Last year, the market cap of cryptocurrencies hit $3 trillion for the first time, and at the beginning of 2021, it was not even $800 billion. DeFi now has $100 billion in total value locked (TVL) on Ethereum alone. But NFTs have been the most surprising, others have been in areas like the Metaverse and GameFi. Who can say that he foresaw these developments?Looking to the future is notoriously difficult. However, we dare to make predictions for 2022, and it will be exciting to see if those predictions come true.
BTC price hits $100,000, increasing breadth and depth of crypto asset market
Rising inflation has made scarce assets such as BTC increasingly attractive. Not only is BTC the oldest, most decentralized, and best-known crypto-asset – a distinguishing feature of it compared to other crypto-assets is its limited supply of only 21 million. Against the backdrop of its institutional adoption and the greater demand that comes with it, it is quite possible that the BTC price will rise above $100,000 this year.
The entire cryptoasset market will also grow. The U.S. dollar price of the 20 largest cryptocurrencies by market capitalization listed on CoinMarketCap has increased by triple digits since the beginning of 2021. Notably, many native cryptocurrencies from alternative layer 1 blockchain protocols (Alt-L1s) that are traded as potential ETH killers (e.g. Solana, Binance Smart Chain, Cardano, Polkadot, Avalanche) are in the top 20 column. Of course, investing in the crypto asset market is riskier than traditional investment opportunities, in part because of its greater price volatility. Still, it is relatively fair to compare the price performance of cryptocurrencies with those of well-known market indices. For example, the MSCI World Index is only 17% higher than at the start of 2021, while gold price trends are currently negative. In addition, the increasing number of wallet addresses, as measured, for example, by the monthly active users of the MetaMask wallet (currently 10 million monthly active users), may indicate that the demand for cryptocurrency investment opportunities will continue. DeFi achieves double-digit interest rates by providing liquidity, lending and staking, while banks in developed countries offer savings rates below 2% quite often.
Ethereum gets an upgrade, remains the dominant smart contract platform
Ethereum is expected to complete the transition to a POS mechanism this summer. Financial institutions from the TradFi space are also likely to enter the staking business. Staking rewards thus serve as a sort of “golden rate” for the crypto asset market, as one can rarely invest in this market in a more risk-free way than staking ETH. Here, people can choose to build their own staking infrastructure, or turn to staking services such as Coinbase or Blockdaemon. In terms of price development, ETH, like other Alt-L1 tokens, continues to have great potential. Although the share of protocols and tokens mapped to Ethereum-based DeFi and NFTs is decreasing, Ethereum still carries the largest transaction volume.
Cryptocurrency investments are more sustainable
Issuers of ETPs, cryptocurrency exchanges, mining companies and financial institutions are all interested in offering green products and services to their clients. So far, many potential cryptocurrency investors have been reluctant to invest in Bitcoin because of the relatively high carbon footprint of Bitcoin mining. Often, interested companies must also comply with ESG regulations.
However, some models can calculate the climate compensation required for BTC-based products for providers of cryptocurrency investments. For example, a recent study by the Frankfurt Academy Blockchain Center outlines how BTC trading as well as holdings can be offset by purchasing emissions allowances from the European Emissions Trading System (ETS). In the former case, $18 is required to offset CO2 emissions. In the latter case, let’s say one holds BTC for a year and must buy a $100 emission allowance. It can be assumed that the price of CO2 emissions will increase substantially in 2022.
Overall, the energy mix used by blockchain network operations is getting greener. After China’s mining industry took a hit, it wasn’t just mining companies that pulled out of China. Given the sizable cost structure of renewable energy, mining companies are increasingly developing renewable energy sources such as geothermal or solar.
Web3 infrastructure paves the way for the decentralization of the Internet
Web3 represents a new paradigm that leverages blockchain technology to provide internet architecture in a decentralized and autonomous manner. At its core it is reducing reliance on large “big tech” networks and IT service providers, such as cloud or internet providers, as they tend to process collected data in an opaque way, have a “single point of failure”, and due to oligopoly In the market environment, you can operate some arbitrary products and pricing policies.
Web3, on the other hand, is built on the idea of giving users of the internet back control over data and infrastructure.From decentralized data storage via blockchains like Arweave or Filecoin, to decentralized wireless networks like the Helium network, tokenized platforms, and projects where all decisions are made by the community, to a whole new way of managing identities – -Web3 offers a wide range of possibilities. Cryptographic tokens are particularly important in this context, as they can provide a sustainable incentive system that encourages network users to provide the required infrastructure in the long term.
NFTs and blockchain games will be a source of income
The Metaverse is a virtual platform where people can collaborate and trade economically. A digital economy such as this is difficult to achieve without NFTs and blockchain-based infrastructure. 2021 is a turning point for “GameFi”, with the launch of Axie Infinity and the Ronin sidechain, greatly increasing throughput, enabling 1 million active players to participate in the Axie Infinity universe in August 2021. In the Philippines in particular, Axie Infinity, developed by Sky Mavis, has become a source of income for many.
Microsoft and Facebook have announced that they are building their own frameworks for the digital world, known as “Metaverses.” It can be assumed that these Internet giants will develop a largely centralized, partially closed system, and in the long run, the transfer of value to other digital ecosystems will become more difficult or even impossible. This is diametrically opposed to the idea of Web3, which focuses on individuals having clear property rights and freedom of movement with the help of blockchain technology.
It is still exciting to wait for the dawn of the multi-chain world. This could spur a new wave of adoption, especially NFTs and blockchain-based gaming economies, which could get a further boost once value transfer is seamless across different crypto universes. In emerging economies, the employment sector is likely to undergo structural changes. Arguably, such an interconnected economy can be thought of as a “metametric”. What sounds far-fetched may soon be a reality, i.e. in 2022, especially in certain areas of gaming.
