 have largely unfolded as we anticipated in our 2023 Crypto Market Outlook. The selection of digital assets has shifted towards higher-quality targets, leading to Bitcoin's dominance steadily rising above 50% for the first time since April 2021. This is largely due to multiple well-known and established financial giants applying for spot Bitcoin ETFs in the U.S., as their participation in this space helps validate and enhance the prospects of cryptocurrencies as an emerging asset class. While some capital may shift towards higher-risk cryptocurrency targets next year, we believe that at least until the first half of 2024, institutional capital flows will remain firmly anchored in Bitcoin. Furthermore, the strong demand from traditional investors to enter this market will make Bitcoin's dominance difficult to shake in the short term.

Bitcoin's unique narrative has helped it outperform traditional assets in the second half of 2023, and we expect this trend to continue into next year. Unless a widespread risk-off environment triggers liquidity demands, we believe Bitcoin could perform well even in a more challenging macroeconomic backdrop. For example, the fiscal advantages in the U.S. and other countries may limit the restrictive monetary policies that keep capital stagnant. The U.S. commercial real estate sector appears vulnerable and could put new pressure on regional banks. These two developments should continue the long-term trend of Bitcoin as an alternative to the traditional financial system. All of this could reinforce the deflationary narrative associated with Bitcoin's halving in April 2024.

New Trading Regime

The last cryptocurrency bear market (2018-19) ended with the emergence of decentralized finance (DeFi) and the rise of multiple Layer 1 (L1) networks, which were ostensibly built to meet the anticipated demand for on-chain block space. The development activity on these platforms further mainstreamed cryptocurrencies, but overall activity stagnated by the end of 2021. Thus, it proved that more block space was not necessarily needed. Following the subsequent downturn, developers decided to use the cryptocurrency bear market to build. They focused on addressing the technical barriers that hindered the development of new blockchain use cases.

The first phase of this progress involves building the infrastructure necessary for the future of web3, such as scaling solutions (L2), security services (re-staking), and hardware (zero-knowledge proofs). These remain significant investment opportunities in the cryptocurrency space, but it can be argued that a substantial amount of infrastructure has been built over the past two years. As this has led to the emergence of more decentralized applications (dapps), we believe the trading regime of cryptocurrencies will evolve alongside these efforts. In other words, we expect more market participants to focus on identifying potential web3 applications to help bridge the gap between early adoption and mainstream usage.

Many market participants rely on analogies from web2 to derive investment ideas in the web3 space, such as payments, gaming, and social media. The industry has also seen some use cases with a more unique crypto-native style, including decentralized identity, decentralized physical infrastructure networks, and decentralized computing. We believe the challenge lies not only in identifying the industry but also in picking winners. Achieving dominance in any specific industry relies not just on first-mover advantage (though it helps) but also on realizing and monetizing the right network effects. Before early 2004, at least six other social media platforms, including Friendster and MySpace, had achieved some success but did not reach the same network scale or recognition as Facebook. Given the nascent nature of the digital asset class, we expect many market participants to increasingly rely on intermediaries and platforms to seize the opportunities we see in the next cycle.

L1 Equilibrium

In our view, the moderation of on-chain activity over the past two years has reduced demand for L1s. Ethereum's dominance among smart contract platforms remains solid, leaving only a small amount of direct competition. Approximately 57% of the total value locked in the crypto ecosystem is on Ethereum, while Ethereum's dominance in the overall crypto market capitalization is 18%, second only to BTC. As market participants increasingly focus on applications, we expect more alternative L1s to reposition their networks to better align with the shifting narrative. For example, more industry-specific platforms have begun to spread within the ecosystem. Some focus on gaming or NFTs (such as Beam, Blast, Immutable X, etc.), while others focus on DeFi (such as dYdX, Osmosis) or institutional participants (such as Avalanche's Evergreen subnet, Kinto).

At the same time, the concept of modular blockchains has gained more attention in the crypto community, with many L1s intervening to meet one or more core blockchain component needs, including data availability, consensus, settlement, and execution. In particular, Celestia's mainnet launch at the end of 2023 has reignited discussions around modular blockchain design by providing an always-available plug-in data availability layer. This means that other networks and rollups can use Celestia to publish transaction data, ensuring that this data is available on-chain for anyone to verify. Other Ethereum Virtual Machine (EVM) compatible L1 options focus on smart contract execution, transitioning to Ethereum L2s, such as Celo.

