Module 11: Sector and Narrative Analysis
Prediction Markets, DePIN, Privacy, and More
Chapter 11 of 13 · about 5 minutes
11.1 The long tail
"There are more crypto sectors than any one person can follow," said Hash. "Some are niche today and could be big tomorrow. Some will disappear. This chapter is a quick tour of several that keep coming up, using the same questions every time."
Those questions, from Chapter 2: Is there real usage? Does it need crypto? Does the token capture value? Is it priced in?
11.2 Prediction markets
Prediction markets let users trade on the outcomes of real-world events: elections, sports, economic data, and more. Each outcome has a price between $0 and $1 (or 0% and 100%), which reflects the market's estimate of its probability.
Example. A contract pays $1 if a central bank cuts rates at its next meeting (Module 10, Chapter 2).
| Value | |
|---|---|
| Current price | $0.70 |
| Implied probability | ~70% |
| If you buy at $0.70 and the cut happens | You receive $1: profit $0.30 |
| If the cut doesn't happen | You receive $0: loss $0.70 |
Crypto-based prediction markets saw large trading volumes around the 2024 US elections, and attracted attention as forecasting tools, sometimes moving faster than polls.
| Strengths | Challenges |
|---|---|
| Real usage, especially around major events | Regulation varies widely; some countries prohibit them |
| Clear role for stablecoins and on-chain settlement | Activity can be event-driven and seasonal |
| Useful information for the wider world | Resolving disputed outcomes relies on oracles and rules (Module 3, Chapter 12) |
| Value capture by tokens depends on each platform's design |
11.3 DePIN
DePIN stands for decentralised physical infrastructure networks: projects that use token incentives to encourage people to build and operate real-world infrastructure.
| Example category | What participants provide |
|---|---|
| Wireless networks | Hotspots and coverage |
| Storage | Spare hard drive space |
| Computing | Spare GPU or CPU capacity (Chapter 8) |
| Mapping and sensors | Data from cameras, sensors, or vehicles |
| Energy | Data or capacity from energy devices |
The idea: instead of one company spending billions to build a network, many individuals contribute hardware and are rewarded with tokens.
| Strengths | Challenges |
|---|---|
| Can bootstrap networks quickly | Token rewards may fund supply that nobody uses |
| Uses idle resources | Real customer demand must eventually replace incentives |
| Real-world utility if demand appears | Competing with established infrastructure providers |
The key metric is demand-side revenue: are real customers paying for the service, or is activity mostly participants earning tokens?
11.4 Privacy
As Module 1, Chapter 15 explained, most public blockchains are pseudonymous but traceable. Privacy projects aim to protect transaction details, using techniques such as privacy-focused blockchains, mixing tools, and zero-knowledge cryptography.
| Strengths | Challenges |
|---|---|
| Financial privacy is a legitimate need for individuals and businesses | Regulators often view privacy tools as money laundering risks |
| Zero-knowledge technology has broad uses beyond privacy | Some exchanges have delisted privacy-focused tokens |
| Businesses need confidentiality for on-chain activity | Sanctions and legal actions have targeted some privacy tools (Module 3, Chapter 13) |
The legal picture can shift: the US sanctions on Tornado Cash, imposed in 2022, were lifted in March 2025 after a court ruling (Module 3, Chapter 13). The privacy sector sits at the centre of an important tension: users' right to privacy versus regulators' concern about illicit use.
11.5 The Bitcoin ecosystem
Beyond being money, Bitcoin has attracted a growing set of projects:
| Area | What it includes |
|---|---|
| Layer 2s and sidechains | Faster or more programmable systems built around Bitcoin, including Lightning (Module 3, Chapter 9) |
| Bitcoin DeFi | Using BTC in lending, staking-like systems, and liquidity, often through wrapped BTC (Module 1, Chapter 5) |
| Digital artefacts on Bitcoin | Data inscribed directly onto Bitcoin, which drove periods of high fees |
| Bitcoin staking for other networks | Using BTC to help secure other blockchains |
The narrative: Bitcoin holds the most value in crypto, but much of it sits idle. Putting it to work could unlock large markets. The key risks: wrapped and bridged BTC introduces custody and smart contract risks (Module 3, Chapter 10), and some Bitcoin users strongly oppose changes they see as distracting from Bitcoin's role as money.
11.6 Identity and other infrastructure
Other areas include on-chain identity (verifying people or credentials without revealing personal data), domain names for wallet addresses, oracles (Module 3, Chapter 12), and wallet and account infrastructure (Module 2, Chapter 13). These tend to be essential but slow to generate token value, because they're used by other applications rather than directly by most users.
11.7 A quick comparison
| Sector | Real usage today | Needs crypto? | Main investment question |
|---|---|---|---|
| Prediction markets | Strong around events | Often, for global access and settlement | Does the token capture platform fees? Will regulation allow growth? |
| DePIN | Mixed | For incentives and payments | Is demand-side revenue growing? |
| Privacy | Niche but persistent | Yes, for its core purpose | Can it survive regulatory pressure? |
| Bitcoin ecosystem | Growing | Yes | Are bridges and wrapped assets safe enough? |
| Identity and infrastructure | Growing slowly | Often | Will usage translate into token value? |
11.8 Try it yourself
Choose two sectors from this chapter. For each, find one leading project and answer the four questions from section 11.1. Then find the sector's total activity or revenue over the past year. Is it growing, flat, or shrinking?
Key takeaways from this chapter
- Prediction markets price real-world event outcomes as probabilities and saw large activity around the 2024 US elections, but face regulatory limits.
- DePIN uses tokens to incentivise physical infrastructure; demand-side revenue is the key test.
- Privacy projects address a legitimate need but face significant regulatory pressure.
- The Bitcoin ecosystem aims to put idle BTC to work, with custody and bridging risks.
- Identity and infrastructure are essential but often slow to translate usage into token value.
- Apply the same four questions to every sector: usage, need for crypto, value capture, and valuation.