This article analyzes the key trends in blockchain in 2022, “NFT-Fi” will define 2022, the development of innovative DeFi and staking protocols, the rise of multi-chain interoperability solutions, increased adoption of DeFi on L2…
2021 will be an extraordinary year for blockchain. The market cap of cryptocurrencies exceeds $3 trillion. NFTs are growing in popularity, with a trading volume of over $23 billion. The U.S. launches the first Bitcoin futures ETF. El Salvador uses Bitcoin as legal tender. Ethereum has changed the way it charges. DeFi Total Locked Value (TVL) exceeded $200 billion, a 7x year-on-year increase. Many new chains were also born this year, and the number of blockchain wallet users increased to 70 million.
Cryptocurrencies have recently been used as a regulatory-fighting method of cross-border remittances. Although the crypto market was initially hit hard following the outbreak of the Ukraine war, it has now rebounded to previous levels.Since the beginning of the war, the Ukrainian military has continuously received cryptocurrency donations. And at the Canadian truck driver protests, protesters received cryptocurrency donations after being blocked by traditional crowdfunding channels such as GoFundMe. In the future, people can use cryptocurrencies to donate to charitable causes, which is not possible with traditional financial infrastructure.
The massive increase in cryptocurrency adoption benefits the development of multiple areas of the blockchain ecosystem, including improvements in blockchain infrastructure, development of blockchain applications, adoption of more mainstream and developer-friendly programming languages, and regulation and increased institutional adoption. The report analyzes key trends in blockchain for 2022.
Improvements in the blockchain space
In 2022, with the introduction of the new Layer 1 (L1) blockchain, along with improvements in consensus protocols, transaction costs, transaction times, and token economics, expect further developments in the blockchain space. At the same time, the Layer 2 (L2) solution is also expected to make progress, which will further improve the scalability of the existing L1 solution, pay more attention to the development of bridging solutions, and make it easier for users to make cross-chain transfers. A multi-chain future. The focus on scalability, the ability to process more transactions at a faster rate, will determine who wins the race for L1 and L2 solutions.
1. The rise of multi-chain interoperability solutions
With multiple L1 blockchains and L2 solutions emerging in 2021, the need for cross-chain liquidity on the one hand has become an obvious bottleneck for the widespread adoption of blockchains, but it also provides important development opportunities.
From 2017 to 2021, several L1 and L2 solutions designed to increase transaction speed and reduce costs have been launched, the most well-known blockchains including Polygon, Avalanche, Optimism, Terra and Solana. These blockchains utilize smart contract capabilities, attracting developers to build multiple open source financial applications and games, among others.
In order to take advantage of the unique characteristics of different blockchains, such as transaction costs and latency, and maximize the return on investment, the ability to transfer money across chains becomes critical.
There is currently a trend that decentralized exchange (DEX) aggregators, such as Paraswap, help users get the best price through cross-DEX swaps, and start integrating with cross-chain bridges that not only allow users to exchange transactions on the same blockchain tokens, and also allow users to exchange tokens across chains. For applications that are not deployed on multiple chains, there are cross-chain solutions to these problems, such as Symbiosis Finance, Multichain or Atlasdex. Multichain is a cross-chain token transfer protocol that has attracted over $7.7 billion in total lock-up across several chains, helping to facilitate cross-chain transfers and local exchanges.
Some of the most well-known DeFi applications, such as Aave, Curve, and Uniswap, were originally deployed only on the Ethereum blockchain, but are now deployed on multiple blockchains. This means that users do not have to transfer liquidity between other blockchains in order to interact with a specific application.
2. Improvement of DEX user experience and capital allocation efficiency
This year, the user experience of decentralized exchanges (DEXs) has improved in terms of ease of use and capital efficiency.
The underlying algorithm of DEX will become more complex. Uniswap follows a simple pricing algorithm x * y = k (constant product formula). where x and y are the respective amounts of the two tokens that make up the liquidity pool.While this is easy to understand, it has a relatively large price impact on trades in similar assets, leading to losses.
Many new DEXs have improved algorithms/curves to make them more complex but also more efficient. Some notable examples include:
These algorithms seek to reduce the price impact on transactions, i.e., when a user exchanges one token for another, the value of token X relative to token Y fluctuates less. These new conversion algorithms allow the price of small transactions to remain at a more stable level (around 1), ensuring less price impact, while allowing for the creation of smaller liquidity pools.