That said, integrated chains like Solana still hold significant positions within the crypto ecosystem, suggesting that the debate between modularity and integration may continue. We believe the trend of increasing differentiation among chains—whether by industry or function—will persist into 2024. However, the value of these blockchains ultimately depends on which projects are being built on them and how much usage they attract.

Evolution of L2

The rapid growth of L2 scaling solutions has been driven by the emergence of new rollup stacks (such as OP Stack, Polygon CDK, and Arbitrum Orbit) and the abstraction of functionalities into specialized layers. This has enabled developers to more easily build and customize their own rollups. However, despite the increasing number of L2s, they have hardly diverted any activity from the Ethereum mainnet, instead weakening L1 activity.

For instance, if we compare the share of ETH locked in rollup-connected bridges to alternative L1s, we find that the share of ETH locked in rollup-connected bridges has grown from 25% of all bridged ETH in early 2022 to 85% by the end of November 2023. Meanwhile, despite the increase in rollup usage, the number of transactions on Ethereum has remained relatively stable, averaging about 1 million per day. In contrast, the total activity of Arbitrum, Base, Optimism, and zkSync currently averages over 2 million transactions per day.

Moreover, modular theory is manifesting in the L2 space in entirely unique ways. Eclipse has garnered significant attention in 2023 for challenging existing norms as a "universal" scaling solution that relies on a modular architecture. Notably, Eclipse depends on

(1) Solana Virtual Machine (SVM) for transaction execution

(2) Celestia for data availability

(3) Ethereum for settlement (security)

(4) RISC Zero for zero-knowledge fraud proofs.

This is just one example of how we are beginning to experiment with different (non-EVM) virtual machines at the execution layer, although the impact on the ecosystem remains to be seen. With the Dencun (Dencun) upgrade also expected to arrive in the first quarter of 2024, we may also see a decrease in transaction fees for L2 settlements to Ethereum.

Theme 2: Resetting the Macro Framework

The Long Road to De-dollarization

De-dollarization may continue to be a long-term topic in 2024, especially in an election year. However, the reality is that the dollar is not facing any immediate threat to its global dominance. It is evident that the dollar is at a turning point. While de-dollarization may take many generations to unfold, the global monetary system has begun to shed the dollar's dominance. The macroeconomic imbalances in the U.S. are intensifying, with the Congressional Budget Office (CBO) predicting that by 2028, the cost of servicing the U.S. debt burden will rise to $1 trillion, accounting for 3.1% of GDP. The CBO expects the federal deficit to expand from an average of 3.5% of GDP to 6.1% over the next decade.

On the other hand, the theme of de-dollarization has been a topic of discussion since the early 1980s; nevertheless, the dollar remains the world's reserve currency. In fact, the dollar's oversized role in global finance and trade means that its share in all international transactions has remained around 85-90% over the past four decades. What has changed is that, as the U.S. has imposed more sanctions on Russia due to the war in Ukraine, the weaponization of global finance has begun. This has accelerated interest in developing new cross-border payment solutions, as more countries are reaching bilateral agreements to reduce reliance on the dollar. For example, France and Brazil (and other countries) have begun settling commodity trades in Chinese yuan. Additionally, more experiments with central bank digital currencies are underway to avoid the cumbersome current correspondent banking system.

Cryptocurrency advocates argue that Bitcoin and other digital stores of value play an important role in this emerging trend of transitioning from a unipolar world to a multipolar one, with the value of having a supranational asset being evident—an asset not owned or controlled by any single nation. Currency transformations often occur during periods of socioeconomic upheaval, which are typically only understood in hindsight, much like the paper currency in 11th century China, promissory notes in 13th century Europe, or credit cards in mid-20th century America.

On the other hand, while digital cash and distributed ledgers are likely to constitute a major part of the next transformation, replacing the dollar's position in the global financial system is no easy task. First, the entire crypto market's market capitalization is just a small fraction of the $13 trillion in non-bank held bonds outside the U.S. The dollar's share in foreign exchange reserves has declined over the past 30 years but still constitutes a majority at 58%. However, Bitcoin does not necessarily need to replace the dollar to serve as an attractive alternative in turbulent environments, which may help it find a place in the reserve assets of more countries. The structural adoption of Bitcoin and cryptocurrencies does not rely on the collapse of the dollar, which explains why we saw Bitcoin strengthen in tandem with the dollar in the first half of 2023. In the long run, the ongoing transformation of the monetary regime and the role of cryptocurrencies within it could be significant, even if we may not witness the collapse of the old order firsthand.

