2021 will be a meaningful year for decentralized applications (dApps), the blockchain industry and even the web3 industry ecosystem. The digitization of our lives has also enabled dApps to grow their communities, attract active users, and generate higher revenue. Strong momentum in 2021 sets the stage for a more transformative 2022, which will also bring more infrastructure, new financial (GameFi) and governance (DAO) mechanisms, and security for authentication tools (wallets) s concern. Therefore, DAOrayaki compiled Kyle Ellicott’s article on “Review of the Development Status and Trends of Decentralized Applications (dApps)” to jointly understand the overall development status of the dApp industry.
Industry changes since the fourth quarter of 2018
The current dApps landscape:
There are currently more than 440 companies focused on developing the infrastructure layer of industry and Web 3 applications. This is a 33% increase from the fourth quarter of 2020. On the VC side, over $5.5 billion was invested in dApps infrastructure layer development (of which 15 rounds were over $100 million).
Q4 2021 Decentralized Application (dApps) Layout by Kyle Ellicott
VC and funding:
In the second half of the year, capital deployment across the field continued to grow, with more than 62 public investments in the third and fourth quarters, with more than $100 million raised in ConsenSys (November), Alchemy (October), DeSo (September) , Blockdaemon (September) and Dapper Labs (September).
The VC fund rankings also changed, with Coinbase Ventures at the top, followed by Digital Currency Group (DCG), Andreessen Horowitz (a16z), Pantera Capital and CoinFund.
There are also some “newcomers”, such as Variant Fund ( $110M, Fund II ), Paradigm ( $2.5B Fund II ), Borderless Capital ( $500M Fund II ), Chapter One ( $40M ), as well as from Solana, Polygon and Oasis Protocol’s foundation, which added another $40 million this week, bringing the total size of the fund to $200 million.
In addition, blockchain investments totaled more than $30 billion ($15.5 billion in the first half of the year alone), accounting for about 4.85% of the total $621 billion in venture capital for the year.
Source: Pitchbook & Bloomberg
Building dApps is different from what was done in the previous web2 and mobile eras. For ease of understanding, I’ve broken this layout diagram into sections that, as you read, will help you understand what each building block (or layer) does.
- L 0+1/Infrastructure (blockchain, protocol, node+)
- L2/Extensions (L2s, Rollup, Store, Query, etc.)
- L 3/Contracts (smart contracts, oracles, authentication, etc.)
- L 4/Application (API, wallet, DNS, etc.)
In December 2021, I mentioned that the following key directions were already “on the verge of movement”, and then in January 2022 they made a lot of progress.
- 3 / DNS (.ENS .BTC .SOL)
- 5/Contract language – Solidity vs. Clarity
- 6/Wallet (Authentication)
protocol. As more and more protocols are launched and developed from testnet to mainnet, the themes also become diverse. An example is the CityCoins protocol, where developers can create “CityCoins” (such as Miami Coin and NYC Coin) that communities can use to govern better cities, while providing crypto rewards to individual contributors and city governments, all powered by Stacks provide support.
Rollups. Both Optimistic and Zero-Knowledge will be important directions in 2022 as dApps have the need to remain competitive and improve security. For example, ConsenSys and Mastercard (Mastercard) teamed up to launch ConsenSys Rollups, and Polygon, one of the layer-2 solutions, acquired Mir (now Polygon Zero) for $400 million in December.
DNS. The developments between Q4 2021 and January 2022 show us that domain names (.ETH .BTC .SOL .crypto etc.) can be used not only for websites or wallet addresses, but also as a means of identification and verification. For example, Unstoppable Domains introduced the option to “Log in with Unstoppable” which both uses NFTs to provide single sign-on services for ETH and Polygon. By allowing users to log in using NFTs (such as “yourname.crypto”), users have the ability to control what data can be accessed Permissions to share or show to applications, which is a step closer to “the user truly owns the Internet”. Expected in the next year, around identity-based NFTs (LinksDAO, Poolsuite, RAD Live) and domain names (.ETH .BTC .SOL .crypto, etc.) will be more widely used, which also means that the convenience of access is greatly increased.
Revisiting the “twist”:
In my last summary of dApps covering the first half of 2021, I referred to what happened in the industry as a “turning point”, the time has come to the present, and the changes in the industry prompted me to decide to revisit some of the things I presented earlier, and reflect on What’s happening in the second half of 2021 and the outlook for 2022:
- Protocol developers and maintainers cooperate with traditional venture capital with the goal of developing and improving the industry ecology. [Looking back at Q4, we saw more and larger funds of this form, like Hedera’s $5 billion grant, Oasis’ $200 million, NEAR Protocol’s $150 million (Jan 22) + $800 million funding, $21 million from Polygon+ AU21, $300 million from Harmony, and more. I expect this trend to expand further in 2022, with the network becoming a “battleground” for developers and new dApps as more developers continue to enter the industry. In theory, this would also speed up exchanges and cooperation between different networks, as developers want to interact with cross-chain communities. ]
- VCs added “dApps” to their investment research report and launched new protocol-specific funds. [In Q2, dApps were featured in many investor research reports, and in H2, we saw the trend shift towards broader specific keywords such as “Web3,” “Infrastructure Tools,” and “Economy of Ownership.” Play-To-Earn, “GameFi,” “Blockchain Games,” “DAO Stacks,” and “NFTs,” etc.]
- DAO (Decentralized Autonomous Organization) is a company-like organizational structure with great potential. [We’re going to see this field grow extremely fast, like PleasrDAO buying Wu-Tang Clan’s album for $4M, ConstitutionDAO raising over $40M in a week trying to buy a US Constitution, but also negatives like SushiSwap case. But I and many still believe that 2022 will be a big year for DAOs. ]
- We are seeing a comeback in investing through SAFT (Simple Agreement for Future Tokens), and although not the same as the 2017-2019 boom, there is no denying that traditional venture capital and other institutional investors are participating at scale. [In a nutshell, investment across the field is now over $30 billion. If you and your company haven’t started thinking about these new funding methods, I suggest you do.
- Exchanges expand NFTs into alternative asset classes. (such as Binance, Korbit (Korea), Wazirx (India), FTX, etc.)
- A cross-chain bridge that allows exchanges between blockchains that have not yet interoperated with each other. [I talked about this above, and expect to see more mature cross-chain bridge offerings in 2022. ]
- Consensus mechanisms extend from Proof of Work (PoW) and Proof of Stake (PoS) to Proof of Transfer (PoX), Proof of Protocol Authority (PoA), and more.
- Cloud computing companies are in acquisition mode because they cannot keep pace with the development of decentralized infrastructure. [This space is likely to start heating up in 2022 and take shape in early 2023, mainly due to concerns over the December outage of dYdX on AWS. ]
- More and more companies, governments and small businesses are adding digital assets to their balance sheets.
Business models like “Play-To-Earn” (P2E) will be widely promoted. [Besides 2022 possibly being a golden year for DAOs, I expect P2E and blockchain gaming to be the most prominent themes this year, behind which lies their determination to bring the next billion people into the crypto+web3 world. So, I expect to see more “XYZ-To-Earn” models in many industries. ]
If you’re a developer thinking about where to start building your dApp and which public chain to choose, here’s a snapshot of developer activity in 2021 to help, courtesy of the Electric Capital team.
Source: Electric Capita 2021 Developer Report
All in all, the year leading up to 2022 will be an exciting one. If you are interested in building dApps, web3 infrastructure on the above topics, or want to discuss more about the future of decentralization, please contact us.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/decentralized-application-dapps-development-status-and-trend-review/
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