Many DEXs have adopted an order book model. Uniswap v3 has transformed the classic automated market maker (AMM) model into one that is closer to an order book, where liquidity providers are able to limit their liquidity to a specific price range. This is called centralized liquidity.
dYdX is a new DEX with an order book model. dYdX’s Total Value Locked (TVL) is rising rapidly ($1.1 billion in November 2021) and volume is already approaching Uniswap’s levels (Uniswap’s daily volume is around $1.3 billion, while dYdX’s is around $950 million). However, Uniswap’s revenue is still much higher than dYdX’s top intraday revenue of $17.7 million, while dYdX’s top intraday revenue was only $6.8 million. Sushiswap plans to launch a similar product in the future, and more DEXs are likely to follow suit.
To improve the user experience, several other improvements have also been made in the DEX space, such as unilateral liquidity deployment, non-permanent loss insurance, batch and trade netting, limit orders, leveraged trading, and adoption of L2 solutions.
3. Increased adoption of DeFi on L2
As of December 31, 2021, the assets of various decentralized applications (dApps) have exceeded $241 billion. Lending protocols such as MakerDAO, Aave, Curve, and Anchor Protocol lead the pack, accounting for about 25% of total value locked (TVL). As of December 31, 2021, decentralized exchanges like Uniswap, PancakeSwap, spookswap, Serum, etc. have also created $13 billion in TVL.
In addition to the rapid growth of the TVL of the L1 blockchain, thanks to the high yield of liquidity mining, the TVL of the L2 solution has also increased significantly since the first half of 2021. The best of them is Polygon, whose TVL has rapidly increased from 100 million The dollar rose to a peak of $8 billion. Arbitrum, Optimism, and more L2 solutions were released in the second half of 2021 and received a lot of attention from the DeFi participant and developer community.
The DeFi space is rapidly becoming crowded as more and more market participants enter the world of digital assets and participate in the development of new applications, resulting in increased transaction costs and reduced transaction speeds. These problems will continue to worsen as the number of participants in the blockchain grows, and the main L1 blockchain will quickly saturate. As a result, gas fees on most L1 blockchains will go up.
High volatility and latency in gas fees will cause transaction slippage, which will also be a perpetual problem in Ethereum, so more and more people are moving large amounts of assets to different layers.
The emergence of L2 solutions and sidechains not only improves transaction speed, but also saves gas fees, and the development of the DeFi field will be stronger. By 2022, more DeFi applications are expected to adopt L2 solutions. The increase in TVL for L2 solutions such as Arbitrum, Optimism, and Boba is strong evidence that the community has started to embrace rollups.
With increased transaction speeds, lower fees, and innovations like Optimism V2, the process of deploying L1 smart contracts to L2 will be simplified, so it is fully believed that in the near future, all major tokens will have L2 versions, and bridges will Make sure they can move between layers efficiently.
In addition to major developments in blockchain infrastructure, several blockchain applications have also seen a huge boom in 2021 and will continue to grow in 2022. These applications are described in detail below.
3. “NFT-Fi” will define 2022
The transaction volume of NFTs on multiple platforms has exceeded $23 billion, with OpenSea taking the lead. The transaction volume of NFTs in the third quarter of 2021 exceeded $10 billion, accounting for almost half of the total NFT transaction volume in 2021.
Lending/Collateral NFT technology will dominate the space and will compete with the token swap market. In 2021, NFTs entered the public eye, had a major impact on the art world, and gained mainstream recognition. By 2022, NFTs are likely to continue this trend. Companies such as Swap.Kiwi allow direct exchange of NFTs with other parties in escrow accounts.NFTs can not only tokenize assets, but also tokenize positions. For example, large institutions can create tokens from their existing positions in liquidity pools, swap them without first closing the positions, and then trade those assets. Additionally, companies such as Taker Protocol are allowing users to borrow money using NFTs as collateral, enabling NFT holders to access liquidity.