Economic Outlook for 2024

The likelihood of the U.S. avoiding a recession in 2024 has sharply increased in recent months, although the possibility of a recession is not zero—as highlighted by the deeply inverted U.S. Treasury yield curve. The unique economic resilience of the U.S. this year has been driven by high levels of government spending and nearshoring efforts to strengthen domestic manufacturing. However, we expect these effects to fade in the first quarter of 2024, leading to a more subdued economy under relatively tighter financial conditions. But we believe this does not necessarily lead to a recession. Instead, a recession will depend on endogenous factors, such as the likelihood of renewed weakness in the U.S. banking system or the overall pace of deflation.

Regarding the latter, we have maintained since March 2023 that inflation has peaked, and the slowing overall demand should cyclically support a stronger deflationary trend in the future. To a large extent, this has already been realized, and structural forces, such as artificial intelligence, could lead to greater automation and lower input costs. However, demographic changes—such as the baby boomer generation exiting the labor force—may counterbalance this. Overall, we believe that the economic slowdown and easing price pressures should pave the way for the Federal Reserve to lower interest rates in mid-2024 (or sooner).

In our view, lower capital costs may support risk assets in the second quarter of 2024, but the first quarter of 2024 may face some challenges, depending on how entrenched the Federal Reserve's stance is. In this scenario, cryptocurrencies may not be entirely immune. However, our economic outlook also suggests a trend of a weaker dollar next year, which will be an opportunity for cryptocurrencies, as these assets are often priced in dollars. Although the correlation between changes in many macro variables and the returns of Bitcoin (and Ethereum) has decreased over the past year, a loose macro backdrop remains a core part of our overall constructive market argument for 2024.

Regulatory Interpretation

In a recent institutional investor survey commissioned by Coinbase, about 59% of participants indicated that they expect their companies to increase their investment in the digital asset class over the next three years, while one-third stated that they have increased their investment proportion in the past 12 months. This proves that cryptocurrencies remain an important asset class with broad commercial and investment appeal globally. However, despite many jurisdictions around the world taking decisive action on cryptocurrency regulations, uncertainty in the U.S. is causing it to miss opportunities and impose market restrictions centered on enforcement. In fact, 76% of survey respondents believe that the lack of reasonable and clearly defined cryptocurrency regulations in the U.S. threatens the country's position as a leader in financial services.

Moreover, regardless of the specific language used in the regulatory guidance and other public statements in 2023, the market's perception is that U.S. banking regulators' attitude towards the digital asset ecosystem is at least unfavorable, with some viewing it as outright hostility. The result is that, aside from the largest and most reputable cryptocurrency companies, all firms may encounter difficulties in establishing banking relationships. Whether intentional or not, the regulatory gates established by the U.S. through non-controversial letters and other licensing requirements have cooled the motivation for banks to invest in digital asset technologies or to accept clients actively participating in these activities.

On the positive side, we believe that as multiple committees in the U.S. House of Representatives advance the "Payment Stablecoin Clarity Act" and the "Financial Innovation and Technology for the 21st Century Act" (FIT 21 Act) in 2023, more U.S. lawmakers are recognizing the rising risks of global regulatory arbitrage.

Additionally, the potential approval of a spot Bitcoin ETF in the U.S. could connect cryptocurrencies to a new category of investors and reshape the market in unprecedented ways. Compliance-friendly ETFs could serve as the basis for a range of new financial instruments (such as lending and derivatives) that can be traded among institutional counterparties. We believe that 2024 will continue to lay the groundwork for cryptocurrency regulations, leading to more progressive regulatory clarity and greater institutional participation in this space in the future.

Theme 3: Connecting to the Real World

Tokenization is an important use case for traditional financial institutions, and we expect it to become a significant part of the new round of the crypto market cycle, as it is a key part of "updating the financial system." This primarily involves automating workflows and eliminating certain intermediaries that are no longer needed in the processes of asset issuance, trading, and record-keeping. Tokenization not only has a product market that is very suitable for distributed ledger technology (DLT), but the current high-yield environment makes the capital efficiency offered by tokenization even more important than two years ago. In other words, for institutions, the cost of occupying funds for even a few days in a higher interest rate environment is much higher than in a lower interest rate environment.

