Feb 4, 2022
Web3 and the Crypto economy predictions for for 2022
Web3 and the Crypto economy predictions for for 2022
2021 proved to be a watershed year for crypto, with the price of BTC increasing by about 70% year on year, Defi reaching $150 billion in value locked, and NFTs debuting as a new category. As the new year unfolded, here’s what holds for 2022 and what it means for the crypto industry:
1. ETH scalability will improve, but newer L1 chains will experience significant growth — As we welcome the next hundred million people to crypto and Web3, ETH’s scalability difficulties are likely to increase. With the advent of ETH2 and numerous L2 rollups, Eth scalability is surely bullish. The traction of the Solana, Avalanche and other L1 chains indicates that we will be living in a multi-chain environment in the future. We will also witness the emergence of newer L1 chains that focus on specialized use cases such as gaming or social media.
2. L1-L2 bridge usability will improve significantly — As additional L1 networks gain traction and L2s grow in size, our industry will anxiously seek improvements in the speed and usability of cross-L1 and L1-L2 bridges. We should expect to witness some exciting advances in bridge usability in the following year.
3. Zero-knowledge proof technology will gain traction — In 2021, protocols such as ZkSync and Starknet will begin to gain traction. As L1 links become congested due to increased usage, ZK-rollup technology will pique the interest of both investors and users. New privacy-centric use cases, such as privacy-safe applications and gaming models with built-in privacy, will emerge. This may also pique the interest of more authorities in cryptocurrencies, as KYC/AML may pose a significant challenge in privacy-centric networks.
4. Regulated Defi and the rise of on-chain KYC attestation — Many Defi protocols will adopt regulation and distinct KYC user pools. Decentralized identification and on-chain KYC verification services will be critical in connecting users’ true identities to Defi wallet endpoints. More ENS addresses will be accepted, and new cross-chain name resolving mechanisms will emerge.
Also Read: 4 risks to watch in crypto that everyone must know
5. Institutions will play a significantly larger role in Defi participation — Institutions are growing more interested in Defi participation. For starters, institutions are driven to higher-than-average interest-based returns as compared to traditional financial products. Furthermore, employing Defi to reduce the cost of delivering financial services offers up new potential for institutions. They are, however, nonetheless unwilling to participate in Defi. Institutions want to ensure that they are only doing business with known counterparties who have gone through the KYC procedure. The expansion of regulated Defi and on-chain KYC certification will assist institutions in gaining trust in Defi.
6. Defi insurance will emerge — As Defi spreads, it becomes a target for security breaches. According to the London-based firm Elliptic, the overall value lost by Defi exploits in 2021 will exceed $10 billion. To protect consumers from cyberattacks, trustworthy insurance systems insuring customers’ cash against security breaches will be developed by 2022.
7. Web 2.0 social networks will face stiff competition from NFT-based communities — NFTs will continue to expand regarding how they are regarded. We’ll see creator tokens or fan tokens take a more front-row seat. NFTs will be the next step in evolving users’ digital identities and passports to the metaverse. Users will form local and unique groups based on the type of NFTs they own. User-created metaverses will be the social networks of the future, posing a threat to today’s ad-driven, centralized types of social networks.
8. Brands will get more actively involved in the metaverse and NFTs — Many brands find that NFTs are excellent vehicles for brand promotion and generating brand loyalty. In 2021, Coca-Cola, Campbell’s, Dolce & Gabbana, and Charmin created NFT collectibles. Adidas has collaborated with the Bored Ape Yacht Club on a new metaverse project. More innovative brand marketing strategies utilizing NFTs are likely. Brands will use NFTs and the metaverse as the new Instagram. And, as with Instagram, many firms may begin as NFT natives. Many more celebrities will also join the bandwagon and use NFTs to boost their personal brand.
9. Web2 firms will awaken and attempt to enter Web3 — We’re already seeing this with Facebook’s attempt to rebrand itself as a Web3 company. Other large Web2 corporations are likely to dip their toes into Web3 and metaverse in 2022. However, many of them are likely to build centralized and closed network versions of the metaverse.
10. It’s time for DAO 2.0 — DAOs will become more mature and mainstream. As more people join DAOs, the meaning of employment will shift: never receiving a formal offer letter, accepting tokens instead of or in addition to the fixed salary, and working on many DAO initiatives simultaneously. DAOs will also face additional issues in determining how to conduct M&A, manage wages and benefits, and coordinate activities in larger and larger enterprises. A multitude of tools will arise to assist DAOs in executing efficiently. Many DAOs will also learn how to connect with regular Web2 firms. Regulators are likely to get increasingly interested in DAOs and strive to educate themselves on how DAOs work.
Also Read: Ask the Orb: What is an Initial Dex Offering (IDO)?
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