In 2021, 75% of NFT transactions will take place on Ethereum. By 2022, NFT transactions may move to other L1 and L2 chains, including Ronin, Flow, Immutable, and Solana. Multi-chain solutions that allow NFTs to be transferred across chains will redefine the field. Since Solana and its NFT marketplace launched in the second half of 2021, Solana’s total NFT transaction volume has exceeded $1.3 billion, with SolanArt leading the way. At the same time, Polygon has completed more than $480 million in NFT transactions, of which $413 million came from OpenSea, mainly thanks to the ability of users to issue NFTs directly on Polygon through the OpenSea platform.
The application of NFTs in games will be another focus. The trading of game items will spawn a variety of business models, such as on-chain analytics that emphasize item performance, scarcity, and utility.
Some examples of NFTs applied to DeFi include:
- Liquidity provider positions in Uniswap V3 are represented by NFTs because they are not fungible.
- The NFT platform Ubisoft Quartz allows people to use cryptocurrencies to buy scarce digital goods.
- UC Berkeley auctions NFTs for two Nobel Prize-winning inventions: CRISPR-Cas9 gene editing and cancer immunotherapy
- NFTs as tickets to participate in exclusive events
- Artists sell music streaming rights to fans and allow fans to share streaming rights
5. Increased focus on safety
A total of $14 billion in cryptocurrency has been stolen in 2021, another record high. In total, $2.2 billion was stolen from DeFi platforms. This number is worrisome and could deter institutions from participating in on-chain protocols.
Centralized marketplaces Crypto.com and the Wormhole protocol have both become the latest targets for hackers.According to Crypto.com, on January 17, 2022, about $30 million worth of Bitcoin and Ethereum were stolen, and the accounts of about 500 users were hacked. The Wormhole protocol, which allows users to transfer assets between the Ethereum and Solana blockchains, was hacked on February 2, 2022, with a loss of approximately $320 million. These hacks show that digital asset platforms still have a lot of work to do before they can be more widely adopted.
Due to the open source nature of crypto projects, white hat hackers will play an important role in securing the ecosystem.At the ETHDenver 2022 conference, white hat hacker Jay Freeman discovered a critical vulnerability in the L2 solution Optimism code, and he emphasized the importance of bug bounties for incentivizing white hat hackers and suppressing malicious hackers, which is beneficial to improve the security of the entire system . White hat hackers are actively involved in finding vulnerabilities, contacting teams publicly, or attacking platforms and returning funds. In the $600 million hack of the Poly Network in August 2021, the white hat hacker returned the funds to the project team and subsequently accepted a job offer from the project.
With the popularity of cryptocurrencies, scams will be inevitable. For example, some Boring Ape (BAYC) holders were tricked into selling their BAYC holdings at low prices, so it has become critical to educate users on cybersecurity and blockchain operational security.
As more funds are deployed to DeFi protocols, security audits must be taken seriously. As more DeFi innovation occurs, more vulnerabilities will be discovered, which will in turn drive innovation in security. On-chain security will attract greater attention as regulatory requirements tighten.
6. Development of innovative DeFi and staking protocols
In 2021, Uniswap V3 market makers earned $200 million in commissions and suffered a temporary loss of $260 million, including a net loss of $60 million, or 30% of commission income. Finding solutions for large temporary losses (losses due to the volatility of tokens) will be a focus in 2022. Managing LP positions in Univ3 is much more complex than in UniV2, and the algorithm will adjust liquidity ranges based on different data points on and off-chain. Demand for precise indexing protocols will also increase. Protocols like Chainlink will also be used more and face more competition. To reduce temporary losses, more solutions will be established.
Although in 2021, NFTs and the Metaverse are getting a lot of attention. By 2022, there will be a renewed interest in new protocols in the DeFi space. More traditional financial applications such as interest rate swaps, futures, hedge funds and insurance will be launched on the blockchain. Brand new protocols will also emerge.
Many new projects will take inspiration from Curve’s token economy and the way it has helped protocols like Convex and Votium evolve. Curve’s token economy allows users to vote on which pool gets CRV rewards (interest).
Based on current usage trends, the Ethereum mainnet will become more expensive, which will further increase the threshold for using the mainnet, while L2 is more beneficial for newbies. Ultimately, only whales and professional traders will be able to use the Ethereum mainnet. Even the new DeFi protocols are more suitable for professionals. For example, centralized liquidity is really good for market makers, but not so good for retail traders, whose profits can plummet due to additional transaction fees.