Throughout 2023, we have witnessed many newcomers beginning to offer tokenized access to on-chain U.S. Treasury exposure on public permissionless networks. As digital-native users seek returns unrelated to traditional cryptocurrency yield sources, the total assets of on-chain U.S. Treasury-like exposures have increased sixfold, exceeding $786 million. Given the demand from clients for higher-yield products and the need for diversified sources of returns, we may see tokenization expand into other market instruments, including equities, private market funds, insurance, and carbon credits by 2024.

Over time, we believe that more business and financial sectors will incorporate aspects of tokenization, although regulatory ambiguity and the complexity of managing different jurisdictions continue to pose significant challenges for market participants—along with integrating new technologies into traditional processes. Due to risks associated with public networks (such as smart contract vulnerabilities, oracle manipulation, and network outages), most institutions have so far relied on private blockchains. While private blockchains may continue to grow alongside public permissionless chains, this could fragment liquidity due to interoperability barriers, making it more difficult to realize the full benefits of tokenization.

An important theme worth noting around tokenization is the regulatory progress made by jurisdictions such as Singapore, the EU, and the UK. The Monetary Authority of Singapore has sponsored "Project Guardian," which has developed dozens of proof-of-concept tokenization projects on public and private blockchains of global tier-one financial institutions. The EU's DLT pilot regime has established a framework that allows multilateral trading facilities to utilize blockchain for trade execution and settlement instead of relying on central securities depositories. The UK has also launched a pilot regime seeking a more advanced framework for issuing tokenized assets on public networks.

While many are now looking for potential commercialization of "proof of concept," we still expect full implementation to continue over the years, as this theme requires regulatory coordination, progress on on-chain identity solutions, and the scaling of key infrastructure within major institutions.

Perspectives on Web3 Gaming

After a sharp decline in trading activity during the early cryptocurrency bear market, the recent resurgence of Web3 gaming has gained attention. Currently, this field is primarily focused on attracting mainstream gamers outside of many "crypto-first" communities. Overall, the potential market share of the gaming industry is currently about $250 billion, expected to grow to $390 billion within the next five years. However, despite the enormous investment opportunities, users have generally rejected the existing web3 "Play to Earn" model demonstrated by early projects like Axie Infinity. In fact, this model may lead to greater skepticism among mainstream gamers towards web3 gaming.

This has prompted developers to conduct more experiments, attempting to combine the network effects of high-quality AAA games with sustainable financialization mechanisms. For example, game studios are considering using web3 narratives, such as non-fungible tokens (NFTs), that can be used, transferred, or sold in designated markets within the game. However, surveys indicate that most gamers do not favor NFTs, which broadly reflects their rejection of "Play to Earn." The value-added potential for the gaming industry in leveraging web3 architecture lies in its promise to improve user acquisition and retention rates, but so far, this remains an unproven argument. As many projects' game development processes reach the standard of 2-3 years (following significant fundraising in 2021-2022), we believe that some web3 games that may be released in 2024 could soon provide the data and statistics we need to better assess this sector.

How to Build a Decentralized Future

A major theme for 2024 (likely longer, depending on development timelines) is the decentralization of real-world resources. We are particularly focused on the relevant concepts of decentralized physical infrastructure networks (DePIN) and decentralized computing (DeComp). Both DePIN and DeComp leverage token incentives to drive the creation and consumption of resources constructed in the real world. In terms of DePIN, these projects rely on creating economic models that help incentivize participants to build physical infrastructure not controlled by large companies or centralized entities (ranging from energy and telecommunications networks to data storage and mobile sensors). Specific examples include Akash, Helium, Hivemapper, and Render.

DeComp is a specific extension of DePIN that relies on distributed computer networks to meet specific tasks. With the mainstream adoption of generative artificial intelligence (AI), this concept has been revitalized. The computational costs of training AI models can be high, and the industry is exploring whether there are opportunities to adopt decentralized solutions to alleviate this issue. It remains unclear whether the combination of blockchain and AI is feasible, but the field is growing. For example, a related research area called zero-knowledge machine learning (ZKML), which focuses on privacy, promises to revolutionize how AI systems handle sensitive information. ZKML could enable large language models to learn from a set of private data without directly accessing that data.