The emergence of a multi-chain world
The debate over which smart contract-backed blockchain ecosystem will prevail in 2021 has slowly come to an end. The prevailing view is that we will live in a multi-chain world where multiple blockchains can communicate information and value to each other. As a result, we will see a steady decline in the ratio between TVL on Ethereum and TVL across all blockchains. A year ago, that percentage was 90 percent. Today, it’s only 62 percent. Nonetheless, it is foreseeable that in 2022, BTC will remain the number one blockchain and Ethereum the second. Another related development will be sharding (zero-knowledge and optimistic sharding) or second-layer protocols, which will compete with first-layer blockchains. They promise lower transaction fees and faster transactions while leveraging the security of the underlying base layer. In addition, interoperability between different blockchain ecosystems through bridges and cross-chain protocols is also actively working. Equally important, with Polkadot and the Cosmos Inter-Blockchain Communication Protocol (IBC), efforts are being made to build a kind of Layer-0, a network of different blockchains able to communicate with each other.
Interestingly and importantly, all of the above solutions are public chain solutions. The consortium blockchain blockchain infrastructure was expected to find applications in the enterprise context (enterprise blockchain or permissioned blockchain) a few years ago, and has given great attention to it, but now it plays a smaller role . This mainly affects platforms such as Hyperledger or R3 Corda, but of course there are also applications developed on these infrastructures with limited access. But it is already clear that the public chain has won the game. This can be determined by metrics such as transaction throughput, transaction volume, market capitalization (mapped assets), and even developer activity.
More legal clarity through regulation and through bans
In 2022, many countries are expected to issue statements on how to deal with crypto assets. Will they tighten restrictions and introduce bans like China, or take a crypto-friendly approach like El Salvador, which has BTC as its official currency alongside the U.S. dollar in September 2021. The regulator will focus on issues such as anti-money laundering, KYC, taxation and stablecoins, and will explore the feasibility of DeFi regulation on exchanges with regulators in other jurisdictions. It is worth mentioning that, soon, the Markets in Crypto Assets (MiCA) regulations will also come into force, which will provide a unified legal framework at EU level and create more legal clarity for service providers and issuers of crypto assets. In this regard, it can be argued that Europe and North America are heading towards a fundamentally “crypto-friendly” path. Decentralized protocols like BTC and ETH will be tolerated, but only if rules are followed to prevent money laundering, KYC, and taxation.
The digital euro will still not exist as a large-scale stablecoin
A digital euro could theoretically exist as a central bank digital currency (CBDC), as a key solution, or as a stablecoin.However, the European Central Bank (ECB) does not expect to issue a CBDC until 2026 at the earliest. Small countries like the Bahamas or Nigeria have discovered CBDCs. As a key solution, the digital euro will be piloted this year with the first European commercial banks and will be made available to industry and the financial sector. However, the initiative of commercial banks is crucial here, as this type of digital euro does not actually require the involvement of the ECB. A digital euro in the form of a stablecoin will still exist only as a pilot project in 2022. Euro stablecoins are not expected to experience the huge trading volumes that USD stablecoins have. The reason for this is that, on the one hand, stablecoins are interest-free, and at the same time the issuer has to pay negative interest to the ECB. On the other hand, with the MiCA regulations coming into effect, financial regulators are expected to pay special attention to stablecoins and enforce strict requirements. Against this backdrop, further substantial growth in USD stablecoins is highly likely. Therefore, this means that the “dollarization” of the crypto asset market will continue.
Positive progress in adoption by institutional investors and large corporations
In the past year, institutional investors and large corporations have also expressed their interest in digital assets. These include hedge funds, asset managers and family offices, but also pension funds or institutions such as Sparkasse or Raiffeisen-Volksbank. After higher-than-average inflation, a persistently low interest rate environment, further application areas, and the consequent increase in demand, major banks such as JPMorgan or Goldman Sachs began to develop a range of products around cryptocurrency investments. Tech companies such as Microstrategy and Tesla hold billions of dollars in BTC to fight the expansion of the money supply, which has led to relatively high inflation over the past year.
Regarding adoption by large corporations, Zuckerberg’s Meta company went even further, declaring itself as one of the future major players in the Metaverse. Additionally, we will see an increase in M&A activity. For example, PayPal acquired the startup Curv (custody and IT security technology in the crypto asset space), and Coinbase acquired Unbound Security (custody technology and focus on cryptography).
DAOs open up new avenues for social and economic coordination
A Decentralized Autonomous Organization (DAO) is a blockchain-based decentralized organization that is collectively owned and managed by its members through voting using tokens according to pre-defined rules. These create exciting use cases such as crowdfunding, social clubs, HR or collective investment projects. According to Consensys, the top 20 DAOs have $14 billion in their coffers and are trending upward. Examples of DAOs include Syndicate, MakerDAO, ClimateDAO, and ConstitutionDAO, and in 2022, countless new DAOs will emerge. As you can imagine, DAO building tools enable anyone to create a DAO for any purpose. The DAO will also expand if questions can be clarified about the extent to which the DAO is affected by existing regulations, and in which jurisdictions it must be answered when in doubt.
Note: The metrics listed in the article are primarily based on data obtained by the authors at the time of writing.Additionally, this article should not be considered investment advice, nor is it a recommendation to buy or sell any particular cryptocurrency asset. It does not constitute financial advice. As always, “Do Your Own Research” (DYOR) applies.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/forbes-10-predictions-for-blockchain-crypto-assets-defi-and-nfts-in-2022/
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