New Liquid Staking Protocols will be launched, allowing people to stake tokens across different blockchains and projects, and then use derivatives of those staked tokens (called Liquid Staking Tokens) to participate in DeFi. These liquid collateral tokens will be backed by tokens currently held and locked.
For example, ETH-merge will use a proof-of-stake (PoS) method to verify Ethereum transactions. People will start using liquid staking tokens such as stETH to continuously earn interest, and the current annualized rate of return is around 4.4%.
7. The rise of DAOs
A Decentralized Autonomous Organization (DAO) is similar to a traditional organization, except that the DAO’s governance rules are written and enforced by smart contracts, and all DAO transactions are publicly visible to anyone on the blockchain. DAOs have garnered enormous attention, financing the purchase of high-ticket items such as football and golf clubs, and even one of the 13 originals of the U.S. Constitution.
By 2022, DAOs will prove that more business models can be built collectively, such as TreasureDAO. This is a successful NFT marketplace on Arbitrum focused on equal distribution of proceeds and community ownership. With BitDAO holding over $2.5 billion in liquidity in the new year, DAO treasury management will become more important than ever. BitDAO becomes a Master DAO, building communities to buy minority or majority stakes in multiple DAOs around the world.BitDAO cooperates with world-renowned universities to form eduDAO, which is used to promote research, issue project grants and develop new products. The DAO will also be used more broadly for political donations, with UkraineDAO, which aims to support Ukraine, having received significant donations, while the Assange DAO, which aims to fund Julian Assange’s legal expenses, has raised $7.5 million.
At the same time, more tech companies will turn to decentralized organizations, including not only small companies but also large ones. Companies such as Shapeshift have successfully transitioned from a centralized to a decentralized entity and tokenized their previous shareholder equity in an airdrop to over 1 million Shapeshift users, the largest airdrop in cryptocurrency history.
DAOs provide protocols and platforms with an opportunity to quickly raise funds and opportunities, while allowing more community members to participate in the decision-making process. This may prompt new and existing protocols to conduct ICOs, such as L2s (like Boba) and DEXs (like Sushiswap and Uniswap) launching Boba, SUSHI and UNI tokens.
While DAOs that allow people to invest centrally are growing in popularity, they are not new. “The DAO”, one of the first DAOs to let users pool their funds to invest, launched in 2016 and has raised $150 million from around 11,000 investors, but due to a bug in a smart contract, The DAO DAO funds were stolen, and this incident led to the hard fork of Ethereum in 2017.
A common problem with DAOs is the slow decision-making process and poor task management caused by the size of the community. Service tools around DAO governance will become increasingly important and a key factor in preventing mismanagement of capital by the DAO community.
8. Massive Investment and Metaverse of Decentralized Gaming/P2E Economy
In 2021, there are three major themes in the game field, namely “Earning While Playing” (P2E), game guilds and the token economy of chain game Axie Infinity. The blockchain game blockchain Flow has been around for a while, but Axie Infinity recently created its own ecosystem blockchain for all upcoming games.
Developers choose to develop their games on the blockchain, providing players with low-cost transactions, fast execution and settlement, which can attract a large number of users. Currently, only certain elements are deployed directly on-chain, such as tokens and NFTs. Infrastructure companies provide support for these functions, such as Stardust outsourcing NFT management to users. By 2022, it is likely that more and more traditional games such as chess and backgammon will move to a P2E model and be fully deployed on-chain, including computation and graphics.
In 2022, more games will be deployed directly on the chain, providing permanent storage and supporting NFTs of different levels to be traded on the game market. Animoca Brands is a leader in blockchain gaming, they currently have 8 blockchain-based games, including Virtual World, Sandbox (which has received significant investment from companies such as SoftBank and has partnered with brands such as Adidas and Atari) cooperate). Animoca Brands has also partnered with Formula 1 and well-known football clubs such as Bayern Munich and Manchester City to launch a collection of NFT collectibles. The future will continue to see the rise of blockchain entertainment studios dedicated to gaming and NFT projects.
In addition, in 2022, more game developers from traditional game companies (such as EA, Activision Blizzard, etc.) will enter the blockchain game field. Still, many P2E games in development will have to make trade-offs between time-to-market and game quality.