DePIN, as a powerful real-world application case for blockchain technology, has the potential to disrupt existing paradigms, but it is still relatively immature and faces numerous challenges. These challenges include high initial investments, technical complexity, quality control, and economies of scale. Additionally, many DePIN projects focus on how to incentivize participants to provide the necessary hardware, but only a few projects have begun to develop financialization models that drive demand. While the value proposition of DePIN may arrive early, realizing these benefits could take years. Therefore, we believe market participants still need to adopt a long-term perspective to invest in this industry.

Decentralized Identity

Privacy is the new frontier for blockchain developers, who are leveraging innovations such as zero-knowledge (ZK) fraud proofs and fully homomorphic encryption (FHE) to perform computations while keeping user data encrypted. The applications in this area are broad, especially concerning decentralized identity—the ultimate state where users fully control and own their personal data. For example, this could allow medical research institutions to analyze patient data to help them discover new trends or patterns in specific diseases without disclosing any sensitive health information about patients. However, to achieve this, we believe individuals need to have control over their identity data—contrary to the current situation where information is stored on many different centralized entity servers.

It is certain that we are still in the very early stages of addressing this issue. However, ZK systems and FHE, once viewed as purely theoretical concepts, have recently seen more experimental implementations within the crypto industry. In the coming years, we expect to see greater advancements in this field, potentially enabling us to have end-to-end encryption in web3 applications and networks. If this is the case, we believe decentralized identity could have a strong product-market fit in the future.

Theme 4: The Future of Blockchain

Better User Experience

One theme that has emerged during the recent bear market cycle is how to make crypto technology more user-friendly and accessible. The additional responsibility of managing cryptocurrencies and everything involved (wallets, private keys, gas fees, etc.) is not suitable for everyone, making it difficult for the industry to mature unless it can overcome some key user experience-related challenges. Progress in account abstraction seems to have made meaningful strides in this regard. The concept of account abstraction dates back at least to 2016 and refers to treating externally owned accounts (like wallets) and smart contract accounts similarly to simplify the user experience. Ethereum advanced account abstraction in March 2023 by introducing the ERC-4337 standard, opening up new opportunities for users.

For example, in the case of Ethereum, it could allow application owners to act as "payers" and cover users' gas fees or enable users to fund transactions using non-ETH tokens. This feature is particularly important for institutional entities that do not want to hold gas tokens on their balance sheets due to price volatility or other reasons. J.P. Morgan's proof of concept report as part of Project Guardian highlights this, where all gas payments are processed through Biconomy's Paymaster service.

As the Dencun upgrade may reduce rollup transaction fees by 2-10 times, we believe more decentralized applications (dapps) may pursue a "no gas transaction" path, effectively allowing users to focus solely on high-level interactions. This could also facilitate the development of new non-financial use cases. Account abstraction can also promote robust wallet recovery mechanisms to create fail-safes against simple human errors (such as lost private keys). The goal of the crypto ecosystem is to attract new users and encourage existing users to become more active participants.

Validator Middleware and Customizability

Developments like re-staking and distributed validator technology (DVT) are empowering validators to customize key parameters in new ways—to better adapt to changing economic conditions, network demands, and other preferences over time. From an innovation perspective, the growth of validator middleware solutions has already been a major theme in 2023, but we believe that their full potential to enhance customizability and unlock new business models has yet to be fully realized.

In terms of re-staking, EigenLayer currently leads the way, which may be a way for validators to protect data availability layers, oracles, sorters, consensus networks, and other services on Ethereum. The potential rewards obtained through this process could represent a new source of income for validators in the form of "security as a service." EigenLayer officially launched its first phase on the Ethereum mainnet in June 2023 and will begin onboarding operators for active validation services (AVS) in 2024, after which re-stakers will be able to delegate their staking positions to these operators. We believe these developments are worth watching, particularly to see how much staked ETH will be allocated to additional security measures when EigenLayer is fully open to the public.

Meanwhile, distributed validator technology (DVT) for proof-of-stake networks can offer stakers more design choices regarding the establishment and management of validator operations. DVT distributes the responsibilities (and private keys) of a single validator across multiple node operators, thereby limiting single points of failure. This can reduce the risk of slashing penalties and enhance security, as the compromise of a single node operator does not threaten the entire validator. Additionally, for individual stakers, DVT enables participants to run validators and earn rewards without needing to stake too much (assuming they collaborate with others through platforms like Obol, SSV Network, or Diva Protocol to meet staking thresholds), thereby lowering the barrier to entry and promoting greater decentralization. As a result, we may see DVT enable validators to be geographically dispersed to mitigate availability and slashing risks.