2022 will show which blockchains are best for game development. Flow has proven suitable for deploying games, however other blockchains such as Solana (low transaction cost and high throughput) still have a lot of flexibility.
Because blockchain-based games require players to own the game’s native NFTs and then allow players to earn tokens while playing the game, this also leads to a situation where some players don’t have enough funds to buy the game’s native NFTs. This gave rise to scholarship programs, where game NFT owners lend them to players, known as “scholars.”These scholars then invest time in the game and earn rewards. The rewards will then be distributed between scholars and game NFT owners. This also gave birth to the game guild. A prime example is the Yield Gaming Guild, founded in 2018 with 100,000 members, 18,500 Yield Guild badge holders, 32 scholarship managers, and over 10,000 Axie Infinity Scholars across Southeast Asia, India, Latin America, Brazil and Europe.
Guild managers need to ensure a stable number of members in order for the guild to earn more tokens. However, for NFTs whose value changes rapidly, money management will be very difficult. Software management systems around guild management will be a new topic in 2022.
At the same time, how to develop a blockchain game that can attract players’ interest for a long time is also worthy of attention. Axie Infinity’s daily revenue rose from $10,000 in early March 2021 to a peak of $17.5 million, but revenue has since been declining, highlighting how quickly interest in the blockchain ecosystem has shifted.
The rapid rise and fall of revenue can be attributed in part to the shift in player interest and the release of new games on the blockchain. A similar situation will continue in 2022, so the focus will turn to how to make a blockchain-native game with a P2E mechanism to attract long-term player interest.
In addition, as more funds will be invested in P2E projects, many venture capital funds will be born that focus on investing in blockchain games. For example, Spartan raised $50 million for its Metaverse and Gaming Fund. Recently, FTX announced the establishment of a fund worth 2 billion US dollars, focusing on investment and mergers and acquisitions in the game field, led by Amy Wu.
In addition to huge investments in gaming, 2021 will see a significant increase in the focus on the Metaverse. Through 2022, this trend will continue. Events that are live-streamed on the Metaverse or virtual e-commerce platforms will provide attendees with event merchandise, such as the Toronto Fashion Show in Decentraland. More NFT series collectibles will be released in the Metaverse, such as the Australian Open NFT series, and the Dolce & Gabbana series will also be released in the Metaverse. In terms of virtual experiences, more gaming, gaming and banking experiences will also be present in the Metaverse. Banks and insurance companies are also creating various virtual services in the Metaverse. JPMorgan Chase has opened a virtual lounge in Decentraland, where integrated financial services firm IMA Financial plans to sell insurance.Sweden’s Mecro Bank has announced that it is looking into delivering a banking experience in the Metaverse.
9. Storage will continue to be dominated by centralized companies
From a financial perspective, the cost of data storage has been decreasing over the past few decades, especially decentralized storage. Currently, more than 80 ZB of data is stored globally, which is equivalent to about 2.4 trillion 4K movies or 4.8 trillion video games. If you assume Amazon can store all this data and charge $0.0125/GB per month. That means Amazon could potentially make $100 billion a month just by storing this data. This data is owned by individuals, companies and institutions. The storage business is owned by big tech companies and is a major source of revenue for them, especially Amazon (AWS revenue accounts for 14.5% of its total). Decentralized storage will continue to drive down the profit margins of big tech companies and allow people around the world to regain control over their data through solutions like Slik Photos.
From a privacy perspective, decentralized storage allows people to store data on a distributed network of nodes rather than a central server. In a distributed network of nodes, people’s files are stored on multiple devices. Stored content is only available to the uploader and the users they share with, similar to Google Drive.
Some well-known decentralized storage protocols include Arweave, Filecoin, and Functionland. These are open-source, community-governed decentralized storage solutions that allow users to store applications and files on the blockchain.There are also companies that do not have blockchain tokens but still use Web3 applications, such as Filebase, which stores user data across multiple decentralized storage networks in S3-compatible encryption. More business models around storage, indexing, and identity are expected to be developed. These will be prerequisites for any blockchain project and help differentiate a Web3 project from a blockchain or cryptocurrency project.
10. Incentives for blockchain developers
In 2021, the flow of talent from Web2 to Web3 is at an all-time high. In 2022, how to retain talent and provide developers with clear long-term and short-term profitability goals will be the theme.
Good blockchain developers keep jumping between projects, which leads to a lot of movement. The 2021 Electric Capital developer report shows that only 25-30% of blockchain developers are still working part-time or full-time on the same project after their third year. Blockchains like Solana, NEAR, and Polkadot are all written using the popular programming language Rust combined with C++. Among developers, the Rust programming language is more popular than Solidity (the language in which Ethereum is written). This is mainly because Rust has existed for longer and has a wider range of applications, and Solana has provided high rewards to attract developers. Since Solana launched, it has provided substantial funding to support projects built on it. Solana and NEAR have the fastest developer growth of any blockchain in 2021, with a more than 4x increase in full-time developers, but they only have a small percentage of Web3 developers.Solana, NEAR, and Polkadot have a combined total of 2,700 developers.
How to retain talent in the long term will attract more attention. While issuing tokens can reduce developer churn, rapid token launches and falling token prices may lead to faster brain drain. Hacking will also accelerate the process.
As more and more people embrace blockchain and realize its use cases, there will be an influx of developers flocking to Web3. Soon, blockchain will evolve from being a buzzword and a product selling point to being fully integrated with the product.
Rust will continue to be the mainstream programming language for new projects outside the Ethereum ecosystem. Rust is a systems programming language with safety and speed as the main goals. Rust has been voted the “most popular language” for the sixth year in a row, according to the Stack Overflow Developer Survey, showing growing developer support for Rust. Developers looking to learn a new language should seriously consider Rust as multiple new blockchains adopt Rust as a programming language, such as Solana (launched in 2021), Polkadot (launched in 2020, but parachains launched in 2021) and NEAR (founded in 2017 but launched in 2020). By 2022, there may be more new L1 blockchains adopting Rust.
11. Growing calls for regulation
To foster institutional adoption, more on-chain governance, legal technology frameworks, and identity innovation are needed. The government’s focus will shift to the monitoring of on-chain activity, such as KYC reviews of decentralized applications, allowing regulators to track on-chain certified identities. One of the services that helps users create digital identities is the Ethereum Name Service (ENS), which provides names for wallets and websites. It allows users to have their own username and profile and use it on multiple services on the Ethereum blockchain. Instead of long wallet addresses, users can receive cryptocurrencies with a custom wallet name.
Additionally, legal tech innovation requires collaboration with government and legal teams, which can slow time-to-market for products. By addressing legal issues, implementing security measures, and ensuring that transactions are not affected in the event of a failure on the chain, it is beneficial to promote the increase of on-chain liquidity. There are already some protocols, such as the Astra protocol, that equip smart contracts with a decentralized compliance layer for dispute resolution and KYC review needs. Blockchain is expected to integrate third-party applications into smart contracts, making identity verification possible. There are already on-chain applications like Polygon and Terra that use digital authentication applications such as Synaps to connect users’ verified IDs to their wallets and store them in a decentralized manner.
On-chain yields are high, but so are costs. As security and insurance coverage expands, costs for institutional investors may also increase.
Regulation of privacy protocols may not materialize in 2022. However, money laundering is a growing concern that needs to be addressed before institutions can deploy capital on-chain.
As the adoption of cryptocurrencies increases, more and more countries are introducing regulations targeting this area. On the one hand, countries such as the UAE are looking to attract cryptocurrency businesses by creating virtual asset zones, including digital assets, products, operators and exchanges. In September 2021, the UAE Securities and Commodities Authority and the Dubai World Trade Centre Authority (DWTCA) signed a framework agreement allowing DWTCA to license and authorise financial activities related to crypto assets. In October 2021, DIFC, another free trade zone in Dubai, released the first part of the digital token regulatory framework, where non-citizens and non-residents can easily set up sole proprietorship companies in the DIFC and obtain visas and trade licenses. Dubai is home to many crypto companies, and exchanges BitOasis and DWTCA recently signed a memorandum of cooperation with Binance to help build their regulatory framework.
However, there are also some countries and institutions that are taking steps to crack down on cryptocurrencies. From April 1, 2022, India will impose a 30% tax on all virtual digital assets without any exemptions, which will make cryptocurrency income taxed the same as lottery and gambling income. Meanwhile, El Salvador’s decision to accept cryptocurrencies as legal tender was opposed by the International Monetary Fund (IMF), with major rating agency Fitch Ratings downgrading the country’s credit rating. The U.S. and U.K. have the same taxation regime for crypto gains as they do for stock gains, while in Germany, cryptocurrency held for more than a year can be sold tax-free regardless of profit.
U.S. President Joe Biden is expected to issue an executive order directing government agencies at all levels to study cryptocurrencies and central bank digital currencies (CBDCs) and propose a digital asset regulation strategy.
Increased regulation is beneficial to the crypto ecosystem, as measures to protect consumers, investors, and businesses can drive adoption of the crypto ecosystem. Additionally, establishing global standards could remove some of the friction of buying and selling cryptocurrencies. However, regulation can also have a negative impact on cryptocurrency trading.According to government policies, some countries will become cryptocurrency paradises in the future, attracting a lot of talent and capital.
12. Institutional adoption increases
Friendly regulation could provide clearer guidance for institutions developing crypto products. Coinbase abandoned its USDC lending program after being threatened with prosecution by regulators, but such plans may be back on the agenda once regulations are clarified.
There are already crypto futures ETFs on the market, and crypto spot ETFs may be introduced in 2022. The U.S. Securities and Exchange Commission (SEC) is looking into launching a crypto spot ETF on Arca Exchange, a subsidiary of the New York Stock Exchange. Major investors such as Charles Schwab and Grayscale Investments are also discussing launching cryptocurrency ETFs in 2022.
Increased cryptocurrency adoption has also sparked renewed interest in central bank digital currencies (CBDCs), but most CBDCs are still at the research stage, with countries such as the UK still evaluating the merits of adopting CBDCs.Therefore, it is unlikely that a mainstream CBDC will be launched before 2025-2026. China plans to increase public adoption of CBDC this year, and this helps reveal the advantages and challenges associated with CBDC adoption.
As blockchain research matures, blockchain is expected to be applied to other government functions. For example, the Estonian government has used blockchain technology in the tax system as well as in the business registration system, and has used blockchain technology to protect residents’ electronic health records. UK hospitals are using blockchain to track the storage and supply of Covid-19 vaccines.
Regulatory clarity will also incentivize financial institutions to offer crypto products. It is expected that more and more financial institutions will use cryptocurrency staking as a relatively safe way to make money. Companies such as Foundry Digital and Sygnum already offer pledged investing services to their clients.
13. Integration of stablecoins
2021 is the year of algorithmic stablecoin projects that monitor supply and demand through algorithms, thereby keeping the price of tokens constant. However, most projects fail. At present, more algorithmic stablecoin projects try to find an optimal balance between mortgage and algorithm.
Due to market volatility, UST (Terra stablecoin) has seen two de-pegging in 2021. Ultimately, the Terra team gained enough liquidity by connecting to blockchains like Solana and Cosmos.
In 2022, more collateralized stablecoins like DAI and MIM will appear. They will come with additional features like free lending. With more interoperability and interconnectivity between different blockchains, some stablecoins may become obsolete.
China’s digital yuan is being adopted by tech giants such as Tencent and Alibaba, and has fueled the growth of financial conglomerates. WeChat is also adopting the digital yuan and offering client-side access. The question is whether and how the digital yuan will integrate with decentralized applications.
Stablecoins could make cryptocurrencies a mainstream medium for everyday transactions and have applications in other areas such as the exchange of goods and services, the issuance of decentralized insurance solutions, derivatives contracts, and consumer lending. In order to function better, stablecoins must maintain their stability, and the volatility of stablecoins has also declined significantly in recent years.
To sum up, the Web 3.0 blockchain infrastructure is the key to sustainable growth of on-chain innovation. 2021 has sparked the first debate on the difference between Web3 projects and blockchain projects/programs/protocols. A blockchain company should interact with at least one blockchain to be considered a blockchain-native company. However, a Web3 project requires a fully decentralized technical solution as part of the infrastructure, including community-governed open source projects and decentralized storage, identity and privacy solutions. The development work around the blockchain infrastructure is currently underway, and many business models originate from it, and the global blockchain infrastructure is expected to see significant growth in the future.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/delta-fund-13-tech-trends-for-the-blockchain-industry-in-2022/
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